Good morning and good evening. First of all, thank you all for joining this conference call, now we will begin the conference of the fiscal year 2022 fourth quarter earnings results by Samsung Fire & Marine Insurance. This conference will start with a presentation followed by a divisional Q&A session. If you have a question, please press star one, that is star and one on your phone during the Q&A. For translation, please press star two, that is star and two on your phone. Now, we shall commence the presentation by Samsung Fire & Marine Insurance.
[Foreign language]
Good morning. I am Kim Jae Hong, head of the IR team. Thank you for joining our financial year 2022 earnings conference call. Today, we will begin with 2022 business highlights, which will be followed by 2023 business strategy presented by our new CFO, Kim Jun-ha. We will have the Q&A session with answers provided by the executives of each business line. The entire session, including the Q&A, will last a total of one hour.
[Foreign language]
With that I would invite CFO Kim Jun-ha.
[Foreign language]
Good morning. I am Kim Jun-ha, the newly appointed CFO. Allow me to start by presenting to you SSMI's 2022 business results and strategies for this year. 2022 pre-tax profit reported KRW 1,536.8 billion, while net profit came in at KRW 1,141.4 billion.
When excluding last year's one-off gain of special dividend from Samsung Electronics, net profit growth was 16.5% year-over-year.
[Foreign language]
First, for the long-term insurance, ahead of IFRS 17 implementation this year, we improved our portfolio around high CSM yielding products, which include age term products like children's insurance and lapse-supported insurances that have robust persistency profiles, thereby growing the mix of high margin products from new sales. Thanks to efforts behind efficiency improvements for value-enforced policies, our 25th month persistency ratio for production was up 8.7 percentage points year-over-year, while 37th month's rate improved 7.4 percentage points. The size of risk and loading premium, which formed the basis of future earnings, also posted 8.2% year-over-year growth.
[Foreign language]
On the back of more stringent standards for claims review in response to excessive claims from medical indemnities, like for cataract treatment, risk loss ratio improved by 3.1 percentage point, recording 86.9%, while in Q4, we saw sizable improvement of reduction of 6.4 percentage points year-over-year.
[Foreign language]
Next, auto insurance. Direct premium written was KRW 5,924.4 billion with combined ratio of 97.5%, maintaining a flat trend year-over-year. In 2022, due to heavy rainfalls, snow, and other natural disasters and deepening inflation, there were levers behind rise in underwriting costs driving up the loss ratio. Thanks to increases in quality-driven revenue and claims efficiency, we were able to achieve underwriting profit quite steadily for two consecutive years.
[Foreign language]
Next, on general insurance, direct premium written was up 17.8% on year, underpinned by the reinsurance strategy geared towards reducing profit volatilities. Net premium written was up 3.6% year-over-year. Loss ratio increased 2.1 percentage points on year to 77.1% due to the impact from natural disasters and high-risk events. Next, asset management. Company's investment profit was KRW 2,081.1 billion, with investment yield up 0.1 percentage points year-on-year, reporting 2.9%. Excluding year 2021's one-off dividend gains, investment yield was up 0.3 percentage points year-over-year. The financial market of late has seen uncertainties continue, both internal and external, characterized by inflation, deepening of interest rate volatilities, and stagnation of the property market. With this backdrop, we have been monitoring risks thoroughly and managing the quality steadily.
[Foreign language]
Now that was on 2022 earnings of the company. I will now move on to present our major strategies of Samsung Fire & Marine for this year. The insurance industry in 2023 is facing changes both internal and external, including changes of the accounting system and greater like-likelihood of a global recession. To counter such change in the market, SSMI will continue to bring fundamental growth and bring efficiency innovation so as to focus on securing earnings stability mid to long term.
[Foreign language]
In terms of the long-term insurance business, it will be where the impact from IFRS 17 will be the greatest. As such, we will focus on growing new sales CSM through developing and distributing high-margin new products, and by strengthening our channel's competitiveness. We will also continue to improve efficiencies, including the persistency ratio, with a view towards gaining a solid basis for future earnings.
[Foreign language]
For the auto business, there are levers of pressure, including rise in insurance inflation, deepened market competition, and rise in the activity level with the effects of the endemic fully kicking in. Despite such, backed by revenue growth driven by quality contracts and process innovation, we will pursue three consecutive years of underwriting profit.
