Planning part in charge of Investor Relations at Hyundai Marine & Fire Insurance. Thank you so much for taking time out of your busy schedule to join us here today at our 2025 fiscal year-end earnings conference call. This conference call will be conducted with consecutive interpretation in both Korean and English, and is expected to last approximately one hour, including time for Q&A. We will begin it with a presentation walking you through the 2025 financial results and a 2026 business outlook, followed by a Q&A session with our management team present here today. Without further ado, let us dive into the review of our fiscal year-end financial results and our outlook for the future.
Good afternoon. I am [Kyu Won Chung], CFO and Head of the Corporate Planning and Management Group at Hyundai Marine & Fire Insurance. At the outset, I'd like to extend my deepest gratitude to the investors and analysts for joining our conference call today.
I will now present our financial results for the period. Please refer to the summarized financial results on page three. For 2025, net income on a separate basis recorded KRW 561.1 billion, representing a 45.6% decline year-on-year. Looking at the details, our insurance service results decreased across all business lines, including commercial, long-term, and auto. Specifically, due to the deterioration of long-term insurance performance and the automobiles segment swinging to a loss, the total insurance service result reached KRW 396.1 billion, a 62% decline compared to the previous year. Net investment income recorded KRW 330.3 billion, down 6.2%.
In the fourth quarter alone, we recorded a net loss of KRW 73 billion as the deficit widened YoY. However, our new business CSM Multiple reached 15.9x , an improvement of 3.1x year-on-year, driven by proactive rate hikes as well as sustained efforts to optimize our product and coverage portfolios. In Q4, the multiple recorded 15.8x , slightly lower than the previous quarter. This was primarily due to the industry-wide discontinuation of Driver's Insurance products in December, which possesses relatively lower multiples. Nonetheless, our multiple remained the highest in the industry. Finally, our K-ICS ratio or solvency ratio rose significantly by 33.1 percentage points to reach 190%.
This achievement is attributed not only to macroeconomic factors such as rising market interest rates, but also to our internal asset liability management or ALM improvement efforts, as well as successful institutional updates regarding insurance risk calculation standards. Now I will discuss our performance by business segment, focusing primarily on the Q4 results. For the full year 2025, the insurance service results for long-term insurance recorded, KRW 338.1 billion, representing a 60.9% decrease year-on-year in the fourth quarter. In the fourth quarter alone, results deteriorated by KRW 131.5 billion year-on-year.
To give you a little bit of context into the reasons behind this, while CSM amortization income increased by KRW 15.3 billion YoY, and the negative gap in claims experience variance remained similar to the previous year, expenses related to owner's contracts rose by KRW 146.4 billion. This increase was driven by the best estimate assumption updates, which reflected rising loss ratios and Medical Indemnity. In fact, Medical Indemnity accounted for 90% of our total claims experience variance. Regarding persistency, the 13-month ratio recorded 86.6%, down 0.6 percentage points, while the 25-month ratio remained on par YoY. Looking at sales, the monthly average for new businesses for long-term insurance recorded KRW 10.7 billion, a 9.8% decline from KRW 11.9 billion average in 2024.
New business for healthcare insurance averaged KRW 9.8 billion, a 9.3% decline. Strategically, we are increasing the proportion of no labs products, which offer higher CSM multiples while expanding the share of year term policies to enhance our management of interest rate sensitivity. As of year end of 2025, our CSM balance stood at KRW 8.9 trillion. Despite robust inflows from new businesses, the balance declined to 7.5% compared to the previous quarter, a drop from around KRW 9.2 trillion. This is due to negative experience adjustments, including the upward revision of loss ratio assumptions and the impact of the education tax rate hike. By channel, we achieved improved new business CSM multiples in both our tied and GA channels.
Moving forward, we will strengthen sales in the highly profitable tied channel while focusing on enhancing efficiency within the GA channel. Moving to the auto and commercial segments. In auto insurance, the cumulative effect of previous rate cuts led to an insurance service loss of KRW 90.8 billion, resulting in a swing to a deficit. Our commercial insurance service results stood at KRW 148.8 billion, a 6.1% decrease YoY. Although the frequency of large scale claims such as the Kumho Tire and Icheon fires increased in 2025, we maintained relatively solid performance by growing our retained premiums in high quality lines. Notably, our overseas branches in Japan and the U.S., among others, are showing synchronized growth in both scale and profit, and their contribution to our bottom line is steadily increasing.
However, our retention rate temporarily took a dip due to a rise in reinsurance premiums following these large scale accidents. Next, I will cover asset management. As a result of our sustained ALM efforts throughout 2025, the weight of domestic bonds in our portfolio increased to 43%, while the proportion of loans and alternative investments decreased. For the full year 2025, net investment income recorded KRW 330.3 billion. Excluding the deduction for net insurance finance expenses, investment profits slightly increased to approximately KRW 1.218 trillion. However, interest expenses rose by KRW 31.7 billion to reach KRW 880.1 billion, causing total net investment income to decline 6.2% YoY. This increase in interest expenses stems from the reclassification of the experience variance related to dividend cash flows from net income to other comprehensive income.
