[Edaily Reporter Kim Hyung-il ] Hana Securities assessed that Hanwha General Insurance Co.,Ltd.(000370)reported second-quarter standalone net income that exceeded market expectations and that the trend of improving profitability in its long-term insurance business is continuing. The firm maintained its “Buy (BUY)” investment rating and target price of 10,500 won.

On the 13th, Ko Yeon-soo, an analyst at Hana Securities, stated, “Hanwha General Insurance Co.,Ltd.’s second-quarter standalone net income was 116.4 billion won, exceeding the consensus by 15%,” adding, “Despite a deficit in auto insurance, earnings from long-term insurance and investment income were better than expected.”

Insurance operating profit totaled 101.8 billion won, up 8% year-over-year and 27.6% quarter-over-quarter. Long-term insurance profit stood at 113.8 billion won, showing growth compared to both the same period last year and the previous quarter. The difference between projected and actual claims payments and the difference between projected and actual operating expenses improved by 14.2 billion won and 9.3 billion won, respectively, compared to the same period last year, while the cost of loss-bearing contracts also improved by 8.9 billion won, driving the results.

Auto insurance recorded a deficit of 17.2 billion won, though the deficit narrowed compared to the previous quarter. The auto insurance loss ratio stood at 91%, marking an improvement for the third consecutive quarter, while the combined ratio (including operating expenses) for the second quarter was approximately 106%. General insurance profit stood at 5.3 billion won, a decrease of 1 billion won year-over-year due to the impact of several high-value fire incidents.

The margin on new insurance contracts (CSM) stood at 327.2 billion won, up 24.9% year-over-year and 8.2% quarter-over-quarter. This was driven by the rise in the CSM multiple for protection-type life insurance to 14.4x following the adjustment of long-term insurance rates last April. Although the CSM adjustment amounted to only 115.3 billion won despite reflecting actuarial assumption guidelines, the company projected that its annual CSM target of 4.6 trillion won is fully achievable.

Investment gains and losses totaled 34.3 billion won, a 45.5% increase compared to the same period last year. The return on assets under management was 3.2%, up 0.57 percentage points year-over-year, with solid performance driven primarily by interest and dividend income, as well as valuation gains and losses on financial assets measured at fair value through profit or loss (FVPL).

Researcher Ko stated, “Although the CSM multiple for new contracts is expected to decline by approximately 1 to 2 times in the second half of the year, it remains at a healthy level of over 14 times even in July,” adding, “We expect to be able to mitigate further declines by improving product profitability.”

He continued, “Following the introduction of the managed care payment system in July, annual losses related to manual therapy are estimated to decrease from 40 billion won to approximately 18 billion won,” adding, “This will contribute to the improvement of long-term insurance profitability going forward.”

Finally, he added, “If discussions on reforming the surrender value reserve system gain momentum, interest in insurers that have had their dividends restricted will increase,” noting that “Hanwha General Insurance Co.,Ltd. may also see greater prospects for resuming dividend payments.”