[Dividend Pressure Aftermath] Insurance Companies Also Face Inevitable Downsizing, Card Companies Enjoy Record-Breaking Boom

Insurance Companies Under Direct Pressure
Samsung Life & Fire Lower Dividend Payout Ratios, Hanwha Life's Net Profit Up 313% Last Year
Planned Dividend Increase This Year, But Financial Authorities' Recommendations Pose Challenges

Credit Card Companies Increase Dividends
Hyundai Card Raises Dividends for 2nd Year... KB Kookmin Card Doubles Dividends

[Image source=Yonhap News]

[Asia Economy Reporters Oh Hyung-gil and Ki Ha-young] As the financial authorities' 'dividend restraint order' expands to the secondary financial sector, the insurance and card industries are experiencing mixed fortunes. The insurance industry is inevitably reducing dividends due to direct pressure from financial authorities. In contrast, some card companies not affiliated with financial holding companies, which are not subject to restrictions, are planning record-high dividend distributions, creating a stark contrast.

According to financial authorities and related industries on the 5th, Kwon Dae-young, Director of the Financial Industry Bureau at the Financial Services Commission, recently stated in a briefing on the 'Financial Industry Bureau Work Plan,' "The COVID-19 crisis and capital soundness are not issues exclusive to banks," adding, "Since the new international accounting standard (IFRS17) is being introduced in insurance, we expect CEOs and shareholders to make sound judgments and decide on appropriate dividend levels." Earlier, the Financial Supervisory Service also advised insurance company executives to "maintain dividend payout ratios at the average level of the past three years."

Accordingly, insurance companies are deeply concerned. Samsung Life Insurance and Samsung Fire & Marine Insurance, which had already resolved cash dividends, also lowered their dividend payout ratios this year. Samsung Life decided on a cash dividend of 2,500 KRW per share, totaling 449.4 billion KRW, with a payout ratio of 35.5%. This represents a decrease of 150 KRW per share and 1 percentage point from a year ago, when the dividend was 2,650 KRW per share (totaling 475.9 billion KRW) with a payout ratio of 36.5%. Samsung Fire & Marine Insurance also reduced its dividend from 56.2% (8,800 KRW per share) a year ago to 49.5% (8,800 KRW per share).

Hanwha Life Insurance, which recorded a net profit surge of 313.7% year-on-year to 242.7 billion KRW last year and had planned to increase its dividend payout ratio this year, is now in a difficult position due to pressure from financial authorities. Hanwha Life's dividend payout ratio last year was 22.4%, up 4.3 percentage points from 18.1% in 2018.

The insurance industry feels compelled to comply with the financial authorities' recommendations. A life insurance company official said, "The financial authorities' recommendation is practically a mandatory guideline," adding, "We have decided to set dividends at previous levels." A casualty insurance company official also said, "Although performance improved last year due to better loss ratios amid COVID-19, we decided not to increase dividends," lamenting, "Even financial holding companies are reducing dividends, so insurance companies cannot afford to be defiant."

On the other hand, card companies are increasing dividends. KB Kookmin Card decided on a cash dividend of 2,174 KRW per share, totaling 200 billion KRW. Compared to a year ago, when the dividend was 1,087 KRW per share and the total dividend was 100 billion KRW, this is about double. The payout ratio rose by 30 percentage points to 61.6% from 31.6% a year ago. However, this is explained as a base effect, as the payout ratio has generally been around 60%.

Hyundai Card is also increasing dividends for the second consecutive year. Hyundai Card's final dividend is 914 KRW per share, totaling 146.7 billion KRW. The final cash dividend payout ratio is expected to be around 60%, similar to last year.

Samsung Card set its dividend per share at 1,800 KRW, 200 KRW higher than a year ago. The total dividend amount rose 12.5% to 192.1 billion KRW. However, the cash dividend payout ratio decreased by 1.4 percentage points to 48.2% from 49.6% the previous year.

Shinhan Card also decided on a cash dividend of 3,145 KRW per share, totaling 394.3 billion KRW. The payout ratio is expected to be around 65%, similar to last year.

A card company official said, "As net profits increase, even if dividends rise, the payout ratio will remain similar or decrease," adding, "Bank-affiliated card companies are 100% subsidiaries of holding companies, so dividends have positive effects such as discovering new growth engines. Therefore, dividends will be made at levels that do not affect capital adequacy or leverage regulation ratios."

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