Samsung Fire & Marine Insurance Co., Ltd. (A000810) Earnings Call Transcript & Summary

Good morning and good evening. First of all, thank you all for joining this conference call. And now we will begin the conference of the fiscal year 2019 fourth quarter earnings results by Samsung Fire & Marine Insurance. This conference will start with a presentation followed by a divisional Q&A session. [Operator Instructions] Now we shall commence the presentation by Samsung Fire & Marine Insurance.

Good afternoon. I am Joon Chang Ho, Head of the IR team at Samsung Fire & Marine. We'd like to start the earnings conference call for fiscal year 2019. Today, CFO will present key earnings highlights for 2019 and business strategies for 2020, which will be followed by the Q&A session with the participating executives. Now CFO, Bae will start the report.

Good afternoon. I am Tae-Yeong Bae, CFO of Samsung Fire & Marine. I will give you a brief summary of the key earnings highlights for fiscal year 2019 and then discuss our views on the business for 2020 and future outlook. First is 2019 earnings report. On Page 1, the direct premium written was up 3.3% to post KRW 18.8 trillion, and the net profit fell 42.4% year-over-year to KRW 609.2 billion. The DPS was determined at KRW 8,500, and the dividend payout ratio was up 10.3 percentage points to 56%. On Page 2, as for the long-term line, we achieved 29.5% growth in terms of health insurance new business and the risk premiums earned grew 6% year-over-year. The risk loss ratio was up 5.2 percentage points to stand at 84.2%, and expense ratio was up 2 percentage points. On Page 3, the auto insurance revenue was up 8.5% year-on-year, thanks to the online channel growth. The loss ratio increased to 6.1 percentage points to 91.4% and while the expense ratio improved 1.3 percentage points to post 16.3%. Turning to Page 4. General insurance revenue grew 4.1% year-over-year, and the recurring premiums grew 8.8% but the underwriting process fell 8.2%, mainly due to one-off flood damages in the Middle East in the second half of 2019. On Page 5, the investment profit declined 6.8% year-over-year, but when excluding one-off factors, such as Samsung Electronics stake disposal gains in 2018, it grew 1.7%. The investment yield is 2.9%, and the adjusted yield is 3.2%. On Page 6, the asset liability spread margin was down 5 basis points compared to the end of last year to post 34 basis points and the duration matching ratio is 85%. Now I'd like to brief you on where the company is currently standing in 2020. As for the whole industry, the total accumulated underwriting income from January to September last year is estimated to be about KRW 270 billion. Yes, the underwriting income posted by Samsung Fire & Marine was KRW 450 billion, which means that our market share in terms of underwriting income is 167%. Many insurance companies are struggling with deterioration of their underwriting profitability, and most companies are forecasted to post underwriting losses on a full year consolidated basis, except Samsung Fire & Marine. We're improving the quality of long-term business by expanding health protection coverages and focusing on selling more policies rather than pursuing bigger premiums, all of which are our efforts to secure solid profit streams. In fact, the monthly number of policies sold increased from 187,000 in the second half of 2019 to 243,000 policies in January 2020, which shows that we are pursuing qualitative growth in our sales efforts. In the month of January this year, the health care and illness products accounted for 81%, and the risk and loading premiums accounted for 83%. These results will lead to stable sources of income when they are coupled with recurring premium increase and persistency ratios. This year, we will closely monitor the market with profitability as our top priority and boost underwriting profitability as well. For this, we're taking measures to gradually strengthen underwriting and strictly managing profitability by coverage type. As for the auto insurance, we believe that the auto insurance profit will certainly bottom out this year in terms of the denominator of the loss ratio, standard premium hikes, revised policy portfolio and efforts to cover for more costs are already resulting in an accelerated growth of recurring premiums. In terms of the numerator of the loss ratio, in terms of accident frequency and risks, the number of car accidents has already been declining and also claims growth is expected to slow down in light of expected regulatory improvements, including the increase of deductibles for drunk driving and the government agencies guidelines on auto insurance medical treatment assessment. We're making efforts to improve profitability through stronger underwriting for policies that are expected to have more than 100% combined ratios. In January of this year, the share of online sales increased to 46% and the share of high-margin policies, including insurance for larger passenger vehicles was up 2 percentage points to 38% year-over-year. Since the domestic