Samsung Fire & Marine Insurance Co Ltd

KRX:000810

Earnings Call Analysis

Samsung Fire & Marine Insurance Posts Strong Q1 2024 Earnings and Growth Plans

Samsung Fire & Marine Insurance reported an exceptional first quarter of 2024 with a net profit of KRW 701 billion, a rise of 14.6% year-over-year. New business CSM grew 30.6%, leading to an increased insurance profit of KRW 446.2 billion. Despite heightened competition in auto insurance, the company's market share expanded through strategic responses. However, general insurance profits dipped 4.2% due to higher loss events abroad. Investment yields improved by 0.25 percentage points, yielding KRW 742 billion in profit. The company aims to sustain CSM at 15x and achieve a shareholder return target of 50% over three years【4:3†source】【4:9†source】.

Strong Start to 2024

Samsung Fire & Marine Insurance reported a solid performance in the first quarter of 2024, with a consolidated pretax profit of KRW 917.7 billion. This reflects a significant increase in net profit attributable to majority interest, which hit a record KRW 701 billion, marking a 14.6% year-over-year growth. This improvement showcases the company's resilience and capability to navigate a competitive insurance landscape.

Growth in Long-Term Insurance

The company demonstrated robust growth in its long-term insurance segment, generating an insurance profit of KRW 446.2 billion, a 6.3% increase from the previous year. This growth is largely attributed to the higher amortization of Contractual Service Margin (CSM) and effective management of experience variances. Furthermore, the CSM for new business expanded by an impressive 30.6% year-over-year, bringing the total CSM volume to KRW 13,712 billion. This is a positive sign for investors as it indicates effective product positioning and channel strategy.

Auto Insurance Challenges

The auto insurance segment faced intensified competition, which led to adverse trends in premium levels. Nevertheless, the company adeptly strategized to maintain market dominance. Claims efficiency improvements sustained profits in this area, resulting in an insurance profit of KRW 102.5 billion, showcasing the company's operational effectiveness despite market challenges.

General Insurance Growth with Higher Loss Ratios

Samsung Fire & Marine Insurance's general insurance business benefitted from growth in both domestic and international markets, driving a 13.6% year-over-year increase in insurance revenue. However, the overseas operations experienced higher loss events, resulting in a slight increase in loss ratios by 3.3 percentage points, which caused the insurance profit for this segment to decline by 4.2% year-on-year to KRW 55.1 billion. This is a critical point for potential investors to consider, as it may influence future risk assessments and profitability.

Investment Performance and Strategies

The company's investment yield has improved to 3.65%, an increase of 0.25 percentage points compared to last year, with total investment profits recorded at KRW 742 billion, which is a 13.2% year-over-year improvement. The company's focus on enhancing management efficiency and generating higher valuation gains from alternative investments has paid off, further stabilizing the financials and giving assurance to investors about future returns.

Capital Management and Shareholder Returns

Looking ahead, Samsung Fire & Marine Insurance has set a target for the shareholder return rate at 50%, improving from the current 37.4%. This target will be gradually implemented over the next three years. The company has emphasized that any excess capital derived from a K-ICS ratio above 220% will be utilized for shareholder returns as well as enhancing domestic and international business operations. This demonstrates a commitment to providing value to shareholders while also investing in future growth opportunities.

Continuing Challenges and Future Outlook

The roadmap forward suggests that while the company may encounter fluctuations in the investment landscape and more volatile insurance markets, it remains committed to maintaining profitability and enhancing shareholder value. The increased focus on careful capital allocation, efficient management of insurance contracts, and sustained CSM growth indicates a potential for continued positive performance in future quarters. However, investors should monitor the market dynamics closely, especially in the auto and general insurance segments, where challenges may persist.

Earnings Call Transcript 2024-Q1

[Operator]

Good morning and good evening. Thank you all for joining the conference call for the earnings results of Samsung Fire & Marine Insurance. This conference will start with a presentation followed by a Q&A session. [Operator Instructions]Now we will begin the presentation on Samsung Fire & Marine Insurance's first quarter earnings results of the fiscal year 2024.

