Good morning. I'm Koo Young-Min, CFO and EVP of Corporate Management Support Division. I will now run through 2026 third quarter business results of Samsung Fire & Marine Insurance.
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As an outcome of persistent profit-driven growth strategy, insurance profit sustained year-over-year uptrend during the third quarter, reporting cumulative KRW 1 trillion 510.3 billion in profit, which is a rise of 9.8% year-over-year. Investment profit reported KRW 1 trillion 43.4 billion, up 6.7% year-on-year, despite higher volatilities of the market weighing down on our Q3 earnings.
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As such, Q3 cumulative consolidated pre-tax profit came in at KRW 2 trillion 503 billion, with net profit attributable to controlling interest reaching KRW 1 trillion 865.5 billion, up 4.6% year-over-year, posting solid results.
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Moving on to results of each business line. First, on the long-term insurance, net increase in CSM volume in Q3 was approximately KRW 240 billion, and total CSM volume expanded KRW 667.4 billion year-to-date, reporting KRW 14 trillion 835 billion.
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In terms of efficiency metrics, 25th and 37-month persistency ratios improved sizably by 4.8 percentage points and 7.4 percentage points year-over-year, respectively. Thanks to profitability management, risk loss ratio in Q3 reported 97.9%, stabilizing at last year's level, continuing on with the downward cycle seen in the first half, with Q3 first year loss ratio reporting 60%, which is an improvement of 9.5 percentage points year-over-year.
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As such, cumulative insurance profit reported KRW 1 trillion 230.9 billion, increasing marginally by 1.1% year-over-year, keeping to an uptrend. In the fourth quarter, we will continue to drive innovation for fundamental resilience of the company and rebuild profitability of our insurance business.
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Next is on the auto business. With an unwavering focus on profitability as our priority, we focused on enhancing quality of the portfolio rather than growing the top line, which resulted in a slight decline versus last year, with cumulative insurance revenue at KRW 4 , 135.1 billion.
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In terms of insurance profit, despite rise in insurance costs driving higher loss per claim, on the back of lower accident rate, which is an outcome of improved policy mix, and due to higher earned premium per coverage, Q3 insurance profit reported KRW 19.1 billion, which is a significant improvement from last year's loss of KRW 64.8 billion, with profit cumulatively coming in at KRW 39.2 billion.
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We typically see seasonality during the fourth quarter with high variability in profit, but through rigorous acquisition management under a profit-centric backdrop and control over efficient claims workflow during the winter season and downsizing of the claims paid, we will do our best to drive a turnaround in underwriting profit for the year.
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Next is commercial insurance. Although loss ratio reported 72.8%, temporarily widening the volatilities following large loss events such as fire and heavy rain in Q3, cumulative loss ratio was stable at 62.4%, down 1.2 percentage points year-over-year. Driven by growth from both domestic and global businesses, cumulative insurance profit came in at KRW 212.9 billion, reporting a sizable increase of 35.9%.
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In Q4, we will continue to diversify the company's portfolio, pivoting on strategies for specialty and marine insurances, and by fine-tuning loss management, we will solidify our leadership in the domestic B2B market. We will also expand on tangible results by broadening our business base in the global market and securing new revenue streams to build growth levers for the future.
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Next is on asset management. Despite higher market volatilities during Q3, which led to temporary valuation losses, as we persistently made investments into higher-yielding assets with an aim to enhance book yield, investment income showed stable growth, with cumulative investment yield reporting 3.33% and investment profit amounting to KRW 2 , 404 billion, up 3.9% year-over-year, sustaining a robust uptrend.
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In Q4, we will tightly manage asset quality with respect to domestic and global real estate and retail loans and continue to add exposure to high-yielding interest-bearing assets and construct high-return portfolios around private assets so as to drive sustainable performance despite market volatilities supported by balance between stability and profitability.
