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The author is an analyst of NH Investment & Securities. He can be reached at junsup@nhqv.com. — Ed.
A Plus Asset is pursuing new growth momentum by deploying a strategy of running GAs as affiliates. If its efforts prove successful, profitability and earnings stability should improve.
Effect of 1,200% expense regulation has decreased
Since 2021, financial authorities have limited commission fees to 1,200% of monthly premiums for new insurance contracts. Commissions deferred by the 1,200% expense regulation are slated to be recognized from this year. Also, sales are expected to recover this year.
However, considering the recent inflation and economic slowdown, insurance operations have been deteriorating. We expect the new contract slowdown to sustain amid the unfavorable environment.
Aiming to improve profitability by expanding number of FCs
Having directly managed financial consultants (FCs), A Plus GA started to run general agencies (GAs) as affiliates. The firm hopes to have 1,000 FCs in place by yearend.
If successful, this strategy should boost sales via economies of scale. Management indicators such as incomplete sales may deteriorate in part; however, the firm is trying to sustain internal control at the current level by setting fee-related conditions. Profitability and stability should improve if this strategy works.
2022E NP (excluding minority interests) of W49.2bn (+307% y-y)
Dampened by new contract slowdown, 2022 sales should recover only to the levels seen prior to the implementation of the 1,200% expense regulation, but the company’s NP excluding minority interests should surge 307% y-y to W49.2bn, backed by one-off gains related to real-estate disposal. We forecast DPS of W400 (vs W350 in 2020 before the introduction of the 1,200% expense regulation) and DY of 7.3%.
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