[Click e-Stock] "Samsung Fire & Marine Insurance Proves Itself as a Defensive Stock in Insurance Sector...Target Price Raised"

Daol Raises Target Price by 1 Million Won to 7.6 Million Won

On May 19, Daol Investment & Securities raised its target price for Samsung Fire & Marine Insurance from 7.5 million won to 7.6 million won and maintained its "Buy" investment rating.

Ji-Won Kim, a researcher at Daol Investment & Securities, stated, "After reflecting the first quarter results and confirming reduced earnings volatility, we have raised our future earnings forecasts for Samsung Fire & Marine Insurance."

For the first quarter of this year, Samsung Fire & Marine Insurance reported consolidated operating profit of 913.8 billion won and controlling net profit of 634.7 billion won, exceeding market expectations by 2.7% and Daol Investment & Securities’ estimates by 6.5%.

It was assessed that there was qualitative improvement in the Contractual Service Margin (CSM). Although newly contracted CSM decreased, the degree of CSM adjustment was reduced and profitability improved positively. The CSM conversion multiple rose to 14.2 times for protection-type policies and 15.1 times for personal insurance, while it fell to 6.4 times for property insurance. Kim explained, "This is interpreted as the result of portfolio restructuring by suspending sales of high-loss coverage and expanding sales of high-profitability coverage. Assuming the improved profitability level is maintained, it will be necessary to keep an eye on sales trends in the non-life insurance sector, but if sales recover in the future, the growth potential of new contract CSM based on higher profitability will become evident."

Insurance profit reached 551.3 billion won, receiving positive evaluation in terms of reduced volatility compared to competitors. Kim noted, "General insurance profit surged by 110.7% year-on-year due to the revision of the rate system and a decrease in major accidents during the quarter," adding, "The impact of rate hikes was partially reflected, which also narrowed the deficit in motor insurance." Investment profit was 362.4 billion won, attributed to increased dividend income and foreign exchange gains on overseas equity holdings.

Samsung Fire & Marine Insurance’s K-ICS (Korean Insurance Capital Standard) ratio was estimated at 270.1%. Kim stated, "Although we considered the impact of rising interest rates on the company’s asset-liability duration structure, the change in the required capital standard for indemnity health insurance was reflected, resulting in an increase from the previous quarter and maintaining the stability of the solvency margin."

In addition, Kim estimated, "Dividendable profit is also expected to increase due to the rise in the value of Samsung Electronics’ equity holdings," adding, "This demonstrates the company’s status as a defensive stock within the industry."

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