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With the overall market backdrop weighing down on our profit, SFMI, leveraging its enterprise-wide risk management capacity and capital strength, have implemented profit-centric strategies in systematic and consistent manner. This has created a structural trajectory for enhanced competitiveness of our core businesses, upon which we will further strengthen stable profit-making capacity and earning space with the focus on future value creation.
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Lastly, I have an important progress update that pertains to corporate value-up planning. Through the BOD meeting dated 9th of November, we decided to acquire remaining equity shareholding of 60% in Canopius, together with global private equity fund KKR and KIC, Korea Investment Corp. Total purchase price will be approximately $ 2.47 billion, assuming closing end of March 2027, of which SFMI will invest around $ 1.67 billion.
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This investment is an important milestone under the corporate value-up plan announced early 2025. It's a strategic decision to achieve long-term shareholder return enhancement driven by new revenue streams underpinned by global business expansion, capital efficiency, and ROE improvement.
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Since 2019, we've made a strategic investment into Canopius, growing together with mutual trust through collaborations in reinsurance and by sharing business infrastructure. Upon such successful partnership, we intend to make a bigger leap through this acquisition.
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It is more than simply an increase in equity interest. We can secure a steady stream of revenue by tapping into high-quality assets of the Lloyd's market and internalize global top-tier talent and business infrastructure, which will serve as a strategic turning point through which we can diversify into global B2B businesses away from a portfolio that is anchored solely on domestic B2C business.
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Canopius investment is part of our plan to enhance corporate value of SFMI and a tangible outcome of our global expansion efforts, which is one of the three key strategic pillars of enhancing shareholder return, global business, and improving core competitiveness. As such, our capital allocation plan, inclusive of shareholder return, remains unchanged.
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Based on the current value-up plan, we are currently considering the next phase of mid-to-long-term capital planning. Once the direction is determined, we will come back with an update so as to provide better visibility of the company's mid-to-longer-term growth strategy and capital allocation plans for the benefit of the shareholders.
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SFMI will continue to pursue sustainable growth and enhance long-term shareholder value through consistent implementation of our strategies and transparent and proactive communications. We sincerely thank our shareholders for your continued trust and support. Thank you.
[Non-English content]. That concludes our presentation of our third quarter performance. We'll now move on to the Q&A session. Executives from our respective business divisions are also joining us today to address your questions. To ensure a smooth and efficient Q&A session, we kindly ask that each participant limit their questions to two at a time.
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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 pressed the number star one. For cancellation, please press star two, that is star and two on your phone.
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The first question will be provided by MW Kim from JP Morgan Securities. Please go ahead with your question.
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Good morning. I am Kim Myung-wook from JP Morgan. I have two questions that I would like to ask. First is on your capital allocation plan and your decision to acquire Canopius, the remaining shareholding. Regarding the first question, even after the acquisition, I see that you still would have quite a significant amount of excess capital that you will hold. Would like to know as to why, despite that backdrop, you have not decided to make any changes to your previous capital planning, meaning you are still keeping to the share cancellation schedule of 2028, as well as the 50% payout ratio from a mid-term perspective by 2028.
The reason why you have not brought any changes to such an approach, is it because you are planning to make additional investments or additional acquisitions going forward, and also to make investments for your business expansion? Is that why you are still sticking to the current value-up plan? Also, when making the assessment on the Canopius acquisition, I'm sure you would have made assessments of the level of the reserve. That is one of the key metrics that we use when we assess global insurance writers. Would like to know that you must have looked at the claim loss table of Canopius, and do you believe that their level of reserving is appropriate compared to their Lloyd's competitors as well?
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This is the CFO responding to your question about the Lloyd's and responding to your question. Basically, our decision to acquire Canopius was based upon looking at the balance between shareholder return as well as long-term investment. I think there may be some understanding that this acquisition was made solely for the purpose of expanding the business and engaging in an M&A, but we have placed a keen consideration on striking a balance between shareholder return as well as long-term strategic investment. I can assure you that that decision was made as part of our mid to long-term capital planning as well.
