DB Insurance Achieves Earnings Surprise... "Further Upside Expected"

[Asia Economy Reporter Park Jihwan] Daishin Securities maintained a buy rating and set a target price of 65,000 KRW for DB Insurance on the 16th, stating that the first-quarter earnings significantly exceeded market expectations and there is room for further improvement.

Researcher Park Hyejin of Daishin Securities said, "Most of the key indicators improved in the first quarter," adding, "It is especially positive that the insurance operating deficit, which had been continuously expanding, was significantly reduced in the first quarter." The cumulative renewal effect of special contract adjustments in January, June, and December last year, as well as the increased automobile insurance premiums in the first quarter of this year, have led to continuous improvement in the automobile insurance loss ratio quarter by quarter.

Accordingly, the automobile insurance loss ratio fell to 80% in April. The expense ratio in the first quarter also performed considerably well relative to sales, so the expense level itself is expected to decrease from the second quarter. It was explained that the automobile insurance loss ratio is the lowest among coverages, the insurance operating deficit is the smallest, and profits are expected to improve further going forward.

Researcher Park said, "The first-quarter net profit recorded a strong performance, exceeding our estimate of 107.4 billion KRW by 28.1% and the consensus of 104.5 billion KRW by 31.7%," adding, "This strong performance was due to the decline in the automobile insurance loss ratio, the decrease in the expense ratio, and an increase in investment income."

He explained, "Investment income was 324.8 billion KRW, down 16.3% from the previous quarter but up 14.7% year-on-year," noting, "This is because there were no gains from sales in the first quarter of last year." It was analyzed that a slight gain from sales occurred in the first quarter and the insurance operating deficit narrowed to -14.6 billion KRW, which is positive.

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