NH Investment & Securities on the 1st said Samsung Fire & Marine Insurance is expected to benefit not only from stable earnings and dividend appeal but also from the increased value of its Samsung Electronics equity. It maintained its "Buy" investment rating and raised the target price 23% to 910,000 won from 740,000 won. The previous session's closing price was 618,000 won.
Jeong Joon-seop, an analyst at NH Investment & Securities, said, "We changed the method for deriving Samsung Fire & Marine Insurance's target price to an SOTP (sum of the parts) approach that separately calculates the insurance institutional sector value and the Samsung Electronics equity value and adds them," noting, "We reflected the sharp increase from the past in the value of the 1.5% Samsung Electronics equity held by Samsung Fire & Marine Insurance."
NH Investment & Securities assessed Samsung Fire & Marine Insurance's appropriate corporations value at a total of 38.488 trillion won, including 24 trillion won for the insurance institutional sector and 1.4524 trillion won for the Samsung Electronics equity value (applying a 50% discount rate). Converted to per-share corporations value, that becomes 910,000 won.
Jeong said, "On an SOTP formula basis, the share of Samsung Electronics equity in Samsung Fire & Marine Insurance's corporations value reaches 37.7%," adding, "With dividend yield expected at 3.6% this year and in the 4% range next year, which is not low, Samsung Fire & Marine Insurance is an attractive insurance stock that can enjoy both the Samsung Electronics premium and dividend income."
Second-quarter results this year were also projected to post solid performance above market expectations. NH Investment & Securities estimates Samsung Fire & Marine Insurance's second-quarter consolidated net income attributable to controlling interests at 713.6 billion won, up 11.9% from a year earlier.
By segment, insurance profit and loss is expected to be 592.8 billion won, up 23.4% from a year earlier. The shortfall in the variance between expected and actual results for long-term insurance is narrowing, and profit and loss in general insurance and auto insurance is also analyzed to improve from the previous quarter and a year earlier.
Investment profit and loss is also estimated to record 385.1 billion won, up 8.6% from a year earlier, helped by strong results at Canopius and increased contribution from expanded equity, as well as a favorable stock market environment.
Jeong also noted that positive momentum from regulatory changes can be expected.
Jeong said, "Starting this month, managed benefits will be implemented for certain items such as manual therapy and extracorporeal shockwave therapy," adding, "If the balloon effect is not significant, a reduction in insurance payout leakage on the order of hundreds of billions of won annually will emerge, which will act positively on results."