Samsung Life Insurance said Thursday that it expects limited impact on its business following its planned incorporation of Samsung Fire & Marine Insurance as a subsidiary.

"Incorporating the subsidiary will have no impact on the company’s profits or capital ratio, nor will there be any changes in overall business management," Samsung Life's Chief Financial Officer Lee Wan-sam said during an earnings call earlier in the day.

Yet, with both firms leading their respective insurance markets, synergy is expected, particularly as the boundaries between life and general insurance continue to blur amid evolving consumer needs. Like other life insurers, Samsung Life has been expanding into the health insurance sector in recent years.

"The two companies are already active in the overlapping health insurance sector. Within legal boundaries, we will pursue further synergy through cross-selling and joint investments in alternative assets," Lee added.

The comments follow Samsung Life’s application for regulatory approval from the Financial Services Commission last week for the subsidiary affiliation. Industry watchers estimate the review process will take about two months.

The move follows Samsung Fire’s January announcement that it plans to reduce its 15.9 percent treasury shareholding to below 5 percent by 2028, aimed at enhancing corporate value and increasing shareholder returns.

If the affiliation is approved, Samsung Life’s stake in Samsung Fire will increase from 14.98 percent to 16.93 percent, surpassing the 15 percent cap set by local insurance regulations. Under the Insurance Business Act, an insurer must incorporate another insurer as a subsidiary if its stake exceeds this threshold.

While Samsung Life could alternatively sell shares to comply with the cap, industry analysts believe subsidiary incorporation is the more likely outcome.

A key concern had been the overhang risk leading up to the stake sale, as uncertainty about a divestment often prompts investors to preemptively offload shares, potentially driving down stock prices.

However, following Samsung Life’s formal application to the FSC for subsidiary affiliation on Feb. 13, this overhang risk subsided, triggering a rally in both insurers’ stock prices. Samsung Life surged 15.1 percent, while Samsung Fire jumped 18.5 percent over the next two trading days.

Selling shares also carries the risk of weakening Samsung Life’s dominant position within Samsung Group’s governance structure.

Currently, Samsung Electronics Chairman Lee Jae-yong holds an 18.9 percent stake in Samsung C&T, which in turn owns 19.34 percent of Samsung Life. Samsung Life, in turn, is the largest shareholder of both Samsung Fire and Samsung Electronics, reinforcing Lee’s control over the group’s key business divisions. Any reduction in Samsung Life’s stake in Samsung Fire would require careful management to preserve this strategic power structure.

Some industry insiders had speculated that Samsung Life might further increase its stake in Samsung Fire post-affiliation, but the company dismissed the possibility on Thursday, stating it has no plans to expand its holdings at this time.

Meanwhile, Samsung Life reaffirmed its commitment to increasing shareholder returns, targeting a mid-term goal of a 50 percent payout rate within the next three years or so.

Boosted by robust earnings in 2024, the company announced a record-high dividend of 4,500 won per share, representing a 21 percent on-year increase. Last year, Samsung Life reported a net profit exceeding 2.1 trillion won ($1.46 billion), becoming the first local life insurer to surpass the 2 trillion won mark and the second in the overall industry, following Samsung Fire, which achieved the same milestone with its 2024 earnings.

"We aim to enhance corporate value by maintaining an appropriate capital ratio while ensuring a stable and steadily increasing shareholder return rate," the CFO said.

By Choi Ji-won (jwc@heraldcorp.com)