[Click eStock] "Hyundai Marine & Fire Insurance with Stable Loss Ratio... Target Price Maintained"

[Asia Economy Reporter Myunghwan Lee] Daishin Securities announced on the 17th that it maintains a Buy rating and a target price of 38,000 KRW for Hyundai Marine & Fire Insurance, citing the stability of indicators such as insurance loss ratios that differ from market expectations.

Daishin Securities forecasts that Hyundai Marine & Fire Insurance's automobile insurance loss ratio for the second quarter of this year is likely to continue at the first quarter level. The company's automobile insurance loss ratio in the first quarter was recorded at 79.1%. Contrary to expectations that the automobile insurance loss ratio would naturally rise due to the transition to an endemic (periodic outbreak of infectious diseases), it is expected to remain at a considerably stable level.

The automobile insurance loss ratio in April rose slightly to 79% compared to March. This was because the number of COVID-19 confirmed cases decreased to the 3 million range in April and social distancing measures were eased, causing automobile traffic to exceed pre-COVID levels. However, despite the number of confirmed COVID-19 cases dropping below 1 million in May, Daishin Securities expects the loss ratio to slightly decrease or remain similar. Initially, the loss ratio was expected to continue rising. Researcher Hyejin Park of Daishin Securities noted, "June is critical, but there seems to be no significant change from the May trend."

Hyundai Marine & Fire Insurance estimates that the risk loss ratio will decrease by 4-5% compared to the first quarter. The company's risk loss ratio in the first quarter was 99%, higher than competitors. The cataract surgery costs, which raised the overall risk loss ratio in the first quarter, significantly decreased starting in March. From April, the industry as a whole has strengthened payment reviews for cataract surgeries, and the Financial Supervisory Service classified cataract surgeries involving brokers as insurance fraud, causing a sharp decline in claims. Daishin Securities estimates that Hyundai Marine & Fire Insurance paid approximately 70 billion KRW in insurance claims for cataract surgeries in the first quarter. From April, this figure is expected to decrease by more than half, potentially increasing profits by around 35 billion KRW in long-term insurance.

Additionally, it was noted that a general insurance large loss of 6 billion KRW due to an S-OIL factory fire and one-time costs of 20 to 25 billion KRW related to voluntary retirement will be reflected. However, due to a significant rise in interest rates in the second quarter, interest income is expected to increase substantially.

Researcher Park stated, "Guidelines for Korean medicine treatment and measures to curb excessive treatment, which could help reduce automobile insurance loss ratios in the future, are also pending," and assessed Hyundai Marine & Fire Insurance as "the most attractive investment within the financial sector."