[Foreign language]
For the general insurance, we plan to drive revenue growth by discovering new markets and risks both at home and abroad, while we continue with the reinsurance strategy to reduce volatilities and profitability, all in all contributing to solidifying the robust basis for company earnings. Also, mid to long term, we will gradually broaden our business domain by providing variety of services, having direct re-relevance to customer safety, such as offering of consulting services for safety management.
[Foreign language]
Lastly, for asset management, facing greater financial market volatilities, we will further strengthen the risk management regime while increasing running yields through selective investment into high rated prime corporate loans. Also, by expanding dividend bearing assets, we will continue to improve portfolio profitability, and by strengthening ties with global private equity funds, we'll be exploring new investment opportunities.
[Foreign language]
SFMI was able to record highest profit ever, despite greater uncertainties both internal and external last year. We expect many difficulties and changes this year, but by proactively countering changes in the environment while continuously looking for opportunities for uninterrupted growth, we will be laying the basis for future earnings. We will also endeavor to gain market trust and recognition in terms of the ESG, environment, social, and governance aspect.
[Foreign language]
In the year 2023, we commit to exert our utmost to bring differentiated earnings and further enhance our shareholder value. Thank you.
[Foreign language]
Now, we will move on to the Q&A session. I would like to ask that you please ask no more than two questions per person.
[Foreign language]
Now, Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pre-pressed the number star one. For cancellation, please press star two, that is star and two on your phone.
[Foreign language]
The first question will be provided by Hyung Jae Lee from Hyundai Motor Securities. Please go ahead with your question.
[Foreign language]
Thank you very much for taking my question. My first question relates to your loss ratio for the auto business. Looking at the tentative account closing, the figures seem to be quite positive. Would like to understand as to the extent of the impact that you benefited from the changes in the overall system and the rules. Also looking at the current trend for the February, the month of February, I think that the pattern is still going to be quite favorable going forward. Would like to understand your take on that. Second question, this year we've seen a lot of interest regarding the dividend payout policies of banks. We've seen heightened interest. I think going forward, either this year or next year, you companies like SFMI will also be facing similar challenges, higher call for shareholder return.
Although you can't share any specific number at this point, can you provide some color as to the direction of your shareholder return policy? I would assume that it would be difficult for you to just base it on KICS or the solvency ratio.
[Foreign language]
Yes. Good morning. I am Vice President of Automobile Insurance Strategy Team. I am Lee Sang Hyuk. I will respond to your question about the auto loss ratio, relating to the impact of the improvement in the overall system, et cetera. If you look at month of January, it was slightly higher than expected, but still we outperformed the plan.
[Foreign language]
Regarding the impact of changes in the overall regulatory regime because the timing of the implementation of those changes was November 2022 and January 2023, it's too early to say that we have seen a direct impact from such changes.
[Foreign language]
Now the reason why we've seen some improvement, in the loss ratio or decline in the loss ratio in January is that if you compare to the situation in November where there was, very heavy rainfall and a very cold wave, that, factor was eliminated. We've seen this decline in loss ratio thanks to the seasonal effect. Also recently, because of the economic recession and the overall constraint on the demand and consumption, we've seen less mileage driven, which then drove down the accident rate.
[Foreign language]
In order to make sure the impact of such changes in the regulatory regime is really felt, we are very closely cooperating with the relevant authorities and also providing those information to our customers and also are currently carrying out many different activities to make sure that these improvements can really take a firm root and be well established. We believe and we expect to see the impact of such improvement in the overall regulatory regime to start to feed in after the first quarter.
[Foreign language]
Lastly looking at the claims trend for the month of February, due to the reasons that I have previously mentioned, and the fact that the seasonal impact from heavy snowfall and cold wave has been mitigated, which all contributed to improving the accident rate trend, we expect going forward compared to the January figure, we will be seeing a better loss ratio profile going forward.
[Foreign language]
Yes, this is the CFO. I will respond to your second question on our capital plan. As you know, the company has put in place a shareholder return policy based off of a dividend per share, DPS. Our plan is to progressively grow that as we go into the future. As you know, this is the first year of IFRS implementation.
As we close our accounts on a quarterly basis, we will consider the actual figure as well as compare that with the plan set before. Up until the end of the year, we will continuously look at those different factors and continue to finalize our capital plan. With the adoption or implementation of IFRS 17, as well as considering the fact that our business environment is quite uncertain at this point, please, I hope you understand that it will be difficult for us to provide you with any specific direction regarding our capital plan. However, having said that, I can make sure that we will continue to carry our DPS trend in a very steady and upward trend.
