Korean Re Leaps Forward in
World-Class Reinsurance Market

Asia's No. 1 seeks to become world - class reinsurer in 2020

"Korean Re registers an average annual growth rate of 13 percent, and its distinctive recruitment and training programs help raise competitiveness,"Korean Re CEO Park Jong-won says.
The following are excerpts of his recent interview with NewsWorld.
Q: It appears that Korean Re has emerged as the leading reinsurance company in the nation and is poised to make a second leap forward. But in the past we know it suffered financial hardships. Would you tell us about the process of overcoming the managerial difficulties that started with the financial crisis in the late 1990s?
A: When it was a state-owned company from 1963 to 1978, the company engaged in loose business under the control of the government. As a result, it faced bankruptcy due to bad loans to financial companies during the IMF crisis.
Since I took office in July 1998, the company embarked on full-fledged restructuring efforts to overcome the managerial crisis without depending on public funds and outside financial assistance. Intensive restructuring resulted in laying off 30 percent of our employees (September, 1998). The company collected 135.1 billion won from selling bonds to the Korea Asset Management Corporation to secure cash liquidity and minimized its debts on insurance companies.
Boosted by such restructuring efforts, Korean Re's current net profit amounted to 3.7 billion won, despite recording a deficit of 280 billion won for fiscal year 1998.
The productivity per employee, which stood at 3.7 billion won in 1998, rose to 14.4 billion won in 2006.
Q: It seems that the company has managed to see continued growth with its strenuous efforts made toward restructuring. Would you tell our readers about the current managerial situation?
A: With an annual average growth rate of 13 percent since I took the helm, Korean Re has emerged as the world's 12th (Asia's No. 1) reinsurance company.
The cumulative net profit amounted to 420.4 billion won over the eight years from 1999, equivalent to 5.1 times the cumulative volume over the previous 36 years, a mere 82.7 billion won.
The outstanding managerial performance can be attributed to the adoption of our aggressive business expansion policy coupled with scientific risk management.
Korean Re's market value has continued to increase to reach 1.4 trillion won, ranking second among all insurance companies, which reflects the credibility the market has given the firm's remarkable managerial performance in recent years.
Korean Re was added to the KOSPI 100 index along with Samsung Fire & Marine Insurance in May 2005.
The company's stock price has continued to rise, as it is backed up by steady growth and has maintained a steady market share.
My philosophy for distributing profits to stockholders while focusing on maximizing profits has also led to a steady rise in the stock's price.
The company has also made strenuous efforts to enhance its credit and secure new investors through prudent investor relations (IR) activities. Due to the recent efforts, the share of foreign shareholders has climbed 4.6 fold over the past six years.
Q: We know the company's international credit rating has been raised, boosted by its outstanding managerial performance. Can you tell us about this?
A: The international credit rating agency, Standard & Poor's, upgraded Korean Re's credit rating to A- (stable) from BBB + (stable) as of Dec. 6, 2006. This was due to the remarkable improvement in the company's managerial performance. Additionally, the company's long-term credit rating was assessed as stable.
The upgrade reflects Korean Re's strengthened capitalization, as a result of steady increases of retained earnings, and adequate reserves in the event of catastrophic events. Also, Korean Re has consistently maintained its combined ratio at a stable 95 percent over the previous five years.
Korean Re's risk management is based on statistical rise analyses and the application of risk models to assess exposure to insurance and catastrophic risk. More recently, stress testing has been implemented to better monitor assets and credit risks.
With the support from Korean Re's dominant position in the domestic reinsurance market, the company is expect to further build on its positive sales momentum. Korean Re has also been targeting niche markets by developing new products.
Q: What is your plan to enable Korean Re to leap forward as a global reinsurance company?
A: Amid an annual growth rate of 13.7 percent, the portion of Korean Re's overseas sales in total premium increased to 14.4 percent for fiscal year 2006 from only 3.2 percent in 1998.
From 1998, Korean Re has been targeting areas with high growth potential and low risk such as China, the Middle East, Southeast Asia, Eastern Europe and Latin America.
For fiscal year 2006, Korean Re and major reinsurance companies around the world realized huge profits, as there were no major natural disasters. Korean Re has been focusing on stabilizing its performance by managing risk in accordance with regional differences in the event of outbreaks of natural disasters. Korean Re has been adopting differentiated strategies in exploring overseas markets.
Korean Re has also been focusing on the Chinese market, which has emerged as a major market in the world's reinsurance sector. I personally visited China's most remote areas for charity purposes, to set up elementary schools for instance.
Korean Re has been expanding its relations with China's entire insurance and reinsurance industry.
The company has managed to secure a leading role in the Asian market, accounting for 73 percent of contracts in overseas projects in the region. It has been establishing a stable business network through exchanges based on cultural similarities over the past 26 years.
Since it emerged as Asia's top reinsurance company in 2001, its credibility was raised in the region. It has been providing small- and medium-sized insurance companies in Asia, which lack solvency margin, with adequate coverage for the previous 40 years.
It has seen a steady rise in its credit rating, boosted by strengthened capital power encouraged by a steady high growth rate and profits.
It has also been playing a major role in invigorating the Asian market by promoting close regional cooperation.
Korean Re's marine department has signed contracts with some 150 shipping companies around the world. Major shipping companies include the world's No.1, Zodiac of Israel, No.2, MSC of Italy and No.3, Evergreen of Taiwan.
The company's aviation overseas inward facultative business has seen consistent growth in premium volume, reaching over 10 billion won in fiscal year 2006. Korean Re provides capacity for satellite insurance for major global accounts. It signed contracts with 35 world-leading aviation companies like Lufthansa, the No.1 firm of Germany, and Air France.
Q: Do you have a program to promote a friendly and cooperative environment designed to raise the company's competitiveness?
A: To raise productivity, we have introduced a reward incentive or profit sharing system where employees are rewarded in accordance with their work performance.
For development of quality human resources, Korean Re has been carrying out various kinds of programs. For example, it has been implementing an outdoor program including trekking and exercise.
With the goal of promoting expertise among its employees, Korean Re has started to dispatch them overseas to obtain their MBA degree. Many of them are sent to leading reinsurance companies in the United States and Europe to acquired advanced reinsurance know how. Others are also sent to various overseas branches.
Employees are subject to the "circulation work system"in which they shift their workplace every five years in order to be equipped with the capability to become reinsurance experts.
In addition, the company has been operating a training program involving traversing trails along the Baekdu Mountain Range. The trekking program, which began in 2004, has been held every year and has helped boost employees'morale and the company's competitiveness as a whole. nw

Korean Re CEO Park Jong-won

Korean Re headquarters