Investment

The Korean economy suffered some setbacks in 2018, with GDP growth rate declining to a six-year low of 2.7 percent. This arose primarily from a fall in construction and equipment investment. Amid economic slowdown, the growth of consumer prices eased to 1.5 percent. It was encouraging, however, to see exports and private spending improve, helping to shore up the economy.

The Bank of Korea raised its key interest rate one time to 1.75 percent from 1.5 percent over the course of the year. However, the yield on three-year Korea treasury bonds dropped by 32 basis points to 1.817 percent at the end of 2018, reflecting weak economic conditions. The Korea Composite Stock Price Index (KOSPI) closed the year at 2,041.04, down 17.3 percent from a year earlier due to moderating corporate profit growth and foreign investors’ net selling position.

In 2018, we maintained our key investment principle of ensuring the stability of the portfolio, with efforts being made to improve the profitability of our invested assets. We saw our invested assets swell by 4.5 percent to KRW 5,878.5 billion on the back of stable inflows of investment income and premium income. Our investment portfolio remained dominated by domestic fixed income securities, including government bonds and others with high credit quality, representing 32 percent of total invested assets.

We continued with our diversification strategy to help increase our overall investment performance. As a result, the proportion of foreign investments and alternative investments (including loans) increased to 31.1 percent and 23.2 percent, respectively, of total invested assets. Foreign investments consisted mostly of Korean Papers and bonds with global credit ratings of A- or higher. The majority of our alternative investments were composed of senior secured real estate loans and acquisition finance.

Our invested assets generated KRW 173.4 billion in investment income for the year, excluding foreign exchange gains/losses, with an investment return of 3.1 percent compared to 2.5 percent in the prior year. Out of the total, 33 percent of the investment income came from our domestic bond holdings, which amounted to KRW 57.3 billion. Income from foreign and alternative investment accounted for 32.8 percent (or KRW 56.8 billion) and 29.6 percent (or KRW 51.3 billion), respectively.

Going into 2019, we believe that a dominant theme that will shape financial markets for the year will be growing external uncertainties involving how Brexit and a trade row between the U.S. and China will unfold. Weakening growth momentum in major economies that may weigh down the global economy is also a major downside risk to the overall investment environment. Nonetheless, we will continue to maintain our investment policy that focuses on ensuring the stability of our investment results. Also, a significant focus will remain on how to expand our alternative investments steadily and in a way that both generates stable returns and meets our diversification needs.   

Investment Results ²⁾

(Units: KRW billion, USD million)

* Gains and/or losses from foreign exchange hedging for insurance liabilities have been excluded.

2) ‌Investment results in this investment section are based on the Separate Financial Statements of Korean Re, reflecting investment operation at the head office only. 

Investment Portfolio for 2018

(Unit: %)

Invested Assets

(Units: KRW billion, USD million)

– Individual figures may not add up to the total shown due to rounding.

Investment Income

(Units: KRW billion, USD million)

* Gains and/or losses from foreign exchange hedging for insurance liabilities have been excluded.

– Individual figures may not add up to the total shown due to rounding.