With regards to the timelining and possibility of accelerating, right now, as I've mentioned before, we are in the phase of reviewing and revisiting our value-up plan across the board, inclusive of the shareholder return as well as the timing of the cancellation of the treasury shares and the repurchases of those shares. Because we have not yet reached a final conclusion and final decision-making on that aspect, I think that's why you've seen what you've seen on the slides that we have pre-circulated. Just to reinforce the point that we are committed to further enhancing and expanding the shareholder return, and that is a key aspect of looking at our mid to longer term capital planning. I can assure you that we still remain quite progressive in terms of the shareholder return stance. Once we reach a final conclusion on the overall planning, we will come back to you with an update.
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I will respond to your second question. I am Jeon Kyung-eun from Global Investment.
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Responding to your second question on our global investment, as you know, Canopius is a member of the Lloyd's market, and the Lloyd's market itself adopts a very rigorous supervision and management of its members, and they go through on an annual basis validation and verification. We also, as having our representation in the BOD, were involved in the quarterly-based validation and verification process. We've taken part in the process, and especially with regards to the acquisition of the controlling stake, we had dedicated six weeks of a very close review together with the professionals and experts of the core investors, as well as by engaging in external advisors, the local advisors. As such, we were able to verify the adequacy of that entity.
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During that six-week period of a very close due diligence, we were able to confirm the adequacy of the entity, and going forward, we will also continue to hold on to a conservative approach.
[Non-English content] . Thank you for your question. We'll now take the next question.
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The following question will be presented by Sinyoung Park from Goldman Sachs. Please go ahead with your question.
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Thank you for taking my question. I am Park Sinyoung from Goldman Sachs. I have a follow-up on the Canopius investment. I would like to know as to the financial and the strategic impact that you are looking forward to through this transaction, and if you could provide some quantifiable figure, that would be helpful. In the material that you've guided, you're expecting about 1 percentage point ROE improvement. I would like to know as to what the basis of that calculation is. Also, what are the possible business-related synergies that you can expect from a mid- to long-term perspective from such global expansion?
The second part of this question is that I think we can say that this acquisition was a landmark deal. Going forward, can you share as to what your future plans will entail? Are you also considering additional M&A opportunities, or for the time being, would you just focus on post-merger integration with Canopius and really focusing on synergies with Canopius? Another question that I have is that since you have now decided on capital allocation for the purposes of growing your business going forward, can we from the market assume that we're now a step closer to expecting an upgraded version of your value-up plan? If so, when can we see that upgraded version, and what requirements or conditions would have to be fulfilled for you to come up with that plan?
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This is the Head of the RM Team, Lee Yong-bok. Responding to your question about the financial impact after the acquisition of Canopius and the basis for that calculation: we based it off of the accretive profit increase of Canopius becoming a subsidiary, and also that combined with the going-forward business growth of the company, and we expect ROE to expand by about 1%- 2%.
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This is Jeon Kyung-eun. I'm the head of the global investment team. Regarding the Canopius acquisition, if you look at the impact on our bottom line, as of 2025, under the equity method valuation, there was an impact of KRW 113.9 billion. Once the entity is consolidated and included in our financial statement come year 2028, that will be when we will have a full year reflection. On a pre-tax basis, we will see the profit at KRW 750 billion. Through this global expansion, we will be able to secure a new revenue stream, having an upward impact on our bottom line.
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In terms of the strategic impact, going forward, the entity will be able to make use of good quality creditworthiness of the company and the credit ratings that's been assessed by S&P and AM Best, as well as leverage the capital strength of SFMI. Canopius, in expanding its new business, will be making use of its foothold in the Lloyd's market, Bermuda, and Singapore, and combining that with the strength that we have of our global foothold under SFMI. We believe for the time being, we shall focus on generating synergies and operating and managing it in a stable manner.