[Unknown Executive]

[Interpreted] Good morning. I am [ Chang Ho Kim ], Head of IR at Samsung Fire & Marine. Thank you very much for joining us for this earnings presentation. We would like to just provide you with a brief update of our business results followed by a Q&A session. And going forward, our focus would once again be on the Q&A.First quarter 2024 consolidated pretax profit was KRW 917.7 billion, with net profit attributable to majority interest recording quarterly record of KRW 701 billion, which is up 14.6% versus last year.For long term insurance, driven by higher amortization of CSM and stable control of experience variance, insurance profit reported KRW 446.2 billion, which is up 6.3% year-over-year. On the back of stronger competitiveness in terms of product and channel, new business CSM expanded by 30.6% year-over-year, bringing CSM volume to KRW 13,712 billion as at the end of the first quarter, which is an increase of KRW 409.2 billion year-to-date.Competition deepened for auto insurance. And in the face of adverse premium trend, while we were able to respond strategically, it led to an expansion of our market dominance. And on improved claims efficiency, insurance profit came in at KRW 102.5 billion, sustaining the profit streak. General insurance saw growth from both domestic and overseas businesses, driving insurance revenue up by 13.6% year-over-year. However, due to higher loss events overseas, loss ratio inched up 3.3 percentage points and insurance profit fell 4.2% year-on-year, reaching KRW 55.1 billion.Thanks to efforts placed behind improving efficiency of management aimed at enhancing the running yield and on higher valuation gains from alternative investment, investment yield was 3.65%, improving 0.25 percentage points versus last year and investment profit reported KRW 742 billion, an increase of 13.2% year-over-year.This ends the first quarter update. We will be happy to take your questions now.

[Operator]

[Interpreted] [Operator Instructions] The first question will be provided by Hong Jae Lee from Hyundai Motor Securities.

[Hongjae Lee, analyst]

[Interpreted] I am Lee Hong Jae from Hyundai Motor Securities. I would like to ask you 2 questions. First question is on your capital ratio, particularly if you could highlight some of the key elements that had impacted your required capital, such as how big was the impact from the introduction of the actuarial assumption based risk amount and also the lower mass lapse segmentation.Second question is regarding your domestic project financing exposure, what is the extent of that exposure? Also including the overseas CRE, if you could provide some color as to what your exposures are? And also, what is the amount of accumulated provisions that you have so far, accumulated provisions as well as the loss that has been booked? And until the end of this year, would there be any additional loss that you will need to recognize?

[Unknown Executive]

[Interpreted] I will respond to your first question on required capital. I am the Head of the RM division, [ Leeung Ho ]. There are 2 elements regarding this question, which has to do with number one, the segmentation of the mass lapse shock. And the second is the new introduction of the actuarial risk -- assumption-based risk amount.Relating to the mass lapse risk, which is part of the insurance risk, in the past, there was just 1 category, but that's been segmented into 2. One for protection, the other for savings. And there is a positive impact on the K-ICS ratio by about 10 percentage points.And the second factor that had an impact is the new introduction of the actuarial assumption based risk amount. And that actually is in the form of an experience variance for the expenses. And that has an impact of minus 10 percentage points.So all in all, if you put together the impact from the segmentation of the mass lapse, as well as the application of the actuarial risk amount, the impact offset one another. Thank you. [Interpreted] I will respond to your second question. I am [ Chaewon Jae ], VP of Finance Planning Team. So, all of the PF loan exposure that the company has as of end of March is KRW 2.6 trillion. All of the assets that we are exposed to are all exposures to the mother portfolio -- mother project financing. And hence, at this point, there is no issue regarding asset quality.Regarding the provisions for bad loans that we've set aside after also reflecting and being in compliance with the guideline that the supervisory authority has announced at the beginning of year, so including that amount, currently our provision stands at KRW 10.1 billion for the PF loans.And also for our overseas real estate exposure, we have in total KRW 1.3 trillion. Most of these assets that we hold are in the form of funds. Hence, it is recognized in terms of valuation gains or losses.So as of last year, we've already booked from the -- for these overseas property assets that we have valuation losses of KRW 140 billion. For this year, our projection is that we believe that we will be able to significantly downsize that amount to around KRW 30 billion to KRW 40 billion. [Interpreted] We will take the next question.

[Operator]

[Interpreted] The following question will be presented by Myung Wook Kim from JPMorgan.

[M.W. Kim, analyst]

[Interpreted] There are 2 questions that I would ask. First is -- I would like to first thank you for shedding light on the company's mid to longer-term capital plan. If we look at the capital plan that you've shared, we see that if there's an excess capital of K-ICS ratio of 270% that you would use that proceeds to actually make that distribution. My first question is, but if you then compare that to the previous slide that you've shared, you also have adjusted basis K-ICS ratio, which is based upon the capital that the company actually hold in force. So going forward, if there were to be some changes in the K-ICS ratio, would you be able to also change the threshold of capital --adequate capital level of that 220% that you state on your slide? Because in some other countries, we see that the CSM portion seems to be comparatively less reflected in such calculations.And also, second question is regarding your capital allocation. If we look at your new CSM growth, it's at 30%, which is quite impressive. To what extent do you think that this double-digit growth in your new CSM is sustainable going forward? And if you believe that such very steep growth of the market and the insurance business is possible within Korea compared to Asia or other DMs, do you think that there could be more emphasis on allocating your capital for the domestic insurance business?

