Life insurance companies reported poor performances in their stock investments through equity-linked insurance products.

Equity-linked insurance products, also known as variable insurance, invest part of customers’ premiums in the stock market.

According to the Korea Life Insurance Association, life insurance firms posted -12.87 percent in combined rate of return in their stock investments through the variable insurance products last year.

The figure is lower than the KOSPI’s year-on-year drop of 10.98 percent.

Among the big three companies, Samsung Life posted the lowest earnings rate of -10.39 percent. It stayed sixth in ranking.

Korea Life and Kyobo Life saw the rate come to -6.28 percent and -6.94 percent, respectively, ranking second and third.

While Dongbu Life topped the list with an earnings rate of -4.42 percent, many firms posted rates of below -10 percent.

ING Life, which ranked 11th, posted a rate of -11.34 percent, followed by Allianz Lie with -12.96 percent, KB Life with -13.65 percent and Metlife with -14.06 percent.

Other life insurers such as Mirae Asset, Ace and AIA reported poorer performances by posting rates between -14.58 percent and -15.84 percent.

Heungkuk Life Insurance recorded the lowest rate of -16.08 percent.

With the stock market performing strongly again after the 2008 global financial crisis, there has been a sharp rise in demand for variable insurance products that invest heavily in securities for high returns and have insurance protection.

Most variable insurance products invest 80-95 percent of premiums in stocks and bonds, according to the life insurance association.

Last year, Kyobo Life launched new variable annuity insurance policies which guarantee the principal even if the investment return fails to grow.

Mirae Asset Life’s new variable annuity insurance, sold at banks, has part of its investment returns transferred to bond-type funds once the returns surpass a certain level, in order to guarantee a positive return.

The recent global stock market turmoil connected to the eurozone debt crisis is troubling many variable insurance subscribers. As their funds incur losses, they are wondering whether they should withdraw their subscriptions.

But insurance firms argue that short-term fluctuations don’t matter much for variable insurance.

“Variable insurance is a long-term financial product dealing in long-term subscription for over a decade,” a company spokesman said.

“Short-term fluctuations matter even less if the insurance premium is paid in monthly installments ― when the stock market is bearish, one buys stocks at cheaper prices, thus minimizing the average cost and maximizing investment return when the stock market index heads up again later.”

By Kim Yon-se (kys@heraldcorp.com)