[Click eStock] "Korean Re, Defensive Stock Approach Valid Amid Uncertainty"

"Delays in Value-Up Remain a Burden"

On the 16th, SK Securities analyzed that a defensive stock approach is effective for Korean Re amid increasing domestic and international uncertainties. Accordingly, they maintained a 'Buy' investment rating and a target price of 10,000 KRW.

Seol Yongjin, a researcher at SK Securities, stated, "As domestic and international uncertainties such as recent tariff issues are growing, the reinsurance industry, which is less sensitive to changes in the market environment, can be a relatively stable investment alternative." He added, "Overall conditions, such as relatively lower capital burdens compared to primary insurers, are positive."

Researcher Seol viewed that Korean Re would be positively affected by regulatory environments, including expectations of credit rating changes and the introduction of a solvency ratio centered on basic capital. He analyzed, "If the credit rating rises, the credit risk burden on primary insurers decreases, enabling access to a wider range of reinsurance contracts, thereby increasing growth opportunities. Additionally, insurers may increase reinsurance cessions to manage their basic capital ratios."

Korean Re's net profit for the first quarter of this year is expected to increase by 17.2% year-on-year to 73.5 billion KRW. Although a one-time loss of about 30 billion KRW is expected to be reflected due to the Los Angeles wildfires in the U.S., the performance of the general property and casualty (P&C) insurance sector, excluding this, is favorable and is expected to offset the impact.

In the second quarter, losses related to wildfires in the Gyeongbuk region are expected to be partially reflected. Researcher Seol explained, "Considering the excess of loss (XL) reinsurance limit, the impact is estimated to be about 20 billion KRW."

Regarding the life and health insurance (L&H) sector, since poor performance was recorded last year due to the revision of detailed rules and conservative reserves for overseas life insurance liabilities, it is expected that the burden will ease this year due to the base effect.

However, despite positive business conditions, delays in value-up remain a burden. Researcher Seol explained, "It is somewhat regrettable that clear guidelines for efficient capital utilization, such as value-up disclosures, have not been presented."