Hefty Dividend Payout from Samsung Electronics
The author is an analyst of NH Investment & Securities. He can be reached at junsup@nhqv.com. -- Ed.
We believe that Samsung Life is well-positioned to maintain a differentiated market position, positively viewing relatively lower uncertainties regarding IFRS17-related risk and SEC’s special dividend payout. That said, the firm needs to better respond to structural changes in the insurance industry.
Raise TP to W91,000
We raise our TP on Samsung Life from W76,000 to W91,000, in reflection of upwardly revised earnings forecasts thanks to Samsung Electronics (SEC)’s special dividend payout. We also positively view that it faces less uncertainties (vs peers) regarding upcoming system changes. Of note, our TP was derived by applying a target P/B of 0.36x to 2021E BPS of W253,316.
Response to IFRS1 and structural changes remain key issues in life insurance sector
Responding to the upcoming IFRS17 introduction now represents the largest issue among life insurers. The new accounting standard is to have negative impacts upon most life insurers’ currently reported shareholders’ equity. But, given that Samsung Life has thus far shown stronger capital adequacy versus peers, we expect related risk to be lower for the firm—a factor that will likely help Samsung Life maintain its superior position in the life insurance market.
That said, we believe that Samsung Life needs to better respond to structural changes in the industry. We note that Hanwha Life and Mirae Asset Life have established GAs as their subsidiaries in an attempt to separate product production and sales, with some small/mid-sized insurers aiming to position themselves digital insurance companies. Against this backdrop, Samsung Life will likely need to strive harder in pursuing structural innovations in line with changing market trends.
1Q21 NP sized at W1,009.5bn (+339.0% y-y)
In 1Q21, Samsung Life’s consolidated NP likely upped to W1,009.5bn(+339.0% y-y) on: 1) a special dividend payout (around W800bn) from SEC; and 2) a lighter burden for variable insurance-related guarantee reserves thanks to bullish stock market conditions.