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Edited Transcript of 000810.KS earnings conference call or presentation 14-Nov-19 5:00am GMT

Q3 2019 Samsung Fire & Marine Insurance Co Ltd Earnings Call

Seoul Nov 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Samsung Fire & Marine Insurance Co Ltd earnings conference call or presentation Thursday, November 14, 2019 at 5:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Chang Joon

Samsung Fire & Marine Insurance Co., Ltd. - Head of IR

* Il-pyeong kim

Samsung Fire & Marine Insurance Co., Ltd. - Executive Director & Head of car insurance Strategy Team

* Jeong Byung-rock

Samsung Fire & Marine Insurance Co., Ltd. - Head of Long-term product development team & Executive Director

* Tae-Yeong Bae

Samsung Fire & Marine Insurance Co., Ltd. - CFO, Senior VP & Director

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Conference Call Participants

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* Do Ha Kim

Cape Investment & Securities Co., Ltd., Research Division - Analyst

* Jin-Sang Kim

HMC Investment Securities Co., Ltd., Research Division - Analyst

* Myung Wook Kim

JP Morgan Chase & Co, Research Division - VP

* Seung-Gun Kang

HI Investment & Securities Co., Ltd., Research Division - Research Analyst

* Yong Hoon Sung

Hanwha Investment & Securities Co., Ltd., Research Division - Analyst

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Presentation

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Operator [1]

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(foreign language) Good morning, and good evening. First of all, thank you all for joining this conference call. And now we will begin the conference of the fiscal year 2019 third quarter earnings results by Samsung Fire & Marine Insurance. This conference will start with a presentation followed by a divisional Q&A session. (Operator Instructions)

Now we shall commence the presentation by Samsung Fire & Marine Insurance.

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Chang Joon, Samsung Fire & Marine Insurance Co., Ltd. - Head of IR [2]

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[Interpreted] Good afternoon. I am Joon Chang Ho, the Head of IR team. Thank you for joining Samsung Fire & Marine's 2019 Q3 Earnings Conference Call. We will begin with our CFO, Bae Tae-Yeong's presentation on Q3 earnings results and future outlook, and we'll also share with you information on some of the policies the company is currently implementing. And in the end, we will end with a Q&A session, which will be conducted with participating executives.

With that, I now turn it over to our CFO, Bae.

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Tae-Yeong Bae, Samsung Fire & Marine Insurance Co., Ltd. - CFO, Senior VP & Director [3]

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[Interpreted] Good afternoon. This is Bae Tae-Yeong. As you can see on Page 1, Q3 direct premium written was up 4.3% year-on-year, reporting cumulative figure of KRW 14.1 trillion. Cumulative net profit was KRW 585.9 billion, down 35.1% year-on-year. But on a pretax basis, it was down 24.4% after the removal of one-off impact, which includes last year's gains from sales of Samsung Electronics shares.

And due to higher valuation gains from fixed income and interest rate declines, RBC ratio was up 24 percentage points compared to September end of last year, coming in at 362%.

Moving on to Page 2. For the long-term line, new business on a cumulative basis where healthcare insurance was up 27.9%, with risk premium earned increasing 6.2%. Risk loss ratio increased to 83.9% in Q3, reporting 82.6% on a cumulative basis.

Expense ratio was up 1.6 percentage points cumulative year-over-year. For the long-term line, we will continue to pursue qualitative growth in Q4 by strengthening the portfolio with a profitability focus on healthcare and illness coverage.

On Page 3, auto insurance direct premium written was up 7.6% year-on-year on a cumulative basis, driven by growth in the online channel. Combined ratio was up 4.0 percentage points year-over-year cumulative basis, reporting 104.8%. But it was flat on a Q-on-Q basis on hike in earned premium and higher share of the online channel. Expense ratio on a cumulative basis improved by 1.1 percentage point, but loss ratio was up 5.1 percentage point on higher claims per policy.

