On Friday, Goldman Sachs adjusted its stance on shares of Hyundai (OTC:HYMTF) Marine and Fire Insurance (001450:KS), moving from a "Buy" to a "Neutral" rating. The firm also lowered the price target for the insurer's shares from KRW53,000 to KRW35,000. This revision comes amid concerns about the company's ability to meet dividend payout expectations due to its current capital position.
The analyst at Goldman Sachs pointed out that Hyundai Marine and Fire Insurance's solvency ratio is at 170%, which falls short of the 200% threshold required to ease surrender reserve requirements. This financial metric is crucial for insurers as it indicates their ability to cover potential claims.
The analyst's remarks suggest that unless this threshold is reduced, the company may have to halt dividend payments in 2024E (expected) to prioritize improving its K-ICS ratio, a measure of capital adequacy specific to Korean insurance companies.
The revised outlook includes a significant reduction in the expected dividend payouts for Hyundai Marine and Fire Insurance for the years 2024E to 2026E. This adjustment reflects the analyst's anticipation that the company will not be able to proceed with meaningful increases in its Dividend Per Share (DPS) as previously expected.
The decision to downgrade the stock and cut the 12-month price target by 34% to KRW35,000 is a response to the challenges Hyundai Marine and Fire Insurance may face in maintaining its financial health while meeting the expectations of shareholders. The firm's analysis indicates that the insurer's focus will likely shift towards bolstering its capital adequacy rather than distributing profits to shareholders in the form of dividends.
Goldman Sachs' update serves as a revised guidance for investors, signaling a more conservative outlook on Hyundai Marine and Fire Insurance's financial prospects in the near term. The new price target and rating reflect the firm's current assessment of the insurer's stock potential given the identified financial constraints.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.