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Edited Transcript of 032830.KS earnings conference call or presentation 13-Aug-19 7:00am GMT

Q2 2019 Samsung Life Insurance Co Ltd Earnings Call

Chung-Gu, Seoul Aug 16, 2019 (Thomson StreetEvents) -- Edited Transcript of Samsung Life Insurance Co Ltd earnings conference call or presentation Tuesday, August 13, 2019 at 7:00:00am GMT

TEXT version of Transcript


Corporate Participants


* Dae-hwan Kim

Samsung Life Insurance Co., Ltd. - VP, Head of Business Support Division & Inside Director

* In Hwan Kim

Samsung Life Insurance Co., Ltd. - Head of IR

* Jun-Kun Lee

Samsung Life Insurance Co., Ltd. - Internal Accounting Control System Officer

* Kyung-Bok Lee

Samsung Life Insurance Co., Ltd. - Chief of Financial Affairs Team & Executive Director

* Sun Kim

Samsung Life Insurance Co., Ltd. - Former MD


Conference Call Participants


* Byung Gun Lee

DB Financial Investment Co., Ltd., Research Division - Team Leader

* Jin-Sang Kim

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

* Myung Wook Kim

JP Morgan Chase & Co, Research Division - VP

* Sara Lee

Morgan Stanley, Research Division - Executive Director

* Seung-Gun Kang

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




In Hwan Kim, Samsung Life Insurance Co., Ltd. - Head of IR [1]


Good afternoon, everyone. This is In Hwan Kim, Head of Investor Relations. Thank you for taking the time to join us today for Samsung Life 2019 Earnings Results Presentation. Today's call is scheduled for 1.5 hours starting with the earnings presentation delivered by our CFO, Mr. Dae-hwan Kim, and followed by your questions, which will be addressed by members of the management team present here today.

Please note that the figures in this presentation may be revised during the auditing process and any forward-looking statements including the earnings outlook contained in today's conference call are subject to the change depending on both domestic and overseas market conditions and operating environment.

Let me now hand over the presentation to our CFO, Mr. Dae-hwan Kim.


Dae-hwan Kim, Samsung Life Insurance Co., Ltd. - VP, Head of Business Support Division & Inside Director [2]


Good afternoon. This is Dae-hwan Kim, CFO of Samsung Life. I will begin with the key financial highlights for the second quarter starting on Page 4.

During the second quarter, where the prolonged U.S.-China trade tensions and the slowdown in domestic exports in Life's uncertainty in the financial market, post the (inaudible) environment continued along with the competition intensified in the health insurance market among Life and P&C companies. Despite such market conditions, the company continued to achieve notable results throughout all business areas including new business, net profit and capital adequacy.

Our second quarter value of new business achieved a robust (inaudible) growth of 40%, which is a record high on a quarterly basis. This is possible from our efforts to minimize the loss and profitability from the change in experienced people by resizing our products and expanding health insurance sales. Meanwhile, our second quarter net profit attributable to shareholders increased by 1.6% year-on-year and investment yield improved by 11 basis points year-on-year, thanks to the pioneer sales of our real estate.

Lastly, in terms of capital adequacy, which is becoming more emphasized ahead of adoption of KICS and IFRS 17, our RBC ratio came in at 352% still being maintained at a superior level.

Moving on to our second quarter new business results. Second quarter 2019 value of new business achieved a robust growth of 40.2% year-on-year to record KRW 358 billion. This is a result of the strong sales in health insurance despite the negative KRW 56 billion effect from lowering of NIER from 3.4% to 3.1% due to the recurring market interest rate. Meanwhile, our new business margin expanded by 15.2 percentage points year-on-year to 54.0% made by improvements in new business portfolio focused on protection sales.

Next, we'll go over our new business results in more detail. First, our financial business increased by 28.3% year-on-year as our quarterly VoNB trend continued on to the second quarter. At the same time, despite the lowering of NIER from decline in market interest rate, our business margin continued to improved, thanks to the protection growth, which now stands at 73% than the -- out of the whole APE.

Next, I'll go over our health insurance in more detail, which is aligned as one of our major product lineups. Our second quarter health APE came in at KRW 247 billion, which is mainly double from last year's first quarter's KRW 132 billion. If you look at our quarterly protection APE in detail, the growth of our health APE was backed by the strong sales of cancer, precondition and general health insurance that has continued since last year and positive marketing funds on our newly launched LTC insurance.

