ASSET MANAGEMENT

In 2019, South Korea’s GDP growth rate declined to a 10- year low of 2.0%, primarily due to a fall in construction and equipment investment and a slowdown in exports and private consumption. The consumer price index marginally increased by 0.4%, reflecting the sluggish economy. The Bank of Korea cut its policy interest rate two times, to 1.25%, a record low and keeping pace with the Federal Reserve Board’s rate cuts for its last three announcements. The yield on three-year Korea treasury bonds dropped by 45.7 basis points to 1.36%, reflecting weak economic conditions. However, the Korea Composite Stock Price Index (KOSPI) closed the year at 2,197.67, up 7.7% from a year earlier, on expectations that a rebound in semiconductors will lead to higher profits next year.

In 2019, our invested assets generated KRW 235.8 billion (excluding foreign exchange gains/losses) in investment income, with an investment return of 4.0%, up 0.9%p from the prior year. From that total, 33.2% of investment income came from our foreign bond holdings, which amounted to KRW 78.2 billion. Income from alternative investments and domestic bond holdings accounted for 29.7% (or KRW 70.1 billion) and 21.6% (or KRW 51.0 billion), respectively.

Throughout 2019, Korean Re has focused on investment portfolio stability, while at the same time searching for opportunities to maximize the profitability of our invested assets. We saw our invested assets increase by 5.8%, to KRW 6,220.7 billion, due to the stable inflow of investment and premium income. Our investment portfolio remained dominated by domestic fixed income securities composed of government bonds and other high-credit quality bonds, representing 31.0% of total invested assets. To help increase our overall investment performance, we increased the proportion of alternative investments (including loans) up to 26.5% of total invested assets. Most of our alternative investment vehicles are loans—real estate loans and acquisition finance—and loan-linked products.

Early in 2020, we expected the global economy to show modest growth, as the trade dispute between the U.S. and China dissipates. This is in spite of uncertainties related to the upcoming presidential election in the U.S. and monetary policy directions of major central banks. However, the world encountered an unprecedented challenge because of the COVID-19 outbreak. Financial markets are now in great turmoil. Nonetheless, we will continue to maintain an investment policy that focuses on ensuring the stability of our investment results. Also, a significant focus will remain on generating stable returns and meeting our diversification needs.