[Click e-Stock] "Samsung Life Q4 Results Meet Expectations... Dividend Gains to Benefit from Semiconductors"

On January 23, Kiwoom Securities maintained its "Buy" investment rating and a target price of 2.2 million won for Samsung Life Insurance.

On this day, Ahn Youngjun, a researcher at Kiwoom Securities, stated, "We continue to view the insurance sector as our top pick."

He forecast that the fourth-quarter net profit attributable to controlling shareholders last year would reach 274.7 billion won, up 325% year-on-year, in line with market expectations. Although insurance profit is expected to be relatively sluggish due to an unfavorable environment such as a rise in loss ratios, he analyzed that strong investment profit and the low base effect from the previous year would lead to a significant improvement in results.

Ahn commented, "Insurance profit is expected to turn to a surplus of 23 billion won, compared to a loss of 64.51 billion won in the same period last year," adding, "Due to a general increase in loss ratios across the sector, such as the normalization of the medical strike, as well as seasonal factors like household adjustments and performance-based pay, insurance profit is expected to be lower than the usual level."

He continued, "However, the one-off loss factors that were reflected at over 700 billion won in the same period last year are showing signs of improvement," and "Investment profit is expected to return to a normal level as the one-off gains from changes in accounting treatment last year are removed."

He particularly highlighted the possibility of a special dividend from Samsung Electronics due to favorable conditions in the semiconductor industry. Samsung Electronics plans to use 50% of its free cash flow (FCF) from 2024 to 2026 for shareholder returns, and the increase in earnings driven by the industry upturn is expected to lead to a larger pool for shareholder returns.

Ahn explained, "Samsung Life Insurance holds an 8.51% stake in Samsung Electronics," and "When Samsung Electronics paid a special dividend in 2021 based on its policy of returning 50% of its 2018-2020 FCF to shareholders, approximately 648 billion won after tax was added to Samsung Life Insurance's earnings."

The estimated FCF of Samsung Electronics for 2024-2026 is about 120 trillion won, and if a special dividend is paid in the same manner, the expected increase in earnings for Samsung Life Insurance next year would be about 1.3 trillion won.

Ahn added, "It will be confirmed that the company has the ability to generate more than 2 trillion won in annual net profit attributable to controlling shareholders," and "With its ability to secure stable new contract margins, Samsung Life Insurance is expected to deliver the most robust performance in the sector."