Lotte Damage Insurance reported a loss of 19.8 billion Korean won in the first quarter... investment losses are the main reason

Lotte Property & Casualty Insurance recorded a net loss of 19.8 billion won in the first quarter of this year as losses in its investment division widened, reversing from a profit in the same period last year to a loss.

According to the performance announced by Lotte Property & Casualty Insurance on the 15th, the operating loss for the first quarter of 2026 was 28.5 billion won. Compared with a net profit of 11.3 billion won in the first quarter of last year, the revenue structure deteriorated markedly. However, there are signs of recovery in the company’s core business—insurance, the insurance segment. Insurance operating profit was 27.2 billion won, turning from a loss of 11.2 billion won in the same period last year to a profit.

Insurance Contract Service Margin (CSM)—a key indicator that shows an insurance company’s future profitability, i.e., future profit recognized over the contract period—stood at 2.509 trillion won at the end of the first quarter, up 11.1% from a year earlier. The CSM amortization amount was also 58.7 billion won, up 12.3% year over year. This means that, under the new accounting standards, the revenue base of the contracts held by the insurance company is expanding to some extent. This can be interpreted as being unrelated to short-term performance, suggesting that the strength of its core business is improving.

The issue lies in investment operations. In the first quarter, the investment operating performance recorded a net loss of 55.7 billion won. The company explained that turmoil in financial markets caused by the Middle East war and rising oil prices led to a sharp increase in interest rates, and the evaluation losses of interest rate-related assets during that process were reflected in its results. When interest rates rise, the prices of existing bonds and other interest rate-related assets tend to fall. Since insurance companies hold a large amount of such assets, they are significantly affected by market fluctuations. However, Lotte Property & Casualty Insurance believes these assets are relatively safe, and once the market stabilizes, some of the valuation losses may be recovered. The company also stated that most of the temporary losses from certain foreign exchange assets—excluding the costs of currency hedging—can also be recovered.

The preliminary solvency ratio at the end of the first quarter, provisionally indicating financial soundness, was 164.4%. The solvency ratio is an indicator of how well an insurance company can withstand unexpected losses; the higher the value, the more stable the company’s financial strength. The company explained that although there were temporary valuation losses stemming from fluctuations in interest rates and exchange rates, the growth momentum of core metrics such as insurance profit and loss and CSM is continuing. This trend suggests that while quarterly performance may fluctuate in the short term due to volatility in financial markets, as long as profitability in the core business and the management of capital soundness are maintained, performance is expected to gradually move toward stability.