general insurance business has favorable loss ratio and profit contribution, we will continue to strengthen our market position, driven by profitability. Overseas facultative inward business was a burden on general insurance earnings, so we are restructuring the portfolio based on profitability by reducing the share of high-risk coverages. We will also strictly manage variability by reducing the long tail burden and presenting one-off accidents like those that happened last year. In terms of asset management, we will flexibly respond to the lower interest rate environment and improve the medium and long-term returns. We will increase the share of high-yield quality assets such as infrastructure financing, and invest more in alternative assets through global asset managers in order to secure additional gains. At the same time, we will adjust offering rates more flexibly in consideration of the market rate to realize steeper spread margin. Next, I'd like to share with you our internal views on future outlooks on the sources of profits for the next 2 to 3 years. First, on long-term line, the number of policies and protection premiums will continue to increase. As a result, we expect the steady growth of the risk premiums, loading premiums and recurring premiums that will be carefully managed for profit generation. As the industry is recognizing the importance of loss ratio management, it is crucial to develop strong claims management capabilities based on good underwriting and data analysis. The industry competition is going to be based more on profitability. And Samsung Fire & Marine will lead these industry-wide trends. The auto insurance loss ratio peaked in 2019 and the auto cycle is expected to improve from 2020. In anticipation of this change, we preemptively increased sales last year in order to grow the size of the recurring premiums. We will work hard to move up the turnaround point for auto insurance. In the general insurance line, we are pursuing joint growth opportunities in the U.S. and the Asia Pacific markets with Canopius, a lowest participants in order to overcome the limitations of the domestic market. Currently, we're discussing joint business management options in the U.S. and the Asian markets. Samsung Fire & Marine is the only Korean insurer capable of conducting financially and strategically meaningful general insurance business overseas. Likewise, we will create new revenue pipelines in general insurance business. We believe that the P&C industry competitive landscape is going to diversify even further. It will not only involve the incumbents, but also the growth of bank-based financial holding companies and the entrance of big tech companies in the insurance market, thereby, potentially creating a triangular competition landscape in the industry. In this ever-changing environment, P&C companies cannot guarantee sustainable growth if they maintain their business as usual. The nature of insurance business will change fundamentally, and you can only be successful when you're prepared to build up your capabilities and take the lead. In recognition of this, Samsung Fire & Marine is carrying out restructuring and innovative measures internally and externally so that we can achieve sustainable growth in these changing times. These efforts include the creation of a joint venture with Kakao and pursuit of joint business with Canopius in Asia and the U.S. We are using a telescope to look into the future and a microscope to carefully examine the current situation. Using the telescope, we will explore new market opportunities while we manage the details using the microscope. Samsung Fire & Marine is setting its own course, and we're fully equipped with innovation. Being #1 is not just shown in financial numbers, I'd like to ask for your continued support and interest. Thank you.

Now we will have a Q&A session, please limit the number of questions per person to 2.

[Operator Instructions] The first question will be presented by Seung-Gun Kang from HI Investment & Securities.

Hello, I am Kang Seung-Gun from HI Investment & Securities. I'd like to ask questions regarding risk loss ratio trends and the underwriting strategies. Currently, I understand that it's not easy for you to increase indemnity premium rates because of regulatory issues. And also, there are changes in the behaviors of the policyholders. Therefore, stricter underwriting may have limitations as to how much impact it can create on the loss ratio trend, and that has been shown on your loss ratio trend recently. Therefore, the market is interested in understanding the percentages of death benefits and living benefits in your portfolio. So I'd like to ask you to give us some numbers as to such percentages in 2017, that was when -- that was before, competition became fiercer. So in 2017, what was the percentage of death benefits versus living benefits? And how did these numbers change in 2019? And you mentioned that you are going to continue to strengthen underwriting in 2020 as well. So do you think that these numbers will change this year?

