Samsung Fire & Marine Insurance's headquarters in Seoul / Courtesy of Samsung Fire & Marine Insurance

Samsung Life Insurance is reviewing a plan to make Samsung Fire & Marine Insurance its subsidiary following the latter's recent announcement of corporate value enhancement strategies, according to industry sources, Wednesday.

Currently, Samsung Life is the largest shareholder of Samsung Fire & Marine, holding a 14.98 percent stake.

While Samsung Life serves as the holding company for Samsung Card, Samsung Securities and other financial affiliates of Samsung, Samsung Fire & Marine has been an independent entity.

The sources noted that Samsung Life's review of making Samsung Fire & Marine its subsidiary is influenced by the latter's recently announced value-up plan, the first of its kind among listed insurance companies in the country.

Samsung Fire & Marine disclosed the value-up plan on Friday, setting target levels for its risk-based capital ratio at 220 percent and return on equity at 11 to 13 percent. The firm also announced a phased increase in its shareholder return ratio to 50 percent by 2028.

"We plan to retire treasury shares, reducing our current treasury share ratio of 15.93 percent to below 5 percent by 2028," the company said at the time.

If Samsung Fire & Marine retires its treasury shares, the stake held by its largest shareholder, Samsung Life, will subsequently increase.

Under the Insurance Business Act, if an insurance company holds 15 percent or more of another insurer's shares, it must designate that insurer as its subsidiary upon approval from the Financial Services Commission.

If Samsung Fire & Marine lowers its treasury shares to 5 percent, Samsung Life's stake is expected to rise from 14.98 percent to 16.93 percent, according to securities firms' reports. As a result, Samsung Life would be required to designate Samsung Fire & Marine as its subsidiary.

If Samsung Fire & Marine gradually retires its treasury shares, and Samsung Life disposes of enough shares to keep its stake in Samsung Fire & Marine below 15 percent, the issue of subsidiary integration would be resolved. However, this could lead to potential stock price declines due to overhang risk — potential sell-offs.

"We are currently considering various options related to Samsung Fire & Marine's value-up plan," a Samsung Life official said. "The specific details are expected to be announced at our upcoming investor relations event on Feb. 20."

Meanwhile, Samsung Fire & Marine's decision to introduce the value-up plan is seen as being supported by solid performance.

The firm's plan is drawing significant attention in the market, as it could serve as a benchmark for shareholder return strategies among other large insurers, which have seen strong results following the implementation of the International Financial Reporting Standard 17, a set of new global accounting standards, in 2023.

Samsung Fire & Marine's net income increased from 800 billion won ($522 million) in 2020 to 1.8 trillion won in 2023.

By the third quarter of 2024, its cumulative net income already surpassed 1.86 trillion won, exceeding the total for 2023. The firm expects its net income for the entire year to reach a record high of 2.1 trillion won.