Corporate Logo(source: hanwhalife.com)
On April 22, Korea Investment & Securities Co.,Ltd resumed coverage on Hanwha Life (088350), maintaining a ‘Neutral’ rating. The firm cited lingering uncertainty surrounding the insurer’s capital ratio and distributable earnings, indicating that a clear trigger is needed to drive share price growth.
Analyst Hong Ye-ran noted, “The current price-to-book ratio (PBR) stands at just 0.2x, implying low valuation pressure. However, concerns remain over capital adequacy and dividend capacity.” She added that institutional clarity on the surrender value reserve reform and the regulatory level for core capital ratios is required, while continued monitoring of the company’s K-ICS ratio management is also necessary.
The company’s strong operational fundamentals were cited as a positive factor. Insurance income for the year is projected to rise 23% year-on-year. “Backed by its competitive sales channels, Hanwha Life is expected to secure 2.1 trillion KRW in new Contractual Service Margin (CSM), marking the smallest decline among its peers,” she said.
However, capital adequacy remains a critical concern. As of the end of 2024, the K-Insurance Capital Standard (K-ICS) ratio stood at 163.6%, down 20.2 percentage points from the end of 2023. “While the continued expansion of new business CSM is encouraging, upcoming changes such as the extension of the ultimate observation period and a decline in long-term interest rates are expected to negatively impact the K-ICS ratio, making a rapid recovery unlikely,” she explained.
“Confirmation of dividend resumption this year would be an important trigger for revaluation of the low PBR,” she stated. For this to occur, she added, “The company would need to meet several conditions: maintain a K-ICS ratio above at least 170%, secure a core capital ratio benchmarked at 50% under regulatory standards, and see the required K-ICS ratio for an 80% surrender value reserve reduced to 170%.”
Despite the capital concerns, the analyst noted that downside risk appears limited. “The current share price has likely found a floor,” she said. “Given Hanwha Life’s efforts to stabilize earnings and secure distributable profits, dividend resumption is anticipated no later than next year.”
*[KOSPI]Hanwha Life(088350) was established in 1946 as the first domestic life insurance company in Korea, and in 2012, it changed its name from Korea Life to Hanwha Life. The market capitalization is 2.3146 trillion won(as of November 19, 2024, closing price).
Corporate Logo(source: hanwhalife.com)
On April 22, Korea Investment & Securities Co.,Ltd resumed coverage on Hanwha Life (088350), maintaining a ‘Neutral’ rating. The firm cited lingering uncertainty surrounding the insurer’s capital ratio and distributable earnings, indicating that a clear trigger is needed to drive share price growth.
Analyst Hong Ye-ran noted, “The current price-to-book ratio (PBR) stands at just 0.2x, implying low valuation pressure. However, concerns remain over capital adequacy and dividend capacity.” She added that institutional clarity on the surrender value reserve reform and the regulatory level for core capital ratios is required, while continued monitoring of the company’s K-ICS ratio management is also necessary.
The company’s strong operational fundamentals were cited as a positive factor. Insurance income for the year is projected to rise 23% year-on-year. “Backed by its competitive sales channels, Hanwha Life is expected to secure 2.1 trillion KRW in new Contractual Service Margin (CSM), marking the smallest decline among its peers,” she said.
However, capital adequacy remains a critical concern. As of the end of 2024, the K-Insurance Capital Standard (K-ICS) ratio stood at 163.6%, down 20.2 percentage points from the end of 2023. “While the continued expansion of new business CSM is encouraging, upcoming changes such as the extension of the ultimate observation period and a decline in long-term interest rates are expected to negatively impact the K-ICS ratio, making a rapid recovery unlikely,” she explained.
“Confirmation of dividend resumption this year would be an important trigger for revaluation of the low PBR,” she stated. For this to occur, she added, “The company would need to meet several conditions: maintain a K-ICS ratio above at least 170%, secure a core capital ratio benchmarked at 50% under regulatory standards, and see the required K-ICS ratio for an 80% surrender value reserve reduced to 170%.”
Despite the capital concerns, the analyst noted that downside risk appears limited. “The current share price has likely found a floor,” she said. “Given Hanwha Life’s efforts to stabilize earnings and secure distributable profits, dividend resumption is anticipated no later than next year.”
*[KOSPI]Hanwha Life(088350) was established in 1946 as the first domestic life insurance company in Korea, and in 2012, it changed its name from Korea Life to Hanwha Life. The market capitalization is 2.3146 trillion won(as of November 19, 2024, closing price).