Our performance in the health insurance market can be differentiated from the result of certain contributors, which had a temporary spike in sales of a particular product. As a result, our second quarter market share in the health insurance market grew up to 9.1% in the Life and P&C market combined. At the same time, 75% of our health insurance APE is generated from exclusive agents, which is more cost efficient in terms of commission, while our competitors rely on the GA channel where excessive competition is taking place.

We continue to enhance product competitiveness in the health insurance sector and continue to monitor the market trend while implementing our product and tendering strategy to maximize the value of new business.

Next is our investment performance. At the end of June 2019, our invested assets reached KRW 222 trillion while our share of funds among total investment assets expanded to 57.9% due to the increase in valuation gains from the market interest rate decline and our efforts to expand (inaudible) long-term bond investments to narrow down the duration gap under [airline] principal while maintaining our stable investment strategy focused on interest-earning assets.

At the same time, our second quarter investment yield improved 11 basis points from 3.4% to 3.5%, which is the result of KRW 92 billion disposal gains from real estate sales and a KRW 45 billion dividend income from a real estate beneficiary certificate. As it is becoming increasingly difficult to defend our investment yield solely with bonds, we will continue our efforts to enhance the investment yield by exploring high-yield alternative assets, expanding overseas investment, increasing retail loan portfolio and by continuing to rebalance our investment portfolio.

Next is our new interest-earning asset investments, reserve coverage and noninterest investment income. During the second quarter, some of the delayed corporate loans from the first quarter were excluded and the portion of loans within the new investment increased to 48.5% leading to a stable new investment yield of 3.0% despite the following KTB yield. Meanwhile, the spread between an average reserve interest rate and the yield on interest-earning assets at the end of June was negative 93 basis points and providing slowdown of -- and providing a slowdown from the last quarter.

But comparing buying and the crediting rating to the sales of SEC shares last year will be normalized after August, so we expect the reserving rate to fall further at the end of third quarter. With that said and the market interest rate has sharply declined since July, we expect our negative margin to widen going forward compared to the current level. The company will continue to try offsetting this spread for noninterest investment in comps, such as premium dividends.

Next is our insurance profit and key efficiency metrics. Pretax insurance profit in the second quarter declined by 5.9% to KRW 337 billion despite the continued improvement in the loading volume from our cost-cutting efforts, due to the decline in the risk margin following the industry rise living benefit claims.

As the hopes against protection sales increased, we expect the growth of our risk premium to accelerate going forward and we expect the loss ratio will stabilize to a 83% level for only more risk margin countermeasures such as strengthened claims management.

Expense ratio should stay at a stable 7% level throughout the year through improved consistency rate and efficiency cost management, and we are expecting this year's insurance profit to be larger than last year's, mainly backed by the increase in loading margin.

Next, we'll go over the net profit. Despite the previously discussed decline in the insurance (inaudible) and the risk margin, net profit grew 1.6% to KRW 309 billion, backed by the growth and investment margin from larger disposal gains and increased contribution from subsidiaries such as Samsung SRA and consolidated funds. Thus, health care accumulating net profit was KRW 757 billion by 9.0%.

Next is capital adequacy. Shareholder's capital at the end of June 2019 was KRW 34.1 trillion growing 17.8% year-on-year. This is the result of KRW 2.1 trillion valuation gain from the SEC share price rise, KRW 1.8 trillion bond valuation gain from the market interest rate decline and the payment of KRW 0.5 trillion dividends.

Meanwhile, RBC ratio at the end of second quarter was 352% increasing by 38 percentage points despite the strength and regulation maintaining our differentiator RBC ratio.

Lastly, I will touch upon the second half business outlook and our capital management policy. Recently, the financial market has been volatile and concerns on our longer-term profitability has risen leading to the share price drop to a historical level since the IPO. While it is true that the company carried a negative margin block and the drop in market interest rate outside the (inaudible) investment margin, we have preemptively taken company-wide measures for the last several years to prevent the fluctuation in our corporate value from interest rate movements, and to secure long-term profitability rather than going after short-term gains. As shown in our first half results, these measures are achieving their desired results.