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Canopius, its profit contribution to SFMI's global platform, business platform, is going to further increase, as well as its contribution in terms of the revenue and profit will also follow. It will have an effect of shifting the pivot and anchoring of our platform, which was previously based on B2C, to a global B2B business. It will have an impact of diversifying the revenue stream for the company. If you look at the global contribution on our bottom line, at this point, it is less than 10%, but immediately after the acquisition of Canopius, that will go up to mid 20% level, and our aim is to further increase that going forward.
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Responding to the third part of your question, I am Cho Beon-hyung, Head of Corporate Management Support Team. We received a lot of questions on Canopius today, and I can once again reaffirm that this investment was made under our value-up planning with a focus on a balance of growing our profit and bottom line, as well as enhancing shareholder value. I clearly understand that there is a market expectation for an upgraded value-up plan. We, at this point, are currently looking at various different elements, including our capital strength, our investment planning, as well as ways to enhance shareholder value. Although I would not at this point be able to share with you a specific timeline, I can assure you that we are engaged in those relevant discussions.
[Non-English content] . Thank you for your question. We'll now take the next question.
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The following question will be presented by Jun-seop Jeong from NH Investment & Securities. Please go ahead with your question.
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Thank you. I have two questions. First one relates to your investment gains and profit. Of course, in the first half, because the market was good, your investment profit was also good, whilst for Q3, it actually turned sour. And that is something that was quite common across the industry with regards to this investment profit variability. But in terms of this level of volatility, is this a level that you can tolerate, or was it outside the bounds of what you can tolerate, which will mean that going forward you would need to adjust your investment approach? If you could give us color on that would be helpful.
Second, I also have a question on Canopius. I understand that the Canopius acquisition will have a downward impact on your K-ICS ratio of 25 percentage points as per the slides that you have shared. Would like to know, is this because of the put option exercise-related aspect with regards to KIC? And also going forward then, because with the adoption of the core K-ICS ratio adoption starting next year, would like to know what impact it will have going forward. And also, you mentioned that for the time being, you will focus more on the integration process rather than looking at additional M&A opportunities. Can you give us a color as to when the timeline with regards to when we will be able to see that 220%?
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Responding to your first question, I am Song Ha-young, the Head of Asset Management Strategy.
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Basically, in the third quarter, despite the fact that we had employed a stable investment strategy based upon the assets that we hold, because of the expanded volatilities in the financial market, there was a valuation loss on a Q-over-Q basis.
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However, we've been able to increase the level of yield that we get from our bond portfolio, and we have reshifted or rebalanced our portfolio focusing on the private assets. So we have a solid basis of income generation based off of our interest as well as the dividend pay that we get. For this year, we will not be facing any difficulties in growing our investment profit.
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I am Lee Yong-bok, the Head of the RM Team. Firstly, in terms of the impact on our K-ICS, on that additional shareholding that we have acquired, we have reflected 80.6% on our available capital, and on the required capital, we have reflected 100%. We've taken a more conservative calculation approach. As you've mentioned, the extent of that will be about 20 %- 25% in terms of the impact on K-ICS.
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Based on the core K-ICS ratio, because there will be impact on the available as well as the required capital, there will be a downward pressure of about 15 to 20 percentage points.
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Regarding the 220%, we are approaching it from a mid to long-term perspective. For the time being, we are focusing on the PMI process, the integration process, and focusing on generating synergies with Canopius. Together with Canopius, we will come up with a concrete plan for our global business expansion. Once that is determined, we will come back to you with an update.
[Non-English content] . Thank you for your question. We'll now take the next question.
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The following question will be presented by Doha Kim from Hanwha Investment & Securities. Please go ahead with your question.
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I have two questions. First one, I see that there's been about a two times increase in your indirect expenses. But if you look at the direct expenses that form part of the expected as well as the actually incurred expense, we've seen that the absolute amount of the direct expenses have actually come down. So, was there any accounting changes that explains this? And if you could provide explanation on that would be helpful. Second is, as part of the insurance finance related profit, within that there is a revenue line item, and in the past it was about KRW 100 billion, but this time in this quarter it was plus KRW 200 billion. I think that there would have been much more than the FX impact. So, if you could share as to the key element that actually drove this, that would be helpful.