Hello, I am [ Choi Bu Gyu ] from Actuarial RM Team. Let me answer your question. Let me give you numbers as to the death and property-related benefits that do not include living benefits. So as for death and property benefits, the percentage in 2017 was 41%, and it went down to 37% in 2019. The reason for the decline in the percentage is because of heated competition in 2018 and 2019 related to death benefits. In 2020, we expect that market competition is going to slow down slightly. So we will continue to put focus on profitability. And we will continue to make sure that we will have more percentage for high-margin coverages through product designing and underwriting. Already, we have been taking measures starting from February by limiting the ceilings for some coverage types and also making it mandatory for people to sign up for death benefits when they're purchasing insurance. So I believe that we will be able to increase the share of high-margin coverages in this year.

The next question will be presented by Byung Gun Lee from DB Finance and Investments (sic) [ DB Financial Investment ].

Hello, I am [ Lee Byung Gun ] from DB Finance and Investment. I'd like to ask you 2 questions. The first question is about dividends. Previously, you mentioned that you were going to increase your dividend payout ratio gradually to 50% by 2021. However, the earnings results for 2019 were rather disappointing. So in order to maintain the dividend amount, your dividend payout ratio has already surpassed 50%. So is it going to be something of temporary nature? Or are you going to continue on with your existing capital policy until 2021? Right now, there are not many clear numbers about earnings outlook. And currently, the business environment is not favorable. So even though your business improved, your DPS is not going to increase if you maintain the previously announced dividend policy. So I'd like to ask you to provide us with some color on that. And the second question is about new business, and I'd like to thank you for providing us with some meaningful comments about your plans going forward. However, when we look at the sales of pseudo cancer-related coverages from December to recently, I can see that there were some differences between what Samsung Fire & Marine has been doing versus the others in the industry. Because in early February, this year, some companies already reduced limits or coverages for pseudo cancer products and has already happened in December. However, Samsung Fire & Marine has been maintaining and underwriting these products. So because of when some companies reduce underwriting for these kinds of products, of course, those who have such needs will go to companies that would allow underwriting of such coverages. So the problem is what's happening in the industry? Who is going to stop this? And for the past couple of months, I can see that Samsung Fire & Marine seems to be focused more on volume growth rather than quality growth. And that has been shown in your new business numbers from December to January this year. So what is your plan going forward? Are you going to reduce underwriting for pseudo cancer-related products? Or are you going to tighten your underwriting in this regard?

Hello. I am CFO, Bae Tae-Yeong, and I will be addressing your question on dividend policy. One year ago, during the conference call, we mentioned we were going to gradually increase our dividend payout ratio to 50% by 2021. But as you mentioned, the actual business results for last year fell below the market expectations. So after much consideration, we decided to increase the dividend payout ratio to 56% for this year. And because we announced that we're going to maintain our capital policy by 2021, we will -- we are planning to maintain that policy. However, there are many factors that we need to continue to monitor, including the market conditions and also valuation-related issues within the company. So by considering these factors, we may take additional measures if necessary.

