Posted on Nov 25, 2011 by Sergio Ulloa
A statement released this month by Korea Life Insurance Ltd confirms that South Korea's second largest life insurance company has now received the appropriate regulatory approval from the Chinese authorities to establish a joint venture business in China with a local partner, and begin providing it's insurance services and expertise in the world's second largest economy.
The China Insurance Regulatory Commission (CIRC) has now signed off on a 50-50 joint venture life insurance business between Korea Life and Zehjiang International Business Group, a state government-owned asset management company, with operations scheduled to begin in 2012, according to the Seoul-based insurer. The new life insurance joint venture will have a total paid-up capital of CNY500 million (US$79 million), equally financed by Korea Life and Zheijang International, and will be headquartered in Hangzhou, the capitol city of Zhejiang province in eastern China. "With the insurance market potential and domestic economic growth in China, the joint venture is expected to begin its business in the Yangtze Delta region," Korea Life said in the statement.
Korea Life will assume the overall business management responsibilities of the new joint venture, and will work to gradually localize their operations for the Chinese market with help from Zheijang International's robust business network.
Korea Life has been looking for a way to enter into China's fast-growing insurance market
for a number of years. The Seoul-based life insurer first set up its representative office in Beijing back in August 2003. Then, in December 2009, Korea Life Insurance signed a memorandum of understanding agreement with Zhejiang International Business Group, which outlined their preliminary plans to partner together through an initial 45 billion Korean won (US$40 million) investment for establishing a joint venture life insurance operation in China. Now that the proper regulatory licenses have all been granted, Korea Life and their domestic partner can begin establishing their business presence in Zheijian province's insurance market, one of China's higher-income areas.
Expanding outside of their saturated home market has become increasingly important for Korean insurers. South Korea remains one of the world's largest insurance markets by per capita premium levels, with a particularly high insurance-penetration rate in regards to life insurance products and services. In the aftermath of the 1998 Asian financial crisis, South Korea's insurance industry has rapidly expanded on the back of regulatory developments, government support, economic growth and rising per capita income levels, to now become the seventh largest market globally in terms of market share. While the domestic insurance market has been open to multinational insurers since 1987, both the life and general insurance sectors are dominated by large domestic financial conglomerates, namely Samsung Life, Korea Life and Kyobo Life, which control over 60 percent of the life-insurance assets between them.
Despite this success at home however, in order to sustain their margins, South Korea's most prominent insurance companies must now look towards expanding into other international markets. Local market analysts have long expressed concerns over the country's alarmingly low birth rate and rapidly aging populace, and the effect this all has the insurance sector's growth prospects if the prospective customer base continues to decline. At present, one in 10 Koreans is aged 65 or older, but the ratio is expected to rise to over 14 percent by 2018. These concerns are of course not unique to Korea. An OECD report issued earlier this year claimed that aging populations will cause global spending on long-term care to double or even triple by 2050, and this will have a considerable effect on insurance markets in tow, as the demand for health-care and retirement-related products continues to rise.
Founded in 1946, Korea Life Insurance is the Southeast Asian country's first standalone insurance company. According to the Korea Life Insurance Association, the company reported over KRW 6.54 trillion (US$5.79 billion) in gross written premiums in 2010, and a 12 percent share of the life market. Korea Life has had to innovate in order to protect its position in the competitive local market. In March 2010, the Seoul-based company became the first Korean insurer to go public on the South Korea Stock Exchange. While that move has successfully raised capital for further development in their domestic life insurance operation, Korea Life is now looking to expand it's footprint into more international markets. Currently the insurer's global network feature offices in Tokyo, London and New York but more work needs to be done to develop a presence in emerging markets with real guarantees of sustainable premium growth. This was a sentiment shared by the company CEO and Vice Chairman, Shun Eun-Chul in an interim report filed earlier this year, saying "The local insurance market is becoming saturated, so advancement overseas is a must." Overall, the company is putting itself on the forefront of Korea's insurance industry as they all expand internationally.
Korea Life Insurance has already had some success in moving its operations into an overseas market
. In April 2009, the company became the first Korean life insurer to enter Vietnam's budding protection market, initially providing endowment policies and educated savings plans through a 2,000 strong agency force. In their first year, Korea Life took a 1.8 percent share of all new insurance sales in Vietnam, with over 10,000 new policyholders and premium income of US$3.3 million.
The company has now set an ambitious target to triple its manpower to 9,000 employees working across 22 branches in Vietnam, with projected annual premium income exceeding US$35 million by 2015. Korea Life is confident they can achieve these objectives due to the favorable market conditions in Vietnam
versus Korea. The Vietnamese insurance industry is growing at average of 10 percent annually. When you combine these economic indicators with favorable demographics, as over 60 percent of the population is under 30, the potential for further insurance development becomes significant. After investing in and starting their operations in both Vietnam and now China, Korea Life Insurance is now considering making inroads into other emerging markets in the Asia Pacific region
Insurance Company Mentioned
Korea Life Insurance
Korea Life Insurance is an insurance company specialized in providing life insurance business. The company offers a wide range of insurance products including whole life/term insurance, survival insurance, death insurance, group insurance, annuity insurance and many other services for both individual and corporate customers. Substantial loan services, credit options, fund products and risk management services are also offered. Korea Life Insurance was founded as Daehan Life Insurance in 1946. The company is headquartered in Seoul, South Korea with additional offices in Ho Chi Minh City and Hanoi, Vietnam.