Following the FSS's unification of accounting standards, KRW 66.4 billion was reclassified from net income to OCI at the end of Q4 2025. Consequently, our investment yield recorded 2.66%, a 15 bit decrease compared to the previous year. Now turning to our capital and solvency position. Our KICS ratio reached 190.1% at year-end in 2025, reflecting the successful outcomes of our capital enhancement measures. Similarly, core capital ratio has maintained a steady upward trajectory after bottoming out in Q1 of last year. This improvement in our solvency metrics is primarily due to our narrowing of the duration gap, achieved by increasing the weight of long-term bonds in our asset portfolio and the share of year-term products within our liabilities.
Our duration gap, which stood at approximately 3.2 years in Q1 2025, improved significantly to 0.7 years by year-end. Consequently, our K-ICS sensitivity to interest rate shifts has stabilized, now reaching 4.4 percentage points per 50 basis points, a marked improvement from the 11 percentage point level recorded at the end of 2024.
I will now outline our key management strategies and outlook for 2026. Regarding the overall insurance landscape, we anticipate heightened interest rate volatility throughout the year. With the implementation of the Insurance Sector Actuarial Supervision Advancement Plan scheduled for Q2, we expect the volatility of our best estimate liability to increase due to updates to the loss ratio and expense ratio assumptions.
There are clear positive catalysts for our bottom line, including the introduction of managed benefits, the launch and contract transition of fifth-generation indemnity insurance, and the regulatory reform of the auto insurance system regarding minor injuries. In this environment, Hyundai Insurance will concentrate its main corporate resources on further strengthening our capital position and recovering our earnings generation capacity. By business segment, first and foremost, in commercial insurance, we will maintain stable earnings power by focusing on portfolio optimization within high-quality lines. Specifically, we will leverage our strengthened partnerships with Hyundai affiliates to solidify our performance in marine insurance, while continuing to rebalance low-quality contracts to accelerate structural improvements. In auto insurance, we project a performance turnaround in 2026 compared to the previous year.
Driven by the base rate increase in February and the adjustment of premiums for riders, we aim to increase earned premium per policy by combining the minor injury system reforms, such as those regarding estimated future treatment costs with our internal efforts to curb rising compensation costs. We are focusing our capabilities on entering a meaningful insurance service result improvement cycle starting this year. In long-term insurance, our top priority is the sustained enhancement of new business profitability. In order to achieve this, we will continue to expand the sales mix of year-term Simplified Health products, which offer both robust margins as well as low interest rate sensitivity. Regarding loss ratios, we are seeing improvements in our first and second underwriting year loss ratios. We plan to maintain this trend through 2026 to steadily increase the proportion of high quality new business within our in-force portfolio.
For Medical Indemnity specifically, we forecast loss ratio improvements driven by the launch of the fifth-generation product and the implementation of managed benefits. Supported by our concerted efforts to tighten claims review and audits, we are committed to achieving a meaningful improvement in our experience variance result this year. Next is asset management. In 2026, we will continue to refine our ALM by increasing the proportion of long-term bonds and expanding bond forward volumes to steadily increase the interest rate sensitivity of our assets. Given the recent rebound in market interest rates, we project that investment profit will increase year-on-year, driven primarily by interest income as the yields on interest-bearing assets continue to improve. Even under our strengthened ALM stance and position, we will maintain diligent in sourcing high-yield assets to further enhance our overall investment yield.
Lastly, I will discuss the direction of our capital policy, its strategies and allocation plan. Leveraging our improved capital position, we will strengthen our core business competitiveness to drive profitability. For the K-ICS ratio, we aim to achieve higher YoY levels by expanding available capital and minimizing duration gap mismatches. Regarding the core capital ratio, we plan to reach the regulatory recommended level early on by managing risk amounts and improving earnings capacity based on the full recognition of surrender value reserves as core capital. Regarding shareholder returns, we plan to implement the phased cancellation of our existing treasury shares. A portion of these shares will be reviewed for use as employee performance compensation to align long-term corporate value with talent retention. However, this will be managed from a long-term perspective to minimize any shareholder dilution.
Once distributable income is secured in the future, we plan to gradually expand shareholder returns through accelerated share buybacks and cancellations alongside cash dividends to resolve the current undervaluation of our stock. Ultimately, once we have sufficiently visibility regarding a sustainable return policy, we will establish and share with you and communicate our midterm corporate value-up plan with market. Finally, in an effort to strengthen our communication with the market, we are planning to expand our earnings conference calls to a quarterly basis starting this year. Through our proactive IR activities and communications, we will continue to enhance the transparency and timeliness of the information that we provide. This concludes my presentation on the 2025 financial results and 2026 outlook. Thank you very much.
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. The first question will be provided by Do-Ha Kim from Hanwha Investment & Securities. Please go ahead with your question.
