By Junsup Jung | Business Korea | March 27, 2023<\/p>\n
The major insurers under our coverage have disclosed their simplified financial statements under new 2022 IFRS17. CSM is expected to be the core of future insurance company valuations.<\/p>\n
IFRS17 summary financial statements disclosed; CSM reconfirmed<\/strong><\/p>\n The major insurers under our coverage disclosed their simplified financial statements under the new 2022 IFRS17 rules. Although full details have yet to be released, we can now confirm data pertaining to: 1) contractual service margin (CSM) at the ends of both 2021 and 2022; and 2) IFRS17-based equity capital and earnings in 2022 (although we note capital and earnings figures are subject to change after IFRS9 application).<\/p>\n After the transition to IFRS17, an insurer\u2019s value will be determined by \u00abequity capital + CSM\u00bb – similar to EV (=adjusted net worth (ANW) + value of in-force (VIF)), which was used in the past.<\/p>\n Although accurate figures remain to be seen as IFRS9 has yet to be applied, \u00abP\/(equity capital + CSM)\u00bb of all listed insurers is expected to hover below 0.5x. Warranting particular attention, since second-tier firms are more undervalued, the valuation merit of such players should come to stand out assuming that the validity of the assumptions bears out down the road.<\/p>\n Nevertheless, non-life insurers represent more attractive option<\/strong><\/p>\n In our view, non-life insurers are still more accessible compared to life insurers. Even after the transition to IFRS17, non-life insurers show higher new contract margin, expectations for profit and shareholder return, and interest rate sensitivity of K-ICS ratios compared to the corresponding figures for life insurers. We present Hyundai M&F as our sector top pick and DB Insurance as our second-preferred pick.<\/p>\n However, we still consider life insurers as appealing mid\/long-term investment vehicles, noting that they are more undervalued than their non-life peers and they are anticipated to deliver high CSM balance growth. Once their competitiveness in terms of new contracts is verified, and once structural improvements for shareholder return are entrenched, life insurers\u2019 valuation merit should draw market attention.<\/p>\n","protected":false},"excerpt":{"rendered":" By Junsup Jung | Business Korea | March 27, 2023 The major insurers under our coverage have disclosed their simplified financial statements under new 2022 IFRS17. CSM is expected to be the core of future insurance company valuations.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"off","neve_meta_content_width":70,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[9,3],"tags":[],"class_list":["post-1172","post","type-post","status-publish","format-standard","hentry","category-korea","category-news"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/posts\/1172","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/comments?post=1172"}],"version-history":[{"count":1,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/posts\/1172\/revisions"}],"predecessor-version":[{"id":1173,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/posts\/1172\/revisions\/1173"}],"wp:attachment":[{"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/media?parent=1172"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/categories?post=1172"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/insurance.vincent-chen.com\/en\/wp-json\/wp\/v2\/tags?post=1172"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}