Going into the second half, the drop in KTB yields and the (inaudible) index will inevitably lead to a higher reserving for variable guarantee option later in the year. However, the company will choose to offset this burden through the insurance profit improvement backed by our cost-cutting efforts as well as utilizing our (inaudible) product disposal gains.

Also, as a (inaudible) this year, this year's dividend payout will follow our plan to gradually increase the payout ratio within 50% for the next 3 years. Going forward, the company will continue to secure high-quality new business as well as improve the insurance profit and will minimize the volatility and longer-term profit for variable guarantee option head count and enhanced asset management yield. Moreover, we will continue to expand our payout ratio to raise shareholder value by our superiority in adopting new routines such as KICS and IFRS 17.

Thank you.


Questions and Answers


Operator [1]


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


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


[Interpreted] This is Seung-Gun Kang from HI Securities. 2 questions. Regarding new money yields, trusting that you have been working hard to defend the yield but still relative to the previous year, it has gone down quite sharply at about 60 basis points. So I think not just for Samsung Life but for the entire industry, the assumed rate of interest has been kept flat up to now. So I'd like to hear more about Samsung Life plans, if possible, reduction of your assumed pricing or the assumed interest rate.

Second, I understand that you have been increasing the proportion of hedging to mitigate risks associated with the variable insurance guarantee options. So compared to the past, I would imagine that interest rate sensitivity may have also changed quite significantly although there are still many uncertainties. Just roughly speaking, what is the sensitivity given current interest rates in terms of your variable insurance guarantee option reserves?


Sun Kim, Samsung Life Insurance Co., Ltd. - Former MD [3]


[Interpreted] This is Kim Sun from the CPC planning team. Let me take the first question on the assumed interest rate.

Interpreted So as you already know, assumed rate of interest is calculated given broader market interest rates and also our investment yields. Currently, the benchmark interest rate of Korea has already been lowered, and it's what they expected that there will already be another cut in the fourth quarter. Given those circumstances, it may be required for Samsung Life to also reduce our assumed interest rates.

Interpreted But if we do reduce our assumed rate that were kind of this impact, it may -- it have on different products. Well, first, for the whole life category, it would mean that our premium rates may be increased quite significantly and the refund of the surrendered cash value may be reduced. So in total, that may reduce the competitiveness of our products in terms of sales appeal. So in order to make up for this type of effect from the assumed interest rate cut, we are looking to various policy measures to revise the product structure so that we can maintain the competitiveness of the product and maintain relatively similar levels of refund rates as we apply now.

Interpreted And then in the case of health-related policies, there will be new minimum effect on the renewable type of policies because for those products, the contract period is quite short. Before the nonrenewable products are cut in the assumed interest rate may mean a significant increase in the premium rates. So we may then address this by introducing more non-surrendered value refund-type products or otherwise, ultimately, revise our product portfolio.

Interpreted So on balance, we do feel that if the assumed rate is decreased may have an impact to a certain degree on the competitiveness of our products. Because of that possibility, we are working to again adjust our product portfolio and come up with other policy measures to offset that kind of impact. In terms of the actual timing of when the assumed pricing may go down, well, given how the benchmark rate cuts have been actually gaining speed, we are reviewing the option at the moment, though we have not specifically fixed the exact timing.


Unidentified Company Representative, [4]


[Interpreted] And then let me take your second question on the variable guaranteed products over all. So recently, amid the abrupt cut in broad market rates, there is growing interest on the profit and loss status of the variable guarantee option type of products, and we are hearing of how many insurance companies are, in fact, struggling because of this issue. For us as well, with the decline in interest rates, we cannot rule out the possibility that it may weigh on our variable guarantee reserves.

Interpreted In terms of the actual full year effect on the variable guarantees, we can only know the exact number later on once the share price and interest rate assumptions are fixed at the end of September and once the actuarial assumptions are also fixed, like as I said, at the end of the year.

Interpreted But given the current situation, if I can just offer a very brief overview of our situation, compared to other insurance companies, we actually have been introducing a hedging on our variable guarantees starting in 2013. In fact, the proportion of the hedged guarantee products are about 40% of the total, which means that in relative terms compared to other companies, we are less sensitive to the impact from changes in interest rates, and also share prices.

