Samsung Life Stock Depends More on Samsung Electronics Than Insurance? [Weekend Money]

Insurance Business Remains Stable
Special Dividend from Samsung Electronics Is the Key Factor

Samsung Life Insurance posted a surprise performance in the first quarter of this year. Net profit soared well above 1 trillion won, surpassing market expectations. At first glance, it appears that the core insurance business has improved significantly, but a closer look tells a slightly different story. A substantial portion of these results came from the reversal of provisions following a legal victory in the immediate annuity lawsuit, as well as the special dividend from Samsung Electronics.

Samsung Life Insurance’s consolidated net profit for the first quarter was 1.2036 trillion won, an 89.5% increase year-on-year. This result exceeded market expectations. The largest factor was the reversal of provisions after winning the immediate annuity lawsuit, with the amount alone reaching approximately 425.7 billion won.

When focusing solely on the core insurance business, performance was somewhat subdued. Insurance profit for the first quarter was 256.5 billion won, a decrease of 7.7% compared to the same period last year. While amortization gains from Contractual Service Margin (CSM) and profits from the release of Risk Adjustment (RA) remained stable, a one-off expense of 52.6 billion won related to retirement benefit liabilities pushed the administrative expense margin into deficit.

However, new contract momentum was not bad. Annualized Premium Equivalent (APE) for protection-type insurance, which converts premiums with different payment periods to a one-year basis, was 803.2 billion won, up 3.6% from the previous quarter. Both whole life insurance and health insurance sales expanded. As interest rates rose, margins also improved, particularly for whole life insurance products.

Investment income surged. It reached 774.1 billion won in the first quarter, a 288.8% year-on-year increase. This reflected the reversal of provisions following the immediate annuity lawsuit victory, plus the special dividend effect from Samsung Electronics. Dividend income from Samsung Electronics was about 285 billion won, up approximately 100 billion won from the same period last year.

Ultimately, Samsung Electronics' stake is an inseparable factor when evaluating Samsung Life Insurance. Samsung Life Insurance holds a stake in Samsung Electronics, making it highly sensitive to changes in Samsung Electronics’ share price and dividend payouts. Once again, expectations for a recovery in the semiconductor industry and a rise in Samsung Electronics’ share price had a positive effect on Samsung Life Insurance’s stock. Reflecting this, iM Securities raised its target price for Samsung Life Insurance by 27.1% to 380,000 won.

Seol Yongjin, a researcher at iM Securities, commented, "While it is clearly positive that the dividend per share (DPS) could steadily increase in the mid- to long-term, even if the size of the special dividend in 2027 is substantial, it will be difficult to expect a sharp increase in DPS in the short term. Taking this into consideration, the company's future share price is more likely to move in line with the value of its Samsung Electronics stake, rather than based on competitiveness in its core business or expectations for dividends."

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