I have two questions for you. One is on onerous contracts and the other is on CSM. Number one, we are in the position where we can compare with peers, the onerous contract figures. Even if we take into consideration everything that you have explained, if we compare the five-year moving average of before, which stood at KRW 158 billion loss, this still is a 2x increase. To just say that this is because of 1 or 2 factors such as pediatric ratio is a little bit too much and excessive. If you could provide any other reasons behind this big jump and variation, that would be great.
If you could also give us a little bit of color on the outlook for the figures as of the end of 2026, that would also be very helpful in terms of the five-year moving average that you foresee. Number two, regarding the -1.15 variation, the adjustment that you said, referring to the education rate tax cuts and the rate cuts. Could you provide a little bit more color and detail on the reasons why we reached this figure?
I'm the Chief Actuary. First, I'll address your question about the owner's contracts. If you look at the figures that you referred to in terms of the onerous contracts, there was an increase of KRW 140 billion in terms of the expense. Of that, KRW 100 billion was a one-off expense.
If you exclude the one-off expenses, the figures are on par with what you've seen before. In terms of the expenses, you will also see KRW 150 billion in losses that was incurred from the third generation Medical Indemnity. The policyholders of this third generation Medical Indemnity were previously in non-schooling age years. However, they will now be entering schooling years, which will help us forecast a decline in the loss ratio. We will even be able to see some reversals or write backs as well. Next, regarding your question about CSM adjustments, as of the end of last year, there were adjustments made from assumption changes of about, amounted to about KRW 1 trillion. Of this KRW 1 trillion adjustment, about 70% stems from first and second generation Medical Indemnity and 30% from Simplified Health Insurance.
Regarding the first and second generation Medical Indemnity, we forecast that we will see a turn to the positive in terms of our experience variance because of the sufficient provisionings that we have done before and also as well as the implementation and introduction of managed benefits. Next, in terms of Simplified Health Insurance, once the loss ratio assumption guidelines are introduced this year, Simplified Health Insurance loss ratio will become an issue. However, for our company, what we are doing is we have separate loss ratio assumptions for Simplified Health Insurance.
That is why we forecast that the shock from the loss ratio assumption guidelines that will be introduced this year will have already been sufficiently absorbed within our company with the practice measures that we have implemented as well as the stringent measures that we have implemented regarding UI, which will pan through this year. I hope that answered your question.
Could you also give us a little bit more detail on the one-off expense?
That is something that is related to the change in the R A system. Before, specifically when calculating the adjustment rate assumption, that is included before with the renewal premium that changed, the ratio is now calculated by the company itself to the ratio proposed by the supervisory commissioner. From our view, this is an area where we require institutional improvements and revisions.
That is why we are communicating that ask to the authorities. That is it for my answer.
Thank you very much. Next question, please.
The following question will be presented by MW Kim from JPMorgan. Please go ahead with your question.
예, 안녕하십니까? 질문 기회 주셔서 감사드립니다. J.P. Morgan의 MW Kim입니다. 두 가지 여쭤보려고 합니다. 첫 번째는 장기 보험 수익성에 대한 부분인데요. 지금 이 저희가 만약에 장기 보험의 수익성을 장기 위험 손해율을 기준으로 좀 보게 된다면, 이 IBNR을 포함해서 현재 장기 위험 손해율이 어느 정도 수준이고, 이 지표의 흐름이 지난 1 year 동안 좀 어떻게 바뀌었는지 그렇게 좀 말씀해 주실 수 있으신지 좀 궁금합니다. 오늘 말씀해 주실 때 장기 보험 수익성 개선에 대해서 좀 아웃룩을 말씀을 해주셨는데, 이 기준으로 어느 수준까지 저희가 한 2-3 years 정도를 볼 때 좀 개선이 가능한지도 좀 말씀을 해주시면 감사드리겠습니다. 두 번째로 좀 여쭤보고 싶은 부분은 이 core capital ratio에 대한 부분을 보고 있는데요.
지금 한편으로는 실제로 기본 자본을 좀 이렇게 강화하는 그런 말씀을 좀 많이 해주셨는데, 계속적으로 이제 신계약을 판매하고 그렇게 되면은 이 요구 자본에 대한 부분도 분명히 좀 이렇게 부담이 될 수도 있는 부분이 될 것 같습니다. 지난 1 year 동안 사실상 이제 요구 자본이 좀 많이 이제 효율적으로 관리하셔가지고 좀 줄어드는 것도 이제 장표에서 볼 수 있었는데 올해 그 전체적으로 요구 자본을 어느 정도 수준으로 좀 관리를 하실 거고, 이게 가능한 신계약의 물량 수준이 어느 정도로 지금 예상해 주시는지 말씀해 주시면 감사드리겠습니다.
