Market Cap Halved... The Humiliation of Samsung Life Insurance After 10 Years Since Listing

▲Samsung Life held a listing ceremony on May 12, 2010, at the Korea Exchange in Yeouido, Seoul. (From left) Seojin Seok, Vice Chairman of the Korea Listed Companies Association; Changho Lee, Head of the Korea Exchange Stock Market Division; Bongsu Kim, Chairman of the Korea Exchange; Suchang Lee, CEO of Samsung Life; Woochul Lee, Chairman of the Life Insurance Association; Sangho Yoo, President of Korea Investment & Securities; Jongyoon Kim, President of Goldman Sachs Securities.

[Asia Economy Reporter Koh Hyung-kwang] Samsung Life Insurance, which will mark its '10th anniversary of listing' this May, is experiencing a relentless plunge in its stock price. As profitability deteriorates due to prolonged low interest rates, earnings have sharply declined, causing the stock price to fall helplessly. The market capitalization, which once reached 23 trillion won at the time of listing, is now at risk of falling below the 10 trillion won mark, having already halved.

According to the Korea Exchange on the 11th, Samsung Life Insurance closed at 50,800 won on the previous day’s KOSPI market, down 1.1% from the previous trading day. This is the lowest price since its listing in May 2010. The stock price, which started at 74,000 won at the beginning of this year, has dropped 31.8% in just over two months. Compared to last year’s peak (March 15, 88,700 won), it has slid 42.7%.

◆ 4th in Market Cap, a Spectacular Market Debut = Samsung Life Insurance, the 'No. 1 in the insurance industry,' attracted great expectations at the time of its listing. Matching the record-breaking public offering amount of 20 trillion won, it set various records from the first day of trading (May 12, 2010). It closed its first trade at 114,000 won, higher than the offering price (110,000 won), instantly ranking 4th in market capitalization (22.8 trillion won) behind Samsung Electronics, POSCO, and Hyundai Motor. The trading volume on the first day was 1.14 trillion won, accounting for 15% of the total KOSPI trading volume (7.3 trillion won) that day, reflecting strong investor interest.

It pushed aside financial rivals Shinhan Financial Group (then 5th in market cap, 20.55 trillion won) and KB Financial Group (8th, 18.93 trillion won) to claim the top spot in the financial sector. With Samsung Life Insurance accounting for about half of the total insurance sector market cap (approximately 50 trillion won) at the time, the insurance sector’s share of the KOSPI market cap, which was only 2-3%, doubled. Securities firms welcomed Samsung Life Insurance’s market debut by raising their target prices one after another.

However, this interest quickly faded. While Samsung Life Insurance’s stock price languished between 90,000 and 110,000 won for several years, investor interest waned and its market cap ranking gradually declined. Although there was a brief rise in the second half of 2017, after peaking at 137,500 won in November of that year, the stock price fell uncontrollably. The 100,000 won level was broken in June 2018, followed by the 90,000 won level in November, and even the 80,000 won level collapsed in May last year. The prolonged low interest rate environment and worsening business conditions caused the stock price to plummet. This year, the decline has accelerated, and recently the 50,000 won level is also under threat.

◆ 17.3 Trillion Won Market Cap Vanished in Just Over 2 Years = Based on the closing price of 50,800 won on the previous day, Samsung Life Insurance’s market capitalization stands at 10.16 trillion won, dropping to 25th place in ranking. Compared to its all-time high market cap of 27.5 trillion won (9th place) on November 1, 2017, 17.3 trillion won (-63%) has evaporated in just 2 years and 4 months. It has been overtaken not only by KB Financial Group (17th, 14.61 trillion won) and Shinhan Financial Group (18th, 14.54 trillion won) but also chased by Samsung Fire & Marine Insurance (30th, 8.62 trillion won) and Hana Financial Group (31st, 8.28 trillion won), which were not even considered competitors at the time of listing. Its share of the entire KOSPI market has shrunk from 2.48% at listing to a mere 0.73%, greatly diminishing its presence.

Due to the sharp stock price drop, the value of shares held by Samsung Life Insurance’s largest shareholder, Chairman Lee Kun-hee (20.76%), has plunged nearly 1 trillion won (984 billion won) this year alone, from 3.0931 trillion won to 2.1091 trillion won. The second largest shareholder, Samsung C&T Corporation (19.34%), has also suffered a simple loss of about 910 billion won due to the decline in share value. In the group’s market cap rankings, Samsung Life Insurance trails not only Samsung Electronics (1st) but also Samsung Biologics (4th), Samsung SDI (9th), Samsung C&T (10th), and Samsung SDS (20th). It has even earned the dishonor of being almost the only listed affiliate whose stock price has fallen since listing.

◆ Low Interest Rate Environment Hampers Earnings Improvement = The securities industry’s outlook for Samsung Life Insurance remains bleak. The insurance industry’s stagnation, coupled with prolonged low interest rates, is worsening earnings. Last year, Samsung Life Insurance posted a net profit of 977 billion won, an earnings shock with a drop of over 40% compared to the previous year.

This year, due to the spread of COVID-19, the possibility of interest rate cuts in major countries including the U.S. is increasing, making the business environment for life insurers even tougher, according to market experts. Park Hye-jin, a researcher at Daishin Securities, said, "Samsung Life Insurance is expected to significantly increase its dividend payout ratio and implement shareholder return policies such as share buybacks over the next two years, but unless interest rates rebound, it will be difficult for earnings to structurally improve."

Reflecting the gloomy situation, institutional investors have sold Samsung Life Insurance shares for 22 consecutive trading days since early last month, unloading 115.3 billion won worth of shares this year alone. Although individuals (92.8 billion won) and foreigners (17.1 billion won) absorbed these shares, it was insufficient to stop the stock price decline. Last year, foreigners sold more than 120 billion won worth of shares over the course of the year.

This content was produced with the assistance of AI translation services.