Samsung Life on the ECM block

Strong first quarter results encourage E-Mart and Shinsegae to pare down stakes in Samsung Life.

Two Samsung Life shareholders took advantage of a sharp share price spike to divest a W655.2 billion ($601 million) stake after Thursday's close. 

The deal in Korea's largest insurance company by assets marks a rare international equity offering from the country this year. To date, the only big deal of 2015 has been a $1.06 billion follow on from Hyundai Glovis, although initial public offerings in Mirae Asset Life Insurance and Innocean Worldwide are expected before the summer

Samsung Life's deal comprised a six million secondary share selldown by hypermarket operator E-Mart and department store operator Shinsegae according to a term sheet seen by FinanceAsia. The two each sold three million shares, in the process reducing E-Mart's stake to 11.8 million shares and Shinsegae's to 4.4 million.

Lead manager Credit Suisse marketed the deal on a range of W108,500 to W112,500, equal to a 3.4% to 6.9% discount to the stock's W116,500 close. The deal priced towards the low end of the range at W109,200, which represented a 6.3% discount.  

It accounted for 22 trading days. 

Books were opened at 2.30pm Hong Kong time and closed at 6pm for regional investors and 8.30pm for US investors. A total of 80 accounts participated with a 60/40 split between international and local accounts. 

One source close to the deal said there was a mix of sovereign wealth funds, long only accounts and hedge fund investors. Roughly 60% of the book went to the top 10 anchor accounts, although there was also healthy interest from trading accounts as the stock has had considerable momentum over the past month.

However, the recent spike meant they would have also demanded a good entry price, which was why the placement came at a fairly high discount by Korean standards 

After badly underperforming the market last year, Samsung Life has been on a roll over the past month. Between December 9 and April 10 it fell 24.8% but has almost made that back, rising 22.8% since then.

On May 12 and 13, the company's shares shot up 10.7% before profit taking on Thursday saw it retreat 1.27%. By contrast, the Kospi 200 is up 8% so far this year, one of Asia's best performing markets.  

Samsung Life has performed better than Hanwha Life, which has fallen 3.4% year-to-date and is now trading at 0.76 times consensus 2015 price to book. But it has not quite performed as well as Tongyang Life, which is up 34.8% and is trading at 0.84 times. 

At current levels, Samsung Life is now the most expensive Korean life insurer at 0.99 times. This valuation has been underpinned by its results, which beat consensus estimates. 

The insurer reported first quarter net profits of W464 billion on Wednesday, above analysts' estimates for W402 billion. This represented a 13% year-on-year increase and an even more impressive 225% quarter-on-quarter increase. 

Analysts said growth was driven by protection type premium business, which were up 8% and a lower risk loss ratio, which fell 9bp to 79.6. The group is also benefitting from increased dividend income out of other Samsung affiliates to the tune of W100 billion. 

In a recent research report, Credit Suisse argued that, "Going forward, rising long term interest rates should bode well for investment yields."

Samsung Life has been one of the hardest hit in the sector because it has the greatest exposure to legacy fixed rate protection policies, which guarantee customers rates of 8% to 10%. Rising interest rates should help to mitigate this.

So far this quarter, 10-year government bond yields have risen 44bp. 

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