Invest1 publisher3 min readPublished
Samsung Life and Hanwha Life cut savings rates below bank deposits as bond yields climb
Samsung Life and Hanwha Life cut savings crediting rates to 2.28% and 2.18%, under a 2.40% deposit rate, while treasury yields rose about 1.4 points. New savings policies are priced off a regulatory average that those cuts pull down, so premiums are set to rise next year.
The Investor · Invest desk
What happened
- Insurers' own benchmark rates rose with the market, but the companies held crediting rates in check by lowering their adjustment ratios.
- The Korea Insurance Development Institute's benchmark rate for interest-linked products hit 3.8% in October, up from 3.2% in February and the highest since July 2024.
- Life insurers' first-half net profit rose sharply, mostly on investment returns, while profit from the core insurance business fell 26.2%.
- Surrender payments rose 39.2% from a year earlier to 28.97 trillion won in January through May as money moved elsewhere.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- cost Buyers of savings-type and short-payment whole life policies will carry most of next year's repricing, since health and conventional whole life premiums move on loss ratios and mortality instead.
- decision A saver weighing these policies against a time deposit gives up 0.12 point a year by staying at Samsung Life and 0.22 point at Hanwha Life.
- cost Holding down crediting rates earns more per policy on fewer policies, with new life contracts down 12.9%, so lost volume can outrun the margin gained.
- exposure Households pay on both sides: roughly 6.6 trillion won more in interest if the Bank of Korea's quarter-point estimate scales to a half-point rise, while their savings policies credit less.
Against the 3.838% three-year treasury yield of Aug. 31, Samsung Life's 2.28% savings rate is 1.558 points short and Hanwha Life's 2.18% is 1.658 points short [7][1][2]. The distance grew through the year. The Korea Insurance Development Institute's benchmark gained 0.6 point from February to October [9] while Samsung Life took 0.05 point off its savings rate from January to September [1], so the space between the industry benchmark and Samsung's product opened by about 0.65 point in eight months [4].
Samsung Life applied the lower ratios beyond savings. It cut crediting rates on protection-type and pension savings products as well, with non-participating annuities the only exception [2]. According to Sedaily, the interest insurers pay on policy reserves fell or held flat over a year in which loan interest costs rose sharply [5].
The first-half profit split fits an insurer keeping the difference: investment returns up, core insurance profit down [17]. It is also where the thesis could fail. Sedaily does not report the insurers' portfolio yields or their reasons for trimming the ratios. If the yield on bonds already on the books trails the 3.838% market rate by most of that 1.5-point gap, the spread being kept is thinner than the quoted rates suggest [7].
Next year's premiums run through a supervisory figure. The Financial Supervisory Service's average crediting rate now sits 0.75 point below the base rate; the two figures imply a base rate of 3.00%, up from the 2.50% at which both stood earlier this year [8][5]. Insurers usually set the assumed interest rate on new contracts in line with that average unless they can justify otherwise [13]. A lower assumed rate means a higher premium for the same cover [12].
Insurers could raise crediting rates late, once the institute's index, a trailing three-month blend of deposit, corporate bond and treasury yields, finishes catching up [10]. They could reprice savings policies next year and absorb the lapses. Or the outflows that ran through May could force a response before either [19]. I'd expect the repricing, because the lower average is already fixed and the assumed rate follows it by default [13]. The case against sits in the same report: according to Sedaily, analysts say higher premiums will drive policyholders away and will not easily shore up profits [21].
Money spent on keeping customers is going into product design. Competition is intensifying in policies with no or low surrender value, whose premiums run 10% to 40% cheaper because they pay back less on cancellation, according to Sedaily [20]. Neither company's savings crediting rate has gone up this year: Samsung Life's fell from 2.33% and Hanwha Life's from 2.22% [1][3].
What to watch
- Whether assumed rates on new savings and short-payment whole life contracts follow the 2.25% supervisory average next year, or insurers cite a justification to depart from it.
- Samsung Life and Hanwha Life crediting-rate resets against the KIDI benchmark, now 3.8% and built from trailing three-month yields.
- Surrender payments after May: a further climb from 28.97 trillion won would test whether holding down crediting rates costs more in lapses than it earns in spread.