Hello, I am [ Joon Chang Ho ] from the channel product and customer planning team. Let me entertain your question on new business and underwriting. In October last year, we went through reshuffling of our product portfolio in order to increase competitiveness of our products as expected and demanded in the market. And as a result, until December, you could see a growing number of sales for health insurance. As for the reasons why we had -- we experienced growth in long-term health insurance in January and February, it's because, first of all, we have a large customer base of 10 million policyholders, and there has been an improved brand recognition among customers. And as a result, our sales grew. Starting from January and also in February, we have been taking gradual measures to strengthen underwriting in order to manage profitability and so the growth of new business starting from February has been slowing down as -- has been going down to the level of last year. And as for your point about the difference between Samsung Fire & Marine and competitors when it comes to pseudo cancer coverages, we will continue to monitor loss ratio trend for these types of coverages, and we will consider adjusting the limit for coverage. In addition to pseudo cancer-related coverages. As for high-risk or low-margin coverages such as policyholders with existing health conditions, we've already strengthened underwriting for these coverages, and we're going to do the same thing for pseudo cancer-related coverages as well. I would like to once again remind you that in 2020, in conducting our sales activities and distribution activities, we will put priority on profitability in terms of our product mix and sales. And I'd like to ask you for your understanding on that.

I'd like to ask you a follow-up question. So is it correct for me to understand that in December last year and January this year, your new business growth was much higher than usual. But starting from February, of course, there are issues related to assumed rates. But other than that, can we say that your new business growth is going to be similar to the level of last year in the first quarter?

So yes, as you mentioned, the level of new growth -- new business growth is going to be similar to that of last year, starting from February.

And I am CFO, Bae, I'd like to add some more comments. We -- as the company is understanding that there are some market concerns about volume growth for Samsung Fire & Marine, but it's been more -- it's been about 1.5 months into this new year. And for the remainder of this year, we will make sure to put tight control over distribution costs and sales volume growth on a yearly basis so that it will be put under control.

The next question will be presented by Jin-Sang Kim from Hyundai Motor Securities.

Hello, I am Kim Jin-Sang from Hyundai Motor Securities. I have 2 questions. The first question is about capital management strategies. Of course, cash dividend and dividend payout ratio, all these things are very important, but I start to think that this may be the right time to consider the possibility of terminating, the cancellating the treasury shares. Of course, I understand that there are many regulatory changes taking place in the industry, including the introduction of IFRS 17 and K-ICS. So maybe you would say that this may be too early to consider these options. But given the fact that Samsung Fire & Marine had excellent capital position, this may be time for the company to differentiate in terms of its capital management strategy. So considering options such as additional share buyback or cancellation of treasury shares, I'd like to ask you, if -- what is your position among these 3 options? Number one, are you not going to do this because of the timing issue, in line with the regulatory changes? Or second option is, are you actually considering such options of share buyback or cancellation? And number three option is you are not going to consider any of these options because you believe that cash dividend is -- cash dividend payout is the right way to do. So I'd like to ask you to provide us with some color on your position. The second question is about competition. As the CFO mentioned in the presentation, competition is fierce -- getting fiercer, and the landscape is changing and there are online players and tech companies and also bank-based insurance business is growing. And at the same time, we see competition coming from life insurance companies as well when it comes to health care protection products and already Samsung Life Insurance has a market share of 8.3% in this product category. As a market leader, you said you are going to solidify your market leadership position and what are the specific strategies and what are the plans that you're going to implement in order to maintain and further strengthen your position in the market?