[Foreign language]
Thank you. We will take the next question.
[Foreign Language]
The following question will be presented by Jung Jun-seob from NH Investment & Securities. Please go ahead with your question.
[Foreign language]
Thank you for taking my question. I am Jung Jun-seo from NH Investment & Securities. My question relates to your loss ratio for the long-term business. The beginning of year 2022, people had some concerns regarding the cataracts treatment and expenses. As we enter into the second quarter, we were able to see that these excessive treatment expenses were well controlled, which was quite positive. We'd like to understand what your take is for what your projection is for year 2023, because recently we've seen a lot of emphasis placed on banking institutions, on their public role. Also the insurance companies recently have, ours are really focusing on responding to the civil complaints.
We would like to understand whether hence, under this backdrop, you will be able to continue this trend of really constraining the excessive treatment and expenses. Do you think that is feasible?
[Foreign language]
I am the Vice President of Long-Term Insurance Strategy team, Lee Yong-bok. I will respond to your question on the long-term insurances. As you've mentioned, thanks to the improvement of the overall rules on the claims reviews for the cataract treatment, we've seen improvements. That improvement continued to show itself in the second half of the year.
[Foreign language]
As you have correctly mentioned, there's been a stronger social call for public responsibility of financial institutions. If you look at the measures that we've put in place, as well as improvement in the rules and more stringent review process of the claims, it was focused on excessive treatment and some moral hazard issues. Hence, as you've seen from our cataract treatment, hence, we will continue to focus and continue to have this approach in the future as well. Also last year, FSS issued a code of standards for insurance fraud, and they announced five major principles which were announced in order to prevent any insurance claim leakages. Based on those principles, we will continue to strengthen our capabilities around constraining excessive diagnostic treatment, as well as preventing any moral hazards.
[Foreign language]
Thank you. We'll move on to the next question.
The following question will be presented by Myung-Wook Kim from J.P. Morgan. Please go ahead with your question.
Yeah.
Yes.
Yeah. [Foreign language]
I am Myung-Wook Kim from J.P. Morgan. Thank you for taking my question. I have two questions. First is on your long-term business line. Under this new IFRS 17 regime, I understand that the company wants to increase the long-term new business. What is your take on the overall TAM, the total addressable market of long-term products in Korea? It's because a lot of people ask whether companies will be able to increase their CSM on new sales in light of the total addressable market. It would be helpful to understand what your understanding is. Also, you are increasing your mix of your lapse-supported products and age term products out of your total portfolio. How do you actually control and manage the underwriting risks that are inherent in these types of products?
Second question on dividend. When you were answering the previous question, you mentioned that you are mindful of the uncertainties in the operational backdrop in 2023. If you look at other global insurance companies, when they talk about their dividend policy under IFRS 17, if it's a company that has ample amounts of solvency capital, they seem to be quite confident in sharing their positioning on a progressive dividend payout policy. We would like to therefore understand what you mean by these uncertainties. Yes, I am Lee Yong-bok, VP of Long-Term Insurance. Responding to your first question, as you have correctly mentioned, the penetration in the Korean insurance market is very high based on the projection or conjecture.
If you look at the new business market or the new sales market over the past 3 years, we've seen the size be maintained at upper KRW 60 billion.
[Foreign language]
This is attributable to the fact that the medical technology continuously advances and also people's interest on one's health has also heightened over the years, hence, supporting the sustainance or maintenance of this new market. In terms of these lapse-supported as well as age term products which are higher margin, we've been increasing its share in terms of the out of the total sales. Starting last year, we have been keeping to an adequate level of rate making.
[Foreign language]
Under IFRS 17, the very important aspects are the efficiency indicators such as the loss ratio and persistency ratio.
In underwriting these types of products, we make sure that we move away from providing high or overly excessive level of coverage on a more minor, on minor risks or minor diseases. Our operational strategy is geared towards further maximizing the profitability, and we plan to run the portfolio as such.
[Foreign language]
I am Vice President of Corporate Management Support. I am Lee Jong-hoon. I will respond to your question as to what Samsung Fire & Marine's understanding is regarding the uncertainties that works that impacts our dividend policy. To begin with, when we are determining the DPS for 22, basically we will consider both the payout ratio and dividend per share. As our CFO has clearly mentioned, our positioning is that we will continue to take DPS on an uptrend, upward trajectory.
