By Yoon Young-sil | Business Korea | February 13, 2025
Carrot Insurance’s Deficit Narrows in 2023 but Remains a Financial Challenge
Hanwha General Insurance is contemplating the sale of management rights for Carrot Insurance, a digital insurance company it established in 2019 in partnership with financial investors, including SK Telecom, Hyundai Motor and Altos Ventures. This decision comes amid financial concerns and a complex interplay of market dynamics. Carrot Insurance, which was launched to tap into the burgeoning digital insurance market, has been a pioneer in offering innovative products like the “Per-Mile Special Contract,” the first of its kind in Korea, which calculates premiums based on driving distance.
Despite its innovative approach and rapid growth, with over 2 million cumulative subscriptions by July of last year, Carrot Insurance has faced persistent financial challenges. The company’s deficit has grown from 38.1 billion won in 2020 to 65 billion won in 2021 and 84.1 billion won in 2022, although there were signs of improvement in 2023 with a reduced deficit of 76 billion won. The company aims to achieve a profit turnaround within the next one to two years.
The financial strain on Carrot Insurance has been significant, with Hanwha General Insurance providing nearly 300 billion won in support. The company’s solvency margin ratio (K-ICS) fell to the 180% range, indicating a pressing need for financial bolstering. In response, Hanwha General Insurance issued 500 billion won worth of subordinated bonds last month to maintain its own K-ICS ratio, which stood at 215.8% at the end of the third quarter last year, a decline from the previous year.
The potential sale of Carrot Insurance is being pursued discreetly, as confirmed by an investment banking industry insider who stated, “The sale of Carrot Insurance is currently being pursued below the surface.” The insider further noted, “If Hanwha Financial’s financial situation and market conditions align well, the sale could be easily accomplished.”
Carrot Insurance’s valuation reached 1 trillion won during its last capital increase at the end of 2023, reflecting its market potential despite ongoing financial hurdles. The company has conducted three rounds of capital increases, raising a total of 405.5 billion won, underscoring the strategic importance of securing financial stability and growth.
Hanwha Group, the parent company, has been actively expanding its financial footprint internationally, with Hanwha Life Insurance acquiring a 75% stake in the U.S. securities firm Velocity for approximately 250 billion won, as well as acquiring Lippo General Insurance in Indonesia in 2023 and a 40% stake in Nobu Bank in 2024. These moves highlight Hanwha’s broader strategy of diversification and international growth, which may influence its decision regarding Carrot Insurance.
Experts suggest that potential acquirers of Carrot Insurance could include financial holding companies, large life insurers, or fintech companies, given the innovative nature of Carrot’s business model and its alignment with digital transformation trends in the insurance industry. The outcome of Woori Financial Group’s acquisition efforts for Dongyang Life and ABL Life is also expected to influence the market atmosphere and potential interest in Carrot Insurance.