I am CFO, Bae. Let me entertain your question regarding capital policy. As I mentioned during the conference call earlier last year, we had this timeframe of the introduction of IFRS by 2021. And after the IFRS 17 is introduced, our management regime would have to be changed fundamentally. So our plan was to increase the dividend payout ratio gradually by that timeframe for 3 years. As for the current policy, of course, we will continue to put priority on cash dividend payout and it is because of our understanding that treasury share cancellation is not -- the share buyback without cancellation is not going to help shareholders. And if we do decide to cancel treasury shares then the stake of Samsung Life for Samsung Fire & Marine will increase to a degree that by regulation of Samsung Fire & Marine will become a subsidiary of Samsung Life, which we do not want. And that is why the cancellation option has not been considered. As for buyback option with the cash dividend payout ratio to be around 50%, this buyback option is not something that we completely ignore because we have to look at the payout ratio of tendency. And currently, the company's [ PBR ] is really low in the market. So as for payout options and buyback options, we will consider them in line with the valuation changes in the market. And as you may know, IFRS 17 introduction has been further postponed after discussion. So after 2021, we will progressively and aggressively consider various options going forward. Let me also comment on the second question, which is quite comprehensive. The way I understand the question is that you want to know on what grounds we believe that we're going to be able to maintain and strengthen our market leadership position. First of all, as you may know, Samsung Fire & Marine has excellent capital position compared to the peers in the industry, even based on results, we have very strong capital adequacy. And the market has been wondering what we're going to do with this capital strength. When you think about bank insurance business or big tech companies coming into the insurance market, they are ultimately going to be regulated by the government because when they start doing insurance business, but compared to these new players, we have accumulated capital strength, and we have the know-hows, and we're going to utilize this capital for strategic growth. For instance, we are going to pursue inorganic growth opportunities by creating new growth pipelines and by increasing the efficiency of the capital itself, we're going to increase the ROI. Secondly, we're going to internally innovate our business. Currently, the industry landscape or competition is mainly based on top line growth, which is about volume growth for new business, which is quite inefficient. But we're going to take different approaches. For the long-term line, we have a very efficient and productive TA channel. These Tight Agents are highly professional and well-trained and not like the GA channel. We are able to implement our strategies using the TA channel effectively. For the auto insurance, the loss amount is, for instance, for this category is KRW 230 billion. And if we reach the breakeven point, this means that we will have KRW 230 billion of profit for auto insurance. And as I mentioned in my presentation, we will do our best to advance the turnaround point for auto insurance business. Now moving on to general insurance. Right now, domestically, the premium income for general insurance has been flat, standing at around KRW 5 trillion. And of course, we do have the captive customers but -- and in Korea, it is quite unique when it comes to P&C insurance industry, that in Korea, we have a large portion of health care and protection products. But indeed, the essence of P&C business is general insurance. Therefore, we're going to continue to look for growth opportunities of general insurance, both domestically and overseas. And I believe that these will satisfy your question regarding the ground for our confidence.

The next question will be presented by Sara Lee from Morgan Stanley.

Hello, I am Sara Lee from Morgan Stanley. Thank you for a very detailed presentation about your plans for 2020. But my question may be a little overlapping to the previous questions, but I would once again like to ask you what the management is thinking in terms of overall management objectives and also where the source is of your competitiveness. Because you said that you are going to continue to focus on profitability, but considering the past strategies for the past 2 to 3 years, it makes me wonder if that's really what you mean as an investor, this is a big question. Let me give you some examples. In 2017, for auto insurance, you implemented a 4% premium rate cut and you said that this was going to help boost the market share in the online channel, which will lead to scale of economy, which will later lead to better profitability. However, 2 years have passed. Of course, your market share has increased in the online channel for auto insurance. However, as a result of price-based competition, your loss ratio for auto insurance has worsened. And I wonder if you've decided to take this path and implement the strategy of increasing the market share with the recognition that the loss ratio for auto insurance was going to deteriorate. And in 2018 and 2019 when you look at the health insurance business, there was a very steep competition coming from the peers in the market for health insurance new business and you jumped in, in competing based on commissions. And I wonder if you knew that this was going to deteriorate the profitability of health care-related products. And again, in October last year, you implemented additional premium rate cuts, which were going to affect the margin for these products. And I wonder if this was something that you really needed to do? Or was it just for top line growth. So overall, in my view, for the past 2 to 3 years, it seems that your strategies have not been focused solely on profitability, or is it something that is related to the changing or the constraints of the Korean insurance industry as a whole because of the underwriting cycle, there was no other option but to compete based on pricing and capital strength. Right now, as you mentioned, the landscape is changing, the industry is changing. You do have a good capital adequacy, but other than your capital strength, what other sources of competitiveness do you think you have? So what is the true definition or a sense of your #1 DNA for Samsung Fire & Marine?