[Foreign language]
Last year, some of the shareholders have made their proposal and request that under IFRS 17 and once the CSM volume is more or less fixed, that it could be best to go to quarterly dividend payout or more a steady payout approach.
[Foreign language]
On our view, when we say uncertainties, if you look at under the IFRS 17 regime, the total CSM volume that we calculate, I mean, is that the appropriate level? We believe that we have set it at a quite conservative level, but we would like to continuously monitor as to see the variability between the assumed and the actual figure that we see. We would like to closely monitor that the CSM volume internally as well as compare that with our peers.
[Foreign language]
Also, you've seen that during the fourth quarter, there's been a quite large fluctuation in terms of PNL for the auto line and the commercial line. We would also like to see how that volatility variability actually impacts the total size volatility. Once we fix the CSM volume, then we will be able to come back and share with you a more concrete shareholder or capital plan.
[Foreign language]
Thank you. Next question, please.
[Foreign language] The following question will be presented by Byong Gun Lee from DB Financial Investment. Please go ahead with your question.
[Foreign language]
[Foreign language]
Thank you. I am Byong Gun from DB Investment. I have two questions. First, we will be able to expect disclosure on IFRS 17 in early March regarding the numbers. Maybe if even if you cannot share the specific 2022 figures under IFRS 17, can you at least share with us and the beginning accounts basis, the size of the capital like CSM, RA, and the surrender reserve and KICS percentage, whatever you can share, that would be helpful. Second, it's a follow-up question on the previous long-term business related question. It had already been known that age term and lapse-supported products are products that entail high margin, but it's only recently that we've seen a significant and steep rise in these products.
I would assume that this is a combination of the authority's regulatory approach on trying to curb the rate related, hot competition, and also it will be in line with the corporate strategy. Hence, I would like to understand as to why you have decided to really grow this product very significantly in recent days. What is then your target mix or your percentage of age term and lapse supported products out of the total portfolio?
[Foreign language]
Responding to your first question, I am VP of Corporate Management, Lee Jong-hoon.
[Foreign language]
As I mentioned before, when we were calculating these numbers, we thought to ourselves that we've been quite conservative. Anyhow, the beginning term CSM as of this time is KRW 12.2 trillion. With regards to other figures, we will do some more work, and we will communicate with you when that time comes. Let me clarify one more thing. This is as of from end of 2022, the CSM is going to be KRW 12.2 trillion.
[Foreign language]
Yes. Regarding the long-term long-term question, as you can see, and you are correct, the size of the age term and lapse-supported products, the portion out of the total portfolio has grown. In Q4, as you can see from page two, age term products have expanded its share to about 46%.
This is not due to any regulatory impact but is attributable to the company's strategy.
[Foreign language]
Now, for the lapse-supported products, the premium is cheaper compared to other products, but hence the policyholders prefer this product. From the company's perspective, it is also more beneficial from the CSM perspective, hence we have seen an increase of these products.
[Foreign language]
Now, under such uptrend for the age term products for this year as well, we expect, and we believe that we will see that share rise to around 50% level.
[Foreign language]
Next question, please.
[Foreign language] The following question will be presented by Dohwa Kim from Hanwha Investment & Securities. Please go ahead with your question.
[Foreign language]
Thank you for taking my question. I just have one question. We've seen long-term insurances risk loss ratio improve quite significantly, and it was actually much better than what was expected. I would like to understand whether you believe you can continue on with this trend, and if you can give us the breakdown between medical indemnity and non-indemnity, and share with us what the Q4 trend is. For this year, where you think the driver of improvement in risk loss ratio is going to come between medical indemnity versus non-medical indemnity. The improvement that we've seen was mostly driven by the measures that you put in place for cataract.
End of last year, Ministry of Health and Welfare also made announcement relating to 10 areas where there is a specific excessive treatment going on and relevant product improvements that needs to be made. Since that announcement of the plan, we haven't seen any detailed plan that has been shared. Can you share with us once, you know, that kicks in, what impact do you foresee in your long-term loss ratio improvement?
[Foreign language]
Yes. I am Lee Yong-bok, VP of Long-Term Insurance, responding to your question. Yes, in Q4, we've seen improvement in an year-over-year basis at 89.4%. On a Q-on-Q basis, there's been a slight increase, but that's mostly attributable to seasonality factors and the high risk events and year-end concentration of health screening.