Interpreted So it is true that in the first quarter, we did incur a certain level of loss on our variable guarantee products. However, the loss was entirely within our expectations or the expected range. In terms of the sensitivity, which you asked about, a 10 basis point drop interest rate will translate into about KRW 20 billion decrease in terms of our profit and loss on this variable guarantees. So that is how it is structured at the moment. So when we understand that the interest rates actually have been dropped by about 40 basis points since the first quarter, it is fair to say that we have incurred a certain degree of loss. But again, as we have heard from a previous member of management, we are coming up with various countermeasures including increasing noninterest income sources in order to offset and cover for that loss.

Interpreted So again, I'm from the actuarial RM Team. The company is very strongly committed to doing our best in order to defend against that kind of negative impact, that impact from falling interest rates, while also maintaining our earnings.


Operator [5]


[Interpreted] The next question will be presented by Myung Wook Kim from JPMorgan.


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


[Interpreted] Yes, this is Myung Wook Kim from JPMorgan. 2 questions also. In the second quarter and also throughout this year, I think you have seen a significant increase in the value of new business, which is quite positive. So do you think this very high margin health protection product has enough size and scale to continue this type of growth on a sustainable basis? So in other words, is this market big enough? If so, what kind of domestic demand are you seeing within Korea in that segment? And how are the insurance companies positioning themselves to happen to the space and to broaden this market? I'd like to hear your thoughts as the industry leader.

And the second question has to do with what was already mentioned having to do with returning value to the shareholders. So your share price actually has declined to the lowest level since the IPO. And for us to address those concerns, you have mentioned what you intend to do in terms of your payout going forward. So given how their limitations have seemed in terms of earnings growth and also dividend growth, are you contemplating any other measures, perhaps buyback of shares or any other way in order to further enhance shareholder return?


Sun Kim, Samsung Life Insurance Co., Ltd. - Former MD [7]


[Interpreted] Yes, this is Kim Sun from the CPC planning team. Let me address your question on whether we think that the health insurance market is big enough to continue sustainable growth to how we intend to secure competitiveness.

Interpreted So if you look within the life insurance space, let me actually focus specifically on what kind of sales trends we have been seeing for different products and especially the health-related products. First, for whole life type products compared to 2, 3 years ago like 2016, actually, there's been a 20% reduction in sales with the sales are now going down from KRW 44 billion down to KRW 33 billion whereas, in contrast, the health insurance market actually has grown by 2x in the same period going from KRW 14 billion to KRW 28 billion.

Interpreted And then in terms of what kind of products have been the main driver, the background of growth, well, more recently, I think the key driver has been dementia or long-term care, caregiver-type products to provide for protection in old age. So that is a one big source of demand recently. And then second, we're seeing more prior condition-type products where people with previous medical conditions whereas in the past, products were mostly for standard subjects only.

Interpreted Yes. So it is the company's view that this type of trend will continue going forward. In terms of the basis of this view, first is this demographic aging of the Korean society, where we're seeing an increase in the number of customers with these types of old age health-related needs. So we mentioned the long-term care type of product. But according to market research results, we find that there are very limited customers who feel that they already have sufficient LTC type of coverage.

Interpreted And then the second reason why we're optimistic about growth in this market is that we're continuing to see development, the various types of health care or health-related services and tools. So they will ultimately link up with insurance-type products, which will eventually, or in turn, have the effect of growing the size of this market.

Interpreted And then given the circumstances, then how to go about enlarging our market share. In the short term, of course, it can be achieved by developing good financial products, strengthening our sales and distribution organization to boost sales. But as a large insurer, I think we and other large insurance companies have a distinct advantage in the health products space. Let me explain. Because up to now -- for health or accident-related insurance products, up to now, it was mostly competition over -- based on promotional campaigns or underwriting competition. But ultimately, given the nature of this market, it's all about risk management. So I feel it will be the large insurers like us who have the financial stability and the underlying stability that will ultimately prevail and succeed in this market. And so we have already been making focused investments in this space and focusing on developing capacity. So I'm very convinced that we'll be able to continue to build out our market share.


Kyung-Bok Lee, Samsung Life Insurance Co., Ltd. - Chief of Financial Affairs Team & Executive Director [8]


[Interpreted] Yes, this is the CFO. Let me address your question on the shareholder return policy.

