[Click eStock] "Korean Re, Joint Reinsurance Market Enters Full Growth... Target Price Maintained"

Yuanta Securities maintained a buy rating and a target price of 10,000 KRW on Korean Re on the 22nd, stating that "the full-scale growth of the co-reinsurance market is expected." The previous trading day's closing price was 6,960 KRW.

On the same day, researcher Jeong Tae-jun of Yuanta Securities said, "The previous target price was also 10,000 KRW, but considering the bonus issue on November 21 last year, it has effectively been raised by 17.3%." He added, "Korean Re plans to continue issuing bonus shares at the same rate every quarter," and explained, "As the ratio of treasury shares held by Korean Re decreases in the total outstanding shares due to the bonus issue, it has a positive effect similar to 'treasury share cancellation.'"

Above all, researcher Jeong emphasized, "The differentiated growth engine, co-reinsurance, will now expand in earnest." He predicted, "From this year, due to the impact of changes in economic assumptions, required capital is expected to increase, so Korean Re will make efforts to expand available capital, mainly targeting insurers with low capital ratios."

He also said, "Of course, efforts to expand available capital will primarily be achieved through increasing the Contractual Service Margin (CSM) of new contracts, but given that excessive competition is already underway, companies have no choice but to lower profitability and focus on quantitative growth to increase new contracts." He added, "This means that the increase in surrender value reserves will exceed profits, depleting distributable earnings. Ultimately, this will result in increased demand for co-reinsurance."

Researcher Jeong noted, "The fourth-quarter results last year are expected to show a slight loss due to financial product disposal losses from replacement trading of low-yield bonds and proactive cost recognition through additional reserves for Incurred But Not Reported (IBNR) losses."

Nevertheless, he said, "This is seen as a strategy to reserve the sharply increased profits from the first half of the year, driven by gains on financial assets (FVPL) and expansion of other insurance income, as future profit resources." He added, "Through this, a stable profit flow is expected this year as well. The new contract CSM in the fourth quarter of last year is expected to increase significantly due to the 700 billion KRW co-reinsurance contract signed with Samsung Life in November of that year."