[Foreign language]
The loss ratio on a year-over-year basis last year was 89.4%. There was an improvement of 6.4 percentage points. The improvement that we've seen from medical indemnities was twofold. The main driver behind the improvement was medical indemnity.
[Foreign language]
Yes, I am VP of Long Term Product Development team, Kwon Gi Soon. I will respond to your question about the impact from, rule changes.
[Foreign language]
Now, we expect from the overall system perspective that there will be continuous control on the non-benefit items to make sure that we can prevent claim leakages and to stay away from excessive treatment.
[Foreign language]
In terms of more specific, improvement in the overall regime, one of the key aspects that we can think about is streamlining of the claims process, which will help, improve the convenience felt by the consumers, which will have a positive impact on the overall industrial development. To that end, we will very closely cooperate with the government authorities.
[Foreign language]
Thank you. Next question.
[Foreign language] HSBC [Foreign language] Jae Woong Won [Foreign language]. The following question will be presented by Jae Woong Won from HSBC. Please go ahead with your question.
[Foreign language]
Thank you for taking my question. I'm from HSBC. I have two questions. First is, there is a news that the auto insurance premium comparison service by the big tech platforms will soon be launched. Would like to understand as to the level of development or the stage of development, and what positive and negatives will be felt by SFMI. Would it not undermine your channel competitiveness? I would like to get some color there. Also, can you provide an update as to what your global business or global expansion current status is?
[Foreign language]
Hello. I am Lee Sang Hyuk, VP of Automobile Insurance. Responding to your question, up until last year, the overall opinion was that in terms of these comparison auto premium services to be launched by Naver and KakaoPay, that the auto insurance will likely be excluded. Starting this year, we see a progress whereby the supervisors is allowing that auto insurance premium comparison. You know, that process is ongoing.
[Foreign language]
At this point, we are talking through the Insurance Association to make sure that the benefits that's introduced through this comparison services of on the platform does not further increase the burden from the perspective of the consumers and to make sure that the shock from it is minimized.
[Foreign language]
Recently, I'm sure you've seen some press coverage from the insurance company's perspective. We want to make sure that these platform companies entrance into the market does not overly increase the expense ratio, thereby transferring the burden to the actual users and the consumers. We've made the proposal that there be a specific rate for these platforms and to make sure that the market does not get overheated, which then translates into a bigger burden for the consumers. In that light, we've also made our position or our opinion known that there should be some cap that is applied on the overall commissions or the advertisement expense level.
[Foreign language]
Lastly, we have the insurance companies have shared their views with the authorities and based on the feedback that we provided, the authorities will now hold an hearing with the platform companies or have a meeting with the platform companies before they come to a final decision. Yes, I am VP of Commercial Lines, Strategy team. I will respond to your question about SFMI overseas business. For our global endeavors, I can mention two. One is with Canopius. It's a company that we've made equity investments into some business corporations and markets of U.S. And Asia. Canopius, as you know, is a member of the Lloyd's platform, so it has global underwriting capabilities, while SFMI has our own capital strength as well as license for the U.S. market.
Combining these two capabilities, we are at this point together closely collaborating to explore business opportunities and our volumes are increasing as well.
[Foreign language]
We will continue to have this close cooperation with Canopius and one of them being us underwriting the risk portfolio that is already proven and verified. Second, endeavor is in China, SSMI and joint venture with Tencent. We've already received all of the regulatory approvals required, and all the administrative processes are now complete. At this point in time, we've put in place new executive team and the BOD, and we have all the system in place for joint management of the company. Now, we expect the two companies will continuously cooperate closely for the China's local market.
Our focus for the time being will be the personal insurance, the health insurances, but not only that, we will also explore new opportunities on the B2B side, Korean affiliate B2B side. Korean company B2B side, excuse me.
[Foreign language]
Thank you. We'll take the next question.
[Foreign language] The following question will be presented by Seung-Gun Kang from KB Securities. Please go ahead with your question.
[Foreign language]
Thank you. I would like to ask two questions. First, I believe that with the lessened burden on your new business expenses, in 2023, there may be more heightened competition. We'd like to understand what the company's GA channel strategy is. Usually, if the new business or new sales goes up, typically the persistency ratio shows a downward profile. 2022 was different, however. We'd like to understand what measures you have put in place for that to manage that trend. Second, on your Commercial Line business, 2022 performance was not all that great in terms of your domestic income as well. It was not as positive. I understand that the company introduced some changes on the insurance product types as well as changed your strategy on reinsurance session.
