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

[Interpreted] Good morning. I am Joon Chang Joon, Head of the IR team. Thank you for joining Samsung Fire & Marine Insurance's financial year '21 earnings conference call. We will begin with our CFO, Hong Seong-Woo's presentation on key earnings highlights and future business strategy, followed by a Q&A during which answers will be provided by the management team. The whole session will last around 1 hour. And now I invite our CFO, Hong Seong-Woo.

[Interpreted] Good morning, I'm Hong Seong-Woo, the CFO. I'll walk you through 2021 earnings results and SFMI strategic direction this year. By difficult operational backdrop on the back of efforts improved supported by efficiency SFMI last year reported a sizable line improvement year-over-year. '21 pretax profit was KRW 1,474.1 billion, and net profit was up 42.5% on year, coming in at KRW 1.0926 billion. First, for the long-term insurance on the back of continuous pursuit of margin-focused growth strategy, sales ratio of CSM yielding, high-margin products is trending up and we continue to see risk and loading premium from new sales expand, which make up sources of our future profit. Also, on the back of efforts to enhance value and force efficiencies, 13th month persistency ratio was up 3.4 percentage points year-over-year and 25th month persistency ratio up 3.6 percentage points on year, signaling a broader base for growth in recurring premium and profitability. Risk loss ratio was up 2.8 percentage points year-over-year, an increase in losses from medical indemnity and diagnosis cover. Expense ratio was down 0.7 percentage points year-over-year, reporting 23.3%. Auto line saw improvements across both loss ratio and the expense ratio, driving down combined ratio to 97.4%, which is down 3.4 percentage points on-year. This is a result of loss ratio declines on the back of prolonged COVID-19 pandemic, an increase in quality sales, including that of high protection policies as well as our unwavering efforts towards bringing claims process more efficient. Direct premium written for the commercial line was up 8.4% year-over-year on the back of rise and the domestic revenue. Loss ratio for the domestic business was down by more than 13% on year downsizing of risk retention, which supported volatility management. Aggregate loss ratio for the general line in total was down 6.6 percentage points year-over-year, improving to 75%. Next is investment. Investment profit on the back of one-off increase in dividend was up 7.3%-on-year to KRW 2.0958 billion. Investment yield was up 0.1 percentage points to 2.8%. To enhance mid- to long-term investment yield and to improve portfolio return, dividend-bearing assets out of the total assets invested expanded to 22.9% year-over-year. Asset quality of both bonds and loans also kept at a steady level. Also as of 21st end, RBC ratio reported 304%, up 3.2 percentage points year-over-year, while asset liability duration matching reported 97%, up 13 percentage points. Interest spread between assets and liabilities is 34 basis points, widening 2 basis points year-to-date. This ends the FY '21 earnings. I will now run through this year's strategy. In 2022, Samsung Fire Marine Insurance will actively respond to changes in the business environment, including IFRS 17 slated for next year to solidify a stable base of our earnings through continuous efficiency improvements. We will also secure a basis for future growth such as through new business expansions, including digital businesses. With the long-term insurance to secure a revenue stream, we will continue to supply high-margin new products and advance our underwriting process to broaden prime customer base, and we'll continue to expand CSM, which is the value for future profit expectations. Also by continuing to improve value in force efficiencies, we will drive up long term, i.e., above 25th month persistency ratio. For the auto line, despite uncertainties of COVID-19 and inflation, we would push for top line expansion centering around high-margin quality policies and through process automation that adopt new digital technologies, we plan to bring efficiencies to the claim process so as to sustain our earnings and revenue base. For the commercial line by being nimble and countering risks and responding to new markets changes in the environment, we plan to strengthen product and underwriting competitiveness, which will underpin channel competitiveness. We will also employ reinsurance strategy to bolster risk management so that we can reduce volatilities in profit and improve earnings stability. In order to reinforce the foundation underpinning our future investment return, we plan to improve portfolio profitability and bolster management of volatilities in profit ahead of upcoming IFRS 9 next year. To that end, we will expand assets such as infrastructure fund, real estate fund, PEF and other dividend-bearing assets to explore new income sources that will include high-quality properties. As major countries turn to tightening and with the upcoming interest rate upcycle, we will actively capitalize on financial market volatilities and bring spread margin improvements. Meanwhile, in the mid- to long-term horizon, we will strengthen our private asset investment capabilities by collaborating with global leading companies and diversify investment channel to further reinforce our asset management capabilities. . Next, I will turn to SFMI's key strategies for future growth. First is on digital strategy. We are adopting digital technology to overall business processes of the company and improve our capabilities in using and combining both internal and external data with a view towards bolstering our digital business competitiveness. In terms of the digital platform, with the use of Chac, a brand, which we launched last year, we are gaining greater traction in migrating our SFMI's-direct app to a mobile platform environment. Also by offering wide-ranging digital products and with a targeted marketing be fitting the needs of customer and the channel, we will strengthen our positioning in the digital insurance market. And through everyday insurance products and services, we'll be offering a differentiated customer experience, which will help broaden the customer base. Also to gain a solid basis for growth in the digital health care market, which is expected to grow fast, we are making new developments to transform any fit services, which is currently a value-added services to a comprehensive health care platform. . By providing personalized health care services, we will expand the user base and create synergies with the core underwriting business and beef up our competitive edge in the new market segment. Next is an update on the global business. In cooperation with Canopius of U.K. to which equity investments were made back in 2019 and 2020, we plan to expand into U.S. and Asia and focus on generating key results. Also in terms of JV with Tencent of China, our objective is to obtain regulatory approval from China's local financial authority by the first half of the year. And immediately after such approval is 1 plan to jointly operate the entity and crystallize our business operational plans so that we may bring tangible outcome from China's online insurance market. Going forward, we will leverage our strengths that we have in our robust capital base and explore opportunities for new investments in areas that have high growth potential and create synergies with the core business to secure a growth engine for the future. Lastly, on ESG. We at Samsung Fire & Marine Insurance considers ESG management as an essential element for sustainable growth and have internalized these elements into business activities through various means. Last year, ESG Committee was established within the BOD structure setting up a decision-making mechanism for ESG management. As part of our efforts to expand ESG investment, including investments in renewable energy, we made socially responsible investment, SRI amounting to KRW 4.6 trillion until 2021, and we'll continue to expand such investments with a commitment target of $1 trillion of new investments every year up to 2030. We see an uptrend also in sales of eco-friendly and social insurances and by operating global loss control center Samsung Traffic Safety Research Institute, we are living by our social responsibility in risk management, which lie at the core of the insurance business. As a company, we will attempt at unceasing transformation and internalizing ESG management. We are also preparing for a net zero portfolio preemptively respond to climate change crisis and develop financial support services for ESG-friendly companies and expand and diversify our own ESG investments. We expect insurance market backdrop for 2022 will see heightened internal and external uncertainties on prolonged COVID-19 pandemic, higher volatilities in the global economy ever more fierce digital competition and adoption of IFRS 17 next year. SFMI will proactively respond to such changing environment and speed up efficiency-centric business management so as to implement our strategies for future growth. We would do our utmost to bring outstanding results and enhanced shareholder value in the year 2022. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]