Added to List of Noteworthy Insurance Stocks
The author is an analyst of KB Securities. He can be reached at cygun101@kbfg.com. -- Ed.
Maintain BUY; lower target price 1.3% to KRW79,000
We lower our TP on Samsung Life by 1.3% (KRW80,000→KRW79,000) but maintain BUY:
(1) Underwriting profit growth is outpacing that of other life insurers thanks to loading profit improvements.
(2) Property sales (REIT established), which should generate massive gains, have been delayed to 4Q22 but remain in progress.
(3) Investment return should improve following IFRS17 implementation; the increase in return should reduce the burden of provisions against cancellation refunds and translate into dividend payouts increases.
Added to list of noteworthy insurance stocks
Our TP applies a 0.64x target multiple (sustainable ROE: 5.0%→5.6%; COE: 6.1%→7.0%; TGR: 3.3%) to KRW124,118 12m fwd BVPS; rising long-term bond yields and reduced gains on Samsung Electronics stock valuation resulted in a 2.1% drop in 12m fwd BVPS and boosted COE. We add Samsung Life to our list of noteworthy insurance stocks.
3Q22 forecast: Consolidated NP at KRW214.4bn (+66.0% YoY), 29.8% below market consensus
We forecast 3Q22 consolidated NP (to control. int.) of KRW214.4bn (+66.0% YoY), which is 29.8% below the market consensus; we attribute the large gap to delayed property sales (proceeds reflected in consensus). Earnings should be driven by rising insurance profit and a low-base effect for income from asset disposal. We see insurance profit at KRW382.4bn (+15.9% YoY), with risk premium up 5.7%, loss ratio down 2.6pp, mortality profit at KRW187.4bn (+14.6% YoY) and loading profit at KRW185.0bn (+7.6% YoY). New protection-type contract APE should reach KRW473.1bn (+5.0% YoY). Variable guarantee policies should incur a KRW60.0bn loss (vs. losses of KRW323.0bn/KRW92.0bn in 2Q22/ 3Q21). Investment return should rise to 2.7% (+42bps YoY) on KRW50.0bn in recurring disposal gains and decrease in value of invested assets (losses on bond valuation).