Compared to Domestic Non-Life Insurers, Twice the Level
Share Buyback → Cancellation... Accumulated Scale of 1.3 Trillion Won
Stock Price Responds... Surpasses 90,000 Won Intraday in August
Meritz Financial Group, which opened the curtain on shareholder returns with the 2022 transition to 'One Meritz,' has emerged as a top performer in enhancing corporate value (value-up). The key performance indicator for corporate value enhancement, 'Total Shareholder Return (TSR),' stands at 58%, approximately three times higher than the average of domestic financial holding companies.
According to the recent corporate value enhancement plan implementation status disclosed by Meritz Financial Group on the 20th, as of the end of June this year, Meritz Financial's three-year average annual TSR was recorded at 58%. This is three times the average of domestic holding companies (KB Financial, Shinhan Financial, Hana Financial Group), which is 17%. Compared to the average of domestic non-life insurers (Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance) at 26%, it is more than twice as high.
TSR is a concept that includes not only stock price returns but also dividend income, representing the total return shareholders can earn over a certain period. In other words, shareholders who invested in Meritz Financial have achieved an average annual return of 58% on their principal over the past three years. The cumulative TSR, which has steadily increased since the implementation of the shareholder return policy in 2023, rose by 47 percentage points from 44% at the end of last year to 91% as of the first half of this year.
Meritz Financial regards TSR as the core indicator (target) of its corporate value enhancement plan. To maximize this, it formulates capital allocation strategies by comparing internal investment returns, treasury stock repurchase returns, and cash dividend yields. For the three fiscal years from 2023 to 2025, it has decided to return 50% of consolidated net income to shareholders and is executing this plan. Last year, the shareholder return ratio was 51.2%, and this year, the target is also set at over 50%.
Treasury stocks are repurchased with the principle of cancellation. From 2017 to last year, about KRW 1.3 trillion worth of treasury stocks were repurchased and fully canceled, maintaining a 100% cancellation rate. Unlike simple repurchases, completing cancellation reduces the number of shares circulating in the market, thereby increasing earnings per share (EPS). It also reduces capital, boosting return on equity (ROE). This is also the method Apple in the U.S. uses to enhance corporate value.
Kim Yong-beom, Vice Chairman and CEO of Meritz Financial Group, emphasized the importance of treasury stock repurchases. During the first-half earnings conference call in August, when concerns were raised that a decrease in floating shares due to treasury stock repurchase and cancellation might lead to reduced foreign investor inflows if the company falls short of global index inclusion criteria, Kim stated, "The efficiency of the shareholder return policy takes precedence over supply and demand effects caused by overseas indices."
This approach is supported by the philosophy of major shareholder Jo Jung-ho, Chairman of Meritz Financial Group. Chairman Jo’s usual belief is that "one share held by a major shareholder should have equal value to one share held by a minority shareholder." After becoming chairman of Meritz Financial Group in 2011, Jo separated ownership and management by entrusting full authority to professional managers. In November 2022, he announced the transition to a wholly-owned subsidiary structure where the holding company owns 100% of the shares of its subsidiaries, Meritz Fire & Marine Insurance and Meritz Securities, through a comprehensive stock exchange. The Korea Corporate Governance Forum selected Chairman Jo as the grand prize winner in the economic sector of the '2nd Korea Corporate Governance Awards' at the end of last year.
The stock price has also responded to efforts to enhance corporate value. Starting at KRW 58,400 on January 2 this year, Meritz Financial’s stock price settled in the KRW 80,000 range following the value-up disclosure on July 4. After the earnings announcement and value-up disclosure on August 14, it even surpassed KRW 90,000.
Meanwhile, Meritz Financial is also focusing on expanding communication with shareholders and investors. Following the first value-up implementation plan disclosure among listed financial holding companies in July, it announced the second corporate value enhancement plan and implementation status about a month later on August 14.
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