[Click eStock] "Korean Re, Full-Scale Turnaround Period"

[Asia Economy Reporter Park Ji-hwan] Yuanta Securities evaluated on the 30th that Korean Re has entered a period of a renewed turnaround.

Jeong Tae-jun, a researcher at Yuanta Securities, cited the improvement in the reinsurance industry conditions and the company's strategy focusing on profitability defense as reasons for reaching a full-fledged turnaround period.

The clearest evidence of industry improvement is the continued rise in reinsurance premiums due to a shortage of collateral supply. Researcher Jeong Tae-jun stated, "Just as insurance companies improve loss ratios by raising premiums, reinsurance companies also see improved loss ratios when reinsurance premiums increase," and predicted, "Korean Re is expected to experience a turnaround next year and the year after."

In particular, the improvement in automobile insurance loss ratios expected to continue until the first half of next year, the improvement in long-term insurance loss ratios that may occur with the increase in actual loss insurance premiums, the improvement in protection insurance payout rates, and the normalization of general insurance loss ratios are anticipated.

Additionally, the recent rise in interest rates is positive. When new investment yields increase, interest margins also show an improving trend. Researcher Jeong said, "Since 2016, due to continuous interest rate declines, the company has been defending interest margins by increasing the proportion of loan receivables within interest-bearing assets," and added, "As it has become difficult to expand loan receivables recently due to COVID-19, the rise in interest rates is expected to help defend margins."

The company’s strategy is also evaluated positively. Rather than expanding market share in the domestic reinsurance market, the focus is on defending profitability. Researcher Jeong emphasized, "This can be seen not only in the expense ratio but also in the improvement of loss ratios," and added, "Furthermore, the shareholder return policy is steadily expanding, and the current dividend yield based on the stock price reaches 5.8%, which is also positive."