"Four Major Non-Life Insurers Show Strong Q1 Performance... Expectation of Improved Loss Ratio in Q2"

Hanwha Investment & Securities Report

[Asia Economy Reporter Lee Myunghwan] As the four domestic non-life insurance companies all posted strong performances in the first quarter of this year, securities analysts expect an improvement in long-term risk loss ratios in the second quarter.

Hanwha Investment & Securities stated that while the automobile loss ratio of domestic non-life insurers is expected to rise in the second quarter of this year, long-term loss ratios are anticipated to improve.

According to Hanwha Investment & Securities, the four non-life insurers that announced their first-quarter results on the 12th all recorded strong performances exceeding market expectations. Comparing each company's first-quarter results with market forecasts, DB Insurance (+31%), Meritz Fire & Marine Insurance (+20%), Samsung Fire & Marine Insurance (+15%), and Hyundai Marine & Fire Insurance (+4%) all achieved high results. Hanwha Investment & Securities evaluated that all four companies had automobile loss ratios lower than estimates, and except for Hyundai Marine & Fire Insurance, long-term risk loss ratios were also lower than expected.

However, the new contract environment was sluggish. All four companies saw a decline in new individual insurance contract sales compared to the same period last year, remaining at levels similar to the second half of last year. As a result, despite the disappearance of the 1200% rule effect on recruitment commissions, DB Insurance and Meritz Fire & Marine Insurance's operating expenses decreased compared to last year. Since a recovery in the new contract market is not expected throughout the year, the trend of slowed sales and lower-than-expected operating expenses is projected to continue for the time being.

Hanwha Investment & Securities forecasted that due to the lifting of social distancing and a decrease in the number of quarantined individuals, the automobile loss ratio in the second quarter of this year will rise compared to the previous quarter. However, following the automobile sector, which was the main driver of strong first-quarter results, an improvement in long-term risk loss ratios is expected in the second quarter. Kim Doha, a researcher at Hanwha Investment & Securities, stated, "The risk loss ratios of major insurers are believed to have slightly decreased since April," but added, "Considering that the fundamental issue lies not in diseases but in the medical practices themselves, institutional improvements are deemed essential for mid- to long-term improvement."

Hanwha Investment & Securities presented DB Insurance as the top pick within the industry. At the same time, Samsung Fire & Marine Insurance and Meritz Securities were upgraded to a buy rating due to their secured upside potential.