The author is an analyst for NH Investment & Securities. He can be reached at junsup@nhqv.com -- Ed.
Through its 3Q23 earnings announcement, Samsung F&M demonstrated stable underwriting profit, excellent new contract creation ability, and only limited impact from the implementation of IFRS17 actuarial assumption guidelines. However, it is disappointing that a specific shareholder return policy has yet to be confirmed.
Underwriting profit continues sound
We raise our TP for Samsung F&M slightly from W312,000 to W316,000, reflecting a change in base BPS application year (2023 → 2024). But, we drop our target P/B from 0.89x to 0.82x, noting earnings estimate cuts (versus our previous projections) made in light of continued bond replacement trading. Our new TP was made by applying a target P/B of 0.82x to 2024E BPS of W385,494.
However, we adhere to a Buy rating. IFRS17 actuarial assumption guidelines were applied prospectively, but the impact on CSM proved not to be significant (a decrease of W143bn). A hefty K-ICS ratio (263.2%), stable debt management, and excellent ability to create new contracts are factors that should lead to the company presenting an industry-leading shareholder return policy in the future. That said, it is disappointing that no specific direction was confirmed during the 3Q23 earnings call.
The insurer's shareholder return policy is unclear, but given shinier profit figures this year, DPS is likely to show a y-y expansion. Assuming a DPS of W15,000, we see 2023E DY of around 6%.
3Q23 review: Posts NP of W428.2bn (+26% y-y)
Samsung F&M posted 3Q23 NP (excl minority interest) of W428.2bn. Long-term insurance was generally healthy except for some losses (-W10bn) due to the prospective application of the new accounting guidelines. Of particular note, as high-margin new contracts increased significantly, new contract CSM recorded a whopping W1.2tn (+52.3% q-q). However, overall pre-tax profit decreased q-q due to losses (approximately W150bn) stemming from bond replacement transactions at the investment arm.