Interpreted So let me break down my questions into different parts. So as the first thing, we'll answer the question already mentioned. Actually, our payout policy was announced at the early part of this year where we intend to gradually and progressively raise our payout ratio within 50% for the next 3 years. So this basic position at present remains unchanged.

Interpreted And as was mentioned earlier by another member of management, amid the declining trade and also the fall in share prices on the equity market, it is inevitable that we may have additional reserving burden especially regarding the variable guarantees of products. However, we are strategically trying to counteract against this effect through a broad cost-cutting effort and also by using various disposable or proceeds from various assets -- or disposal gains from various assets, excuse me. For example, we achieved KRW 60 billion in disposal gains earlier in July by selling off a real estate trust-related company.

Interpreted Then looking out to next year and beyond, there are various abrupt changes going in terms of the equity markets and also interest rates. So it is hard to share a very specific outlook at the moment. But in terms of our insurance business, we intend to strengthen our management persistency of our policies, continue with our cost-cutting measures to strengthen the basis for robust expense margin going forward. And also, we're incorporating various strategies in order to continue to improve our mortality margin as well.

Interpreted And then I'd also like to make some comments about various regulatory schemes that are currently pending. So there's KICS, also IFRS 17. In terms of preparedness against these new schemes, I would say that we are the most well prepared relative to any other industry player in Korea. And if you look at recent developments from the regulatory authorities, the financial authorities, it seems that, overall, we have been taking a more eased tone. So in terms of shareholder return, I think that a very favorable environment is now being put in place, which is why, as I said before, we stay -- we stand true to our commitment again to gradually raise our payout ratio to up to 50% over the next 3 years.

Interpreted And then you also asked about whether we have any plans at the moment to do any share buybacks. Although we are not at present concerning it at the moment, given the uncertainties especially on the financial markets and how the life insurance space is particularly sensitive to changes in the market interest rate, we are concerned about deterioration of investor sentiment. And so we are very vigilant about monitoring share price changes and also the overall market sentiment situation. In the longer term, all options are open, and we will make a review of different option in consideration of the different regulatory schemes including IFRS 17 and KICS.


Operator [9]


[Interpreted] The next question will be presented by Byung Gun Lee from DB Financial Investment.


Byung Gun Lee, DB Financial Investment Co., Ltd., Research Division - Team Leader [10]


[Interpreted] Yes, this is Byung Gun Lee from DB Financial Securities. I also have 2 questions. First on Page 9, your negative spreads or reserve coverage is indicated. And I understand how given the current market interest rate situation, it was unavoidable that you will see widening of the negative spread. But in terms of at the end of this year and into the next year, what is your forecast in terms of the negative spread? What level do you foresee presuming that current interest rate levels are maintained and that the BOK does one additional rate cuts?

And then I would like you to break down also by the average reserve interest rate and the yield on interest-earning assets, if possible. So various factors would -- or due to various elements that can be factored in, for example, the disposal gains from your SEC shares or how the recent abrupt drop in interest rates may reflect in terms of your crediting policies. So on balance what is your outlook for the negative spread?

And then one of the other pages of the slide, you mentioned how there is increasing preference among the customers for different types of combination or combo OTC-type products, or products for people with previous medical conditions or cancer products. So could you share with us the profitability of those types of new health products and also the refund rates of those products, in particular, the combo LTC product? I'd like to know what the surrender refund rates are like. So preferably, we would like to hear how you compare against your competitors. But if that is actually difficult or not practicable, could you perhaps compare the profitability with the refund rates of those new products against your own previous products, like the whole life policies that recently the sales have actually been going down on? So we'd like to hear more about the profitability structure.


Unidentified Company Representative, [11]


[Interpreted] Yes. I'm from the actuarial RM team. Let me take your first question on the negative spread.

Interpreted So in terms of our negative spread, it is true that we have seen some deterioration as it was minus 87 basis points as of the end of last year, whereas it is currently at minus 93 basis points for the second quarter this year.

And then there was a one-off in the second quarter because, as you know, because of disposal gains on SEC shares there was about a 7 basis point deterioration of the statutory standard rate that applies to calculation of crediting rates. So that is the effect of widening the negative spread margin by about 3 basis points. So when you back out that one-off, it's fair to say that actually the negative spread for the second quarter was closer to 90 -- or minus 90 basis points rather than 93. For the end of 2019, although originally we forecast that it would remain around current levels, given the abrupt drop in interest rates, however, we would expect that it may widen further to about minus 95 basis points.

