2q 2019 earnings results - 홈페이지...source of earnings 07. investment results 08. reserves /...
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Investor Relations 2019
2Q 2019 Earnings Results
This presentation has been prepared by Orange Life Insurance, Ltd. (the “Company”) solely for informational
purposes in its presentation to current and prospective investors of the Company and should not be construed to be,
directly or indirectly, in whole or in part, an offer to buy or sell and/or recommendation and/or a solicitation of an offer
to buy or sell any security or instrument or to participate in any investment or trading strategy, nor shall any part of it
form the basis of, or be relied on in connection with, any contract or investment decision in relation to any securities
or otherwise.
The information contained in this presentation has not been independently verified. No representation or warranty
expressed or implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or
correctness of the information or any opinion contained herein. The information contained in this presentation should
be considered in the context of the circumstances prevailing at the time and will not be updated to reflect material
developments that may occur after the date of the presentation. Neither the Company nor any of its affiliates,
officers, directors or advisors shall have any liability whatsoever (in negligence or otherwise) for any loss arising
from any use of this presentation or its contents or otherwise arising in connection with this presentation.
This document is not intended for access or use by any person or entity in any jurisdiction where such access or use
would be contrary to applicable laws or regulations. By reviewing this document each recipient is deemed to
represent that it is a person who may lawfully access this document in accordance with the laws and regulations of
the jurisdiction in which it is located. Other persons should not rely or act upon this presentation or any of its
contents.
* IFRS9, 'Financial instruments' and IFRS 6, ‘Lease’ has been applied from reporting periods commencing on or
after January 1, 2019 unless otherwise stated. Financial information for prior periods has not been restated.
RBC ratio remains strong at 428% despite lower yields and tumbling KOSPI
Strong new sales continues – APE grew 21.7% yoy
Protection products diversification revitalized our FC channel by boosting their productivity
Continuing shareholder-driven dividend policy – BOD decided on an Interim dividend of
KRW 800 per share
Initiate strategic discussions to leverage Shinhan Financial Group’s large customer base,
as part of the One Shinhan vision
01. Key Financial Highlights
02. New Business Growth
03. VNB (Value of New Business) Growth
04. VNB (Value of New Business) Margin
05. Premium Income & Profits
06. Source of Earnings
07. Investment Results
08. Reserves / Crediting Rate
09. Efficiency
10. Capital Adequacy
11. Direction for Steering Business and Value in 2H19
12. Next Reporting Due Date
(Unit: KRW bln)
2Q 2019 2Q 2018 yoy YTD 2019 YTD 2018 yoy
Annualized Premium Equivalent (APE) 166.6 136.9 21.7% 348.5 286.8 21.5%
Value of New Business (VNB) 1) 20.4 30.8 -33.9% 50.8 61.7 -17.8%
Premium Income 2) 1,053.9 1,046.0 0.8% 2,142.6 2,089.6 2.5%
Operating Result Before Tax 3) & 4) 84.8 116.9 -27.5% 186.2 217.6 -14.4%
Profit After Tax (PAT) 4) 66.8 94.7 -29.5% 147.2 183.6 -19.9%
Total Assets 5) 32,659.3 31,537.5 n/m 32,659.3 31,537.5 n/m
Invested Assets 6) 26,078.1 24,964.8 n/m 26,078.1 24,964.8 n/m
Investment Yield 7) 3.9% 4.0% -0.1%p n/m n/m n/m
Shareholders' Equity 8) 3,233.5 3,590.9 n/m 3,233.5 3,590.9 n/m
RBC Ratio 428% 438% -10%p 428% 438% -10%p
Note 1) Prior year’s VNB has been restated based on 2018 year-end assumptions
Note 2) Includes premium income from variable business
Note 3) Operating Result Before Tax is Profit Before Tax excluding market variance (Realized capital & FX gains, losses/impairments)
