Thaire Life Assurance

Thaire Life Assurance Plc (THREL)
3Q13 profit shot up 88% YoY
THREL posted 3Q12 earnings of Bt127m, up by 88% YoY and 70%QoQ. The result was far above our expectation, attributable to a lower loss ratio than modeled. 9M13 earnings rose 69% YoY to Bt311m, which represents 90% of our earlier forecast of Bt346m.
Results highlights
Premium revenue rose by 43% YoY and 22% QoQ to Bt389m, led by non-conventional products during the quarter. THREL set provisions for its life policy reserve (loss ratio) in 3Q13 equal to 29.3% of total premiums, down sharply from 46.7% for 2Q13 (but close to the proportion provisioned for FY12 of 29.0%). Its commission ratio also dipped to 31.8% from 39.5% in 3Q12 (but up from 25.5% in 2Q13). Likewise, its combined ratio declined to 63.0% in 3Q13 from 70.7% in the same period last year and 75.6% the previous quarter.
ROI slipped to 3.5% in 3Q13, which was in line with the trends for the money market and the SET. Investment income was Bt10m, up 14% YoY, driven by investment asset expansion.
Outlook
We expect THREL to deliver strong net insurance premium revenue growth for 4Q13 on seasonality.
What’s changed?
We have revised down our commission ratio forecasts from 35% for both FY13 and FY14 to only 33% for each of the two years in order to reflect business diversification into non-conventional products (the firm is now relying more on direct sales facilitated by TV and newspaper advertisements than on sales through commission agents). Given our lower commission ratio assumptions, we have increased our earnings projections by 9.8% to Bt380m for FY13 and by 8.4% to Bt450m for FY14.
Recommendation
Our profit forecast upgrades prompted us to raise our YE14 target price 3% to Bt13.60, based on Embedded Value of 4.70/share and VNB of Bt8.9/share. Given THREL’s favorable long-term earnings outlook, we maintain our BUY rating.