4Q22 Forecast: Consolidated NP at KRW510.5bn (+190.7% YoY)
The author is an analyst of KB Securities. He can be reached at cygun101@kbfg.com. -- Ed.
Maintain BUY; raise target price to KRW88,000; Insurance top pick
We maintain BUY and raise our TP by 11.4% to KRW88,000 on Samsung Life. Following IFRS 17 implementation, we believe the company’s earnings structure will stabilize and uncertainty over net assets will be resolved, removing the valuation discount. Also, given the decision on 1y retrospective application of IFRS 17, CSM should surge with the reflection of new contract CSM post-transition, contributing to stable earnings growth. Samsung Life remains our top pick for Insurance. Our new TP, which is based on a change in 2023 equity risk premium (7.16%→5.41%), recovery in equity (lower interest rate in 4Q22) and lower discount for COE, reflects KRW133,211 12m fwd BVPS, 0.66x target P/B (sustainable ROE: 5.7%; COE: 7.0%→6.7%; g: 3.8%). We estimate 2022 DPS at KRW2,800.
4Q22 forecast: consolidated NP at KRW510.5bn (+190.7% YoY); below market consensus by 14.9%
We forecast 4Q22 consolidated NP (attributable to controlling interests) at KRW510.5bn (+190.7% YoY), which is below the market consensus by 14.9%. We believe gains on asset disposals have been sufficiently reflected in the consensus but reduced profits from variable guarantee reserves (amid volatility in interest rates, stock market in December) have not been factored in. We estimate underwriting profit of KRW309.6bn (+16.6% YoY), as mortality/loading profits should climb 15.6% YoY/19.4% YoY thanks to +1.5pp in loss ratio. Acquisition costs should decline YoY on weak sales of lump-sum savings insurance products compared to sales at rivals. Investment profit should jump 12.3% YoY on an approx. KRW600bn gain from sales of real estate/beneficiary certificates. We estimate a KRW100bn reversal in provisioning for variable guarantee reserves.