A Step Closer to Samsung Life Insurance Finally Selling Its Shares in Samsung Electronics?

• Amid Samsung Electronics announcing a huge buyback of 10 trillion won, one of the issues that has resurfaced is the potential sale of Samsung Electronics by Samsung Life Insurance.

• The total amount of Samsung Electronics that could be sold by Samsung Life Insurance and Samsung F&M Insurance is 25.6 trillion won (at current prices).

• We remain Positive on Samsung Electronics. The 10 trillion won buyback program is a positive sign on the company's willingness to provide higher shareholder returns.

Amid Samsung Electronics (005930 KS) announcing a huge buyback of 10 trillion won, one of the issues that has resurfaced is the potential sale of Samsung Electronics by Samsung Life Insurance (032830 KS).This issue has been discussed for more than 15 years. However, there appears to be increasing momentum by the Korean lawmakers to force Samsung Life Insurance to sell its shares in Samsung Electronics.

Under the current terms of the Insurance Business Act, an insurance company's shareholding in a subsidiary is limited to 3% of its total assets and this is currently calculated on the historical cost method. A potential change in regulations would change this to a market value basis.

Samsung Life Insurance currently owns an 8.5% stake in Samsung Electronics, which is worth 32 trillion won. In the chart below, you can see Samsung Life Insurance's stake in Samsung Electronics in the past several years. At the end of 3Q 2024, Samsung Life Insurance had an 8.5% stake in Samsung Electronics, with no change from the end of 2018.

Samsung Life Insurance had total assets of 312.7 trillion won at the end of 3Q 2024. Thus, 3% of its total assets would be 9.4 trillion won. Given that Samsung Life Insurance has an 8.5% stake worth 32 trillion won in Samsung Electronics, Samsung Life insurance would need to sell at least 22.6 trillion won worth of Samsung Electronics (at current prices) in order to abide by the "3% rule."

Source: Company data