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

Good morning. I am Joon Chang Ho, in charge of IR. Thank you for joining Samsung Fire & Marine's earnings presentation. We will begin with our CFO, Hong Seong-Woo's brief presentation on key earnings highlights and our future business, followed by a Q&A during which our C-level executives will provide the answers in reference to the earnings material we previously circulated. We will spend around 1 hour in total, including the Q&A session. I now invite our CFO, Hong.

Good morning. I am Hong Seong-Woo, the CFO. On well spread growth across our insurance underwriting and investment, first half '21 net profit was up 71.7% on year to KRW 744.1 billion, while consolidated basis pretax profit for the first half was KRW 1,032 billion outsizing last year's full year profit. In the first half, for the long-term insurance, we employed growth strategies in order to drive net addition of new customers by way of new product offerings that cater to different customer characteristics. Also by adopting underwriting policies that will help secure stable sources of profit, we sought to expand protection premium, which is a source of future profit. We are also seeing visible results starting early this year from our efforts to bring efficiency improvements around long-term insurance, which we've been focusing on since last year. As such, first half 13-month persistency ratio was up 3.8 percentage points year-on-year, which is a significant improvement, while 25th month persistency is also showing an uptrend. We, therefore, expect recurring premium as a source of profit to continue on a growth trajectory. However, due to higher medical service usage in the second quarter, risk loss ratio was inching up, and we expect losses to rise mostly around medical indemnities and diagnosis cost in the second half of the year. By improving overall systems and preventing overly excessive medical claims, Samsung Fire & Marine Insurance will continue to manage claim losses so as to drive steady bottom line from our long-term insurance business. Also, auto insurance saw both loss ratio and expense ratio improved with the combined ratio reporting an improvement year-on-year of 5.8 percentage points coming in at 94.3%. This is due to increase in the take rate of high protection plans from the tied channel and sustained growth of the direct online channel as well as claims efficiency enhancements, all coinciding with the decline in accident rate. Second half of the year is usually more volatile due to floods, typhoons and heavy snowfall, but the company has in place a contingency process for such risks and will endeavor to bring underwriting profit for the auto line. For the general insurance, we laid the basis for stable profit generation on the back of top line expansion in the domestic market and reinsurance strategies set to mitigate profit volatilities. On the back of declines in high claim value accidents in Q2, loss ratio on a cumulative basis was down 8.8 percentage points year-on-year, reporting 72.5%, while underwriting profit was up KRW 63 billion year-over-year. In the second half of the year, to gain additional revenue drivers in the overseas market, we will strengthen collaborations with companies that we've made equity investments into or entered strategic partnerships with, so as to generate tangible results. We plan to carry out business cooperation in the U.S. and Singaporean market with Canopius of U.K., and in Asia, we collaborated with Tencent of China and Vietnam's Pjico, to whom we made equity investments back in 2017. Going forward, we will continue to expand inorganic overseas investments and grow the general lines overseas share to 50% by 2025. Next is on investment. First half investment profit was KRW 1,182.4 billion, up 14.1% on year and investment yield was up 0.2 percentage points, reporting 3.1%. In the second half, we plan to expand dividend bearing assets. And through trading into positions where we can leverage long-term interest rate hikes, we will enhance running yield from bonds to improve the profitability of the overall portfolio. We plan to continue to seek sources for future earnings by investing into overseas real estate and new growth businesses. Next is on how we are responding to the digital market. Samsung Fire & Marine Insurance has strategies to meet the needs of customers, which are quickly becoming digitalized. In order to transform into a specialized insurance platform, we plan to undertake a complete revamp from a mere insurance seller only meeting customers to sell the product, to be a provider of services that pivot on customer care, interfacing with customers in their everyday lives. We will endeavor to gain competitive edge in the digital market by launching digital-friendly products to serve this very purpose. We also have a project to develop a comprehensive health care platform by offering any fit services which is currently a value-added services, offering customized health management services to both retail and corporate customers. Also, we are using the CVC fund to invest into startups that have promising technology and business models like for health care as we continue to partner up with companies outside the platform. Samsung Fire & Marine Insurance outperformed market expectations in the first half of the year despite COVID-19 and ensuing uncertainties. In light of the intrinsic characteristics of non-life business, there would be uncertainties arising from seasonal factors in the second half of the year. However, we will continue to bring improvements in growth and efficiencies with a very strong focus on margin. Together with earnings performance that can truly stand out, we will swiftly carry on with growth strategies so that we may further enhance shareholder value. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]