I'm CFO, Bae Tae-Yeong, let me give you some overall answer to your question. And then the auto insurance and other related executives will answer. So when it comes to long-term insurance, it is usually very long dated. And depending on your perspective, you may have different views. When you compare earnings results for Samsung Fire & Marine against other companies, and when you make such comparisons, it is possible that you have such a view. However, for our company, we are maintaining a long timeframe in running our business. So I'd like to interpret your question as this. You say that we have been emphasizing the importance of quality business and profitability. But you may wonder if Samsung Fire & Marine's actions have actually triggered more competition in the industry. My answer to your question is rather clear. We have 2 very big principles. Number one, we will continue to generate profit, so profit generation is number one. And secondly, sustainability is the second important principle. And your question was about our own DNA as #1 in the marketplace other than having a lot of capital. What else do we have? Like I mentioned, we have profit generation and sustainability as the 2 pillars and in conducting long-durated business, it is crucial for you to be able to maintain such long duration business without much volatility so that you can continue on with generating profit. And this is where you can differentiate from #1 player, Samsung Fire & Marine and others. And it is almost comparing between a very -- a singer with a very popular fan base versus a one-hit wonder. And secondly, our key competence is the ability to be able to generate new ideas and innovate ourselves. Such innovation efforts may not show immediate results right away, but these will lead to more actions in the future. And after that, I will turn over to the relevant executives.

I'm Kim Il-pyeong from Automobile Insurance Strategy team. Let me comment on auto business. As you may know -- so your question was about this decision that Samsung Fire & Marine has taken in growing our auto insurance revenue when there was a possibility of deteriorating loss ratio. As you may know, there is auto -- in the auto insurance business, there is a very clear cycle. So the crucial point here is to understand when there will be the upside type cycle and when there will be the downward cycle. And this kind of auto underwriting cycle is not just impacting us, but all the other participants of the auto insurance industry. So we're all competing based on the fixed size of the pie, and we're all under the same regulation. So depending on the regulation and the environment, the cycles may affect us in a synced way. So of course, generating a large volume of profit is crucial. But at the same time, as this auto -- considering the characteristics of auto business, you have to be able to maintain relative competitiveness compared to the peers. So when you look at the gap of combined ratio between Samsung Fire & Marine and the others in the market, in 2017 it was 3.3% and the gap was reduced to 2.5% in 2018. However, it actually has been expanded to 2.6% last year. As we increased the market share, there was a certain level of scale of economy with higher efficiency, thereby being able to increase this gap between us and the other players and as you may know, the recurring premiums for auto insurance will be realized in the next years and going forward, so the sales that we incurred this year will lead to higher denominator in the loss ratio calculation by providing more profit sources for next year. And we believe that the auto underwriting cycle is going to improve in 2020. And that is why, with this recognition, we increased the sales of auto insurance, starting from the second half of last year, which will -- which have already been resulting in the increase of recurring premiums already. I'd like to add one more comment. If you were going to do this business for only a short period of time, if your profitability was worsening, then you could reduce sales, thereby increasing your profit ratio. However, Samsung Fire & Marine is going concern, and we want to pursue sustainable growth. And that is the basis on which we conduct our sales strategies.