Interpreted And so the minus 95 basis points forecast for the negative spread, let me break down the average reserve interest rate and the yield on IT interest-earning assets. The underlying assumption for the 95 bp is 3.39% yield on interest-earning assets, 4.34% reserve or average reserve interest rate.

Interpreted And then in terms of what are forecasted for 2020, it is hard to say in exact terms, but we say roughly around 100 basis points or 101 basis points. So in terms of the average reserve interest rate and the yield on interest-earning assets, it would have to be adjusted proportional to that.


Unidentified Company Representative, [12]


[Interpreted] Yes, this is [Soka Lee] from the product planning team. Let me take your second question on the profitability of our health-related products, and also how the refund rates compare, compared to our whole life products.

Interpreted So let me first break down the profitability of the different products based on the fee rate percentage. So for the combo LTC plus Alzhemier's type of products, profitability is quite good at 300%. For the previous existing condition products, 400% to 600%. Cancer also quite high between 600% to 700%.

Interpreted So our fee rate is a measure of profitability that looks at how profitable a certain product is relative to monthly premium income.

Interpreted And also in terms of our combo product, we are also different from other companies in that, whereas the competitor's products provide annuity payments until end of life. In our case -- in the case of this year, Alzheimer's or dementia, we only provide annuity payments up to a period of 10 years. So we are much more rigorous in terms of tight risk management.

Interpreted And for all 3 of these major type of health products even where the policies provide coverage for mild cases, we have extra protection through exceeding the policies through reinsurers. So we are practically managing against this type of risk exposure.

Interpreted And then also for the combo LTC plus Alzheimer's products, you asked about the level of refunds upon full payment of all premiums. So compared to the refund rate of our existing whole life products, there isn't much of a difference. So assuming ages 15, 20 years premium payment period, the refund rate is slightly above 100%. So again, not a major difference versus the refund rate of our whole life products. In comparison to other companies, in some cases, offer 130%. So this may actually have a substitution effect because it's higher than the level provided of their whole life products whereas that is not the case for us.


Operator [13]


[Interpreted] The next question will be presented by Jin-Sang Kim from Hyundai Motors.


Jin-Sang Kim, HMC Investment Securities Co., Ltd., Research Division - Analyst [14]


[Interpreted] Yes, this is Kim Jin-Sang from Hyundai Securities. Let me ask 2 questions. So what is the status of insurance profit for the first half of this year? So if you could break it down by expense margin, mortality margin, it would be helpful, especially compared to the previous year. And so if you compare this year versus last year, and also this year versus your forecast for next year, that would be quite helpful. What kind of growth are you anticipating year-on-year?

And the second question has to do with Page 7 where it seems that there's been a gradual increase in your market share for health-related or accident type of policies. But then more recently I think you have been seeing even greater momentum. So do you have a target within the company as to how much market share you want to achieve in the health accident space? And what kind of time table are you thinking of? This was based on APE, but ultimately when you're thinking about the entire broader -- the broad accident or health-related market, what level of market share do you think Samsung Life is capable of ultimately achieving? So if you've done any simulations internally or had any internal discussions, we'd like to hear.


Jun-Kun Lee, Samsung Life Insurance Co., Ltd. - Internal Accounting Control System Officer [15]


[Interpreted] Yes. This is Jun-Kun Lee from the Support Team. Let me take your first question.

Interpreted So regarding the insurance profit for the first half, so thanks to our cost-cutting measures that we have been undertaking at the company, we have seen continued improvement in terms of our expense margin, whereas because of the increase we have seen in living benefit claims paid, we are seeing a deterioration in our mortality margins. So on balance, our insurance profit as a combined -- or from the combined effect of the 2 factors have actually declined slightly compared to the previous year.

Interpreted And -- but because we are enforcing very strict management on-site to better manage and improve our mortality margins, we think that, as the CFO mentioned earlier, we should see some outcomes coming through later in the second half of the year. And we expect to be able to achieve stable loss rates, about 83% in the second half of the year. And on a full year basis, we think our insurance profit will increase.

