[Click eStock] As Profit Growth Slows, Samsung Fire & Marine Insurance Should Focus on Shareholder Returns

Increase in No- and Low-Surrender Value Insurance Costs
Rising Auto Insurance Loss Ratio
Shareholder Returns in Focus: 30% Dividend Yield Plus Share Buybacks Over Four Years

There are projections that Samsung Fire & Marine Insurance's profit growth rate will slow this year due to side effects of intensified competition and a rising loss ratio in auto insurance. Analysts suggest that attention should be paid to share buybacks and dividends.

On the 13th, LS Securities maintained its target price for Samsung Fire & Marine Insurance at 450,000 won and its 'Buy' investment rating, citing these factors. The previous day's closing price was 373,500 won.

Samsung Fire & Marine Insurance's net profit for the fourth quarter of last year was 207.1 billion won, which was in line with expectations. Insurance profits reached 215 billion won, a 12% increase compared to the same period last year, but this was only about half the level seen in the first to third quarters. Investment profits were limited to 62 billion won, which is about 200 billion won less than the average for the first to third quarters. This is believed to be due to approximately 150 billion won in bond replacement trading losses and 80 billion won in provisions for overseas real estate.

The company is also expected to see a slowdown in profit growth this year. The risk loss ratio in the fourth quarter of last year rose sharply to 98.0%, worsening the difference between expected and actual results. In addition, changes in the lapse rate estimation model for no- and low-surrender value insurance policies increased the cost of loss-bearing contracts, which could reduce overall insurance profits. Auto insurance also recorded a loss of 67.7 billion won in the fourth quarter of last year. As premium rates continue to be lowered and costs have risen, the upward trend in the loss ratio is expected to persist. Although investment profits may benefit from bond replacement trading and other effects, valuation gains are ultimately expected to decline.

There is an outlook that shareholder returns, such as dividends and share buybacks, should be relied upon. Lim Heeyeon, a researcher at Shinhan Investment Corp., explained, "The cumulative dividend yield from 2024 to 2028 is estimated at about 30%. If we also consider the mechanical share price increase of 13% from share buybacks, the expected return is approximately 43%," adding, "As long as the share price does not fall by more than 30% over four years, there should be no actual loss."

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