[Click eStock] "Samsung Fire & Marine, Reduced Base Burden"

Reflection of approximately 100 billion KRW one-time business expenses in Q4 last year
Hana Financial Investment "Maintains Samsung Fire & Marine Insurance target price at 310,000 KRW"

Samsung Fire & Marine Insurance logo

[Asia Economy Reporter Gong Byung-sun] Samsung Fire & Marine Insurance's net profit for the fourth quarter of last year is expected to fall significantly short of market consensus. However, Hana Financial Investment anticipates that the base effect burden will ease somewhat starting from the first quarter of this year.

On the 7th, Hana Financial Investment estimated Samsung Fire & Marine Insurance's net profit for the fourth quarter of last year at 68.4 billion KRW, a 50.4% decrease compared to the same period last year. This figure is 56.93% below the consensus.

The poor performance is expected due to approximately 100 billion KRW in one-time business expenses recognized during the period. Costs such as group special performance bonuses and internal welfare fund allocations were incurred in the fourth quarter of last year. Additionally, increased automobile loss amounts and provisions for long-term insurance incurred but not reported losses (IBNR) are expected to raise the loss ratio (L/R) by 1.8 percentage points compared to the previous quarter.

However, the base burden is expected to decrease. In the first quarter of last year, Samsung Electronics' special dividend income was substantial, around 140 billion KRW, resulting in a higher profit base compared to other companies. But due to conservative accounting treatment in the fourth quarter of last year, this burden has somewhat lessened.

Although the overall insurance underwriting profit is expected to slow down across the industry this year, Samsung Fire & Marine Insurance is anticipated to have relatively strong defensive capabilities. Lee Hong-jae, a researcher at Hana Financial Investment, explained, “The general insurance loss ratio is expected to improve this year due to changes in general insurance retention rates,” adding, “The very poor 25th contract retention rate is also expected to rise significantly this year.”

The increase in actual loss insurance premiums is also a positive factor. On the 31st of last month, the Life Insurance Association and the General Insurance Association announced that actual loss insurance premiums will rise by an average of 16% this year. Until now, Samsung Fire & Marine Insurance's past premium increases were relatively low, but since last year, they have been rising at similar levels. The researcher stated, “In the mid to long term, the difference in loss ratios with the second-ranked company will be maintained at a certain level.”

Accordingly, Hana Financial Investment maintained its investment opinion of ‘Buy’ on Samsung Fire & Marine Insurance, with a target price of 310,000 KRW. The closing price on the previous day was 212,000 KRW.

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