4Q22 Preview: Standalone NP at KRW103.5bn (+47.2% YoY)
The author is an analyst of KB Securities. He can be reached at cygun101@kbfg.com. -- Ed.
Maintain BUY, raise target price to KRW280,000
We maintain BUY and raise our TP by 3.7% to KRW280,000 on Samsung F&M based on the following:
(1) Long-term loss ratio should continue to improve this year.
(2) BVPS should normalize under IFRS 17, and the company’s strategy to increase the proportion of risk/loading premiums (to expand new contract CSM contribution) should lead to earnings growth.
Our new TP, which reflects a decline in 2023 equity risk premium (7.16%→5.41%) and recovery in equity on lower interest rates in 4Q22, is based on KRW280,641 12m fwd BVPS and 1.0x target P/B (sustainable ROE: 8.7%; COE: 8.8%→8.7%; g: 3.8%). We estimate 2022 DPS at KRW12,700.
4Q22 preview: Standalone NP at KRW103.5bn (+47.2% YoY); below market consensus by 15.3%
We forecast 4Q22 standalone NP at KRW103.5bn, which is below the market consensus by 15.3%. Auto/long-term loss ratios should come in better than expected, but operating expenses should increase with the accumulation of welfare fund/bonus payment reserves. Standalone NP should rise 47.2% YoY, led by an improvement in combined ratio and the base effect from impairment losses on real estate funds in 2022. Total loss ratio should rise 0.5pp YoY to 85.1%. Auto loss ratio should climb 1.2pp, but long-term loss ratio should improve 4.8pp. Expense ratio should rise 0.1pp YoY to 21.5%. We estimate KRW50bn in non-recurring costs due to accumulation of welfare fund/bonus payment reserves (vs. 95.0bn in 4Q21). New acquisitions for personal insurance should grow 3.0% YoY to KRW33.1bn. Investment yield should climb 38bps YoY to 2.7%, driven by the base effect (KRW32.0bn in impairment losses on real estate funds in 2022).