Risk Management

The decline in the dividend payout ratio of Samsung Life Insurance is expected to affect the life insurance industry as a whole.
The decline in the dividend payout ratio of Samsung Life Insurance is expected to affect the life insurance industry as a whole.

 

Samsung Life Insurance held a board of directors meeting on January 25 and fixed its dividend for 2016 at 215.5 billion won, 117.3 billion won less than a year ago. The dividend per share fell from 1,800 won to 1,200 won and the dividend payout ratio fell from 27.5% to 23.0%. “We had to reduce the dividend for an increase in internal reserves to be prepared for the new RBC and IFRS 17,” the company explained.

For reference, Samsung Life Insurance paid a dividend of as much as 340.3 billion won in 2014 and 332.8 billion won in 2015 although its performance showed little improvement during the period due to low interest rates, low growth, etc. Comparison between these figures and that for 2016 implies that the insurer is now taking recapitalization issues very seriously.

“We need to pay attention to how the decline in the dividend payout ratio of Samsung Life Insurance will affect the life insurance industry as a whole with the market leader having failed to meet its goal by a margin of 7%,” said an industry source, adding, “Even Samsung Life Insurance, which recorded an RBC ratio of as high as 388% in September last year to be second to none in the industry, is regarding the new International Financial Reporting Standards and supervisory rules as uncertainty factors and is trying to keep cash, and then the other life insurance firms under worse conditions are likely to make similar decisions.”

Back in 2015, Samsung Life Insurance’s dividend payout ratio was 27.5% and the ratio was 27.0% for Hanwha Life Insurance and as high as 40.5% for Tong Yang Life Insurance. That year, Kyobo Life Insurance raised its dividend payout ratio for the fourth consecutive year although it was relatively low at 17.8%. 

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