Hanwha Life Insurance CI. /Courtesy of Hanwha Life Insurance
Hanwha Life Insurance(088350) is plunging early in the session on expectations in the securities industry that it will swing to a loss in the third quarter this year. With the suspension of sales of its flagship whole life insurance product and uncertainty over dividends overlapping, concerns are growing about future earnings.
At 9:41 a.m. on the 21st, Hanwha Life Insurance was trading at 4,310 won on the stock market, down 320 won (6.91%) from the previous session.
On this day, iM Securities cut Hanwha Life Insurance’s target price about 8.5% to 5,400 won from 5,900 won. It said third-quarter results will miss market expectations due to weak investment gains and losses, and that the suspension of sales of its flagship insurance product is expected to make it difficult to secure new contracts going forward.
Seol Yong-jin, an analyst at iM Securities, projected Hanwha Life Insurance’s third-quarter net loss at 75.5 billion won, forecasting a swing to the red from a year earlier. Seol expected valuation and disposal losses on financial assets due to rising interest rates and a falling exchange rate, as well as variable insurance hedge operation losses from stock market volatility, to be reflected.
Investment gains and losses in the third quarter were estimated to post a loss of 206.6 billion won. The analysis said losses of 181.6 billion won would occur in the general account and 25 billion won in the separate account. In contrast, insurance gains and losses were projected at 116.2 billion won, turning to a profit from a year earlier.
The suspension of sales of the flagship whole life insurance product was also cited as a burden. Hanwha Life Insurance stopped sales of the “700 Whole Life” product on the 21st of last month. Considering media reports that the product accounted for about 30% to 40% of beginning-of-month premiums, the analysis said volumes of new contracts and the contractual service margin (CSM) could decline going forward.
Seol noted, “With regulatory changes emerging for whole life, the company’s flagship product line, including the halt in sales of 700 Whole Life, and with rising concerns about lapse rates for short-pay whole life, there remains a possibility of further tightening of assumptions.”
Uncertainty over the resumption of dividends is also continuing. Hanwha Life Insurance is constrained in securing resources available for dividends due to the burden of setting aside reserves for surrender value refunds. With delays in improving related regulations, expectations for shareholder returns are said to be declining.
Seol explained, “Delays in improving regulations related to reserves for surrender value refunds are also a burden as dividend-related uncertainty persists,” adding, “It is necessary to identify response measures for uncertainties in new-contract strategy and assumptions.”
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