Expanding Through Re In Singapore And Risk Focus Will Boost Future Prospects

Key Takeaways

• Developing innovative products and strengthening sales channels could drive future revenue growth and profitability through improved CSM.
  
• Diversification in global business and asset management strategies could enhance revenue and earnings through new market expansion and higher investment returns.
  
• Intensified market competition and external pressures could strain revenue growth, compress net margins, and affect long-term earnings stability at Samsung Fire & Marine Insurance.

Catalysts

Engages in the provision of non-life insurance products and services in Korea, China, the United States, Indonesia, Vietnam, Singapore, and the United Kingdom.

• Samsung Fire & Marine Insurance is focusing on developing market-leading innovative products and strengthening its sales channels to drive growth in CSM (Contractual Service Margin), which is expected to be a source of future profits and positively impact revenue.
  
• The company plans to sustain profitability in auto insurance through process automation and stronger cost management, potentially enhancing net margins by reducing expenses and increasing operational efficiency.
  
• SFMI is aiming for diversification and growth in its global business, particularly through Samsung Re in Singapore, which could lead to increased revenue by expanding into new regions and lines of business.
  
• On the asset management side, SFMI is focusing on risk management and building a diversified high-quality portfolio, which could enhance investment yield and improve earnings through higher returns on assets.
  
• SFMI announced plans to progressively increase total shareholder return to around 50% and cancel treasury shares, which could impact earnings per share (EPS) positively by reducing the number of shares outstanding.

Samsung Fire & Marine Insurance Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Samsung Fire & Marine Insurance's revenue will decrease by 17.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.3% today to 25.3% in 3 years time.
• Analysts expect earnings to reach ₩2397.8 billion (and earnings per share of ₩57906.45) by about March 2028, up from ₩2073.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.4x on those 2028 earnings, up from 8.1x today. This future PE is greater than the current PE for the KR Insurance industry at 4.7x.
• Analysts expect the number of shares outstanding to grow by 6.73% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.71%, as per the Simply Wall St company report.

Samsung Fire & Marine Insurance Future Earnings Per Share Growth

Risks

• Intensified market competition, especially in the auto and P&C insurance sectors, coupled with pressures from cumulative rate cuts and inflation, could strain revenue growth and compress net margins.
  
• Increased loss events and higher loss ratios in P&C insurance are impacting profitability, with a reported decrease of 13.9% in full-year insurance profit, potentially affecting long-term earnings stability.
  
• Concerns about financial market volatility, particularly in asset management, could pose risks to investment profitability and affect pretax earnings, given the company's exposure to alternative assets and real estate.
  
• Regulatory changes and potential competition authority reviews related to a subsidiary structure under Samsung Life could complicate strategic moves and shareholder return policies, affecting capital management and net margins.
  
• The sustainability of CSM growth amidst changing actuarial assumptions and GA channel competition raises questions on the long-term revenue potential and consistency of future net profits.

Valuation

• The analysts have a consensus price target of ₩442750.0 for Samsung Fire & Marine Insurance based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₩500000.0, and the most bearish reporting a price target of just ₩360000.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₩9466.2 billion, earnings will come to ₩2397.8 billion, and it would be trading on a PE ratio of 11.4x, assuming you use a discount rate of 6.7%.
• Given the current share price of ₩397500.0, the analyst price target of ₩442750.0 is 10.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.