Note 4) IFRS9(Financial instruments) and IFRS16(Lease) have been applied for reporting periods commencing on or after January 1, 2019 (Financial information for prior periods has not
been restated)
Note 5) 2Q19 Total Assets (IAS39 basis) grew 7.0% yoy to KRW 33.73 trn
Note 6) 2Q19 Invested Assets (IAS39 basis) grew 8.7% yoy to KRW 27.15 trn
Note 7) Adjusted investment yield & 12-month rolling basis: Net Investment Income/Invested Asset (Excludes Unrealized Gains and Losses)
Note 8) 2Q19 Shareholders’ Equity (IAS39 basis) grew 10.8% yoy to KRW 3.98 trn
Total APE rose 21.7% for the quarter and 21.5% on YTD basis
• Protection APE was 12.0% higher (FC +9.9%, GA +15.5%) yoy
• Savings APE rose 83.9% on high BA volumes, while Variable APE was 22.4% lower
Value of New Business declined by 33.9% for the quarter, and -17.8% on YTD, largely due to;
• an increase in the sales portion of low margin products including BA savings products
• a decline in margins in the course of revitalizing the FC channel with various sales initiatives
and diversifying the protection product portfolio
• downward adjustments of our investment return assumptions due to plunging interest rates
ORBT lower as declining bond yields negatively affect our investment income and lead to
additional GMxB reserves
• Net Profit was further lowered as net realized gains decreased
Total Assets, Invested Assets, and Shareholder’s Equity are up 7.0%,8.7% and 10.8%,
respectively on IAS39 basis (New accounting has been applied since the inclusion into the
Financial Group)
RBC ratio remains very strong at 428% after reflecting interim dividend (435% before dividend)
1,800
2,000
2,200
2,400
2,600
2,800
3,000
Jan-18 Jun-18 Dec-18 Jun-19
KOSPI
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
Jan-18 Jun-18 Dec-18 Jun-19
KTB 5yr KTB 10yr
-10.6%
2,131P (Jun 28, 2019)
-96bps
KTB 10yr
2.56% (Jun 29, 2018)
KTB 10yr
1.60% (Jun 28, 2019)
KTB 10yr
1.95% (Dec 31, 2019)
2,041P (Dec 28. 2018)
2,383P (Jun 29, 2018)
Bond yields decline sharply
Long-term bond yields drop sharply on
expected Fed rates and Bank of Korea
base rate cut in July
These low bond yields depressed the
Value of New Business, and negatively
impact P&L, including declines in
investment yield and delay in the release
of GMxB reserves to profits
Korean equities’ performance disappoints
The Korean equity market on a downturn
since 2nd half of 2018
Weak Korean equities’ performance has
led to impairments on our ETF assets and
higher GMxB reserves
• Outlook for equities remains uncertain
for the year, and our 2020 SAA equity
allocation has been reduced to 2% from
3%
Headwind in new sales as customer
demand for new variable policies
weakens
Note 1) APE: Annualized Premium Equivalent
Note 2) FC: Financial Consultant, BA: Bancassurance, GA: General Agency
62.4 52.2 51.1
39.2 36.3 33.3
126.5
84.3
67.4 63.3
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
152.9 148.9
69.6 130.6
64.3
68.9 286.8
348.5
YTD 2018 YTD 2019
72.3 67.5
33.3 63.3 31.2
35.8 136.9
166.6
2Q 2018 2Q 2019
FC BA GA
21.7%
2Q
2018
2Q
2019
YTD
2018
YTD
2019
21.5%
2017
2018
2019
Savings Foreign Currency Product (USD) Variable 2)
Total APE rose 21.7% (KRW +29.7 bln)
FC channel’s total APE reduced by 6.6%
as demand in Variable (annuities, savings)
weakened, but Protection sales were up
by 9.9%
• Protection mix higher from 70.4% to
82.8%
BA channel grew 89.9% contributing
KRW 30 bln APE yoy. The stellar growth
is attributable to the low base in 2Q18
GA APE increased 14.6%, sustaining a
higher Protection mix
• 99.8% Protection mix
BA Volume gradually on decline
BA Volume spiked in 3Q18 but has
gradually declined each quarter thereafter
• BA volume in 1H18 was held back as
the large players heated up market
competition
• From 3Q18, crediting rate competition
eased and we jumped back into the
Savings policies in a move to catch-up
• We managed to lower Korean won
Savings sales reduced significantly
from June 2019
We are steadily shifting our focus to
