ING Life Insurance: (079440.KS) Solid 4Q, mounting expectations for 2018
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- 4Q17 saw net income of KRW66.7bn (+11.3% YoY ), which was lower than the consensus of KRW78.3bn. One-offs include: 1) an increase in stock option reserves (KRW5bn); 2) provision for long- term employee salaries (KRW3bn); and 3) consulting fees (KRW3bn). Without these one-offs, net income would have amounted to KRW80bn.
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- Underwriting net revenue dropped 32.3% YoY due to: 1) a 4% decline in underwriting revenue on continued falls in annuity premiums since the April tax reform and; 2) a rise in the loss ratio (+4.3%p YoY). Management plans to boost the top line by introducing new protection-type products (e.g., whole life medical insurance policies).
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- Investment income slid 3.5% YoY due to a fall in gains from the disposal of bonds as the company reduced bond sales amid interest rate hikes. Management plans to re-invest over 40% of the proceeds from bond sales into high-return assets such as equities, foreign bonds, and alternative investment instruments. It targets to raise high-return assets’ share of its portfolio up to 10% in the mid to long term (vs. 3.2% as of end-2017).
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- The value of new business in 2017 rose 33.2% YoY, led by a 5.5%p YoY increase in the new business margin. The new business APE in 4Q17 fell 16.6% YoY on a decline in savings-type APE, but protection- type new business APE rose 6.3% YoY, much higher than peers: Samsung Life Insurance (032830.KS, BUY) -28.8%, Hanwha Life Insurance (088350.KS, BUY) -4%.
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- ING’s growth strategy based on a high RBC ratio remains valid, considering the growth rate of its protection-type APE, which is higher than peers’. We maintain BUY and adjust up our target price to KRW65,000 as we roll over our valuation base period to 2018.
Hyundai Motor Investment & Securities is the investment banking arm of the Hyundai Motor Group. The company offers stock brokerage and advisory services; derivative products brokerage and advisory services; wrap account portfolio management services; and VIP wealth management and tax planning, institutional equities, derivatives, and futures brokerage services, as well as sells investment and institutional products. It also provides equity offering, ABS, real estate PF and real estate PF securitization, offshore SOC, structured financing, asset securitization, real estate sales, IPO advisory, and private equity fund and fund management services; and CMA/RP portfolio management and fixed income based investments, as well as involved in the issuance, management, and brokerage of OTC derivatives. In addition, the company offers research services, including macro economic forecasts and stock market outlook, industry overviews and forecasts, fixed income strategies, corporate credit analysis, and valuation analysis. Further, it offers a range of retirement and pension services for individuals and corporate members; portfolios and asset allocation consulting and marketing services; proposing retirement pension plans; contract and payment management services; pension plan advisory and actuarial services; and system development and implementation services, as well as operates call centers for retirement pension services, etc.
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