Although we expect difficulties as Q4 typically is a season with higher loss ratio characteristics, we will defend against loss ratio inching up by reducing unsettled cases and through stringent loss management or high claims events.

On Page 4 is general insurance. Direct premium written on a cumulative basis was up 4.5% year-on-year, with NPE, up 8.5% on higher revenue from inventory insurance, but its underwriting profit on a cumulative basis declined 37.1%.

In Q4, for the general lines, we will continue to aggressively manage profitability and expand our new quality accounts.

Page 5 is on asset management. Investment income cumulatively fell 8.5% year-over-year, but excluding last year's one-off gains, was up 2.2% -- 2.6%. Investment yield cumulatively reported 3.0% and adjusted yield, which excludes unrealized gains on the book was 3.3%.

In Q4, we will continue to diversify investments into equity-type alternative investment and PES to make solid the basis for revenue generation.

Next is ALM on Page 6. As of end of September, asset/liability spread margin was 37 basis points, down 2 basis points year-to-date but was up 1 basis point compared to June end. Asset/liability duration matching rate is 84%. And considering recent uptrend in the long-term rates, we expect gross margin and duration to remain at the current level until the year-end.

Next, I would like to show the investor community several policies the company is currently implementing. It's mainly in 3 areas. First, SFM's directional approach to long-term insurance market; second, equity investment into U.K. Lloyd’s and future plans; and lastly, the digital insurance company initiatives together with Kakao.

First, Samsung Fire & Marine's long-term insurance market direction. Driven by the company's proactive approach to long-term markets this year, company's new business revenue for the protection-type increased KRW 3 billion in monthly average on a year-over-year basis and is expected to reach around KRW 17 billion the next month. And it is true that this moved up distribution cost and pressured short-term P&L to a certain extent, and we do understand there is concern among investors.

Company's long-term line strategy forward can be summarized as number one, expand on retail to retain customers; number two, strengthen topic-focused portfolio in health and illness product category; and number three, expand recurring premium through differentiated customer management and secure sources for future profit. Guided by these 3 directions, SFM has expanded future resources for earnings and profit and will soon break the 10 million customer mark, which is a first for a life or a nonlife insurer. Together with this effort, company is undertaking rigorous cost saving and efficient expense management as we strengthen our fundamentals by managing against core KPIs around protection premium, which is our future source of earnings rather than merely growing the size.

In light of the current P&L and loss ratio trend in the industry, we expect overall industry's new business volume to be around the level of this year, or there may be a marginal increase. We expect there to be a move away from competition around new business acquisitions and more towards a focus around fundamentals. As a leading industry player, Samsung Fire & Marine will not engage in unreasonable and reckless market competition and be focused on employing a more sound fundamental-based market strategy for the long-term insurance market.

Second is equity investment made into Lloyd's Canopius and all the growth that it will entail. Last week, we received final approval from relevant regulators of Korea, U.K. and the U.S., gaining a meaningful level of equity interest in Canopius and became a strategic shareholder that will participate in the business management. Canopius is a company expected to become top 5 Lloyd's market insurer by next year. Aside from Canopius, the other top 10 Lloyd's participants are companies with majority shareholders or global leading insurers or are ones that have no intention to sell their shares, which forecloses any investment opportunities.

SFM is not just a simple equity investor, but more a strategic partner for growth for Canopius. Accordingly, we will create a new growth engine for the U.S. and the Asian market and practical discussions are ongoing as we speak.

Samsung Fire & Marine seeks to overcome the domestic market limitations for general insurance, which is the core to the P&C business. And together with our partner company is seeking to globalize the general insurance business. By making solid our general line portfolio, both in domestic and in global markets, we steadily expand the absolute size of earnings that will not sway at any single event.