I have two questions for you. First, covering long-term insurance profitability and the second, regarding core capital ratio. Number one, regarding long-term insurance, I would like to ask you about the long-term risk loss ratios, including IBNR. If you could give us a little bit of color on its yearly trend that you forecast, that would also be great. Although you did give us a little bit of outlook in your presentation, if you could give us a little bit more detail on the extent of the improvements that you forecast and foresee in the next 2-3 year timeline, that would be much appreciated. Number two, regarding the core capital ratio. On one hand, you did state in your presentation that you are committed to continue to strengthening the core capital ratio.
However, as you continue to underwrite new contracts and policies, this might become a little bit of a challenge. In the past couple of years, of course, the company has managed very efficiently, required capital. What is the required capital level that you forecast for this year? What is the basis in terms of the new businesses that you assume when you come up with this required capital ratio?
네, 장기 업무 본부장입니다. 먼저 손해율 관련된 답변 먼저 드리도록 하겠습니다.
I am the head of Long-Term Insurance Division. First, let me address your question about long term insurance.
이십오 년 당사의 IBNR 포함 손해율은 백일점 팔이었습니다. 올해는 백일점 일을 예상하고 있는 상황입니다.
First, let me address your question about the long term insurance loss ratio, including IBNR. Last year the ratio was 101.8%, while this year we've was 1.2%.
절대 수준이 좀 높아 보일 수 있는데 작년에 저희 회사는 업계에서 손해율 증가폭이 1.7로 가장 낮았고요. 시장 전체로는 3.5에서 4.9까지 좀 상승된 모습이었습니다. 아까 연중에 당사의 손해 흐름을 물어보셔서 이제 말씀을 좀 드리는 거고요. 답, 그 이윤 이제 그 속뜻은 경쟁사, 시장이 조금 과열된 부분에서 Hyundai Insurance는 손해율 관리 쪽으로 노력은 했지만 소폭 상승은 있었다 정도로 말씀드릴 수 있을 것 같습니다.
On an absolute sense, if you look at those figures alone, they may seem high, but you do have to take into account the industry figures which, in terms of Hyundai Insurance, we were able to record the lowest increase in terms of the loss ratio at 1.7%, whereas industry wide the increase in loss ratio stood at from anywhere from 3.5% to 4.9%. All in all, we have been making consider efforts and committed to managing and maintaining a healthy loss ratio. There was a slight increase.
손해율이 하락되는 변곡점은 올해로 저희가 보고 있습니다. 앞서 말씀드렸지만 저희가 올해 이제 0.6 percentage points 보유 손해율 하락한다고 이제 말씀을 드렸는데요. 실제로 언더라이팅 이어 기준으로 1, 2, 3를 아주 강하게 관리를 하고 있는데, 1월, 2월 저 효과를 보니 상당히 많이 지금 떨어져 있는 상태고요. 이게 좀 연중까지 계속 지속이 된다면 아까 말씀드린 목표 이상은 좀 달성할 수 있을 것으로 저 그렇게 보고 있습니다.
We believe that the inflection point for the loss ratio going down for Hyundai Insurance is this year. This year is going to be our inflection point year. We talked about the 0.6 percentage point in terms of the retained contract loss ratio target that we are working to achieve. Based on the efforts that we have made in January and February thus far and the results that we have seen coming from that, if we annualize that throughout the year, then we are confident that we will be able to overachieve the target that we have set.
따라서 향후 2-3년간 하락 기조는 계속 유지될 것으로 그렇게 추정하고 있습니다.
Therefore, in the next two to three years, we forecast that the loss ratio will continue on a downward trend.
리스크관리본부 맡고 있는 윤민영이라고 합니다. 앞서 질문 주신 기본자본비율 관련해서 답변드리겠습니다. 그 기본자본비율은 말씀하신 것처럼 그 요구 자본의 부담도 당연히 있을 수밖에 없고요. 저희가 아까 그 설명을 들으신 것처럼 신계약 판매를 할 때 저희가 그 UI 손해율이라든지 그다음에 UI 1년, 2년, 3년 손해율을 지속적으로 관리를 강화하고 있고, 이 신계약 판매를 하면서 손해율 관리가 같이 개선이 되는 거기 때문에 그 손해율 상승 둔화에 따라서 보험 리스크의 증가폭도 둔화될 것으로 전망을 하고 있습니다.
I am the Head of the Risk Management Division. Allow me to answer your question about the core capital ratio. Of course, the difficulties in maintaining required capital related to the core capital ratio that you allude to in your question is an area of potential concern. However, we do need to take into consideration that when we implement and when we bring in new businesses, we also make sure that we strengthen the management of the first year to third year loss ratios in terms of the first year and second year UI loss ratios in particular. This will translate into lower insurance risk ratio, loss ratios as well.
또 말씀을 드리면 앞서 보셨듯이 저희가 작년에도 연만기 갱신, 연만기 갱신형 상품의 포트폴리오 그 비중을 56%까지 늘려가지고 그 장기보험 판매에 따른 부채 금리 민감도를, 그 증가를 완화하는 방향으로 포트폴리오를 계속 재편을 하고 있습니다. 올해에도 같은 기조를 유지해서 금리 민감의 관리를 강화해서 ALM 관리를 보다 강화해가지고 그 자본의 금리 민감도를 줄여나가는 방향으로 지속적으로 관리를 할 예정입니다.