Interpreted And we also think that our insurance profit will continue to see gradual growth following next year and onward, again thanks to continued cost innovation measures and also our continued efforts to improve mortality margins.


Sun Kim, Samsung Life Insurance Co., Ltd. - Former MD [16]


[Interpreted] Yes. This is Sun Kim from CPC planning. Let me take your second question on our outlook for the health and accident space.

Interpreted So as you can see from the slides, we have been seeing continued growth in terms of our health and accident policy market share. So combining first quarter and the second quarter, our current market share is 8.4%.

Interpreted And you asked about our outlook or market share target. But to be precise, we do not have a separate stand-alone target specific to health or accident-type policies, in terms of how much market share we want to achieve.

Interpreted And then also the reason why we do not manage against those type of specific targets is twofold. First, in terms of product portfolio, we have to constantly be ready to adjust the product portfolio given the business conditions and also changing market circumstances. It's quite difficult to -- for us to manage against specific target for against specific product categories. And also, we do not think that because market share as an indicator does not adequately reflect profitability of the products or risk. I think having a specific market share target would -- could be understood as our company is being more focused on delivering achievements or outcomes to show the market rather than being tighter about risk management.

Interpreted So in terms of market share, the position of the company is to continue current levels, but then continue to grow from the current levels by 1% to 2% on a sustainable basis. So again, this is on aggregate for all protection-type products not just health and accident, but inclusive of whole life as well. And then more important for us would be to continue to improve value of new business, EV, by 10% or more on a continuous basis.


Operator [17]


[Interpreted] The next question will be presented by Sara Lee from Morgan Stanley.


Sara Lee, Morgan Stanley, Research Division - Executive Director [18]


[Interpreted] Yes. So I want to ask for further details regarding loss rates. You did say that you expected to improve some in the second quarter -- second half of the year. But I believe the company's position was similar last year and the previous year, but loss rates continued to deteriorate. Of course, last year, there was a one-off factor in the first quarter. It was still quite high compared to the previous year. And even at the second quarter, it continued to be high. So what are the factors that led to the higher loss rates, if you could break it down? Is it because there was an increase in living benefit claims and there was an increase in reinsurance cost perhaps, or there's a higher claims ratio relative to coverage? Or what are the factors that explain the higher loss rates?

And then if we move on to the second half of the year and next year, conceivably, if you sell more health-related policies, it will be fair to expect that your loss rate may increase from current levels.


Jun-Kun Lee, Samsung Life Insurance Co., Ltd. - Internal Accounting Control System Officer [19]


[Interpreted] This is Kun-Jun Lee from the support team. So as you mentioned, yes, it is true that mortality margins have continued to decline due to the continued increase in living benefit claims. So with more medical service usage, there's been more claims for health-indemnity type products. And as the states endorsed, cancer screening program has become widened, benefit to more claims for diagnosis or surgical procedures. But this applies not just to us, but to the entire industry.

Interpreted Yes. And as you mentioned or as was previously mentioned, our main product categories, of course, the protection-type products, which include the health and accident-related policies, and those sales have increased. In terms of our risk premium, previously, it was growing at a relatively lower 3% level. But with the increase we have seen in sales of these types of products, we expect it to improve further to around 4% to 5%.

Interpreted And as you previously heard from our head of product team, the health-related products that we are currently marketing actually are safer in terms -- or safer relative to similar products by other insurance companies, through reinsurance coverage and also other supplementary measures.

Interpreted And also to crack down on -- excuse me, to reduce claims, we are working very, very hard to prevent and to counteract against fraudulent claims. So we are scrutinizing questionable benefit claims, responding proactively to insurance fraud and also enforcing very tight discipline in terms of on-site mortality and margin management. And we think the results of these efforts should start coming through.

Interpreted So although we're not seeing the loss rates are likely to revert back to historic past levels, so we do think that we'll be able to hold stably at around 82%.


Operator [20]


[Interpreted] Currently, there are no participants with questions. (Operator Instructions)


In Hwan Kim, Samsung Life Insurance Co., Ltd. - Head of IR [21]


[Interpreted] As there are no questions, we will now conclude the conference call for the second quarter 2019 for Samsung Life. For further inquiries, please do contact us at the IR team. Thank you.

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