strategic higher margin BA products, such
as Variable and USD Savings policies,
while moving away from traditional
Savings
50.9 55.9
30.9 35.7
81.9 91.7
2Q 2018 2Q 2019
FC GA
103.7 124.5
63.6
68.7
167.2
193.2
YTD 2018 YTD 2019
APE: Annualized Premium Equivalent
FC: Financial Consultant, GA: General Agency
2Q
2018
2Q
2019
YTD
2018
YTD
2019
12.0%
15.5%
81.9 91.7
2Q 2018 2Q 2019
167.2
193.2
YTD 2018 YTD 2019
Whole Life Health
2Q
2018
2Q
2019
YTD
2018
YTD
2019
14%
86%
36%
64%
13%
87%
38%
62%
12.0%
15.5%
Protection APE by Channel
2Q Protection APE grew 12.0%
(KRW 9.8 bln)
• FC’s Protection up 9.9% (KRW 5.0 bln)
• GA’s Protection up 15.5% (KRW 4.8 bln)
On a YTD basis, Protection APE grew 15.5%
(KRW 26 bln)
• FC’s Protection up 20.1% (KRW 20.8 bln)
• GA’s Protection up 8.2% (KRW 5.2 bln)
Protection APE by Product
Strategic launching of multiple new health
products – Dementia in February and
cancer in June – boosted FC’s
productivity and captured meaningful
numbers of new customers
Health proportion grew within Protection
• 14% (2Q18) → 36% (2Q19)
• 13% (1H18) → 38% (1H19)
Steady growth of protection sales from FCs on the back of company-wide efforts to
increase customer base and revitalize the FC channel with diverse product offerings
VNB: Value of New business
21.5%
14.6%
-2.9%p
-3.3%p
-0.8%p
YTD2018
채널믹스
& 물량
상품믹스 금융시장 YTD2019
30.8
61.7
20.4
50.8
2Q YTD
-33.9%
-17.8%
2Q
2018
2Q
2019
YTD
2019
YTD
2018
YTD
2018
YTD
2019
Channel
Mix &
Volume
Business
Mix
Market
YTD VNB margin declined -7%p to 14.6%
Total APE was higher but large volumes from
the low margin BA channel lowered company-
level VNB margin by 2.9%p
• Expect a drop in 2H BA volume and lower
BA channel mix
During 1H19, high-margin Whole life mix
dropped, while there was strong demand for
low-margin products, such as Dementia, which
were offered to vitalize FC activity. This
resulted in a 3.3%p drop in VNB margin
• Expect business mix to improve in 2H as
company focus is back on high margin
products
VNB margin reduced by 0.8%p economic
assumption changes from lower market rates
• NIER1): 2.90% (18YE) 2.65% (2Q19)
• RDR2): 8.5% (18YE) 8.1% (2Q19)
KRW 10.5 bln lower VNB for the quarter
Total APE grew 21.7%, but high margin
FC channel APE dropped by 6.6%
Whole life product mix have declined
within Protection
But new product offerings and multiple
sales initiatives supported FCs activities
and captured new customers, thereby
stabilizing the channel
• Active FC ratio is 70.0% in 1H19 up
from 65.6% in 2H18
Note 1) NIER: Net Investment Earnings Rate, Note 2) RDR: Risk Discount Rate
34.6%
4.9%
0.9%
23.5%
3.4% 3.5%
Protection Savings Variable
YTD 2018 YTD 2019
34.9%
4.3%
8.3%
25.9%
2.7%
12.6%
FC BA GA
YTD 2018 YTD 2019
Variable Savings Protection
VNB margin by product
Protection VNB Margin dropped to 23.5%
due to a higher mix of low-ticket Health
business including Dementia and lower
whole-life mix
Despite the rise in savings volume, savings
margin has been squeezed 1.5%p on lower
NIER
Variable margin is up 2.5%p due to repricing
in April 2019 and lower expenses (there was
a Variable Sales Campaign in 1H18)
VNB margin by channel
FC channel’s VNB margin declined to
25.9% on reduced margin of protection
business
BA volumes grew significantly, but the
lower NIER led to a margin drop of 1.6%p
GA channel’s VNB margin was higher
(+4.3%p) due to repricing and business
mix improvement
Premium income includes variable business
Operating Result Before Tax: Profit Before Tax excludes market variance
(Realized capital & FX gains and losses/Impairments)
116.9
84.8
94.7
66.8
2Q 2018 2Q 2019
217.6
186.2
183.6
147.2
YTD 2018 YTD 2019
888.0 931.7
158.0 122.2 1,046.0 1,053.9
2Q 2018 2Q 2019
1,800.6 1,868.9
289.0 273.7
2,089.6 2,142.6
YTD 2018 YTD 20192Q
2018
2Q
2019
YTD
2018
YTD
2019
-27.5%
ORBT
2Q
2018
2Q
2019
Operating Result Before Tax Profit After Tax
YTD
2018
YTD
2019
-14.4%
ORBT
Regular Single
0.8%
2.5%
Premium Income up 0.8%
Premium income up 0.8%, KRW 7.9 bln,
and on YTD basis 2.5%, KRW 53 bln.