I'm [ Joon Chang Ho ] from Channel product and customer planning team. Let me answer your question related to long-term insurance. As the CFO already mentioned, we, at Samsung Fire & Marine consider long-term business as a very important source of profitability. And in conducting long-term business, we do not consider this just as product categories for competition in the industry, but rather, we are running our long-term business with the strategy for sustained profit generation. Of course, in the '19 -- for the time frame of 2018 and 2019, the health insurance market itself has been growing in size. This means that there are growing needs for health care products in the market, and there are growing needs for such products. So many insurance companies in Korea have been introducing new health care insurance products in order to satisfy these diversifying health care insurance needs in the market. However, in Korea, there is this impact of distribution channel on the business, and there have been more options for customers to choose from based on prices and other characteristics. And in this environment, in October last year, there was a mission for us to offer good quality health care insurance products for customers so that they can choose to sign up policies with us and be satisfied with them. And this was our strategy to acquire additional customers and retain them. And in conducting long-term insurance business, it is very meaningful and crucial for us to acquire new customers and retain them so that we can generate a very stable flow of recurring premiums, which will be used for further profit generation. In October last year, we reshuffled our new product lineup, and we learned a lot of lessons, and we will continue to do our best to acquire new customers. As the industry is engaged in fierce competition, there may have been some market views that Samsung Fire & Marine's policies were only focused on new business growth. However, as I mentioned and as was mentioned by -- in the presentation, in 2020, we will strengthen underwriting, and we will put focus more on profitability for this year. And in doing the long-term business, we will make sure that this will continue to generate a stable basis for profit for Samsung Fire & Marine in a sustainable manner.

The next question will be presented by Myung Wook Kim from JPMorgan.

I am Kim Myung Wook from JPMorgan. I'd like to present to you 3 questions. The first question is that when we reflect on all the comments that were made for the past 3 conference calls, it seems to me that strategies for the company has been revised or changing because it is my impression that in the past, you put more focus on growth and top line growth, but now you seem to be focused more on the bottom line growth. And you mentioned that in 2020 and going forward, there will be new kinds of competition coming from financial holding companies, Fintech and other elements. So in -- given the assumption that there will be stronger competition in the industry. Are you still going to maintain the priority on profitability, even though this would mean that you will lose your market share? This means that you would have possibility of losing the #1 position in terms of market share because I really want to know what your stance is? You've been talking about long-term profitability. However, there are some mixed views about your market share movements versus management's comments and decisions. So it's been rather confusing. So I'd like to know how strong you are or how determined you are in terms of putting priority on profitability, even though this would mean that you will lose significant market share. The second question is about embedded value. Of course, you're not disclosing the EV numbers, but I'd like to know a little more about the value of in-force and the value of new business. So I'd like to know how much of the value that you estimate for in-force policies and how much added value coming from the new business for 2019? The reason why I'm asking this question is nowadays, you're selling more longer-dated policies. But I wonder if these long-term insurance and such policies would add to profitability to what extent and how much cash flow will be generated from these long-dated policies? And if possible, one more question is that I'd like to know why you are putting a limit on dividend payout ratio to be around 50%, why not 60%, 70% or 80%? I wonder if you are considering this option within the timeframe of 2 to 3 years?

You presented us with 3 questions. I will answer the first and the third one. And the second one will be addressed by a relevant executive. So I can understand that your question is basically that Samsung Fire & Marine willing to sacrifice its market position in pursuit of profitability. I think this is more of a rhetoric because we have to think about the definition of market leadership or market position. For a very long time in the insurance mid-industry in Korea, we have been ranking companies based on new business volume, let's say, KRW 15 billion or KRW 13 billion and then you would rank all these insurance companies on the basis of new business volume growth. And for Samsung Fire & Marine, new health care, new business volume would be, let's say, KRW 14 billion. But when you think about the amount of recurring premiums per month it's about KRW 800 billion. So which criteria should we use to determine the market position? As for us, being #1 in terms of new business growth doesn't really mean much because we're interested in generating stable profit for sustainable business growth, as was mentioned by Mr. [ Kyung ] from CPC Planning team. So in that sense, if we take that approach, I believe that our profitability and the market leadership position is not so much of an apple-to-apple comparison, but more of an apple-to-orange comparison. We are managing many different KPIs, but we have to make a distinction between the current numbers and future profitability. And now I'd like to address your question regarding dividend policies. So basically, you're asking why 50% cap for a dividend payout ratio. As I mentioned 1 year ago, we explained the overall 3-year plans for capital management, and this is the second year according to that plan. Of course, there are many options that we can consider, including cash dividend payout, payout ratio and buyback and so on. We will maintain the overall dividend policy for the announced timeframe. But considering the market conditions, we may consider other options. But overall, our next dividend policy will be announced after the 2021 period is over.

