[Click e-Stock] "DB Insurance: Target Price Up 10% on Higher Shareholder Return Ratio"

LS Securities: "Period of Undervaluation Expected to Diminish"

On August 31, LS Securities raised its target price for DB Insurance from KRW 210,000 to KRW 230,000, maintaining its "Buy" investment opinion as well as its stance that the company is its top pick in the sector.

LS Securities analyst Jeon Bae-seung explained, "We are revising up the target price by 10% to reflect the higher target shareholder return ratio for DB Insurance," adding, "Although the 50% target shareholder return ratio by 2030 remains low compared to major insurance companies in developed countries, the new value-up policy is expected to further strengthen management’s focus on profitability. We also expect the period of relative undervaluation to consistently diminish."

Previously, DB Insurance announced a new plan to enhance corporate value. The company raised its shareholder return ratio target to 50% on a separate basis and 40% on a consolidated basis. It also introduced DCR (Dividend Coverage Ratio) alongside the K-ICS ratio to set ranges for shareholder return execution, and set a goal to maintain return on equity (ROE) at least 2 percentage points higher than the cost of equity (COE).

Analyst Jeon indicated that the core of this plan lies in managing distributable profits by moderating the speed of growth. He added, "The company assessed that excessive competition for new contracts is reducing distributable profits, thereby restricting shareholder returns, even as performance improves." He further commented, "As a result, regardless of whether the surrender value reserve system is improved, the company derived an appropriate volume of new contracts that enables the contract service margin (CSM) on existing contracts to steadily increase, thus ensuring sufficient resources for dividends."

He went on to say, "It is positive that the company devised a way to continuously expand shareholder returns without any reform of the surrender reserve system. This also shows considerable confidence in the potential for increased profits from Protegra and improvement in profitability indicators. On the other hand, as distributable profit emerges as a key indicator of shareholder returns, the need to manage its high volatility has also been raised."

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