Mirae Asset Life
The author is an analyst for NH Investment & Securities. He can be reached at junsup@nhqv.com -- Ed.
In its first IFRS17 earnings announcement, Mirae Asset Life reported 1Q23 NP of W101bn. Moving ahead, we expect that quarterly NP of around W50bn will be sustainable, even after excluding one-off FVPL asset gains.
Reflecting IFRS17/9 financial statements, raise TP to W3,400
Considering its IFRS17 and 9 financial statements, we adjust our earnings estimates for Mirae Asset Life and raise our TP to W3,400 from W3,150. Our new TP is calculated by applying a target P/B of 0.15x to 2023E BPS of W23,292. Our target P/B reflects a 2023E~2025F average ROE of 7.1% and discount rate of 70% (vs our discount rates of between 50~55% for DB Insurance and Hyundai M&F).
The higher discount rate versus that for non-life insurers reflects: 1) still-significant uncertainties towards shareholder return; and 2) the firm’s relatively weaker position compared to non-life players and competing life insurers in terms of new contract CSM. As our new TP represents an upside of only 11.3% from the current share price, we maintain a Hold rating.
In our view, however, Mirae Asset Life’s 2023E P/E of 1.5x points to significant undervaluation. We expect the discount to narrow if: 1) effects of differences between estimated and actual amounts and CSM adjustments (due to assumption changes by the Financial Supervisory Service) revealed in the firm’s 1Q23 earnings continue beyond 2Q23; 2) improvement in new contract CSM is confirmed; and 3) shareholder returns (eg, dividends) materialize.
1Q23 review: NP of W101bn, +78.7% y-y
Mirae Asset Life recorded 1Q23 non-consolidated NP of W100.7bn, which represents a 78.7% y-y increase versus the 1Q22 IFRS17 figure and a 576% y-y jump from the 1Q22 IFRS4 result.
Amortization gains on CSM and RA came to W52bn and W12bn, respectively, and the actual amount for insurance claims and expenses, etc, was only W2.1bn above the estimated figure—a relatively stable showing compared to that at peers. Investment gains totaled W93.8bn, including W65bn in gains on FVPL assets under IFRS9 resulting from interest rate decline and stock market improvement.
In 1Q23, CSM upped by W27.0bn q-q to W2tn. In detail: 1) new contract CSM reached only W57.2bn, hampered by a tepid variable insurance market; but 2) unlike at peers, gains of W10.5bn were reflected on new accounting assumptions.