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Yes, I will take your first question. I am Cho Jin-man, Head of Long-term Insurance Strategy.
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I take your question to mean with regards to the experience variance with respect to the long-term insurance. That would be my understanding in responding to that question.
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If you look at the experience variance as of Q3, there was a decline of minus KRW 41.5 billion, and on a Q-over-Q basis, there was also a marginal decline.
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This is basically because of the initial expense that was invested with regards to investing into the new agents as well as expanding of the IT infrastructure.
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These investments were essential investments that will help us secure a more solid sales and operational basis. In Q4, we are going to have a rigorous control on only making investments with essential investment and manage the investment cost so that we could reduce the recurring expenses so that we can alleviate additional burden.
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Regarding the second question on that accounting treatment regarding the expenses on the financial revenue versus the expense side, why don't we at the IR team look into it and we will come back to you later.
[Non-English content] . Thank you for your question. We'll now take the next question.
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The following question will be presented by Yong-jin Seol from iM Securities. Please go ahead with your question.
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I have two questions. The first one, with regards to the benefit effect, the balloon effect, there is a balloon
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I'll cover the second question. With regards to the medical indemnities, the benefit of the NHI, I would like to understand that, having the balloon effect, what impact it will have. The second question is, starting next year, there's going to be the contract execution related cost, that new guideline that is going to be applied. I would like to know its impact on your new acquisition as well as if there's any potential impact on CSM, if you could explain that.
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Regarding the first question on the managed benefit items, that really is an advancement for the non-benefit items. In terms of the physical chiropractic type of treatment, rather than it having a short-term loss ratio impact, the impact will be more mid to longer term.
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In terms of the balloon effect, we are seeing that mostly with regards to the [Non-English content] (stretch-and-spray treatment) area, and more of the pseudo non-benefit treatment items.
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We're going to take on a preemptive approach to make sure that there is no balloon effect, and if there's any abnormal signals, we will react quickly.
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Taking your second question, I am Cho Jin-man, Head of Long-term Insurance Strategy Team.
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In terms of the revamping of the sales commissions to the agent, it is following the timeline as set by the supervisory authorities and their roadmap. Back in July of 2026, the 1,200% rule for the GAs were applied, and then starting 2027, there will be an even spread of the recognition of the commission.
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For the TA channel of the company, the current structure is going to persist, and the impact of such change is not going to be really felt in the TA organization. However, for the GA channel, initially, it will change the way in which the expenses are actually disbursed initially, and so it will have an industry-wide impact. From a mid to longer term perspective, we think that the competition across the channels will become more stabilized.
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With an expanded application of that even allotment, the maintenance sales commission in 2027 were to be paid out in four years, along four years, and then it will increase to seven years come 2029 in sequence and in phases. We expect that the importance of the maintenance of the contract as well as customer management is going to become important and its impact on acquisition as well.
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We believe that that's going to improve on the persistency ratio, and we will be able to see a more eased competition when it comes to selling commission.
[Non-English content] . Thank you for your question. We'll now take the next question.
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The following question will be presented by Byung-gun Lee from DB Securities. Please go ahead with your question.
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Thank you. I have two questions. The first one also relates to Canopius because I truly fail to understand why the company has decided not to acquire a 100% stake in that entity. It's not that you are short on capital, you still have quite a bit of capital buffer, and you've been represented in Canopius's BOD over the past six, seven years. The price at which you are acquiring this time around is higher compared to when you moved from 21% to 40% stake. Going forward, if your assumption is that this company is going to perform quite well, next time you make additional equity investment, the price is going to be higher. You're waiting and waiting, and you're being overly prudent. I want to understand the rationale behind why you are taking that approach.
