South Korea's financial regulator has issued a management improvement order to Lotte Non-Life Insurance. However, as the insurer's financial condition remains sound, the measure is preventive in nature and focuses on financial management.
The Financial Services Commission held its regular meeting on the 4th and approved the management improvement order for Lotte Insurance.
This measure is one level higher than the management improvement recommendation issued in November last year. However, the escalation occurred automatically because Lotte Insurance's management improvement plan submitted at that time failed to receive FSC approval. This means the measure was not elevated due to deteriorating financial conditions.
In fact, Lotte Insurance's solvency ratio (K-ICS) stood at 159% as of the end of last year. This represents an increase of approximately 39 percentage points from its low point of 119.93% at the end of March last year. The ratio is also about 30 percentage points higher than the regulator's recommended level of 130%. Annual net profit for last year reached 51.3 billion won, more than doubling from 24.2 billion won the previous year.
"This management improvement order is strongly preventive in nature, aimed at encouraging stronger capital soundness management," the FSC said. "It does not mean that Lotte Insurance's management condition has deteriorated, leading to an elevated measure." Insurance payouts and retirement pension services continue to operate normally.
Industry observers expect Lotte Insurance to fully comply with the regulatory measures. The insurer withdrew its lawsuit seeking to overturn the management improvement recommendation against the FSC on the 13th of last month. "We understand that Lotte Insurance has decided to cooperate fully with the financial authorities' policies," an industry source said. "Their goal is to take aggressive improvement measures and normalize operations as soon as possible."