Lastly, on the establishment of a digital nonlife insurer with Korea's main platform provider, Kakao. SFM has created a CVC fund worth KRW 40 billion, making investments into 5 start-ups, both home and abroad, in health management and telemedicine, including an equity investment into new, which is a #1 U.S.-based B2C health management startup. As such, we are maintaining both a long and a short list of potentials as we continue to monitor the market.

By applying technologies developed from such invested companies and through acceleration of digital transformation, internally, we wish to bring insurance value chain innovation and through partnerships with companies outside, like Kakao, we are seeking to seize opportunities that future will entail. By bringing together Kakao's platform and SFM's business know-how built over 60 years, the meeting of the 2 #1 companies and set up of a new entity with Kakao would create new insurance that world has never seen and insurance that is seemly embedded in peoples' daily lives and will open up a new market loved by the younger generation.

In the domestic loss time market, SFM will pursue efficient management with a profitability focus. And through growth with our strategic partners like Canopius and Kakao, we plan to eventually gain a top-tier position in Korea and in the global insurance ecosystem. Thank you.

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Chang Joon, Samsung Fire & Marine Insurance Co., Ltd. - Head of IR [4]

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[Interpreted] We would now like to entertain your questions. (Operator Instructions)

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Questions and Answers

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Operator [1]

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(foreign language) (Operator Instructions) The first question will be provided by Seung-Gun Kang from HI Investments and Securities.

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Seung-Gun Kang, HI Investment & Securities Co., Ltd., Research Division - Research Analyst [2]

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[Interpreted] I would like to pose 2 questions. Previously, in October, there was a press article about the rate cut on the protection products. I understand that this is lowering the rate to a level that is commensurate to your peers and competitors. This would have been a very important decision and would have quite a bit of impact on your business overall. And this will inevitably lower the margin that the company is currently reporting. So could you provide some color as to the extent of that margin decline? And what other types of growth would you be needing to -- as we generate in order to offset the impact from the rate cut?

My second question relates to your dividend policy. I understand that your profit this quarter due to higher level of expenses as well as more investment, the profit level is not as satisfactory. And considering the seasonality, the slow seasonality of Q4, we are, at this point, not expecting a great improvement. In that light, the company has communicated on numerous occasions that it is committed to upgrading or increasing its dividend stance, but the market is concerned about the current profit that is being generated. So could you provide some more color as to what your dividend payout policy would look like going forward?

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Jeong Byung-rock, Samsung Fire & Marine Insurance Co., Ltd. - Head of Long-term product development team & Executive Director [3]

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[Interpreted] I will respond to your first question. I am Jeong Byung-rock from the long-term product development team. My answer will relate to your question on the October, the products, the rate adjustments that we've made. The rate adjustment that took place in October was in line with the change in the reference rate. As you would know, other companies in the industry have actually made the rate adjustments already in the month of April, in line with the change in the reference rate. For all the companies, we've made to a certain extent, adjustments in October and that is why we have done another as such in a little latter period in October.

And also, please keep in mind that the adjustments that took place in October, it did not have any impact. We're making the adjustments on the indemnity product.

The impact of the October rate adjustments actually brings our product competitiveness to meet the level of the market, and we do expect that it will further expand our market competitiveness for our core product offerings.

We are aware that there are concerns about the rates actually going down on high-quality coverage. The loan loss ratio coverage. But conversely speaking, we have also seen increases in -- the impact of increase in rates for high loss ratio coverage. And also, we were able to see strengthening of the competitiveness of the high-margin or highly profitable product categories in the healthcare and in illness coverage. So those improvements in the portfolio, we believe, will bring about a makeup in the shortfall.

And just to provide you detail on the portfolio improvement impact, as of the first half of 2019, our higher-margin product-based portfolio and its share of the total was only around 72%. But afterwards, we were able to expand this to 76%.

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Tae-Yeong Bae, Samsung Fire & Marine Insurance Co., Ltd. - CFO, Senior VP & Director [4]

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[Interpreted] I'm the CFO, I will respond to your dividend question.

