To Help Samsung Chairman Lee Pay Inheritance Taxes
Hyundai Securities said in a company analysis report on Samsung Life Insurance on Sept. 22 that Korea’s biggest life insurer is expected to continue to increase its dividends in the mid to long term as it needs to serve as a major source of funds for deferred payment of the large inheritance tax by its majority shareholder, Samsung Group Chairman Lee Jae-yong.
Of the three sons and daughters of the late Samsung Group Chairman Lee Kun-hee, Lee Jae-yong currently holds the largest stake (10.44 percent or 20.87 million shares) in Samsung Life Insurance, followed by Hotel Shilla President Lee Bu-jin (6.92 percent) and Samsung Welfare Foundation Chairwoman Lee Seo-hyun (1.73 percent).
Hyundai Securities also noted that Samsung Life Insurance is free from risks such as year-end adjustments to auto and property and casualty insurance premiums and suggested a target price of 91,000 won (US$68.10).
Hyundai Securities estimates Samsung Life Insurance’s dividend per share (DPS) to be 3,400 won this year, up 13.3 percent year on year, with a dividend yield of around 4.7 percent. However, although Samsung Life Insurance’s dividend yield is not as high as that of that of the whole Korean life insurance industry, it has high dividend growth visibility and expects its dividend to climb by 23.5 percent year on year in 2024 and by 11.9 percent in 2025.
Samsung Life Insurance is expected to see an increase in profits due to the mechanism of the amortization of insurance contract margins after a transition to a new insurance accounting system (IFRS17), and its reserves for policyholder refunds is about 6 trillion won, so dividend resources will expand in proportion to an increase in the life insurer’s profits, according to the report.
The report also analyzed that Samsung Life Insurance has a strong financial structure to increase dividends. It estimated that dividends that Samsung Life Insurance receives annually from other Samsung Group affiliates, including Samsung Electronics, are sufficient to cover its financial needs. Currently, Samsung Life Insurance holds an 8.5 percent stake in Samsung Electronics.
In fact, in 2022, its dividend income totaled 73 billion won from Samsung Electronics, 208 billion won from Samsung Card, 45 billion from Samsung Securities, and 98 billion won from Samsung Fire & Marine. Altogether, it amounted to about 1 trillion won after taxes.
This figure exceeds Samsung Life Insurance’s estimated dividend total of 606.6 billion won in 2023. Its dividend increase is expected to hit 143.7 billion won in 2024, but Samsung Securities and Samsung Fire are expected to increase their dividends by 58.5 percent and 12.3 percent this year, respectively. So, Samsung Life Insurance will be able to cope with an increase in dividend payments, Hyundai Securities analyzed.