[Click eStock] "Meritz Financial Group, High Insurance Fatigue but Solid Financial Structure"

Daishin Securities maintained a target price of 120,000 KRW and a 'Buy' rating on Meritz Financial Group on the 5th, stating that although investor fatigue has increased due to changes in insurance actuarial assumptions, the company's solid financial structure highlights its corporate value.

Researcher Park Hye-jin said, "Using the log-linear principle model proposed by the Financial Supervisory Service to assume the lapse rate, the year-end CSM decrease is expected to be minimal," adding, "The company anticipates a maximum decrease of 200 billion KRW."

Park noted, "There will be adjustments related to the difference between actual and expected results; cumulative gains from this difference amounted to 342 billion KRW through the third quarter of this year," and added, "The company tried to manage the gap between expectations and actuals within about 5-6%, but this ratio expanded to 10% in 2024, leading to a change in the year-end loss ratio assumption. Considering all factors, the year-end CSM is expected to remain unchanged."

Meritz Securities is not expected to adjust insurance premiums. Currently, most insurance companies are considering premium increases due to inevitable declines in CSM multiples caused by new contracts and assumption changes.

Researcher Park said, "Our premiums are already higher compared to other companies," and forecasted, "Most insurers' long-term insurance profits will decrease in 2025, but in that case, our company is expected to maintain the 2024 level."

She added, "The company expects the impact of loss ratio assumptions by age group to be even greater, but since the overall liability structure changes will be fully reflected in April, they plan to establish new contract-related strategies thereafter. Due to asset and liability duration over-matching related to the KICS ratio, the ratio will actually rise when interest rates fall, so there is no concern about capital ratio."

Meanwhile, with real estate project financing (PF) business expected to recover in the second half of next year, profit growth in the securities division is anticipated.

Researcher Park said, "Overseas stock trading volume in the third quarter reached a record high of 141 trillion KRW, and in November alone exceeded 65 trillion KRW, making it highly likely that the fourth quarter will see even greater increases," and added, "The company expects its strength in real estate PF to resume once interest rates and construction costs stabilize, projecting this to occur in the second half of next year."