While single premium income reduced on
lesser BA single savings sales, higher
regular premium income led premium
income increase for the quarter
Lower ORBT and profits
ORBT which excludes market variances
(net realized gains and impairments, and etc.)
was KRW 32.1 bln lower yoy
• Investment margin reduced from lower
interest rates
(2Q18 One-off dividend income: KRW 4.8 bln)
• GMxB reserving due to weak stock market
performance with falling interest rates
• Increase in IBNR and higher claims
• Expenses increased with advertising
* Please refer to ‘06. Sources of Earnings’ slides (P19-20) for more
details
51.7 40.6
41.7 34.1
35.5
16.8
128.9
91.5
2Q2018
2Q2019
Note 1) Other Margins includes Reserves, Lapses, Surrenders, Policyholders’
Profit Share, and others
Note 2) Expenses: Acquisition and Maintenance Expenses – Other Margins
Note 3) PBT: Profit Before Tax
투자수익
+235.8
투자비용
-223.0
사업비 등 2)
-132.0
PBT 3)
201.1
Investment
Credited
-451.5
Investment
Return
+481.1 Expenses 2)
-282.9
Loadings
+383.2
Claims
-303.7
Risk Premium
+374.9
100.3
71.2
29.6
105.8 100.3
76.2 71.2
66.9
29.6
248.9
201.1
YTD2018
YTD2019
Investment Margin
Mortality &Morbidity Margin
Expense & OtherMargins1)
Investment margin decline led to lower PBT in 2Q
Investment margin dropped by KRW 18.7 bln
• Lower interest rates continues to dilute new money rate
• Less net realized gains (KRW -5.3 bln) and less dividend income (KRW 4.8 bln one-off
dividend income recorded in the previous year)
Mortality and Morbidity margin reduced by KRW 7.5 bln
• Recent increase in disability claims volatility drove IBNR to increase by KRW 4.3 bln for
the quarter (compared to a KRW 0.8 bln release in 2Q18), leading to net reduction of
KRW -5.1 bln
• Morbidity claims increased
Expense & Other margins declined by KRW 11.1bln, after reflecting additional GMxB
reserves and Advertising cost
• 2Q19 Advertising cost was KRW 4.1 bln against zero spending in 2Q18
• 2Q19 GMxB reserving was KRW 4.2 bln, while additional KRW 0.9 bln was reserved in
2Q18, which resulted in net effect of KRW -3.3 bln
82.6% 81.2%
9.7% 9.2%
2.3%
1.9%
1.8% 3.7%
3.1% 3.5%
0.4% 0.5%
2Q 2018 2Q 2019
Domestic Stock
Investment Funds
Overseas Securities
Cash & Cash Equivalent
Loans
Domestic Bonds
Note 1) Adjusted investment yield & 12-month rolling basis: Net Investment Income/Invested Asset
(Excludes Unrealized Gains and Losses)
Note 2) Arithmetic mean of 24 life insurance companies(including Orange Life).
