Insurers are hesitant to announce their dividend policies despite improved financial performances.
This is because the introduction of the new accounting standard, IFRS17, the Korean Insurance Capital Standard (K-ICS), and the new employee benefits system has increased financial uncertainty for insurers which have decided that it is risky to increase dividends hastily, reported Business Korea, citing analysts.
According to an official at Hanwha Investment & Securities, as of 28 June 2023, only Samsung Life among major insurers has specifically revealed plans for rewards for shareholders this year, including the dividend payout ratio.
Samsung Life has suggested a dividend payout ratio of 35-45% this year. Assuming a 6% year-on-year increase in required capital, Samsung Life estimates a dividend payout ratio of 35% to maintain its K-ICS ratio. This results in an expected dividend yield of 5.9%.
In addition to the introduction of new standards such as K-ICS and IFRS17, Korean financial authorities have ordered insurers to raise capital and strengthen capital adequacy management to face potential risks in the market.