With regards to any specific dividend-related numbers, please do understand I won't be able to provide you with the specifics. Having said that, we are very intensely and closely listening to the voices of the market. And we will really reflect the voices as well as have a very shareholder-friendly approach. And once the company makes a prudent decision and review of what the dividend is going to be going forward, we will come back and communicate that with the market when the timing is appropriate.

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Operator [5]

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(foreign language) The next question will be presented by Myung Wook Kim from JPMorgan.

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Myung Wook Kim, JP Morgan Chase & Co, Research Division - VP [6]

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[Interpreted] I would like to present 2 questions. First has to do with your long-term insurance. Last quarter, CFO has shared with us that one of the key company strategy is placing emphasis on growth of the business. I would like to understand whether this strategic stance has changed over the course of the -- as we move down from the first quarter. And so what should we expect in terms of growth as we go into next year? I asked this question because if you think about the market share increases, carrying to the actual cost increases on your health insurance growth. It was, I think, only around -- in the upper 1% level, which was also attached to the fact that your competitors have been very hard at competing against one another. So due to the changes in the circumstances, have you adjusted your strategical position to have a more focus and shift on profitability? My second question is on the auto insurance. The combined ratio has gone up quite significantly. And despite the fact that there were 2 rate hikes in the first half of the year. It seems like it wasn't enough. Do you think it is possible for you to expect additional rate hikes either once or more than once when next year comes, that will be ample enough to cover for the increases in the claim?

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Unidentified Company Representative, [7]

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[Interpreted] I am (inaudible). I am team member of CPC, the Channel Product Customer planning team at Samsung.

Basically, our objective of actually growing our new business volume is focused on securing the sources for future profit from our new business as well as expanding on our retained customers. So we are very actively responding to the needs and the changing circumstances of the market.

As our executive from the product development team has previously mentioned, the reshuffling of the rate structure that took place in October was basically further reinforcing and strengthening our price competitiveness as well as our competitiveness in the coverage that we provide to the market vis-à-vis our peers. It is not simply just growing the size of the business. We're very much focused on high profitability or high-margin product portfolios and the healthcare insurances and also increasing the retention from our value in-force customers. So it is geared towards qualitative growth.

The continuing fact that very deep growth is going to entail pressures on the loss ratio as well as increasing in the distribution costs, we expect that come next year, we won't see the market as overheat as much as we've experienced in this year.

Based on the assumption that next year's market size is going to be quite flat year-over-year, we expect that our company's protection related to new business volume to remain about at the same level compared to this year.

So next year, rather than trying to bring about growth in terms of near size, we will strengthen our fundamentals, the core aspects of our profitable portfolios and be very agile in responding to the needs and the changes of the market and our customers.

I'm sure you will all know this, the key sources of profit for long-term insurance is actually dependent on the recurring premium, and recurring premium is highly impacted by a customer base as well as the purchase persistency ratio.

So we do not think that a simple growth in the size of the new business is not -- does not bear much meaning. We are, therefore, much more focused on expanding our high-margin product portfolios, including the healthcare and BB cover. And as our CFO has previously mentioned when he talked about our approach towards the long-term market going forward, the company will be -- will move away from any types of unreasonable or reckless competition, we will focus more on competition that is underpinned by core fundamentals.

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Il-pyeong kim, Samsung Fire & Marine Insurance Co., Ltd. - Executive Director & Head of car insurance Strategy Team [8]

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[Interpreted] I will respond to your second question. I am Kim Il-Pyeong from the Automobile Insurance Strategy team.

While it is true that there is necessity to actually hike the auto rate, also premium rates. I have to say that I'm quite cautious as to commit myself to any level of possibilities or probabilities at this point in time.

Now having said that, in light of this difficult industry situation that we are currently experiencing, this very fact is also amply and sufficiently recognized by the authorities as well. So the industry participants are submitting different measures and ways we could bring about improvement in the market. And currently, discussions are ongoing quite actively. So we do look forward to a positive plan being devised come next year.

