Non-life , MoM earnings improved

• 4 non-life insurers in Oct 2017 W273.2bn, up 9.2% YoY, MoM 65.6% ↑

The net income of four non-life insurers (Samsung F & M, Hyundai Marine & Fire Insurance, Meritz F & M) in IBK Investment & Securities increased by 9.2% and 65.6% YoY to W273.2bn in October 2017, respectively. The increase in profits is attributable to an improvement in insurance operating profit due to a decline in total loss ratio. Overall loss ratios for the five non-life insurers fell 3.8% p and 2.5% p yy, respectively, to 80.8% yy. In the case of long-term insurance, the number of cases filed due to a decrease in the number of business days due to the Chuseok holiday in October.

• Maintain non-life insurance 'Overweight'

We maintain Overweight on the non-life insurance sector. 1) The net profit of the four non-life insurers in October stood at KRW2.5 trillion, up 26.3% from the same period of the previous year, and 2017 earnings are expected to remain robust even considering seasonality in November and December, 2) Positive as the Bank of Korea (BOK) raised the benchmark interest rate yesterday and is expected to boost its return on investment (ROI).

Nevertheless, unlike life insurers, interest rate sensitivity is relatively uncomfortable, and system-related issues such as health insurance and auto insurance may be a concern. Our top picks are Samsung Fire & Marine (TP: W350,000). This is because the company is enjoying robust sales growth despite auto premium cuts this year, and is expected to benefit from a rise in interest rates on the back of its second-largest life insurers' assets.