You'll see, have seen in our performance of last year that our proportion or weight of year term insurance increased to a maximum of 56% in our portfolio. This is part and parcel of our efforts to make sure that we improve the interest rate sensitivity in terms of our long-term insurance portfolio. That stance is going to continue into this year with us making continued improvements in strengthening our asset liability management efforts, as well as making sure that the interest rate sensitivity of our assets continues on a downward trend.
정리해서 말씀드리면 신계약 포트폴리오 관리를 통해서 CSM 창출력을 제고하고 요구자본 관리를 지속적으로 하는 한편, 요구자본 그 자산부채 매칭을 통해서 요구자본 증가를 억제하여 가치 중심의 경영관리를 지속해 나가겠다는 말씀드리겠습니다.
All in all, to summarize and give you an answer to your question, in terms of the new business segment, we will continue to make sure that we strengthen our management so that we can continue to increase the CSM margin, while making sure that we adhere to the capital requirements through managing our ALM at more stringent levels, so that everything that we do is value centric and value focused.
네, 질문 감사합니다. 그럼 계속해서 다음 질문을 받도록 하겠습니다.
Thank you for your question. Next question, please.
다음으로 질문해 주실 분은 골드만삭스의 방재현 님입니다.
The following question will be presented by Jae-hyu n Bang from Goldman Sachs. Please go ahead with your question.
아, 네, 안녕하세요. 저 골드만삭스 방재현입니다. 질문 기회 주셔서 감사합니다. 저는 자본 정책 관련해가지고 총 두 개의 질문이 있는데요. 첫 번째는 저희가 만약 이십칠년에 해약환급금이 기본자본으로 백 프로 카운팅 된다고 하면은 저희 Tier 1 Capital 인상폭은 어느 정도 될 것으로 보고 계신지 궁금하고, 혹시 당사가 타깃하고 있는 비율이 있는지 공유해 주시면 감사할 것 같습니다. 두 번째는 해약환급금 규제가 합리화된다고 하면은 올해 배당할 가능성은 어느 정도로 보고 계신지 총 두 가지 질문드리겠습니다. 감사합니다.
Thank you for the opportunity to ask questions. I have two questions regarding your capital policy. Number 1, if the surrender value reserve is 100% recognized into core capital at the end of 2027, what is the Tier 1 ratio that you expect after this change? Is there any company-wide targets that you have set internally? Second, my question regarding capital is once this change is implemented, what is the dividend that you forecast will be available for dividends?
예, 리스크관리본부 윤민영입니다. 먼저 질문 주신 기본자본비율 관련해서 답변드리겠습니다. 그 말씀하신 것처럼 해약환급금 준비금 중에서 자본으로 인정받지 못하던 부분들이 추가적으로 그 기본자본비율 산정 시 인정을 받게 되면, 어, 저희 자본은 지금 세전으로 한 일조 정도 증가할 것으로 예상을 하고 있습니다. 이에 따라서 기본자본비율은 십 퍼센트 포인트 정도 개선 효과가 있을 것으로 예상이 되고요. 저희가 이런 이걸 반영하면 제도가 본격화되는 이십칠년 삼월에는 그 기본자본비율이 팔십 퍼센트 이상이 될 수 있을 것이라고 예상하고 있습니다.
I am the head of the Risk Management Division. Allow me to answer your question on the capital policies. For the capital, core capital, currently the proportion of a surrender value reserves that are not recognized as core capital. If that is all recognized as core capital with the changes in the policies that will be implemented by the financial authorities, on a before tax basis, there will be a total of a KRW 1 trillion increase in our capital, which represents a 10 percentage point improvement as per our forecast. Once these changes are implemented and are in place fulfilled as of March 2027, we forecast that our core capital ratio will hit 80% or above. With that said, the supervisory authorities policies have not yet been finalized, which is why we are a little bit cautious in our projections.
However, we will continue to manage our capital ratio so that we will be able to maintain at least a core capital ratio of 80%.
I'm the head of the Corporate Planning Division. Let me address your question about the impact of the SVR in terms of the second part of your question. Now, I'll tell you about the dividend that we'll be able to provide. As of the end of last year, the SVR in Q2 represented a solvency of over 170% and with an 80%-90% provision and reserve, we were able to reach KRW 3.9 trillion after a KRW 100 billion drop.
With the 5.4 statutory reserves and the unrealized figures of around KRW 7 trillion, about KRW 7 trillion, that will result in a dividend amount. Our sensitivity to the SVR reserve or provisioning is per 100, 1 per 10 percentage point, KRW 450 billion-KRW 500 billion. If the system is improved from the current 80% to around the 50% level, that will result in a positive dividend amount. Just to give you a little bit of an update on the improvements to the surrender value reserve systems, there have not yet been any particular movements or activities once when we've talked to the financial authorities.
