South Korean insurance companies have paid smaller dividends than their foreign counterparts, according to data released by the insurance industry on Sunday.
In the fiscal year of 2016, AIG Korea Inc. paid 26.2 billion won ($22.8 million) in dividends with a payout ratio of 200 percent, giving away more in dividends than it made in net income. The dividends all went to AIG Asia Pacific Insurance Pte., which holds a 100 percent stake in AIG Korea.
“This is our first payout since our launch in 1954,” said an official from AIG Korea. “Even after the payout, we have remained financially sound with a risk-based capital ratio of 404.34 percent.”
MetLife Insurance of Korea Co. also sharply increased its dividends over the same period. After paying 15 billion won in 2013, it upped the payout to 65 billion last year, about 83 percent of its net income. MetLife is owned entirely by its MetLife group affiliates in the U.S.
Lina Life Insurance Company of Korea also doubled its dividends from 70 billion won in 2015 to 150 billion won last year. BNP Paribas Cardif paid 1.7 billion won of its 1.9 billion won net income in dividends.
“The recent trend is partly due to the corporate income tax reforms,” said an unnamed official from a foreign insurance company. “But global insurance companies also tend to raise dividends when the headquarters are going through a difficult time or there is a need to boost the presence of the Korean entity.” In 2015, the Korean government introduced a policy in which companies that don’t spend more than 80 percent of their net income on investment, dividends or wages are levied a 10 percent additional corporate tax on the remaining amount.
Compared to their foreign peers, Korean insurers have paid relatively smaller dividends over the same period. A majority show a payout ratio hovering around 20 percent, with Samsung Life Insurance Co. and Samsung Fire & Marine Insurance Co. slightly higher at 37.6 percent and 30.8 percent, respectively.
“As part of our shareholder-friendly policy for the past three to four years, we have used one-third of our net income for stock repurchase, one-third for dividends and kept the remaining one-third as retained earnings for future investment,” said an official from Samsung Fire & Marine.
Kyobo Life Insurance Co., despite holding many shareholders overseas, scaled down its payout ratio from 18 percent to 16 percent to expand capital in preparation for the new international financial reporting standards of IFRS17 to be implemented in 2021.
By Park Joon-hyung
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