2Q 2019 results not yet available
4.0% 4.0%
4.0% 4.0% 3.9% 3.9%
3.6% 3.6% 3.5% 3.5% 3.6%
1Q2018
2Q 3Q 4Q 1Q2019
2Q
Orange Life
Industry Average(Simple)
2Q
2018
2Q
2019
Asset Duration 10.0 10.4
Yield-enhancing
Investments3)
+Foreign Bonds: 7.7%
2)
Note 3) Yield-enhancing Investments: Alternative Investments and listed stocks
Investment return remains above industry
average
Although lower bond yields continue to
pressure our investments yield, it remained
strong at 3.9%
Asset portfolio remains low-risk
Asset duration was lengthened further for
ALM purposes
• 2Q19 Asset Liability Duration gap -0.65
Yield-enhancing Assets (Alternatives and
Listed equities) and Foreign bond have
reached 5.1%, 2.6% of Invested Assets,
respectively (2Q18 Yield-enhancing Assets
4.1%, Foreign bond 1.2%)
New money KRW 115.7 bln was invested
into overseas real estate and infrastructure
funds (on a commitment basis)
Loans account for 9.2% largely composed
of policy loans
21,077 22,729
4.0% 3.9%
2Q 2018 2Q 20192Q
2018
2Q
2019
Reserves Crediting Rate
49.9% 49.7%
50.1% 50.3%
9.8%
2Q 2018 2Q 20192Q
2018
2Q
2019
Fixed Crediting Rate Reserves
Fixed Crediting Rate 6% or higher
Floating Crediting Rate Reserves
10.0%
Crediting rate has been managed lower
Average crediting rate of fixed
guarantee reserves decreased by 4bps
from 4.94% to 4.90%
Average crediting rate of floating rate
reserves was reduced 8bps from
3.01% to 2.93%
Maintaining a sound reserve composition
Fixed reserve portion remains close to
50% while the share of reserves with high
guarantees of 6% or higher has fallen to
9.8%
The mix of floating crediting rate reserves
increased slightly (by 0.2%p) as a result of
high new business volumes from the BA
channel
5,187 4,999 5,407
14,228 14,993 14,585
19,416 19,992 19,992
4Q 2018(UFR 4.2%)
2Q 2019(UFR 4.2%)
2Q 2019(UFR 5.2%)
Tested Reserves LAT Surplus Gross Premium Valuation
1)
Note 1) UFR: Ultimate Forward Rate
KRW 5.4 trn LAT Surplus suggests that even upon further market rate declines,
additional reserving will not be a likely scenario
LAT Surplus represents the amount of statutory reserves held in excess of the GPV (Gross
Premium Valuation) reserves. Regulators require insurers to disclose LAT results twice a
year
LAT Surplus drop of KRW 188.8 bln was expected with end-June 2019 market interest rate
fall. But as the Financial Supervisory Service changed the Ultimate Forward Rate used to
calculate the discount rate applied, LAT Surplus increased KRW 219.3 bln from year-end
2018
Interest rate scenario is provided by the regulator and uniformly applied to all insurers
• [4Q 2018] LAT Surplus KRW 5.2 trn
LAT discount scenario = +82.4bps (Industry spread* × 80%), UFR 4.2%)
• [2Q 2019] LAT Surplus KRW 5.4 trn
LAT discount scenario = +88 bps (Industry spread* × 80%), UFR 5.2%)
* Industry spread = Liquidity premium + Credit spread
1,227 1,217
81.0% 78.4%
61.8% 59.6%
2Q 2018 2Q 2019
5.1% 5.9%
2Q 2018 2Q 2019
5.1% 5.5%
YTD 2018 YTD 2019
43.0% 40.6%
91.4% 96.4%
72.8% 78.2%
2Q 2018 2Q 2019
43.9% 42.4%
93.5% 96.8%
YTD 2018 YTD 2019
Expense Ratio (Maintenance Cost / Premium Income)
Loss Ratio (Claims/Risk Premium)
-2.5%p
-2.2%p
YTD
2018
YTD
2019
2Q
2018
2Q
2019
2Q
2018
2Q
2019
Mortality Total Morbidity
Number of customers
Persistency – 13th month
Persistency – 25th month
YTD
2018
YTD
2019
YTD
2018
YTD
2019
75.0% 77.7%
Expense/Loss ratio
Expense ratio increased to 5.9% mainly
due to advertising costs for the quarter,
but the YTD expense ratio was flat at
5.5%
Loss ratio hiked to 78.2%, as Morbidity
loss ratio was higher and as additional
incurred but not reported reserves have
increased. But Mortality loss ratio was
lower for the quarter
(YTD loss ratio was 77.7%)
Persistency/Number of customers
Persistency dropped slightly from previous
year
•13th month persistency dropped due to an
increase in sales of protection products
(which generally have lower persistency),
along with higher sales coming from newly
joined FCs in their 20s – which tend to
record lower persistency than business from
experienced FCs
• 25th month persistency is lower due to early
surrenders of business from the GA
channel, where upfront commission was
offered when initially entering the market
→ Management took actions to improve
persistency by shifting to a more leveled-
commission scheme for the GAs.
