[Click eStock] “DB Insurance, Favorable Performance Expected Centered on Auto Insurance”

Yuanta Securities "Maintains Target Price at 60,000 Won"
Improvement in Auto Insurance Loss Ratio... Reflecting 2019 Premium Increase Effect

[Asia Economy Reporter Gong Byung-sun] An analysis suggests that DB Insurance is expected to deliver results in line with market consensus. The profit improvement appears to be driven mainly by a significant improvement in the loss ratio of automobile insurance. Accordingly, on the 19th, Yuanta Securities maintained a target price of 60,000 KRW and a 'Buy' investment rating for DB Insurance.

The loss ratio in the automobile insurance sector is improving. The automobile insurance loss ratio is forecasted to increase by 3.8 percentage points compared to the same period last year and by 5.1 percentage points compared to the previous quarter. Researcher Jung Tae-joon of Yuanta Securities explained, "The effect of the 2019 premium increase is being reflected," adding, "If DB Insurance succeeds in raising premiums throughout the year in line with the ongoing premium increase trend among small and medium-sized non-life insurers, further improvement in the loss ratio is possible over the next two years."

Other sectors are also expected to show improvement. The general insurance loss ratio is expected to improve by 9.5 percentage points year-on-year and by 1.9 percentage points quarter-on-quarter. Researcher Jung predicted, "Since the loss ratio in the same period last year was unusually high, it will revert to a normal level in the 60% range." Long-term insurance is improving relatively slowly. The long-term insurance loss ratio is expected to decrease by 0.1% year-on-year and increase by 0.8 percentage points quarter-on-quarter. Researcher Jung said, "The slight increase compared to the previous quarter is because insurance claims in the previous quarter were lower than expected," adding, "With the increase in actual loss insurance premiums at the beginning of the year, the three-year average premium increase rate has turned upward, so the year-on-year improvement in the loss ratio will become larger toward the end of the year."

Investment operating profit is forecasted to decrease by 2.0% year-on-year but increase by 13.2% quarter-on-quarter. The year-on-year decrease is expected because the scale of bond sales will shrink due to rising interest rates.

Therefore, DB Insurance's performance is expected to meet consensus. Researcher Jung stated, "DB Insurance's net profit for the first quarter of this year is expected to be 148.6 billion KRW," explaining, "This slightly exceeds the consensus of 147.2 billion KRW." Expectations that insurance operating profit will increase year-on-year and quarter-on-quarter are reflected in the performance.