[Click eStock] "Hanwha Insurance, Stock Still Cheap Despite Strong Earnings"

[Asia Economy Reporter Park Ji-hwan] Yuanta Securities on the 1st issued a 'Buy' investment opinion and a target price of 7,000 KRW for Hanwha General Insurance, stating that although the company recorded strong earnings in the first quarter of this year, its stock price is still undervalued.

Researcher Jung Tae-joon of Yuanta Securities evaluated, "Due to the significant increase in actual loss insurance premiums last year, we can expect earnings growth from the loss ratio improvement cycle until next year." Despite the stock price rising about 23% since the beginning of the year due to strong first-quarter results, he emphasized that the stock is still significantly undervalued with a price-to-earnings ratio (PER) of 3.2 times and a price-to-book ratio (PBR) of 0.37 times.

In particular, the analysis highlights the importance of focusing on the three-year average actual loss insurance premium increase rate. Due to being designated as a management target following a deficit turnaround in 2019, actual loss insurance premiums were significantly raised early last year. Since actual loss insurance products have the highest proportion of three-year maturity products, the effect of premium increases must be reflected in a rising three-year average premium increase rate for it to lead to a substantial improvement in the loss ratio.

Researcher Jung explained, "The premium increase rate in 2018 was significantly low due to the introduction of Moon Jae-in Care, whereas the premium increase rate in 2020 was significantly high, so we can expect loss ratio improvement from the rising three-year average premium increase rate through 2022." He added that this will serve as a driving force showing a differentiated earnings growth trend compared to major general insurers.