I'm [ Choi Bu Gyu ] from Actuarial RM Team. Let me address your question regarding EV. Let me answer -- give you some numbers. For instance, there were some adjustments of assumed rates and the figures related to cancellation last year. As a result, the unit profitability for new business has gone down from 9.3% in 2018 to 7.8% in 2019. But compared to the figure in 2018, the protection-type new business was 14.4% in -- KRW 14.4 billion in 2018 but it increased to KRW 17.4 billion in 2019. So as a whole, the value of new business has grown by 4% from 2018 to KRW 870 billion in 2019. As for the disclosure of EV numbers, there are differences in terms of assumptions used for IFRS 17 and [ K-ICS ] versus the existing EV calculation method. So if we disclose EV numbers, this would lead to some confusion in the market. So after all the assumptions and methodologies are streamed out, we will announce them. However, to add a little bit if the embedded value of new business is converted to a CSM method, then it's going to increase by about 1.5x

As we're running out of time, we will entertain one more question.

The last question will be presented by Yong Hoon Sung from Hanwha Investment & Securities.

I am Sung Hoon Yong from Hanwha Investment & Securities. First of all, I'd like to know more about this joint venture initiative that you are pursuing with Kakao. Personally, I believe this is a very good move that you are working with a platform provider rather than a telecommunications company. As for this joint venture initiative with Kakao, are there any specifics that you could share with us at this point in time, including what kinds of products you are planning to offer through this channel? The second question is related to your plan for overseas growth. You've been talking about possibilities for overseas general insurance and reinsurance and many other ideas have been proposed for the past 10 years. But there are some views in the marketplace that you may be a little too conservative, you may be a little too cautious about these initiatives. You may not be able to tell us exactly when these things will be materialized, but I'd like to know whether you are really determined and committed to this? And do you have any specific ideas that you are implementing right now?

I am CFO, Bae Tae-Yeong. Let me give you some explanation about this joint venture initiative with Kakao. We actually made an offer to Kakao first. And we talked to them and explained to them about the market changes. And we said that we have been doing P&C business for the past 68 years with expertise in underwriting and product design and claims management, while Kakao has a wonderful platform, even though it doesn't have any experience in doing insurance business because we have been trying to carry out some innovation internally within Samsung Fire & Marine, but there were some limitations. So we decided to make that offer, I did it myself. And there have been consultations for the past 2 years. And last year, finally, we made an agreement. Right now, we are working to apply for a preliminary approval from the regulators. And we believe that it will come maybe within this year or early next year. And currently, at the working level, discussions are underway between Kakao and SFM regarding the details on products and vehicles and concepts. I cannot give you some details. But what I can say is that these are going to be IT based and this will be very close to our everyday lives, so that these will be sort of integrated into our daily lives. Currently, we're not only looking at the aging population, but also this young generation in their 20s and 30s, so which could be fascinated by the new offerings that we are planning to offer. And about your second question, I'd like to make a brief comment. It is true that we've been talking about all these inorganic growth opportunities for a long time, but you may think that not a lot of tangible outcome has been made. But as you may know, last year, we acquired $150 million of equity in Canopius, and we are actively communicating with the major shareholders of this company. And indeed, the executives representing Samsung Fire & Marine's general insurance line of business is a Board member of this company and are observers as well. We're currently discussing many ideas regarding the Asian Pacific market. And this is so much I can tell you, but a lot of things are happening right now.

I'd like to thank you for your participation. If you have any further inquiries, please contact the IR team. And with this, let us close the earnings conference call for fiscal year 2019. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]