[Click eStock] "Korean Re, Excellent Operating Profit... Target Price Up"

[Asia Economy Reporter Ji-hwan Park] Hana Financial Investment evaluated that Korean Re is showing very excellent ordinary profit. They maintained a 'Buy' investment opinion and raised the target price to 15,000 KRW reflecting improved ordinary profit.

Lee Hong-jae, a researcher at Hana Financial Investment, explained, "The operating profit in the second quarter was 63.7 billion KRW, down 12.9% year-on-year," adding, "However, the profitability of domestic and overseas P&C improved, leading to an overall improvement in ordinary profit." He analyzed that with the easing of social distancing in the second quarter, household loss ratio (L/R) rose by 7.3 percentage points year-on-year, and overseas COVID-19 related losses reached a record high of 30.6 billion KRW. Despite a 15.9% increase in large losses such as natural disasters compared to the previous year, the current ratio (C/R) rose by only 0.8 percentage points year-on-year.

Although there were some concerns due to the large fire accident at Coupang's logistics warehouse in June, the loss amount was only about 6.5 billion KRW, highlighting risk management capabilities. The return on invested assets recorded 4.0%, as bond CG decreased but profits related to alternative investments increased.

Researcher Lee Hong-jae emphasized, "With the formalization of accident exemption and early reflection of Incurred But Not Reported (IBNR) losses, additional COVID-19 losses have been reduced, so second-half performance is expected to be favorable," adding, "assuming a dividend payout ratio similar to last year (30%), the expected dividend yield is 7.1%, highlighting dividend attractiveness."

He stated, "The recent key issues in the insurance industry are IFRS17 and K-ICS," and explained, "Due to the nature of reinsurance, the previously high seasonality has eased, resulting in more stable performance and increased predictability. Also, assumptions such as renewal of reinsurance premium riders are reflected in the introduction of K-ICS, which could improve the solvency ratio compared to the current RBC, so risks related to the new system appear to be very limited."