BLA unlikely to meet premium growth forecast
Bangkok Life Assurance (BLA) might reduce its premium growth forecast for this year due to the company's strategy to focus more on long-term savings insurance to achieve higher profit margins, its executives have told analysts.
In a meeting with analysts last week, BLA executives said premium growth this year might fall short of the expected 18.6 per cent, because the company is adjusting its product mix to focus more on long-term savings insurance. As a result, the company might lose some market share and revise downward its forecast for growth in premiums. The new product mix would help BLA sustain an underwriting margin of 1-2 per cent, because the long-term savings insurance will lead to a reduction in burdens including tax, life policy reserve and capital adequacy ratio (CAR).
As of March 31, BLA had equity reserve of 16 per cent and CAR of 252 per cent, higher than the requirement of 125 per cent.
Analysts at Finansia Syrus Securities predicted BLA’s premiums would grow 10 per cent this year.
The executives told the analysts that the company wants to focus on profitability more than expansion of business volume. First-year premiums this year are expected to grow by 12 per cent, and gross premiums are expected to grow by 18 per cent, according to the executives.
BLA plans to launch a new long-term savings insurance product, Whole Life First, this quarter as part of a plan to boost its margins.
Finansia Syrus Securities estimates BLA will record net profit in the second quarter of Bt900 million to Bt910 million, a drop of 1-2 per cent from the first quarter and 30 per cent year-on-year. Apart from the product mix strategy, another factor in the expected reduction of net profit is a decline in profit from investments in line with the slowdown in the Stock Exchange of Thailand Index.
BLA this quarter has set a higher reserve of 65 per cent of total premiums.
The company has left unchanged its policy of keeping a reserve of 63-68 per cent of total premiums, meaning that profit growth this year should be slower than last year’s, according to Bualuang Securities.
Bualuang Securities estimates the insurer will report net profit of Bt3.7 billion, up by 8 per cent year-on-year.
BLA reported an investment yield of 5.5 per cent in the first quarter, up from 5.1 per cent in the fourth quarter last year. The company targets investment yield of 5 per cent this year. However, the brokerage houses believe the yield will gradually increase in line with an expected increase in the policy rate and profits from stock trading.
Looking at investment assets, bonds account for 64 per cent of total investment followed by debentures at 19 per cent and 8 per cent from stocks.
