Samsung Fire & Marine Insurance Q1 Net Profit Up 163%... Record High Even Excluding Special Dividends (Comprehensive)

Operating Profit Up 136%·Net Profit Up 163%
Improved Loss Ratios in Auto and Long-term Insurance
Impact of Samsung Electronics Special Dividend
Qualitative Growth Focused on Profitability Achieved

[Asia Economy Reporter Ki Ha-young] Despite the challenging business environment caused by COVID-19 and prolonged ultra-low interest rates, Samsung Fire & Marine Insurance achieved the largest net profit in history for the first quarter of this year. Excluding the special dividend from Samsung Electronics, the net profit more than doubled compared to the same period last year, marking the highest quarterly net profit excluding one-time gains. This is seen as evidence that the qualitative growth strategy focused on profitability pursued so far is yielding results.

According to Samsung Fire & Marine Insurance's announcement of the 'Q1 2021 Business Performance' at the investor conference on the 12th, the provisional operating profit for Q1 was 595.3 billion KRW, and net profit was 431.5 billion KRW, representing increases of 136% and 163% respectively compared to the same period last year. Sales were recorded at 4.8493 trillion KRW, a slight decrease of 0.2% from last year. Operating profit and net profit more than doubled compared to last year, surpassing market expectations with a surprise performance.

Q1 Record Performance Driven by Samsung Electronics Special Dividend and Loss Ratio Improvement

This strong performance is attributed to increased investment income from the special dividend of Samsung Electronics and stabilization of insurance profits due to improved loss ratios in automobile and long-term insurance. The prolonged COVID-19 pandemic led to reduced vehicle movement and fewer hospital visits, resulting in lower loss ratios for automobile and long-term insurance, thereby improving insurance profits. Additionally, Samsung Fire & Marine Insurance received a total special dividend of 140.1 billion KRW from Samsung Electronics, in which it holds a 1.49% stake, at 1,578 KRW per share, significantly boosting investment operating profit.

The combined ratio (loss ratio + expense ratio), which measures insurance operational efficiency, recorded 102.1%, down 3.2 percentage points from last year. Looking at loss ratios by insurance category, long-term insurance saw a 0.1 percentage point decrease to 82.4% due to an increased proportion of guaranteed premiums. Automobile insurance loss ratio dropped by 6.5 percentage points to 79.8%, thanks to a temporary decline in accident rates due to COVID-19 and continuous loss reduction efforts. However, general insurance loss ratio rose by 6.2 percentage points to 87.3% due to an increase in high-cost claims.

The investment sector achieved an investment operating profit of 691.8 billion KRW, up 40.3% from the same period last year. Even excluding the special dividend, the company explained that it is enhancing profitability and securing asset stability through optimal portfolio rebalancing, moving away from its previous conservative investment stance.

Collaboration with Canopius and Tencent Joint Venture Proceeding as Planned

During the conference call, Samsung Fire & Marine Insurance announced that alongside strengthening profitability centered on its core business, it is also advancing digital business for future growth, collaborating with Canopius, and proceeding with overseas projects such as the Tencent joint venture as planned.

In particular, regarding its digital strategy, the company plans to build its own platform centered on the Digital Headquarters established last year, aiming to provide an expanded representative insurance platform beyond just an application (app) for insurance sales. Furthermore, it intends to build a digital ecosystem focused on insurance-related businesses such as healthcare and mobility to acquire new customers and expand into new business areas.

Regarding future dividend policy, the company plans to maintain a dividend payout ratio of around 50% this year while considering various options.

Hong Seong-woo, CFO of Samsung Fire & Marine Insurance, stated, "We will avoid reckless competition and continuously pursue profit differentiation through growth focused on profitability and efficiency improvement. We will do our best to maximize performance befitting the top company in the non-life insurance industry, surpassing last year's profit achievements."

Despite COVID-19 Impact... Insurance Industry Expected to Post Strong Q1 Results

Meanwhile, insurance companies are expected to achieve strong results in the first quarter despite the spread of COVID-19. Life insurers are expected to see increased net profits due to the reversal of variable guarantee reserves amid a stock market boom, while non-life insurers are expected to benefit from reduced traffic and medical usage due to COVID-19. According to financial information provider FnGuide, the combined net profit of three life insurers?Samsung Life, Hanwha Life, and Mirae Asset Life?and five non-life insurers?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, Meritz Fire & Marine Insurance, and Hanwha General Insurance?is estimated to increase by 82.1% year-on-year to 1.646 trillion KRW in Q1.

Earlier, Dongyang Life and Lotte Insurance also reported strong results. Dongyang Life recorded a Q1 net profit of 106.5 billion KRW, up 67.4% year-on-year, and operating profit increased by 48.5% to 124.1 billion KRW. Lotte Insurance turned profitable in Q1 with operating profit and net profit of 27.5 billion KRW and 62.8 billion KRW, respectively, compared to the previous quarter.