If we refer to the meeting that was held with the FSC with insurers in October of last year, we were able to confirm the authorities recognition and realization that there needs to be improvements made to the surrender value reserve system. We do expect some changes that will be coming this year.
Thank you for your question. Next question, please.
The following question will be presented by Hyun Lim from Shinhan Investment & Securities. Please go ahead with your question.
Uh, 왜 하는 건지 조금 그 말씀을 주시면 좋을 것 같고요. 관련해서 어쨌든 이게 실제로 반영이 되게 되면 말씀드린 것처럼 초기 손해율이 오히려 좋기 때문에 단기 손익 관점에서는 좀 긍정적인 효과가 나올 수 있는 부분이 있는지 회사 측에서는 이 부분을 어떻게 해석하고 계시는지도 같이 좀 고견 말씀 주시면 감사하겠습니다. 최근에 이 그 가이드라인 관련해서도 좀 업계에서 이견이 좀 있는 걸로 알고 있습니다. 단편 담보랑 일반 담보 쪽에 그 손해율 과정을 뭐 다르게 넣는다 뭐 이런 이야기가 좀 있는 것 같은데 이렇게 만약에 된다면은 어떠한 이제 회계적인 수치가 왜곡이 된다던가, 저희가 시장에서 이제 그 분석을 할 때 기존에 저희가 생각했었던 거랑은 조금 뭔가 달라지는 게 있는지 좀 궁금합니다.
이 부분에 대해서도 말씀 부탁드리고 지금 현재 이게 논의가 되고 있는 사안이기는 하지만 회사 측에서 판단하셨을 때 어떻게 적용하는 것이 좀 더 합리적인 그런 방향인지에 대해서도 같이 코멘트 해주시면 정말 감사하겠습니다. 이상입니다.
Thank you for the opportunity. I have two questions for you. Number one is regarding non-Medical Indemnity loss ratios. With the implementation of the managed benefits, of course, the loss ratio on the Medical Indemnity side will see improvements. However, that could be offset with increased loss ratios on the non-Medical Indemnity side. If you could give us a little bit of color on what expectations you have here, that would be much appreciated. Number two, my question is with regards to the loss ratio assumption guidelines. Of course, in the short term, regarding CSM, the loss ratio is going to be a lot better. Of course, that's a given. However, in the end, this can actually be incorporated to and be reflected in experience variance. Ultimately it could be pretty much the same thing. What is the ultimate goal?
I'm a little bit confused on what the ultimate target and goal or objective of the guideline is. Regarding this guideline in the initial stages, the loss ratio is going to be a lot stronger and better. Do you believe that this will be incorporated and reflected into short-term profitability going up as well? I'm also aware that there has been some dissonance in the industry as well on the guidelines. Some have been for, some have been against the guideline. What is Hyundai Insurance's stance and what are your views on how to best implement these guidelines?
실손의 손해율 트렌드에 대해서 말씀드리겠습니다. 25년에 실손의 손해율의 흐름은 이제 시장하고 함께 좀 봐야 되는데요. 매출이 좀 증가하면서 약간 좀 과열 국면으로 좀 진입된 구간이었고, 실손의 손해율이 많이 악화된 한 해였습니다.
I'm the head of the Long-term Insurance Products Division. Let me first address your question about the non-Medical Indemnity and Medical Indemnity loss ratio trends. In 2025, if we were to look at the loss ratios for Medical Indemnity, we have to look at the industry as a whole. As a whole, the loss ratio very much deteriorated in the industry with a lot of overheating in this segment overall.
시장 흐름에 따라서 당사도 손해율이 좀 올라갔습니다. 1.7 percentage points 올라갔고요. 시장은 4.3-5.6% 정도 올라간 시장이었다고 보시면 될 것 같습니다. 당사는 앞서 좀 반복된 말씀이지만 UI 손해율로 UI 손해율 관리로 그 쉬프트를 했단 얘기는 실손 외 손해율을 관리하겠다는 얘기였고요. 1.7% 정도의 상승이 있었고, 올해는, 올해도 한 1.5%-2% 정도의 상승을 예상은 하고 있으나, 저희는 실손의 그 관리 급여 제도 도입이라든가 이런 것들이 이제 도입이 되면 그 효과하고 합쳐서 한 0.6-0.7% 정도의 전체 손해율 하락을 좀 기대하고 있는 거고요. 결국은 실손의 손해율을 1.7% 내외에서 관리를 해줘야 그 관리급의 효과가 합쳐서 마이너스 효과로 이루어질 수 있다, 이렇게 보고 있고, 현재는 저희는 그 정도 수준에는 좀 와 있다라고 말씀드릴 수 있습니다.
As I've explained in terms of the market trends, Hyundai Insurance's loss ratio for Medical Indemnity was of course rose in tandem with the market 1.7 percentage point increase. With that said, the industry average stood at around 4.3-5.6 percentage points. Hyundai Insurance's increase in loss ratio was much more minimal. As we've explained in our presentation, our commitment to managing more stringently loss ratios in terms of first and second underwriting years is part and parcel of our commitment to make sure that we manage our non-Medical Indemnity loss ratios more meticulously as well. As a result, this year we forecast that there will be a 1.5%-2% increase in our loss ratio.
