Samsung Electronics Returns 10 Trillion Won To Shareholders… As Samsung Life Insurance And Fire And Marine Insurance Prices Go Up

Samsung Electronics Stock Buyback Announcement

Samsung Electronics announced a plan to buy back and cancel 10 trillion won worth of its treasury shares. This move boosts the stock prices of Samsung-affiliated insurance companies. The expectation is that these companies will see their shares in Samsung Electronics increase, leading to potential returns for their shareholders.

Since the announcement, Samsung Electronics’ stock price has risen by about 5%. The share buybacks and cancellations will happen over the next year. The share prices of Samsung Life Insurance and Samsung Fire and Marine Insurance have both increased by around 10%.

Currently, Samsung Life Insurance owns about 8.51% of Samsung Electronics, while Samsung Fire and Marine Insurance holds about 1.48%. As Samsung Electronics cancels treasury stock, these percentages will grow. This increase is projected to benefit the insurance company’s shareholders.

Under the Financial Industry Act, financial companies cannot hold more than 10% of shares in non-financial companies without approval. In 2018, Samsung Life Insurance and Samsung Fire and Marine Insurance sold their shares in Samsung Electronics equally after a divestment.

NH Investment & Securities estimates that the additional value from increased shares could be between 228.4 billion to 761.2 billion won, depending on the final amount of treasury stock canceled.

Unlike in 2018, new accounting standards (IFRS9) mean that any sale of shares will not benefit Samsung Life Insurance from an accounting perspective. In 2022, the company stated its commitment to selling shares for shareholder returns.

Selling shares could provide funds for shareholder returns, such as dividends or new buybacks. Additionally, rising Samsung Electronics stock prices can improve the financial health of the insurance firms. Asset value increases can enhance their available capital and overall financial condition.

A drop in Samsung Electronics stock was previously linked to lower solvency ratios for the insurance companies. An insurance industry official noted that while rising shares of Samsung Electronics can improve the fortunes of insurance firms, the financial impact remains limited. There is no direct correlation between Samsung’s share price and the insurance companies’ profits or losses.