Bangkok Life Assurance
Play
Although BLA has to increase premium reserve following Gross Premium Valuation (GPV) as a result of decreasing yield curve in July-August 2014, the impact will be alleviated by a number of maturing insurance policies. A recovery is still projected in 2
Bangkok Life Assurance Plc (BLA)
- Limited impact from decreasing yield curve in 2H14
BLA explained that it had to increase the premium reserve by B1.45bn in
2Q14 as a result of substantially decreasing yield curve in the quarter. While
the value of the company’s assets, mostly investment assets; 90% of which
are held-to-maturity investments, will be estimated by a capital price and
thus not benefit from the decreasing interest rate, the value of insurance
liabilities will be estimated by fair value. Accordingly, the decreasing interest
rate will result in the amount of Gross Premium Valuation (GPV) over the
amount of the Net Premium Valuation (NPV), leading to the aforementioned
reserve increase. However, the effect from the decreasing interest rate will
be limited in 2H14, thanks to new products (long-term products, helping
alleviate the impact from GPV) and a number of maturing insurance policies
in 2H14.
- Way exceed FY2014 target. To focus on long-term products in rest of 2014
Total premium income in 1H14 grew as much as 64.0%yoy, exceeding
BLA’s FY2014 target of only 25.2%yoy and the industry’s growth of
19.2%yoy. First year premium income soared 162.92%yoy, versus
49.0%yoy targeted, while renewal year premium income increased
25.5%yoy, versus 16.3%yoy targeted. BLA has been able to increase its
overall market share to the third of the market rankings (following AIA and
MTL) or 14.43%. The market share of its first year premium income was at
the second rank (following MTL) at 17.94%, helping reduce the pressure for
the business growth in 2H14. Regarding the products, instead of
endowment products, the company will focus more on long-term products
through selling agents for its higher margin and lower burden on capital.
- Hold for interim dividend
We reiterate to hold BLA for its interim dividend. The current share price still
has an 13% upside from a new 2014 fair value of B73 (2014 embedded
value of B21 plus VNB of B52), versus B81 previously.