With the management benefit implementation and introduction, however, we forecast that there will be a 0.6%-0.7% drop. All in all, our goal is to maintain the loss ratio for Medical Indemnity at around 1.7%, taking into account everything. That is where our current loss ratio levels are at.
네, 개리 본부장 김경동 입니다. 그 신담보 손해율 제도 개선 관련해서 답변드리겠습니다.
I'm the Chief Actuary. Let me address the question on the loss ratios for the new writers.
일단, 이 제도는 통계가 없고 불확실할 때는 보수적 가정을 적용해야 된다는 회계적인 취지가 있고요.
First of all, the principle or rule of thumb of this system is that when you don't have the stats and there are uncertainties, always go for the conservative assumptions and principles that you would use. The basis or objective of this system really is to make sure that we relax the competition and CSM margins so that you can protect against competition and new business. In terms Simplified Health Insurance, as we stated before, we calculate this separately from the comprehensive type insurance, and that has been the case since the fiscal year and earnings and results since last year as well. As you've said, in the initial years, especially in the first three years, so short-term, this will be incorporated into experience variance. However, it's still short-term. This will be gradually incorporated into the experience loss ratio.
Our view is that this is not going to cause any significant distortions or raise any significant challenges or issues. We believe that the task on hand for Hyundai Insurance is to make sure that we more stringently manage our new business loss ratio based on UI. Thank you for the question. Next question, please.
The following question will be presented by Byung Jin Lee from DB Securities. Please go ahead with your question.
I have two questions. First on the Medical Indemnity side. As of the end of last year, we saw a Medical Indemnity figures. I'm curious about the loss ratio of Medical Indemnity insurance for years 1, 2, 3. Number 2, on the new business side, I'm curious about your CSM targets. Stemming from that, your yearly CSM targets, as well as the increase that you forecast in surrender value reserves for this year.
To answer your first question, I am the Chief Actuary. If you combine the first through third Medical Indemnity generations, that stands at around KRW 2 trillion. If you account for the fourth, third, fourth generation, that's about KRW 1.2 trillion. We'll need to get back to you on the exact figures, but that's a ballpark amount.
I'm the head of the Corporate Planning Division. Allow me to answer the second part of your question. On the new business side, first to answer your question about the monthly payments. For the long-term, healthcare insurance, our target is KRW 9.8 billion, and on CSM, KRW 2 trillion. The increase that we expect in surrender value reserves as of the end of the year will be around KRW 400 billion-KRW 500 billion.
Thank you very much. Next question, please.
다음으로 질문해 주실 분은 삼성증권의 정민기 님입니다.
The following question will be presented by Min-gi Jeong from Samsung Securities. Please go ahead with your question.
네, 안녕하세요. Samsung Securities Min-gi Jeong 연구원입니다. 저 한 가지만 질문드리도록 하겠습니다. 저희 KICS 요구자본 관련된 것이고요. 뭐 업권 요구자본이 저희 연초 대비해서도 그렇고 전분기 대비해서도 그렇고 많이 줄었고, 또 업권 대비해서도 좀 특이할 만한 사항인 것 같아서요. 아까 잠깐 뭐 보험 리스크 축소되는 영향 그리고 그 금리 리스크죠. ALM 매칭 강화된 영향들 각각 좀 말씀을 해주셨는데, 실질적으로 이 요구자본 축소에 각각 뭐 어떤 요소들로 인해서 어느 정도 영향을 대략적으로 미쳤는지 가이드 해주시면 추정에 도움이 될 것 같습니다. 감사합니다.
My question is about the K-ICS ratio or the capital requirement. We've seen a reduction compared to the beginning of the year and also compared to the previous quarter as well. You've explained to us about the impacts of, you know, in terms of the decline in insurance risk and also the impact regarding interest rates. Can you match with your ALM policies and commitments to give us a little bit more of a breakdown in terms of which what activities are going to impact what part of capital requirements?
네, 윤민영입니다. 그 말씀하신 것처럼 저희가 지난 한 해 동안 많은 노력을 기울여서 2024년도 말에 좀 아쉬웠었던 지급여력 비율 수준이 2025년 말에 좀 크게 개선이 됐습니다.
We have made a concerted effort in terms of our capital requirements and especially our solvency in order to make sure that we made a significant improvement compared to the end of 2024, which was a little bit unfortunate in terms of the results to make a great improvement in 2025.
