'Dividend + Share Buyback' Shareholder-Friendly Policies Bring Mixed Emotions to Non-Life Insurance Companies

[Asia Economy Reporter Changhwan Lee] Domestic non-life insurance companies experienced mixed outcomes according to their shareholder return policies. Companies that continued shareholder-friendly policies such as active share buybacks or dividend increases received positive evaluations, while those that reduced dividends faced criticism.

According to the industry on the 1st, Meritz Fire & Marine Insurance announced on the 21st of last month that it decided to enter into a trust contract to acquire treasury shares worth 100 billion KRW to enhance shareholder value. The contract period is until February 20, 2023.

Meritz Group, including Meritz Fire & Marine Insurance, Meritz Financial Group, and Meritz Securities, has been steadily buying back shares since last year after announcing that they would raise shareholder value through share buybacks or cancellations instead of lowering dividend payout ratios.

Although the stock price sharply dropped in the short term at the beginning of last year’s announcement, it later showed a significant upward trend, being evaluated as an active shareholder-friendly policy.

Lee Hongjae, a researcher at Hana Financial Investment, raised the target price for Meritz Fire & Marine Insurance, stating, "The recent active enhancement of shareholder value through share buybacks is very positive."

DB Insurance also received positive market evaluations by raising dividends to 3,500 KRW per share. After recording the highest-ever performance last year, dividends increased by about 59% from 2,200 KRW last year to 3,500 KRW this year.

Lim Heeyeon, a senior researcher at Shinhan Financial Investment, analyzed, "DB Insurance’s steadily increasing dividend payout ratio every year is a clear differentiating point within the industry."

Jung Joonseop, a researcher at NH Investment & Securities, also explained, "The stable upward trend in dividend payout ratio aligns with existing policies, and a continuous and predictable dividend policy will have a positive effect."

On the other hand, Samsung Fire & Marine Insurance, the industry leader in non-life insurance, received negative evaluations by reducing its dividend payout ratio. Samsung Fire announced dividends of 12,000 KRW per share (ordinary shares basis dividend payout ratio of 43.7%). This fell short of the market’s expected dividend payout ratio (50%), leading to negative assessments from the securities sector.

NH Investment & Securities stated, "We lowered Samsung Fire’s target price from 301,000 KRW to 259,000 KRW, reflecting an increased discount rate due to inconsistent shareholder return policies."

Hana Financial Investment also pointed out, "This dividend falls short of the dividend payout ratio target presented in 2019 and even the level Samsung Fire proposed just a few months ago."

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