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Likely to post weak 4Q25 earnings

Maintain Hold; lower TP to W27,000

We lower our target price for Hyundai Marine & Fire (Hyundai M&F) to W27,000 (from W28,000), applying a P/B of 0.4x (vs. 0.5x previously) to our 2026 BPS estimate. We revised down our target P/B to reflect the risk of large-scale, industry-wide CSM adjustments in the event that standardized loss ratio guidelines are introduced. With our target price implying only 0.7% upside, we reiterate our Hold rating.

4Q25 preview: Below-consensus earnings likely

For 4Q25, we expect the company to post a net loss attributable to owners of the parent of W103.3bn, well below the consensus (profit of W69.4bn). Earnings likely deteriorated due to: 1) a sharp rise in loss ratios for third- and fourth-generation medical cost reimbursement policies, which likely drove a surge in onerous contract expenses; 2) continued adverse experience variance amid the normalization of medical service utilization; and 3) a likely further increase in auto insurance loss ratios.

We estimate the end-quarter CSM balance declined significantly QoQ. New business CSM likely fell QoQ due to a lower CSM multiple stemming from industry-wide driver’s insurance product discontinuations in December. In addition, the quarter likely saw CSM adjustments amounting to trillions of won, reflecting factors such as higher loss ratios for first- and second-generation medical cost reimbursement policies and the impact of the education tax rate increase. That said, given that CSM declined YoY in 2024, we estimate CSM growth in 2025 at +8.8%.

Dividends remain challenging

As regulators have not announced any additional reductions in surrender value reserve requirements, we believe dividend payouts will remain difficult. As the reserve system is designed to protect financial consumers from potential harm that could arise when insurers recognize liabilities at market values below their cost-based values, we believe a further reduction in the reserve ratio is unlikely in the near term.