Although it was not as efficient, still, there were 2 rate hikes this year and company internally have been very rigorously managing its loss ratio trend. So we are -- we strongly believe that come next year, we will see improvement in the combined ratio.

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Operator [9]

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(foreign language) The next question will be presented by Do Ha Kim from CAPE Investment and Securities.

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Do Ha Kim, Cape Investment & Securities Co., Ltd., Research Division - Analyst [10]

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[Interpreted] So before I pose my 2 questions, I would just like to provide some comments with respect to the dividend payout spent that the CFO has previously made. I do understand that the CFO has mentioned that you're (inaudible) listening to the market views. But going forward, I believe that for the benefits of the minority shareholders, I think that actually paying out the dividend is one of the most important aspects in light of the capital strength that the company has. And also considering the industry situation as well as the peer performances, I think, for this year, it'd be very important for you to actually over satisfy market expectations on dividend payout.

Moving on to my 2 questions. First has to do with investment. I understand that gains from your fixed income sales have not been too large this quarter, which actually is positive in terms of the expectations that we can have on next year's profit. Having said that, still, you're running yield is not very high. It's quite low. And also your alternative portfolio and the growth of the loan portfolio has not been higher either. So could you just provide some color as to what your investment stance is in terms of your overseas exposure and your alternative exposure? Second question is, where do you think next year's assumed rate? If you think that there's going to be adjustments, to what extent is the question.

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Tae-Yeong Bae, Samsung Fire & Marine Insurance Co., Ltd. - CFO, Senior VP & Director [11]

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[Interpreted] This is the CFO. Before we answer the question, just another note, I understand the comments that you have just made. Internally within the company, yes, we are fully aware of what the market is voicing. And also in terms of the market situation that we found ourselves, the value that is attached to dividend, we do understand that it is quite important. So please be assured that we will consider those comments that you have given us when we make the decision.

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Unidentified Company Representative, [12]

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[Interpreted] I am from the Finance Planning team. I will respond to your question. You've mentioned that the gains from fixed income sales for our company looks relatively low. As you would understand, we believe that it is quite important to manage our assets as against our ALM policies as well as the domestic economic outlook from the mid- to long-term perspective. If you look at the assets that we are currently managing. There's about 37 basis points GAAP as of end of September between the running yield and the crediting rate.

So if you look at the economic [growth] trend from '18, '19 and up to next year. If you look at the outlook, as you know for previous year, the growth rate was 2.7%. This year, it was -- it will be around 2%. Come next year, somehow that predict on a more positive side, as I said, 2.4%. But if you look at the recent numbers, that's been announced by companies like Bloomberg and other foreign global houses as of November, they're projecting around 1.7% growth rate. And JPMorgan, Moody's have shared their projection of 1.8%. Of course, the interest rate movement doesn't always in line -- in full with the growth rate. But still, we believe that for next year, we cannot expect any steep increase in interest.

That is why when it comes to reinvestment deals, we're currently putting on hold. And so we do not think that it is an appropriate timing for us to actually go into sales or fixed income products.

Also, our objectives in terms of the spread margin for us is set at above 3 basis points in the interest decline environment. And also we have been increasing our exposure to overseas investments, corporate financing, as well as overseas offshore bond investments, have increased over the years.

So in light of the rate decline backdrop, aside from the gain from the sales of the bonds basically from January to September, we increased our overseas bond investment by KRW 0.8 trillion, and corporate finance investments, we've increased the asset size by about KRW 1.1 trillion.

So because the domestic bond yield is going down, we've made adjustments in our asset portfolio, so that we can defend an additional decline in our running yield, but also at the same time, increase the new money yield.

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Jeong Byung-rock, Samsung Fire & Marine Insurance Co., Ltd. - Head of Long-term product development team & Executive Director [13]

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[Interpreted] I'll respond to your second question. I am Jeong Byung-rock from long-term product development team.

