Valuations becoming fuller; D/G DBI & HMF to Neutral, retain Buy on SFM

Higher long-term rates pushed up KR insurers closer to fair value, in our view. Korean non-life shares outperformed KOSPI by +16ppt over the past three months, driven by a +14bp rise in the 10Y KTB yield and by a broad 2Q26 consensus beat that triggered +12% upward revisions to 2026E EPS across the second tier. However, we believe much of the positive earnings momentum is already priced in, while the earnings beat was largely attributable to special items. With the sector entering seasonally weaker reporting quarters, we see an unfavorable set-up. We downgrade DB Insurance (005830 KS) and Hyundai M&F (001450 KS) to Neutral from Buy and retain Buy on Samsung F&M (000810 KS). We define cash earnings as reported profit adjusted for non-cash deferral effects and estimate the maximum payout ratio;