Korean Re’s Ambitious Expansion Overseas

Reinsurance firm moving fast to rank among world’s top 5 reinsurance companies in 2020 by globalizing its turf

Since his arrival at Korean Re in July 1998, President Park Jong-won saved the company from certain collapse amid the financial crisis due to enormous losses. He turned the company around without using outside funding support or an infusion of public funds. He cut the company’s payroll by one third and decreased its liabilities to help ease the company’s tight liquidity situation and put Korean Re back on the right track. He has been at the helm of the company ever since, making him the longest serving CEO in the country’s corporate community, while boosting the company’s status to the top reinsurance firm in Asia. CEO Park’s long-term vision calls for Korean Re to rank among the five top reinsurance firms in the world by 2020.
Following are what he said regarding his enviable performance record and the company’s goals both short and long-term in an exclusive written interview with NewsWorld:

Question: Last year was an unprecedented year in terms of Korean Re’s operational results. Can you tell us about the record performance?
Answer: When looking at the third quarter results (April 2009-March, 2010), the company’s growth amounted to 6.5 percent, a very stable record, as it came despite the global financial crisis sweeping the world.
Net profit showed an increase of 44.3 billion won to record 60.4 billion won, the highest such figure in the company’s history. Revised net profit amounted to 110.2 billion won, again the largest since the company began operation, up by 1.6 percent to record 98.4 percent and 208 percent in payment capacity, also the highest in the company’s history, with a 5.3 percent investment return ratio, considered superb in terms of stability and profitability.
At the end of the 2009 fiscal year in March, net profit for the year will amount to 75 billion won with a revised net profit of 145 billion won, setting a new year-end record for the company. The excellent performance results have been attributed to improved overseas operations, which are expected to improve the projected combined record and the realization of stable profit and the continued trend in terms of investment returns.
Q: What are the management targets for this year and the prospects for operational results?
A: The company will strive to attain 10 percent growth in damage insurance premiums to reach 4.8 trillion won, total assets of 4.9 trillion won and net income of 100 billion won to put itself among the 10 top reinsurance companies in the world.
We expect our overseas operations to continue to improve as we will strengthen underwriting and improve our portfolio. Our domestic operation is expected to maintain the 5.5 percent level, as we will continue to maintain investments centered on domestic bonds for stability.
We will continue to explore new markets and develop new products amid the difficult business environment sparked by the economic slump impacted by the global financial crisis for the sound growth of our operations both at home and abroad. This year would be the initial year for our push to have Korean Re rank the fifth largest reinsurer in the world by 2020.
Q: What are the major objectives in Korean Re’s management plan for this year?
A: We decided to make this year a year for powerful advancement toward a new decade in our operations and reach out for more than 10 percent growth in our basic reinsurance operation, not satisfied with our past records, realizing 100 billion won in average annual growth in annual profit in a sound manner and developing a base to diversify our business turf.
We will continue to explore new markets and develop new products to attain 200 billion won in insurance premium profits and continue to explore overseas markets also to expand the portion of overseas operations of the company’s total operations to17.8 percent this year from 17.6 percent in 2009 as well as the stable weight of life insurance to 15.3 percent this year from 14.8 percent last year in order to secure a stable base for increased profits.
In the area of diversification of our business turf, we will take over a stake in a domestic insurance firm or set up a new firm in the sector related to insurance on a short-term strategy and we will consider moves to enter asset management, investment operations and retail financing with a long-term strategy.
Q: Can you give us some examples of your successful management reform since becoming CEO of Korean Re?
A: Korean Re faced serious management problems when I assumed the top job at the company in July 1998 during the height of the Asian financial crisis. The company lost 381.8 billion won in guarantee insurance, especially from the guarantees on financial bonds during the financial crisis, and as a result, the company was feared to sustain a loss of 280 billion won at the end of the 1998 fiscal year, putting itself on the verge of collapse.
But we overcame the crisis through a number of vital measures including the reduction of our payroll by 30 percent as of September 1998, the sale of uncollected credit rights to Korea Asset Management Corp for 135.1 billion won to help ease our tight liquidity, and the discount sale of O/S loss to guarantee insurance firms and minimize its liabilities, which effectively ended the company’s financial crisis. The company did not use public funds or outside financial support in fending off its certain financial disaster.
The company made a complete recovery from the brink of financial disaster with its books ending in the black with 3.7 billion won, although it seemed certain to end the year with a loss of 280 billion won.
The productivity per employee for the 1998 fiscal year stood at 3.7 billion won, but it rose 4.4 times to 16.1 billion won in 2008.
Since 1998, the company’s average annual growth rate was 13 percent, to rank 13th in the world and No. 1 among reinsurance firms in Asia. The company’s annual average growth rate of 11.1 percent has been much higher than insurance firms in Korea with 8.3 percent annual average growth for the past six years.
Q: Can you please talk about Korean Re’s intention to participate in the fund to take over Kumho Life Insurance?
A: The company invested in the Korean Development Bank’s private equity funds on several occasions and this time, too, we participated in the fund to take over Kumho Life in consultation with KDB and as a result of our study on its viability including projections on profit and the safety of protective walls related to the loss provisions, among others. We decided that the fund was a good investment.
Q: Please enlighten us on your global strategy.
A: Korean Re’s management strategy is dedicated to becoming the fifth largest reinsurance firm in the world by 2020 and our overseas operational strategy is as follows:
We plan to expand our overseas operation to cover the entire world as a leading reinsurance firm. We want to expand to Europe and North America from Asia where most of our overseas business (75 percent) comes from, with North America providing us with 25 percent of our overseas sales.
We would like to lead the world reinsurance market in such sectors as aviation, shipping, goods and technology, among others. We would like to lead the world shipping insurance market by taking over 133 contracts on super large cargo carriers including NYK.
We would also like to have Korean Re be a leader in the aviation insurance sector by taking over 44 insurance contracts including Lufthansa and Air France, among others. We would also like to have Korean Re be a market leader in the goods and technology insurance market in Asia.
We would like to bring total reinsurance covers to 2.7 trillion won by 2015 and to 7.5 trillion won in 2020 from the current 750 billion won by expanding overseas reinsurance sales to 50 percent of the company’s total annual reinsurance business in 2020.
As one of the moves toward that goal, we would like to convert offices overseas into branches. In 2011, the office in Beijing will be upgraded to a branch office and we will set up offices in Eastern Europe, Shanghai and Central and South America. In 2015, offices in London, New York and Dubai will be upgraded to branches and we will open offices in India and Australia.
Currently, Korean Re maintains one branch and six offices overseas, but the number will increase to five branches and seven offices in 2015.
We also plan to engage in joint ventures with domestic insurance firms to take over overseas insurance contracts for properties, technology, vessels and airplanes, among others.
Korean Re will also expand its takeover of death insurance contracts in North America, medical insurance contracts in the Middle East and health and damage insurance contracts in China in order to secure growth engines.
Q: What are your management mottos and key words in your management plan?
A: The key word is change: “That which doesn’t change is like the dead.” Ceaseless change can only give energy to a business firm. Changing is not easy and, therefore, how each constituent makes up its mind will determine the success or failure of a company, which is the core element of a corporate culture, like a seed that brings growth to a business firm. Creating a good culture is the most important factor in managing a company. nw

President Park Jong-won of Korean Re.

This is a scene of the head office of Korean Re.