When it comes to the assumed rate adjustment, this will have to reflect the market rate environment as well as operational environment. If the current interest rate level persists, then it is correct that the timing will come for us to review the assumed rate.

But of course, the extent of the assumed rate difference depending on how much it has changed, the impact is going to be quite different. But for the nonlife insurers, if you look at the product portfolio, they're super long-dated as well as most are term-end or year-end-based class of products. So if there's 25 basis points change, that will not have an impact on the year-end, return-end types of a product. And also since the products are very much highly long-dated since the rate will move within about 5 percentage range and since that change in the assumed rate will have impact on the overall market, including other markets participants, there will be a review, of course, but the possibility of a significant change. It doesn't seem probable.

So all in all, if the current level of interest backdrop continues, most of the company will review adjusting the assumed rate.

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Operator [14]

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(foreign language) The next question will be presented by Yong Hoon Sung from Hanwha Investment & Securities.

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Yong Hoon Sung, Hanwha Investment & Securities Co., Ltd., Research Division - Analyst [15]

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[Interpreted] I would like to ask some questions. Since you've talked efficiently about the auto, the new business and investment income. My question relates to your next year's profit. This year, the risk loss ratio has gone up, has leveled up. And Q4 doesn't seem all that positive at this point. What is your projection for next year's risk loss ratio? If there's a movement, how much of a movement are you expecting?

Second question is more of a simpler question, mainly due to lack of -- my poor understanding of the structure. You've mentioned that you acquired 1 of the top 5 Lloyd's providers and also mentioned that you will be globalizing your general insurance business. But what does that mean that your position -- you will be positioning yourself much closer to the eventual -- the reinsurance provider. In that case, what is the volatility of your general life insurance actually go up? Can you provide some more color on this point?

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Unidentified Company Representative, [16]

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[Interpreted] I am [Choi Bu Gyu]. (inaudible) of long-term e-finance support team, I will respond to your question on the risk loss ratio.

So yes, it is correct that our company's risk loss ratio for this year has been -- has gone up on a year-over-year basis, and we will be probably closing with a level that is quite similar to the level that we've seen from January to September of this year.

But before I talk about the outlook for next year, the impact of the October rate cut, we expect it's going to be limited on a loss ratio per se because of the impact from increase in the new business revenue as well as improvement in the portfolio.

So in terms of the loss ratio outlook for the future, you would understand that managing the medical indemnity loss ratio is a very important factor. In that aspect, the volatility is quite high considering the upward trend in terms of the loss claims as well as what the rate is going to be like for next year. So it will be difficult to make that prediction.

So we will end up -- we will put in a lot of effort to actually manage our loss ratios to make sure that there is no leakages that arise from excessive diagnosis or moral hazard. From the rate cut, we will make sure that we will continue to focus on our high-margin products with low loss ratio profile such as death benefit diagnosis, healthcare and illness coverage, we will focus more on these types of coverages so that we may actually reduce the volatility of the medical indemnity portion and reduce that portion and also really focus on managing our high-margin portfolio.

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Tae-Yeong Bae, Samsung Fire & Marine Insurance Co., Ltd. - CFO, Senior VP & Director [17]

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[Interpreted] This is the CFO, providing you some more information about the Canopius acquisition. Canopius is a company that has business coverage across U.K. Lloyd's market, the U.S. E&S and Asia Pacific. They have quite a big regional diversification in terms of their portfolio. And if you look at Samsung Fire & Marine, our general insurance, if you look at our pretax profit basis, of course, this will differ depending on the existence of any natural catastrophes. But it's around KRW 230 billion in size in terms of pretax profit. At this point, together with Canopius, we're currently devising a plan that will bring about growth for both of the companies and the Lloyd's, the U.S. and in the Asia Pacific market. Through this plan, we will be able to increase our top line as well as our bottom line, which SFM will be able to book under our equity method team. And other than the Lloyd's market, also through other general insurance platforms, we, Samsung SFM, believe that we will be able to increase our pretax profit, which is KRW 230 billion by more than twofold going forward. As you would know, our long-term line and auto insurance is a domestic B2C-based business. It is, therefore, exposed to local regulation and local competition. But if you look at our general line business, it has -- if you look at the general line business, it has the characteristics of being global. Therefore, by diversifying our business geographies as well as diversifying the sources of our profit, we believe that the company will be able to further strengthen its resilience.