Yet we have not yet seen that feed through in the results and the performance. We'd like to understand what your 2023 strategy would be.
[Foreign language]
Yes, I am Lee Yong-bok, VP of Long-Term Insurance. Responding to your first question, under IFRS 17, these distribution expenses, the selling expenses will be spread across the entire lifespan of the policy. You are right, the expense burden is going to go down. There may be some possibility of a competition on the price, the expense side. However, there is that limit of 1,200% at the initial year.
Under IFRS 17, the difference between the loss ratio and the persistency ratio and the volatilities that are created, the variabilities that are created on the P&L, basically, because of that aspect, we do not foresee there's going to be any fierce competition on the expense side.
[Foreign language]
Because of the lessened burden on the expense side, there is possibility that the market may start to expand around the GA channel. Our approach is to take the high margin products like the H 10, as well as the lapse-supported products, which have relatively cheaper premium and which benefits the consumer. We will take those products and respond to this trend. You also mentioned possibility of competition triggering a decline in the persistency ratio.
[Foreign language]
If you take a look at page 8, our persistency trend is on an improving trajectory. That is attributable to the fact that we've really strengthened our efficiency control system within the company, really controlling the policies where we think the efficiency level is going to be low, and also by expanding the lapse-supported products, where there is a requirement and need for long-term subscription policies. We expect that the persistency ratio will continue to show an upward trend.
[Foreign language]
I am Kwon Jeong-woo. I respond to your question about the Commercial Line strategy for 2023. As you correctly mentioned, the performance that we've seen from 2022 from Commercial Lines wasn't all that great. The reason is because in the overall market, there's been a high level of high-risk events.
[Foreign language]
This overall trend in increase, upward trend in these high risk events, that's a common denominator across all of the industry. It's part of the cycle. As you mentioned, SFMI has been changing its reinsurance session policy, strategy to one that is more conservative. In terms of the frequency of these events, there was 25% year-over-year growth. While looking at the severity per event, it was actually 15% lower. The impact that we're getting from such high risk events had subsided.
Yeah. [Foreign language]
Looking at strategy for 23. In 22, because there were overall, across the industry, higher level of high risk incidents, the reinsurance market has become a hard market, which will drive up the reinsurance cost and also impact our underwriting cost as well.
[Foreign language]
Yeah. The way for us to respond to these hard market underwriting cycle is twofold. First, has to do with appropriate pricing at, can we actually underwrite that risk on an appropriate price? We are very closely monitoring the market on a monthly basis, and at this point, such upward trend in pricing is being well reflected in the contracts. Second approach is portfolio diversification in 2023. The performance from this business was bad because mostly it was attributable to domestic property insurance.
That's why we want to expand to products that have more stable profile in terms of loss ratio, like the specialty and the marine insurance. Also that is why we want to expand into the global business, where we will be able to underwrite, where we will be able to take a, you know, steady risk, which will help us with the overall diversification of the portfolio. Thank you. Next question please.
[Foreign language] The following question will be presented by Hye-jin Park from Daishin Securities. Please go ahead with your question.
[Foreign language]
Thank you. My question relates to your Commercial Line. Can you give me a breakdown in terms of loss ratio between domestic and overseas and also some more color on the expense ratio, please?
Yes. [Foreign language]
Yes. I am Kwon Jeongu, VP of Commercial Line, responding to your question on loss ratio between domestic and overseas. If you turn to page 4 on the presentation, you will see that the loss ratio increased 2.1% from 75%-77%. Looking at overseas, it moved from 74.7% to 61.6%. There was a decline, while for domestic there was an increase from 75% to 82.2%.
Yeah. [Foreign language]
Responding to your question about expense, our strategy back in 2022 was to expand from B2B and migrate to B2B2C and other, you know, smaller and mid-sized risk underwriting. The drivers behind increase in expense ratio is distribution cost and other cost. Because we engaged and used the agencies and brokers who we used to not use in the past, there was a temporarily uptick in the expense. Last year, this broker and agency basically drove about 30% growth. Overall size was increased. We believe that there is going to be a fixed cost impact, there could be percentage of the expense ratio could actually go up.
We believe that we will be able to cover for the overall expenses with the earnings and the profits that's generated.