우선 보험 리스크 측면에서 말씀을 드리면 신규원 증가에 따라서 보험 리스크량이 늘 수밖에 없는 그런 구조적인 한계가 있긴 합니다만, 저희는 아까 말씀드렸듯이 연간기 갱신형 상품의 구성비를 확대해서 지금 보험 리스크 같은 측면에서도 이제 갱신이 가능함에 따라서 그 부채를 좀 적게 늘어나게 하는 효과가 좀 있었고요. 그 연도 말에 지금 금감원에서 실손보험의 산출 기준을 좀 변경을 한 바가 있습니다. 당사 같은 경우는 그 보험 리스크 실손보험 관련해서 보험 리스크 산출을 좀 타사보다 좀 보수적으로 적용을 하고 있었던 부분이 있었는데, 이 부분에 대해서 금감원에서 표준안을 제시함에 따라서 보험 리스크량이 좀 크게 줄어들어서 전체적으로 전년 대비해서 한 KRW 500 billion 정도 보험 리스크량이 줄어드는 효과가 있었고, 이에 따라 지급여력 비율이 10% point 개선 효과가 있었습니다.
The insurance risk is inevitably going to increase with the increase in growth of new businesses. However, as we said before, we've made a concerted effort to make sure that we increase the weight of year term type insurances in our portfolio. That means that with the renewal contracts that the liability side didn't increase as much as you would see in terms of new business growth. Also at the end of the year, the supervisory authorities actually implemented a new Medical Indemnity benefit calculation standard. Although our company had already been implementing a very conservative based calculation standard. With the introduction of this standard that was introduced by the supervisory authorities, our insurance risk dropped by KRW 500 billion and our solvency improved by 10 percentage points.
또 한 가지 더 말씀을 드리고 싶은 것은 저희가 아까 ALM 매칭 관련해서 말씀을 드렸는데, 자산 측면에서 채권과 그다음에 선도를 지난 일 년 동안 순증금액 기준으로 해서 그 채권 현물만 한 삼조 원 정도 증가하는 정도로 장기채 매입을 지속적으로 추진을 했었고요. 그리고 어 선도도 역시 비슷한 규모로 삼조 정도 증매입을 하면서 자산 듀레이션을 크게 늘리는 효과가 있었습니다. 이에 따라서 그 작년 말 기준 작년 아 그러니까 이십오년 초반에 이점삼 년 혹은 이점육 년 정도 되는 듀레이션 갭 수준이 연도 말에는 영점칠 년 정도로 일 년 이내로 줄어들어서 금리 리스크량이 크게 줄어드는 효과가 있었습니다.
In terms of ALM matching, if you look at our assets on our asset side, we have acquired significant amounts of bonds and forwards, about KRW 3 trillion on both sides. For bond spots, an increase of KRW 3 trillion, and also for forwards an increase of KRW 3 trillion. All in all, a big increase and jump in the duration of our assets with these increase of long-term bonds in our portfolio. As a result of these efforts, the duration gap that stood at 2.3-2.6 years as of the beginning of 2025, went down to less than 1 year to stand at 0.7 years by the end of 2025. This also results and translate into lower interest rate risks as well.
이십육 년에도 보험 부채 포트폴리오 관리 그리고 자산 부채 매칭을 통해서 요구자본을 지속적으로 줄이려는 노력을 계속해 나갈 것임을 다시 말씀드리겠습니다. 이상입니다.
These efforts in terms of the asset side and liability side in order to increase the duration gap will continue on into 2026. That's it for me. Thank you very much.
네, 질문이 더 이상 없으시면 다음으로 당사 홈페이지를 통해 사전 접수된 질문들 중에서 질의응답 시간에 이미 설명드린 내용은 제외하고 관심도가 높은 주요 사항에 대해 오늘 배석한 경영진이 직접 답변하는 시간을 갖도록 하겠습니다.
Okay. If there are no further questions, we will now proceed to questions submitted in advance via our website. We will be excluding items that have already been addressed and covered during the Q&A session thus far, and our management team will present here today, will directly respond to any primary matters of interest. We did receive questions in advance from numerous individual shareholders. We express our gratitude for the interest.
We've covered most of the questions that were submitted. 3 shareholders submitted questions regarding IFRS framework and our plans to reduce the volatility of results under this new framework. Allow me to address this question. Since the implementation of IFRS 17, financial and earnings volatility has been higher than we had initially expected.
This has been due to a series of actuarial assumption guidelines issued by the authorities, as well as the widening experience areas losses in Medical Indemnity. Our fundamental strategy to address this is to increase CSM amortization income, which is the primary driver of our profit, by continuously refining our products and coverage writer portfolios to maintain a high new business CSM Multiple. At the same time, we will be even more stringent in managing the weight of Medical Indemnity as well as ultra-long duration products, both of which tend to heighten earnings and financial volatility. To achieve this, we are driving new business growth centered Simplified Health Insurance products, which offer robust margins and relatively lower volatility, while at the same time expanding the share of year term and renewal type insurance products.
Furthermore, to manage the volatility of experienced areas within our in-force portfolio, we will further strengthen our long-term claims review process and continue to pursue efficiency in operating and business expenses. We will stay committed to communicating and being transparent with our shareholders. Thank you very much for your attention.
This concludes our earnings call. For any additional inquiries, please feel free to contact our IR team at any time. A very big thank you to all the investors and analysts for joining us today.