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The financial authorities are checking not only banks, but also insurance companies and credit card companies to see if their performance and compensation systems are appropriate. It is to check the soundness of financial companies that achieved record-breaking performance last year and increased dividends and the adequacy of consumer services.
It is interpreted that following President Yoon Seok-yeol and Financial Supervisory Service Governor Lee Bok-hyeon criticized the banking sector day following day, saying that excessive bonuses and the oligopoly system are a problem, the targets of pressure from the financial authorities are expanding to other industries.
According to the financial sector on the 17th, the Financial Supervisory Service is currently examining whether some insurance companies’ incentives are excessive compared to their profits.
The five major non-life insurers posted a net profit of 4 trillion won last year. Samsung Fire & Marine Insurance, the number one company in the industry, posted 1.2837 trillion won in net profit last year, up 14.1 percent from the previous year. Meritz Fire & Marine recorded a record high, growing 29.4% to 854.8 billion won. DB Insurance (net profit of 997 billion won, increase rate of 14.2%), Hyundai Insurance (574.6 billion won, 32.8%), and KB Insurance (557.7 billion won, 84.8%) were also good.
They paid or set performance bonuses of up to 60% of their annual salary or 550% of their monthly bonus. The total amount of settlement dividends also increased by 60% from the previous year to KRW 1.36 trillion in total from Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance.
Among life insurers, Samsung Life Insurance posted a net profit of 1.72 trillion won, up 7.9 percent from the previous year, thanks to a decrease in corporate tax. The performance bonus is 23% of the annual salary. Shinhan Life’s net profit was KRW 463.6 billion, up 165% from the previous year.
An official from the financial authorities said, “Since uncertainty in the funding market has not been resolved, we will encourage each company to make efforts to strengthen soundness.”
The Financial Supervisory Service made a plan to check the performance system of credit card companies as well. Shinhan, Samsung, KB Kookmin, and Woori had net income of 1,846.7 billion won last year. On the 31st of last month, Samsung Card paid 50% of its annual salary as a performance bonus, and other card companies are expected to give similar or increased performance bonuses as last year. Dividends also increased from the previous year.
As market interest rates rose last year, credit card companies reduced customer service such as usage limits and raised the average interest rate on credit loans to the mid-to-high 10% range. Financial authorities are planning to induce credit card companies to lower interest rates on credit card loans (long-term card loans), cash advances (short-term card loans), and revolving.
An official from the financial authorities said, “As market conditions have improved (from last year), we are communicating with the industry so that loans can be normalized to the previous level.”