[Jun-Ha Kim, executive]

[Interpreted] Yes. This is CFO, Kim Jun-Ha. I will respond to your first question. Yes, we are showing you the adjusted K-ICS ratio in the slide. But once again, that is actually not an official figure. But we just wanted to share with you. So that adjusted K-ICS ratio, we do not use that as the baseline for the decision-making of the company. But the reason why we show that with you is because of the possible issues relating to the fluctuations or the volatilities. So we -- based upon the guideline that the FSS has announced, which is 200%. That's why we've added that 20% additional buffer.So if the standard is changed at the supervisory authority, then I'm sure that the K-ICS ratio that we use as our baseline can also be subject to certain changes.Regarding the second question on allocating the capital, which is the excess capital that is, and you are -- and tying that with the steep CSM growth of our long-term business, I would first have to say that no one can predict what the growth rate is going to look like as we go forward. Who can say for sure that next year we will also see a double-digit growth? Now within Korea, when it comes to the health insurances, the whole social trend of aging society, we've been able to verify is that it is not necessarily a negative issue for the growth of the health care insurance business.And also to elaborate, last year, we've really focused on realigning our long-term businesses, product and channel portfolio, and we've seen a very steep increase in the CSM multiple. But this year, it had come down to around 15x and we are sustaining that level. So going forward, the CSM multiple of 15x will be used as our key baseline. And at this point, we're thinking very hard as to how we're going to draw up our CSM strategy for our long-term line.

[Unknown Executive]

[Interpreted] Next question, please.

[Operator]

[Interpreted] The following question will be presented by Byung Gun Lee from DB Financial and Investment.

[Byung Gun Lee, analyst]

[Interpreted] I am Lee Byung Gun from DB Investment Securities. First of all, I thank you for the good results this quarter. My first question relates to your new business margin. The multiple -- CSM multiple has come down quite significantly. And I think we are now back to the level that we've seen in Q1 of last year. You say that this was intended. But even if you compare this with your Q4 figures, there's been quite a bit of a decline. So we'd like to gain some understanding as to why this is the case.So, for example, there was change in the discount rate. And I would presume that this did not have any significant impact on P&C insurers, but there would have been some impact and also product changes in your product portfolio. So if you could provide some color as to the reasons behind why we are seeing the CSM multiple go down so significantly, that would be quite helpful. And on a Q-on-Q basis, even if the figure that we've seen last quarter and 2 quarters ago were too high, still that -- the dip is quite significant. So we'd like to gain some understanding there.And my second question is on your mid to longer-term capital plan. We're very grateful for your sharing of this information. But I think at the end of the day, what's important is the time line when this capital plan can be actually implemented and executed.You say that there is a buffer. But I'm just wondering whether all the other aspects that are currently being discussed, including the discount rate changes, is incorporated in this plan that you have on Page 11. So would like to gain some understanding as to the time line when will we be able to see the implementation of this plan that you share with us.

[Unknown Executive]

[Interpreted] I will respond to your first question. I am [ Chu Eunyoung ], VP of Long-term Insurance Strategy team. Regarding the question as to the changes or the decline in the CSM multiple, in January, there has been some adjustment in the assumed rate and we've made some changes on our products and that had driven down the CSM multiple.And in Q1, we expanded our top line revenue, which was GA driven. So because of such shifts or changes within our top line revenue portfolio that had an impact of bringing down the CSM multiple.Regarding the impact from the discount rate adjustments, there's -- I can tell you that no meaningful impact from the discount rate changes. Regarding the reshuffling of the portfolio, going forward we're going to focus on improving the efficiency by minimizing the attrition or the churn out of our subscriber or the customer base, and through a stringent management of poor contracts with regards to the second driver, which was the increase in the revenue share or revenue portion coming from our GA channel. Through the efforts, we are very committed on improving our mid to longer-term CSM multiple.

