Thai Life to shift investments towards govt bonds from deposits
Thai Life Insurance will invest more in government bonds and promissory notes (P/Ns) and less in deposits to deal with the growing sophistication of financial markets.
“The downtrend of interest rates also detracts from the attractiveness of deposit rates,” said Varang Chaiyawan, senior executive vice president.
The market is more difficult than last year, so investing should be more cautious, she said. The challenge for the company is to beat interest rates. The target this year is to maintain an investment yield of 4-5 per cent, similar to last year. The company also has policies worth more than Bt10 billion maturing every year.
The company will gradually increase investment in bonds, especially government bonds, and bid for the P/Ns of the Finance Ministry while reducing the weighting of deposits.
Recently, Thai Life purchased the 40-year P/N of the Finance Ministry, which gives a higher return than government bonds because the product is in the secondary market.
The company’s purchases of Finance Ministry P/Ns will be based on their terms, Varang said.
“The investment strategy this year is to lock in any investment that matches with expiring policies. Before, the company focused on only long-term investments,” she said.
The company has to pay about Bt10 billion a year to redeem policies reaching term, while the return on long-term investment will likely not be as supportive as before.
The company’s investment portfolio this year is expected to expand to Bt170 billion from Bt158 billion currently. Government bonds take the lion’s share with 50.75 per cent, followed by P/Ns with 18.82 per cent, debentures with 16.69 per cent and deposits with 6.94 per cent.
Deposits are no longer appealing as depositors have to contribute higher fees to the Deposit Protection Agency to help service the huge debt of the Financial Institutions Development Fund.
Thai Life reported first-year premiums of Bt2.25 billion in the first quarter, up 13 per cent year on year. Renewal premiums rose 12 per cent to Bt7.6 billion and gross premiums by 12 per cent to Bt9.84 billion.
The company has boosted its premium income rapidly via its more than 50,000 agents nationwide and help from bancassurance partners’ expansion, Varang said.