Commission payment period was
lengthened from 1H17
Note 3) RBC Ratio: Risk Based Capital Ratio
Note 1) IFRS9 (Financial Instruments) has been applied for reporting periods commencing
on or after January 1, 2019 (Financial information for prior periods has not been restated)
Note 2) OCI: Other Comprehensive Income
3,591 3,234
-773
+275 -213 +354
2Q 2018 IAS39to IFRS9
PAT Dividend OCI 2Q 2019
3,588
4,019
819 939
438% 428%
2Q 2018 2Q 20192Q
2018
2Q
2019
2Q
2018
2Q
2019
Required Capital Available Capital RBC ratio
One-t
ime tra
nsitio
n im
pact
as a
t Jan 1
, 2019
OCI 2) &
Others
Dividend PAT
1)
Shareholders’ Equity decreased after
applying accounting changes
As a member of a Financial Holding
Group, IFRS9 accounting applies for
financial instruments, replacing the
previous IAS39 accounting standard – the
one-time impact on Shareholders’ Equity
was a reduction of KRW 773 bln;
excluding this one-time impact,
Shareholders’ Equity would have
increased by KRW 416 bln
YTD 2019 ROE was 9.4%
(based on average Shareholders’ Equity
of KRW 3,116 bln (IFRS9 basis))
• ROE excluding valuation gains on
assets was 11.7%
(based on ‘adjusted’ average Shareholders’
Equity of KRW 2,518 bln)
RBC remains strong at 428%
Available Capital increased 12.0% from
KRW 3.6 trn to KRW 4.0 trn, while
Required Capital increased further by
14.7% from KRW 819 bln to KRW 939
bln from a year ago
RBC ratio was 435% before interim
dividend
Business
Steering
Value
Steering
Business Focus
New Product
Revitalize FC channel
Build Strong customer base
Health (Dementia, Cancer)
Active FC ratio1) 1 Number of FCs2) 2 # of In-force Policyholders 3
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18’18.1 ’18.6 ’18.12 ’19.3 ’19.6
70%
77%
62%
71% 71%
(명) (천명)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17’18.1 ’18.6 ’19.1 ’19.6
1,231
1,227
1,213
1,217
* Feb~June ’19: 17,802 new customers joined from
new product launch - Dementia product
1H 2H
Whole-life and
Foreign Currency
Products
Increase Upselling
Improve margin for
Protection policies
18.1 18.6 18.12 '19.3 '19.6
5,265 5,348
5,087
4,938 4,922
1H19: Focus on stabilizing FC channel by diversifying product portfolio and broadening
customer base
2H19: Upselling to new customers leading to improved VNB, and closely monitor macro
headwinds
Note 1) Ratio of FC selling one or more polices per month,
excluding managerial FCs (Sales and Branch Managers)
Note 2) Registered number of FCs which includes
managerial FCs (Sales and Branch Managers)
(in Thousands)
1H Strategic Initiatives and Results
Successfully picked up momentum for FC channel by offering multiple sales initiatives and
new products and broadening customer base
• The trend since 3Q18 of lower activity and stagnant number of FCs has bottomed out
• New product launches led to an increase in number of customers
2H Strategic Initiatives and Directions
Upsell to newly captured policyholders in 1H19
Focus on increasing Value of New Business by improving protection margins
Offer diversified products with higher margin whole-life policies and foreign currency
savings policies
Closely monitor highly volatile financial markets and proactively steer our strategies
3Q 2019 Earnings Results will be released in November 2019
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