Samsung Life's Glamorous Debut... Bittersweet '10 Years Since Listing'

Entered the Stock Market Brilliantly as 4th Largest Market Cap 10 Years Ago

Long-Term Low Interest Rates Hamper Earnings Improvement

Market Cap of 18.3 Trillion Won Evaporated in Just Over Two Years Recently

[Asia Economy Reporter Ko Hyung-kwang] '137,500 won → 45,950 won.' Samsung Life Insurance's stock price, which will mark its '10th anniversary of listing' this May, is plummeting without hitting bottom. As earnings sharply declined due to profitability deterioration caused by prolonged low interest rates, the stock price also fell helplessly. The market capitalization, which was 23 trillion won at the time of listing, has fallen by more than half and is now at risk of falling below the 9 trillion won level.

According to the Korea Exchange on the 14th, Samsung Life Insurance closed at 45,950 won on the previous day in the KOSPI market, down 3.5% 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, fell 37.9% in just over two months. Compared to last year's peak (March 15, 88,700 won), it has slipped 48.2%.

As the number one in the insurance industry, Samsung Life Insurance attracted great expectations at the time of listing. Matching the record-high public offering amount of 20 trillion won, it set various records from the first day of trading (May 12, 2010). It closed the first trade at 114,000 won, higher than the public offering price (110,000 won), and immediately ranked 4th in market capitalization (22.8 trillion won), following 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, attracting investors' attention.

It pushed out financial rivals Shinhan Financial Group (then 5th in market cap, 20.55 trillion won) and KB Financial Group (8th, 18.93 trillion won) to become the leading financial stock. With the emergence of Samsung Life Insurance, which accounted for about half of the total insurance sector market cap (about 50 trillion won), the insurance sector's share of the KOSPI market cap, which was only 2-3%, doubled. Securities firms raised Samsung Life Insurance's target price one after another, welcoming its entry into the stock market.

However, this interest quickly faded. While Samsung Life Insurance's stock price languished between 90,000 and 110,000 won for several years, investors lost interest, and its market cap ranking gradually declined. It seemed to rise briefly in the second half of 2017, but after hitting a peak of 137,500 won in November of that year, it fell uncontrollably. The 100,000 won level was broken in June 2018, followed by the 90,000 won level in November of the same year, and even the 80,000 won level collapsed in May last year. The prolonged low interest rate environment worsened the business conditions, causing the stock price to plunge. This year, the decline accelerated, recently falling to the mid-40,000 won range.

Based on the closing price of 45,950 won on the previous day, Samsung Life Insurance's market cap dropped to 9.19 trillion won, falling to 25th place. Compared to the all-time high market cap of 27.5 trillion won (9th place) on November 1, 2017, 18.31 trillion won (-66.5%) evaporated in two years and four months. It was overtaken not only by KB Financial Group (17th, 13.68 trillion won) and Shinhan Financial Group (18th, 13.26 trillion won) but also chased by Samsung Fire & Marine Insurance (30th, 7.93 trillion won) and Hana Financial Group (32nd, 7.23 trillion won), which were not even considered competitors at the time of listing. Its share of the entire KOSPI market shrank from 2.48% at listing to only 0.73% now, 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%), plunged from 3.0931 trillion won to 1.9078 trillion won this year alone, a sharp decrease of 1.1853 trillion won. The second-largest shareholder, Samsung C&T Corporation (19.34%), also suffered a simple loss of about 1.1 trillion won due to the decline in share value. In the group's market cap rankings, Samsung Life Insurance lags behind not only Samsung Electronics (1st) but also Samsung Biologics (4th), Samsung SDI (8th), Samsung C&T Corporation (11th), and Samsung SDS (20th). It has even earned the dishonor of being almost the only affiliate whose stock price has fallen since listing.

The outlook for Samsung Life Insurance in the securities industry remains bleak. The insurance industry's stagnation, coupled with prolonged low interest rates, is worsening earnings deterioration. Last year, Samsung Life Insurance reported a net profit of 977 billion won, an earnings shock that plunged more than 40% compared to the previous year.

This year, due to the spread of the novel coronavirus (COVID-19), the possibility of interest rate cuts is increasing in major countries including the United States, making the business environment for the life insurance industry even tougher, according to market experts. Park Hye-jin, a researcher at Daishin Securities, said, "Samsung Life Insurance is known to increase its dividend payout ratio significantly over the next two years and implement shareholder return policies such as share buybacks, 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, selling off 115.3 billion won worth this year alone. Individuals (99.9 billion won) and foreigners (9.9 billion won) absorbed this volume, but it was insufficient to stop the stock price decline. Last year, foreigners sold more than 120 billion won worth over the year.

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