[Jun-Ha Kim, executive]

[Interpreted] This is the CFO, Kim Jun-Ha responding to your question. I mentioned previously that we set aside about 20% as a volatility or fluctuation buffer. And I understand your question to be whether we've incorporated the recent development and discussions that are ongoing relating to the rule and regulatory changes that's been initiated at the FSC level regarding the insurance market reform.Since we do not know the concrete direction towards which such rule changes would take place, we have roughly set aside 20% as a buffer. But once the details are ironed out and we know of the concrete changes that will impact our accounting basis, then we would, at that point in time, would have to then incorporate that into our planning.Regarding your second question -- second part of the question on the time line, if you look at the slide that we've shared, it shows the basis upon which we will make the shareholder return decision, which is the target of ROE, as well as the solvency capability of the company. We also write this method. In the past, it was in the form of cash dividend payout. But going forward, we've also included additional options such as share buyback and cancellation.It would be great if I was able to share with you a specific time line. But still, as I mentioned, there are changes that are upcoming regarding the baseline and the standard by the authorities. So it will be difficult for me to give you a specific month in terms of the time line. Having said that, because this plan is based off of the outcomes that we will see at the end of the close of financial year 2024, our objective is to apply it to that point in time when we make the shareholder return decision. So I can tell you that going forward, from that 2024 result-based shareholder return, these approaches will be applied.

[Unknown Analyst]

[Interpreted] We'll take the next question.

[Operator]

[Interpreted] The following question will be presented by Jun-Sup Jung from NH Investment & Securities.

[Jun-Sup Jung, analyst]

[Interpreted] I also have a question on your capital management policy. Two questions. If you look at Slide 11 on the excess capital, you say that you will use that either for shareholder return or domestic business and overseas business expansion. For domestic business growth, does this mean that you will invest more into your core insurance business or you will focus more on investing into other high-margin capital? I'd like to just gain some color as to what you mean by domestic business growth.And second is, in terms of the method of shareholder return, you've mentioned that you're also considering shareholder -- treasury share buyback and cancellation. But I remember that in your previous earnings call, you said that there are certain issues regarding the subsidiary status in vis-a-vis the equity that is held by Samsung Life Insurance. Wondering whether that issue has now resolved or have you found an alternative way to go about this issue?

[Jun-Ha Kim, executive]

[Interpreted] This is CFO responding to your question on excess capital. We are in the process -- in process of developing and devising a specific, detailed plan for how we will use the excess capital. As mentioned by you, either domestic business, which the -- which has to do with the insurance business, and also making investments, both domestic and overseas.So at this point, we are taking stock of what the demands and requirements are from each of our business units. We're in the process of collating that information and reviewing that. So it would take the form of expanding investments into assets, both domestic and overseas, and also for the domestic insurance business, doing additional risk taking, especially on the health care line.Regarding the expansion of our global business for -- first off for Singapore, Samsung Singapore, the decision has been made to increase capital in the amount of KRW 160 billion. For additional equity holdings or expanding our equity holdings, for instance, for Canopius, the other counterparty had made the request, and we are in the process of reviewing expanding our equity stake at Canopius at this point.Regarding the second question on treasury share buyback and cancellation, previously, you are right, we've said there are certain issues regarding the inclusion as a subsidiary vis-a-vis Samsung Life. But the situation now has changed a bit with regards to the shares of Samsung Fire & Marine held by Samsung Life as well as the treasury shares of Samsung SFMI.Our position is to maintain that holding for the benefit of stability of our governance structure and if need be, that aspect will also further expand. So yes, we are looking into treasury share buyback and cancellation as an option. But if that decision is made, it will be done through the market. And the reason why we are unable at this point to make any official announcement is because it is currently under review. And once things become much more -- much more finalized, we will be able to come back to you with a clearer positioning.

[Unknown Executive]

[Interpreted] Next question please.

[Operator]

[Interpreted] The following question will be presented by Hye-jin Park from Daishin Securities.

[Hye-jin Park, analyst]

[Interpreted] I just have 2 very simple follow-up questions and 1 point that I just would like to double check. First question is that there's been changes in the assumptions for your persistency and lapse ratio in Q4? And the CSM adjustments are quite big in terms of the negative figure that we are seeing. And I understand that your intention is to reduce the size of the deficit, the shortfall. So what is your outlook for the CSM adjustment going forward?And your investment gain has been quite good. Is this just a non-recurring? Is this a one-off thing? And one point that I would like to check is that, very happy to see that you've been very progressively sharing with us what your going forward capital management policy looks like. But I remember that last quarter, you said that within the first half of the year, you would be able to announce officially as to what your capital stance is or capital payback stance is. But you've -- in your answering, you've talked about the end of 2024 results. So does that mean that we have to wait and see up until the end of FY 2024 to see whether there is going to be any share buyback and cancellation? Is my understanding correct? I just want to double check.