Second, my question is on your operating profit. Next year, because of the even allotment of sales commission as well as the new acquisition cost related changes, a lot of companies are expecting a decline in top line revenue. Some of the large scale life insurance companies are actually expecting 15% - 20% fall in their top line, and some in the domestic market have already announced they're expecting more than 8% decline in revenue. I would like to know your assessment of the impact on your revenue as well as your new sales CSM. I'm sure you would have considered these factors and have already incorporated them into your business plan. To the extent possible, can you provide us with some color on this?
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Responding to your question, I am Jeon Kyung-eun, Head of Global Investment Team. As you know, Canopius is a company that operates based off of the Lloyd's market, and it is with that basis that it taps into the U.S. business. Strategically, it is very important for Canopius to expand its business footprint in the United States market, and that is why we went through a very precise selective process in selecting KKR as our core investors, because KKR is well-equipped with the knowledge about the U.S. insurance market, and also it has the talent pool that that market requires.
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The total amount of investment coming from that stream amounts to $800 million. This is an ample amount that SFMI can fully redeem or repay. It is not for financing purposes that they have come on board. It is for the benefit of the partnership that we require, the advisory capabilities that we require for the growth of this business.
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Responding to the second question, I'm Cho Jin-man, Head of the Long-term Insurance Strategy.
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The impact of a guideline change can be divided into short-term and mid to long-term. From a short-term perspective, during the transitional period, there will be some impact on the new business as well as the level of channel-based operations. There may be some variabilities.
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From a mid to long-term perspective, competition will be moving from just competing on the initial commissions element to much more of a product competitiveness, underwriting, sales and operations related support, as well as the capability of the agents, their productivity, and the maintenance of that contract.
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Whilst we have a very stable TA organization within the company, we're also expanding the basis of high-quality GA agents as well. Such a change in the overall competitive dynamic from a mid to long-term perspective is actually beneficial to the company as we can really drive up the value of the new business and the expense profile.
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In 2027, we will continue to focus on driving qualitative growth underpinned by the basic profitability and further strengthen our product competitiveness as well as the strength of our channel.
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The following question will be presented by Hyukgi Min from CLSA Korea Securities. Please go ahead with your question.
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I have two questions. One has to do with the sources of the fund for acquiring Canopius. I know that previously there was a say that you will issue a hybrid securities, but that disclosure was corrected and you've decided to just fund internally. So what does funding internally actually imply or it means? That explanation will help us in making projections for next year and down the road, the investment-related gains and the variabilities and volatilities regarding that. Second question is, compared to the amortization of the CSM, I think the reserving rate for the surrender value reserve is much quicker. There are quite a bit of talks about the potential changes to the guidelines relating to the surrender value reserving. What is your take on the likelihood of that happening?
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Firstly, the total investment amount amounts to KRW 2.3 trillion. When we say we will fund it internally, we believe that in light of the capital as well as the liquidity that the company holds, it is a level that we can amply tolerate. Without the need of going outside for outside funding, we believe that with the cash in the deposit and the asset portfolio that the company holds, we will be able to, with our own liquidity, fund that investment.
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In the phase of actually making that spending, in the ultimate phase of making the cash outflow, there may be fluctuations in the FX rate, and the method in which that money will be actually executed may be subject to change. Once that happens, we will update you.
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In terms of your concern about the investment profit going forward, as we spend that amount of money out, there will be a short-term impact. Be reminded that this is an investment into Canopius, and this will eventually drive excess profit, excess return. Compared to the amount of profit that falls based upon the asset, we expect to see a higher level of investment gain from making investment into Canopius.
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I am Cho Eun-young, the appointed actuary. For this year, we are expecting the overall reserve size to actually come down. With the implementation of the sales commission, the even apportionment of the sales commission in 2028, we believe that the size of the reserve will also become much smaller compared to where we are.
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The size of the reserve is not to the extent that it will have a financial impact on the company at this point. With regards to discussions on changes in the guideline, there is nothing that we know of in particular.
[Non-English content]. As we have reached the end of our scheduled time, we kindly ask that any additional questions be directed to our investor relations team. Once again, we would like to thank you, everyone, for joining us today. This concludes our Q3 2026 earnings conference. Thank you.