Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated net profit increased by 40.5% year on year, reaching KRW1,369 billion.
- CSM (Contractual Service Margin) balance grew by KRW0.5 trillion year to date, expected to exceed KRW13 trillion by year-end.
- Investment profit showed significant improvement, with KRW555 billion reported in Q2, up from negative KRW77 billion the previous year.
- Exclusive sales channel saw a net increase of 2,300 agents year to date, maintaining industry-leading position.
- Shareholder return policy aims to target a global top-tier payout of 50% in the mid to long term.
Negative Points
- Shareholders' equity declined by KRW2.8 trillion year to date, mainly due to the FSS liability discount rate strengthening.
- Significant negative CSM adjustment of KRW600 billion in the first half due to policy cancellations and regulatory changes.
- Interest rate sensitivity remains high, with a 10-basis-point drop in interest rates associated with a KRW2 billion to KRW3 billion drop in margins.
- Pending regulatory changes are causing delays in the disclosure of the corporate value program.
- Margins for whole life insurance products have been impacted by intense market competition and promotional marketing spend.
Q & A Highlights
Q: What was the reason for the decline in margins and revenue in the second quarter, and what are your plans for margin management in the second half?
A: The decline in margins was due to a deterioration in the financial environment, particularly a decline in interest rates. Year to date, there has been a significant decline in interest rates, affecting the entire industry. However, the proportion of health policies has increased, leading to an improvement in our CSM multiple. We expect to achieve a minimum of KRW3.2 trillion in CSM by the end of the year.
Q: What caused the significant negative CSM adjustment in the second quarter?
A: The adjustments were due to policy cancellations and regulatory measures to lower the refund ratio, resulting in a KRW500 billion adjustment from cancellations and a KRW200 billion adjustment from the liquidity premium reduction. These are considered one-off factors, and we expect fewer adjustments in the second half.
Q: When can we expect the disclosure of your value program?
A: We are finalizing our plans based on company fundamentals, including earnings and ROE. We aim to achieve more than KRW3 trillion in annual new business CSM and improve our shareholder return policy to a 50% payout in the mid to long term. The timing of the disclosure depends on the finalization of the enforcement decree to the Capital Market Act.
Q: How do you plan to maintain margins for whole life insurance products, and what are the drivers behind changes in these margins?
A: Margins are affected by interest rates and marketing expenses. We have classified our whole-life products into three categories and are focusing on regular whole-life products to defend against margin declines. Despite interest rate and marketing challenges, we plan to maintain strong margins by focusing on high-margin products.
Q: Can you elaborate on your channel strategy, particularly the increase in exclusive FC headcount?
A: We have seen a significant increase in exclusive FC headcount, now over 30,000 agents. This is partly due to the economic downturn, leading self-business owners to enter the insurance industry. We are focusing on strengthening our exclusive channel rather than expanding into GA channels, as our exclusive agents show higher productivity.
Q: How much impact did interest rates have on your sales and margins, and how do you manage this sensitivity?
A: Interest rate sensitivity has led to a 10% to 20% decline in margins for whole-life products. We have reduced the proportion of whole-life products and increased health-related policies to manage this sensitivity. A 10-basis-point drop in interest rates results in a KRW2 billion to KRW3 billion drop in margins.
Q: What is the expected timeline for achieving a 50% shareholder return ratio?
A: We aim to achieve a 50% shareholder return ratio within the next three to four years. Starting this year, we will gradually and steadily increase shareholder returns.
Q: How does your new value program compare to your previous shareholder return policy?
A: Our previous policy targeted a 35% to 45% payout ratio with annual increases in dividends per share. The new value program aims to increase the payout target to 50%, reflecting our solid earnings growth. This will likely result in higher dividends per share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