[Unknown Executive]

[Interpreted] Yes. Responding to your question, I'm VP of Long-term Insurance. The amount itself, on a year-over-year basis, we see an improvement of KRW 45 billion. So in terms of the long-term products for the persistency ratio, for the short term as well as the longer horizon persistency ratio, we are managing and controlling that process.So from the time a policy is executed, we are very stringently managing and controlling the onboarding -- the onboarding the acquisition process. So going forward, from the second half of the year, you will be able to see better results come through.Just to clarify the second point that you've mentioned, in my answer I did say that the capital plan will be applied based upon the FY '24 results. But that -- and I think that's where the confusion lies. You might have thought that that means that we will start to apply it from March of next year. That wasn't my intention.Basically, the dividend will be dependent upon this year's earnings results. And if you do a reverse calculation, what that means is that the dividend -- the way we're going to do a return is going to be based upon -- or is going to be decided within this year, and we will be able to open and share with you as to what that approach is going to look like. And in the previous call, I did say that we will be able to share with you more color in the first half of this year.And if you think about the first half earnings release, that happens in the month of August. So it will be -- after that point in time, we will be able to confirm the way in which we do shareholder return, and we'll be able to open that approach to you. So I hope there is no misunderstanding.Lastly, on investment gain that you've asked. So in the first quarter, the investment gain has increased about KRW 86 billion. Most of it is because of the interest and dividend income.I understand that what you are asking is the impact that we're seeing on FVPL, the expansion of it due to the changes in the accounting standards, and you are probably wondering about the valuation amount that hinges on the changes in the overall market.So if you go to Page 8, you see the valuation gains from FVPL asset, and that is broken down into equities, bonds and also alternative investment in the amount of about KRW 50.6 billion. So for the equities in Q1, the impact or the increase is because of the rise in the equity prices in domestic and overseas stock market. Bond it says it's valuation gain, but these products are mostly like money market funds and short-term cash-based funds. So although they are captured under P&L categorization, they are in the form of more like an interest income.So for the alternative investment in the amount of KRW 50.6 billion, these are -- if you look at the -- these are the FVPL portfolios, which incorporate corporate financing fund and PEF fund. And most of it are broken down into equity securities and debt securities.For the equity-type securities fund, it was impacted by the changes in the asset value of the underlying assets and also the changes in the overseas interest rate environment. So aside from such valuation gains that we have recognized in Q1, there was no other big or significant one-off factors. [Interpreted] Next question, please.

[Operator]

[Interpreted] The following question will be presented by Jaewoong Won from HSBC Securities.

[Jaewoong Won, executive]

[Interpreted] Thank you very much for the good results despite a difficult and challenging operational backdrop. I just have one question. I see that your new business CSM is quite good. And you've mentioned that the share of your GA channel has gone up. Would like to know as to the extent of the GA channel contribution to your new business and also what is your target?

[Unknown Executive]

[Interpreted] Yes, first off, the new business CSM accounts for 30% of the total as of Q1 of '24. It had expanded to that level. And if you compare this to last year's shares against the last year's revenue, this is about 10% of the GA sales, the entire pie. So within the GA market, we've been able to bolster the competitiveness of our product portfolio, and we have strengthened our market positioning. So we think that we will be able to maintain at minimum the current level.

[Operator]

[Interpreted] Next question, please. [Interpreted] The following question will be presented by HeeYeon Lim from Shinhan Investment and Securities.

[HeeYeon Lim, analyst]

[Interpreted] So thank you very much for good results this quarter. I just have 2 quick questions. First is, you've mentioned that you are planning on sustaining the CSM multiple at around 15x. If you just do a simple calculation, that means on a quarterly basis, you have to have about KRW 18 billion of new business come through. In Q1, I believe that was possible because there were quite, I guess, popular products in terms of the premier class hospital rooms as well as daily allowances, related products that were sold quite well. But in Q3 and Q2, would you be able to do this monthly average of new business in the amount of KRW 18 billion? If you think that this is possible, what are some of the new product lineups that you're currently thinking about and the business treaties or riders that you are currently planning to incorporate?Second question is on your capital ratio. Right now, the company has reported a capital ratio of about -- above 200%. If you look at Page 11, basically you're saying that what is above 220%, the excess capital will be used for shareholder return or domestic or expanding your overseas business. But I would think that it would not be possible for the company to immediately implement and use this 50 percentage point of capital ratio immediately for shareholder return. So just to gain some color as to the future horizon regarding how you're going to do the shareholder return, I think it will be helpful if the company can give us some guideline in terms of the time line, I think. And now if you give us that information, I think it will be helpful for us to understand the intensity of the capital policy or the strength of that capital policy that we can expect from the company.And third is not a question, but a request. Very grateful that you're having this very -- earnings call every quarter, quite progressive. But I would like to ask that you conduct this not through a consecutive translation, but through a simultaneous interpretation in order for us to have a much more higher quality Q&A session, because, obviously, there's going to be a lot of redundant questions. And I think it will be helpful if we conduct this session through a simultaneous interpretation and not through consecutive. And I think that will be for the benefit of the investors and analysts.

