A sharp rise in market interest rates has split the fortunes of insurance and brokerage stocks in opposite directions. Insurers rose on expectations of stronger interest income, while brokerages were held back by concerns over investor fund outflows.
Interest Income vs. Fund Outflows
The KRX Insurance index climbed 10.45% between the 1st and the 25th of this month, according to the Korea Exchange. The index comprises 11 stocks, including Samsung Life Insurance (032830.KS), Samsung Fire & Marine Insurance (000810.KS), DB Insurance and Hanwha Life Insurance (088350.KS).
The KRX Securities index, by contrast, fell 3.44% over the same period. That index is made up of 14 listed companies, including Mirae Asset Securities (006800.KS), Korea Investment Holdings and NH Investment & Securities (005940.KS).
Behind the trend is a rebound in global interest rates. As the armed conflict between the United States and Iran dragged on, crude oil prices climbed again and inflation concerns mounted, pushing rates higher. The benchmark U.S. 10-year Treasury yield broke through the 4.5% psychological resistance level and soared into the 4.7% range. Domestic government bond yields also rose, with the three-year yield topping 3.8% and the 10-year yield exceeding 4.3%.
Insurers hold much of their invested assets in bonds such as government and public debt. As a result, rising rates boost their interest income.
Brokerages face the opposite situation. When rates rise, investors often shift money from risky assets such as stocks into deposits or bonds. As trading volume falls, brokerage commissions — a core revenue source for securities firms — come under downward pressure.
Non-Life Insurers Also Gain From Lower Payouts
Analysts expect insurance stocks to serve as defensive plays for as long as the high-rate environment persists. Non-life insurance stocks in particular are seen as benefiting from a double tailwind — not only rising rates but also improved earnings from a decline in claims payments tied to manual therapy.
"The insurance sector has stood out for expectations of fundamental improvement from rising rates, along with its defensive character amid heightened stock market volatility," said Kim Jae-woo, an analyst at Samsung Securities.
"In terms of earnings, factors improving investor sentiment toward insurance stocks include a turn to a declining long-term loss ratio through profitability management and improved annual earnings from the reversal of loss-making contract costs, confirming a bottoming out," Kim added.
A managed-benefit system taking effect in the second half is also seen as a positive for non-life insurers. Sul Yong-jin, an analyst at iM Securities, said of the non-life insurance sector that "the potential upside in terms of earnings and shareholder returns is high," adding that "as the managed-benefit system takes effect, insurance payouts on indemnity policies, centered on manual therapy, will decrease, leading to an overall improvement in profit and loss."
