Hyundai M&F
The author is an analyst for NH Investment & Securities. He can be reached at junsup@nhqv.com -- Ed.
Although Hyundai M&F’s claims and expenses proved greater than estimated amounts in 1H23, we view the result as being a temporary issue stemming from the company’s relatively high portion of children’s insurance.
2023 profit forecasts reduced, but dividend expectations intact
Although maintaining a Buy rating, we lower our TP on Hyundai M&F from W43,000 to W40,000 in line with a 17.5% cut to our 2023 pre-tax profit forecast on the reflection greater-than-expected claims and expenses in 1H23. However, as this stemmed from an uptick in small-sized claims, which is regarded as a one-off event, the figure should normalize from 2024. Our TP is calculated by applying a target P/B of 0.37x to 2023E BPS of W108,246.
In 3Q23, the IFRS17 Actuarial Assumption Guidelines are to be applied using a modified retrospective approach. Although it remains difficult to predict specific impacts, it is unlikely that CSM or equity capital will suffer. Therefore, we maintain our 2023 DPS projection of W2,500.
When not applying the IFRS17 guidelines, the firm is trading at a 2023E P/E of only 2.6x. Once financial uncertainties are resolved, Hyundai M&F is anticipated to announce active dividend policy, which should bring DY up to 8.2% based on our 2023E DPS.
2Q23 NP of W244.4bn
Hyundai M&F reported 2Q23 NP of W244.4bn (-28.3% y-y (IFRS17), +22.1% y-y (IFRS4)). Claims and expenses were W72.1bn and W107.6bn larger than estimated amounts in 1Q23 and 2Q23, respectively. However, this mainly stemmed from a rapid increase in small claims due to a jump in child and infant patients following the lifting of the mask mandate. Thus, the appropriateness of the existing insurance liability assumptions should not be raised as an issue.
In 2Q23, new contract CSM amounted to W459bn (estimated CSM multiple of 11.7x), and CSM adjustment was limited (-W89bn), as policy cancellations were defended by linking child insurance with adult insurance.