How a $100 bn insurer became a penny stock
SEOUL: Insurers the world over have been walloped by evaporating investment returns, but those in South Korea have been hit particularly hard. The nation’s second-largest life insurer became a penny stock this month.
Hanwha Life Insurance Co. has fallen 64% over the past year, and its shares touched the equivalent of about 71 cents on March 23. Its priceto-book value is just 0.1 times, a fraction the 0.8 average for European insurers or 0.9 among US counterparts, according to data compiled by Bloomberg. The latest slump in markets, which has seen the South Korean won tumble— casting a cloud on Hanwha’s tactic of investing heavily overseas—has layered pain on top of a pre-existing condition. Hanwha, along with its peers, sold a welter of long-term, fixed-rate products to investors decades ago that are now proving costly to maintain.
Those legacy liabilities from the late 1990s to 2001, offering average annual returns of 6%, represent about 40% of Korean insurers’ products, according to Financial Supervisory Service data obtained by opposition lawmaker Kim Sung-won.
That’s putting a major squeeze on Hanwha amid the world’s worst market rout since the global financial crisis.
Hanwha has invested 29% of its total 121 trillion won ($100 billion) in assets outside of South Korea, the most in the industry and close to the 30% maximum allowed. That hasn’t work out so well. It posted a net loss of 39.7 billion won for the fourth quarter, the worst in nine years.