Korean Re has reported a net income of KRW 292.9 billion for the first 9M of 2023, with an insurance income of KRW 194.9 billion.
This year’s net income figure is much improved compared to the KRW 114.9 billion recorded in the same period of 2022, where insurance income was also lower at KRW 170.6 billion.
Despite noting losses at Hankook Tire and losses from the Turkey earthquake this year, Korean Re said there was a “significant improvement” in the business performance of life and long-term insurance as well as some commercial lines of business.
Korean Re’s investment income for the first 9M 2023 also grew to KRW 183.7 billion from KRW -23.2 billion last year. The firm explained that there was an increase in evaluation gains due to a new approach to the classification of financial assets under IFRS 9.
“It is also worth noting that under IFRS 17, foreign currency exchange gains and losses on insurance contract liabilities are reclassified from the insurance profit and loss (P&L) to insurance finance income & expenses, which is a sub-item of the investment P&L,” Korean Re said.
Insurance revenue for the first 9M amounted to KRW 4,524.1 billion, down slightly compared to KRW 4,929.4 billion from 2022.
Korean Re observed that one of the major changes in the income statement based on IFRS 17 is the recognition of revenue on an accrual basis not on a cash basis, which allows revenue to reflect the services provided and exclude deposits. Non-distinct investment components are excluded from the insurance P&L.
“There are also changes in accounting for reinsurance commissions. Fixed reinsurance commissions whose amounts are determined regardless of whether or not an insured event occurs are deducted from insurance revenue, resulting in a reduced appearance of the revenue volume,” the firm added.
Korean Re continued, “Previously they were treated as a business expense for the current period under IFRS 4. Variable reinsurance commissions were also treated in the same way under IFRS 4, but they are now recognized as part of claims under IFRS 17.
“Both business expenses and claims are recognized in profit or loss, so there is only a classification impact with no effect on net income.”
