Thaire Life Assurance
4Q13 profit was in line with our model; good YoY growth outlook
Thaire Life Assurance Plc (THREL)
4Q13 profit as expected
THREL posted 4Q13 earnings of Bt72m, up 88% YoY (but down 43% QoQ). The result was in line with our estimate. FY13 earnings rose 73% YoY to Bt383m, much the same as our earnings projection of Bt380m. The strong growth was derived from both conventional and non-conventional products. Note that in FY13, premium revenue from conventional products grew by 32.5% and premium revenue from non-conventional products by 14%.
Results highlights
Premium revenue rose 17% YoY (but was down 12% QoQ) to Bt389m, led by conventional products during the quarter. THREL set provisions of Bt151m for its life policy reserve (loss ratio) in 4Q13, equal to 43.9% of total premiums, down from 47.4% in 4Q12, but up from 29.3% in 3Q13, due to seasonality. Its commission ratio dropped to 31.7% from 40.6% in the corresponding period last year (but was flattish QoQ). Likewise, THREL’s combined ratio declined to 78.7% in 4Q13 from 91.6% in 4Q12, due to a lower commission ratio.
ROI slipped to 3.4% in 4Q13 in tandem with the trends for the money market and the SET. Investment income was Bt17m, up 80% QoQ, driven by investment asset expansion.
Outlook
We expect THREL to deliver strong QoQ net insurance premium revenue growth for 1Q14, led by seasonality (most conventional clients normally re-insure with the firm during the first-quarter). We also anticipate that for the year as a whole, sales of non-conventional products (in collaboration with Muangthai Life Assurance) will rise strongly.
Note that in addition to general economic conditions, THREL is exposed to concentration risk tied to its limited client base (its top five clients comprise over 70% of total premium revenue).
What’s changed?
Our earnings forecasts of Bt450m for FY14 (up 17.5% YoY) and Bt510m for FY15 (up 13.3% YoY) stand unchanged.
Recommendation
THREL’s favorable long-term earnings outlook is good. As such, we maintain our BUY rating with a YE14 target price of Bt13.6, based on Embedded Value of 3.41/share and VNB of Bt10.19/share.