[Unknown Executive]

[Interpreted] Thank you. Responding to your first question, you are right. In the first quarter, there were certain market issues that drove the expansion of the market and the product. And yes, we are also making full preparation for new product lineup for the second and the third quarter as well. And leveraging the infrastructure gap that we enjoy, we believe that we will be able to sustain the market share at the level that we are currently at.And as I said before, we will also in parallel focus and control on the margin side, the profitability aspect by a stringent control of our portfolio as well as through efficiency management. So through the improvements and the profitability side, we -- our plan is to lessen the over -- I guess, overburden. We want to make sure that we lessen the overburden on the top line revenue.Responding to your second question, our internal direction, yes, we've actually said 3 years as a time line duration, time horizon for us as we continuously and gradually expand on the shareholder return ratio. And every year, this is going to be rolled over. In light of the requirement for in-house investment that the company also has, we will be able to expand and within that 3-year time line and go towards that objective of 50%.Thank you very much for your questions and your request. We will internally consider it and come back to you.

[Operator]

[Interpreted] The following question will be presented by Heewon Choi from Morgan Stanley.

[Heewon Choi, analyst]

[Interpreted] If you look at the first quarter numbers, the experience variance on a year-over-year basis was quite good. Is this an impact from your repricing of medical indemnities? And also as we go towards Q2, 3 and 4, what are your outlook and forecast regarding the claims experience variance?Second question is, this will hinge on your capital management plan as well. But with regards to the government's value or program, are there any preparations that's taking place inside the company? And if so, what are some of the factors that you are at this point mindful of to include in your plan?And then if you look at Page 11, you are -- your target for shareholder return rate is 50% going forward. Right now, it's around 37.4%. Does this include the dividend from the preferred shares as well? And also would this preferred share related dividend be included in your future target? And are there any other factors that you are considering to include within this 50%?

[Unknown Executive]

[Interpreted] Responding to your question on claims experience variance, under the IFRS standards we think that the level that we see in Q1 is most likely going to continue into the -- towards the end of the year. But for Q4, usually this is a season where we see a slight increase in the overall claims paid. So that could have some downward impact on the experience variance. But on a per annum basis, I think the level will be similar to what we see in Q1.Now on second question, the government has announced its second guideline on its Value-Up program. The key gist of it is that including the accountability of the BOD, the companies will be left at the voluntary disclosure for each of the items that's listed. We will wait until the finalized version. The government program is announced. And of course, we will also actively respond and cater to the requirement of voluntary disclosure.And the last point, yes, our shareholder return rate does include the dividend from the preferred shares. [Interpreted] Next question please.

[Operator]

[Interpreted] The following question will be presented by Yong Jin Seol from SK Securities.

[Yong Jin Seol, analyst]

[Interpreted] One follow-up question on your capital management plan is that I see that in terms of your K-ICS ratio, you do have a quite a bit of buffer. But in light of the speed at which your surrender reserve is being accumulated, I think there is some constraint regarding the net addition of the distributable profit. So has that element been considered when you came up -- when you came up with a 50% target?

[Unknown Executive]

[Interpreted] No, the surrender reserve issue is not -- it's not really meaningful for SFMI. I say that because as of end of last year, even accounting for that reserve -- surrender reserve, the distributable income or profit from SFMI is already above KRW 5 trillion. So this is not going to have any significant impact on our mid to longer-term plan. [Interpreted] Since there are no more questions in the queue, we would like to now close the Q&A session. If you have any unanswered questions, please do contact us at the IR team. Thank you.

[Operator]

[Interpreted] Well, and this brings us to the end of SFMI's earnings presentation for Q1 of 2024. Thank you, everyone, for joining us.[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]