[Click eStock] "Dongyang Life Insurance, Potential for Increased Shareholder Returns... Target Price Up"

Target Price Raised from 4,900 KRW to 6,000 KRW
Investment Opinion Maintained as 'Neutral'

NH Investment & Securities raised the target price for Dongyang Life Insurance from 4,900 KRW to 6,000 KRW on the 20th, anticipating an expansion in shareholder returns if conditions become favorable. The investment rating was maintained at 'Hold.'

Jung Joon-seop, a researcher at NH Investment & Securities, explained, "We adjusted the target price upward by revising earnings estimates and reflecting the resumption of dividends and the management's strong commitment to shareholder returns, reducing the discount rate from 60% to 55%. However, we maintain the 'Hold' rating due to the gap between the target price and the current stock price, insufficient distributable profits, and intensified competition in new contracts following the discontinuation of short-term premium whole life insurance."

Dongyang Life Insurance resumed dividends in 2023 with a dividend per share (DPS) of 400 KRW and a payout ratio of 21.1%, but failed to reach the target payout ratio of 30%. Researcher Jung stated, "This was because distributable profits were not sufficiently secured despite no issues with earnings or the new solvency regime (K-ICS) ratio. Many listed insurance companies, excluding Samsung (Life and Fire), also maintain payout ratios around 20%, which reflects this influence." He forecasted that shareholder returns would expand if conditions permit. Jung added, "The industry is discussing the method of calculating distributable profits with government authorities, and if the system is improved, shareholder returns at past levels (30% payout ratio) or higher are expected."

NH Investment & Securities estimates Dongyang Life Insurance's first-quarter net profit to be 59.1 billion KRW, a 62.2% decrease compared to the same period last year. Researcher Jung commented, "Although the decline appears significant compared to the previous year, this is due to an exceptional large-scale investment gain from the interest rate drop in the first quarter of last year. New contracts, including short-term premium whole life and health insurance, will see the effect of discontinuation, with annualized premium equivalent (APE) increasing by 24.6% year-on-year to 206.3 billion KRW."