[Click eStock] "Korean Re, Dividend Appeal is a Bonus Alongside Strong Earnings"

[Asia Economy Reporter Park Jihwan] Hana Financial Investment evaluated on the 21st that Korean Re is showing steady performance with increasing dividend attractiveness. The investment opinion is 'Buy', and the target price was maintained at 12,000 KRW.

Lee Hongjae, a researcher at Hana Financial Investment, stated, "Korean Re's Q2 net profit is expected to record 60.3 billion KRW, a 17.5% decrease year-on-year but a 6.7% increase quarter-on-quarter." He explained that despite reflecting losses from the Coupang logistics warehouse fire (about 6.5 billion KRW) and overseas COVID-19 related death insurance losses (about 20 billion KRW), the increase in reinsurance premiums and special contract adjustments had an impact.

Since the cumulative net profit until the first half of this year is expected to reach 77% of last year's annual net profit, even with conservative assumptions for the second half, the annual net profit is estimated to improve by 39% compared to the previous year. The return on invested assets is expected to record 3.5% due to a decrease in disposal gains.

Researcher Lee Hongjae said, "Although COVID-19 variant viruses are spreading worldwide recently, no negative impact is expected in terms of performance," adding, "Rather, due to reduced medical utilization, domestic household L/R may improve slightly, and since the variant virus has a low fatality rate, overseas death insurance-related losses are not expected to increase."

However, due to uncertainties about the economy caused by the resurgence of COVID-19, the decline in long-term interest rates is considered a burden factor for stock prices. Researcher Lee said, "Despite reflecting one-time losses and reduced asset disposal gains, the performance trend this year is decent, which is positive, but significant short-term stock price increases are not expected until interest rates rebound."

He added, "Since the expected dividend yield this year exceeds 6%, the stock price is expected to have downside rigidity," and "Considering solid profitability and positive long-term outlook for the reinsurance industry, the investment attractiveness remains high if the investment horizon is extended."