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Operator [18]

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(foreign language) The next question will be presented by Jin-Sang Kim from Hyundai Motor Securities.

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Jin-Sang Kim, HMC Investment Securities Co., Ltd., Research Division - Analyst [19]

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[Interpreted] I have 2 questions. First is on your long-term business. I think you mentioned that you were taking a more refrained strategy on your long-term business. But there is concern that outside of the 2021 commission -- I guess, commission structure upgrade that there may be overheating of competition in the GA channel. So before certain products get put off the shelf, people will really focus on selling. Will focus on specific types of products before a change comes. So next year, do you think that it would be possible for you to actually save on the expenses? You've assumed the same level of side of the market, but actual market size or the pie could actually grow. So do you have any specific expense ratio target that you manage against? And what is your forecast for expense ratio for next year?

Second, and also in line with that, if there is an overheating of competition in the GA channel, how do you plan to respond to that? And my second question is, in Q3, is my understanding correct that there are no one-off irregular factors that we need to consider? And also in terms of the gain from the sale of the bonds, it seems like the size of that was quite as usual. If that is not the case, if this was maybe like KRW 10 billion or KRW 20 billion or more, than what you would usually engage in to provide some more color there as well?

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Unidentified Company Representative, [20]

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[Interpreted] I'll respond to your first question, I am (inaudible) from CPC Planning team.

As you have mentioned, some are saying that though, in 2020, there will be competition based on different channels rather than on the tenets of rate. But considering the fact that the loss ratio profile is not good, and there is a worry of economic slowdown and also potential assumed rate decline, in light of all these issues, we believe that it will not be quite probable for there to be an overheating of competition.

So in 2020, we will focus on innovating our product portfolio and underwriting process, thereby, expanding on our retained customers and our new acquisition customers. So that in 2021 as a leading industry player, we can really play in a more stable market.

Our company employs a channel strategy that is underpinned by our TA, the Tide Agent channel, and our TA channel accounts for 77% of the new business, which is quite high.

For our company, our GA channel, we're employing this channel to cater to the new customers who are more sensitive to product or price comparison. Come 2020, we still expect the GA channel portion to be less than or 25%.

So our GA channel profit is actually an increment that goes on top of our Tied Agent profit generation. So there is no negative impact that the GA channel income is having. The dedicated products that we sell through the GA channel, it's comprised of loan loss ratio coverage, so the loss ratio profile is actually quite favorable. GA channel intels an upfront -- higher level of upfront commission, but the maintenance cost is lower. And so we think that this could actually extend to more efficient use of our expenses and contribute to profit source.

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Unidentified Company Representative, [21]

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[Interpreted] I am from the corporate management support team. I am (inaudible).

So for this year, the expense ratio from Jan to September end was 21%. Next year, we're planning to maintain the same level of protection new business. So next year's business ratio will be similar to that of this year.

Now your question relating to any extraordinary items for Q3, we do not have any one-off that you need to be mindful of.

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Operator [22]

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(foreign language) Currently, there are no participants with questions. (Operator Instructions)

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Chang Joon, Samsung Fire & Marine Insurance Co., Ltd. - Head of IR [23]

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[Interpreted] If there are no further questions, we would like to now close 2019 Q3 SFM's earnings conference call. Thank you very much for joining us for this afternoon.

[Portions of this transcript that are marked Interpreted were spoken by an interpreter present on the live call.]