Samsung ’s financial arms hit by earnings falls

Samsung’s financial arms are forecast to report steep earnings declines amid the stock market slump and weak sales environment.

According to data from market tracker FnGuide, Samsung’s four financial affiliates, Samsung Life Insurance, Samsung Fire &Marine Insurance, Samsung Securities and Samsung Card, are estimated to have produced a combined net profit of 1.82 trillion won ($1.39 billion) in the first half of this year, down 33.6 percent from the previous year.

The earnings fall is attributable to the dwindling stock market condition here and sluggish growth in the local insurance market.

Samsung Life Insurance, the largest financial affiliate of Samsung Group, will be hit hardest by the unfavorable market circumstances, according to data. The life insurer generated a net profit of 1.16 trillion won between January and June in 2021, but the figure is forecast to drop below 500 billion won during the same period this year, according to data from the market tracker.

The benchmark KOSPI soared to a historic high of 3,300 points back in June 2021, but it has now lost momentum for growth, with the figure hovering around 2,400 in July of this year. The life insurer’s stock price also hit a three-year high of 87,000 won in the first half of last year on then-booming stock market sentiment, but it fell to around 62,500 won as of Wednesday.

“Life insurers’ earnings in the second quarter will fall short of the market’s consensus due to the stock market’s sluggish performance,” Jeong Tae-joon, an analyst at Yuanta Securities, said. But one of the biggest challenges that life insurers face now is weak insurance sales represented by falling new contracts, according to the analyst.

Samsung Securities is also expected to face a drastic earnings fall. The company achieved a solid net profit of 553.4 billion won in the first half of last year, but the figure is forecast to drop to around 283 billion won this year, according to FnGuide.

This figure is a drop of about 50 percent, but it appears tough for Samsung’s brokerage arm to avoid declining earnings at a time when most other securities firms are facing similar circumstances, with their stock trading commission profits forecast to nosedive amid soured investor sentiment here.

But Samsung Card is expected to generate better earnings this year with the easing of most social distancing measures in April. The company’s net profit is forecast to reach 316 billion won in the first half of this year, up 11.9 percent from the previous year.