[Click eStock] "Dongyang Life Insurance, Q4 Earnings Exceed Market Expectations by Twice"

[Asia Economy Reporter Park Jihwan] Yuanta Securities maintained a 'Buy' rating and a target price of 5,000 KRW for Dongyang Life Insurance on the 25th, stating that the company delivered results that significantly exceeded market expectations due to favorable insurance profit and loss.

Jeong Taejun, a researcher at Yuanta Securities, stated, "The net profit for the fourth quarter last year was 20.7 billion KRW, greatly surpassing the market expectation of 10.9 billion KRW." This was attributed to insurance profit and loss significantly exceeding estimates as premium income remained high due to an increase in held contracts in the second half of the year, while insurance claims decreased. Despite the larger-than-expected reserve transfers caused by the increase in held contracts and variable guarantee reserves, the strong insurance profit growth led to impressive results.

Dongyang Life Insurance experienced deficits in insurance profit and loss during 2019 and the first half of 2020, resulting in a significant annual decline, but it is expected to normalize this year.

Investment profit and loss in the fourth quarter exceeded estimates due to bond sale gains from replacement trading. Contrary to insurance profit and loss, investment profit was high in 2019 and 2020 due to recognized sale gains, but this year, as insurance profit recovers, investment profit is expected to decrease compared to the previous year.

Researcher Jeong Taejun explained, "The solvency capital ratio (RBC) for the fourth quarter was 223.7%, down 15.3 percentage points from the previous quarter, due to liability duration extension from regulatory changes and rising interest rates," adding, "Proactive capital expansion appears to have sufficiently secured a buffer against rising interest rates."

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