[Foreign language]
Thank you. Due to the time constraint, for those in the queue, we would please like to ask that you only ask one question.
[Foreign language] The following question will be presented by Jiwon Choi from Morgan Stanley. Please go ahead with your question.
[Foreign language]
Thank you. I would like to ask you a question on the investment side. As we enter into the second half of the year, we've seen a decline in the interest rate on a KTB basis, about to mid 3% level. Up until the end of this year, we do not foresee that big of a, you know, a rate hike cycle to kick in. What is your view on interest rate going forward for this year and any take on the improvement for the running, on the running yield side? On another aspect on asset management is under IFRS 9, do you think that the volatility of, on the net profit side is going to be further heightened?
[Foreign language]
Yes, I am Wonjae Choi. I'm VP of Finance Planning. I will respond to your question.
[Foreign language]
From an investment perspective, the fact that the interest rate is elevated is something positive. Recently, if you look at the overall interest rate cycle, now there is a signal for economic recession, so we are much more focused on risk management of the assets that we hold.
[Foreign language]
Regarding the strategies that we have for investment on these individual investments that we make on the fixed income and loans, we are making investments into more high-rated bonds and prime loans so that we could enjoy elevated level of interest rate. For assets where we could look forward to a much, I guess, higher return from a long-term perspective, as can be seen from the presentation, we are expanding our exposure to dividend-bearing assets.
[Foreign language]
In terms of the new money yield, because we're only in the beginning of the year, and there's still many more months to go up until the end of the year, and since interest rate volatility is quite high, you know, we cannot put our foot down. Having said that, last year, our new money yield was 4.1%. On the assumption that the current level of interest rate persists, we are expecting about mid-4%. Also responding to your question on IFRS 9.
[Foreign language]
Under IFRS 9, the biggest difference is the invested securities and invested funds, and we within the company call it the dividend bearing assets. Basically, their fluctuations or volatilities and the valuation gains is going to have an impact on the P&L.
Samsung Fire & Marine Insurance [Foreign language]
At Samsung Fire & Marine Insurance, we will see a significant rise in the assets that will impact the net profit line item. Versus our peers, that portion is still going to be smaller. The volatility, hence, basically is going to be impacted by the actual holdings under a fund, whether it be a loan or equity.
[Foreign language]
Compared to the past, because of the fluctuations and the valuation gain has an impact of that on our investment gain volatilities because there's going to be a bigger impact, especially in light of the financial market conditions. When we are making overseas fund investments, we are focused on mainly investing into loan products. We will clearly be aware of these variabilities and volatilities on the P&L in managing our profit.
[Foreign language]
Next question please.
[Foreign language] The following question will be presented by Yafei Tian from Citigroup. Please go ahead with your question.
Thank you. I have a really quick one. The management mentioned the CSM end of 2022 is estimated to be KRW 12.2 trillion. If I were to use the average asset duration about 6 years, does that mean the net profit, if I were to amortize over 6-year horizon, would be around KRW 2 trillion net profit level for this year? On top of that there will be new CSM to add on top of that number. Thank you.
[Foreign language] The line wasn't really good. Yafei, can you speak a little closer into the microphone and just say that again?
Is it better now? Is it clear?
Yes. Can you repeat the question, please?
Yeah. The question is the CSM number. If I were to amortize over 6 years, which is the asset duration, does that mean the net profit for this year would be at around KRW 2 trillion level? On top of that you can add new CSM. Thank you.
Thank you. [Foreign language]
[Foreign language]
Yes. Yafei this is Yi Chung, Lee Yong-bok, from VP of Long Term. As mentioned, as of year end of year 22, the CSM volume is KRW 12.2 trillion. With regards to the specific details, we will be able to share that with you early March when we make the disclosure.
[Foreign language]
Now, typically it is an amortization across seven years. you mentioned six, but depending on each of the insurance companies, the % of amortization is going to differ. That is what I can say for now.
[Foreign language]
Also recently, as we sold more age term products and lapse-supported products, the actual % of amortization is also subject to change. On an annual per annum basis, per annum P&L basis, we will also have to consider for the inflow of new policies or the new sales, as well as the difference between the actual versus assumed. Those aspects will be considered, and we will be able to later on share with you know, what our calculation is.
[Foreign language]
This brings us to the end of the Q&A session. Once again, thank you very much for joining Samsung Fire & Marine Insurance's 2022 earnings conference call. Thank you very much.