Insurance sector
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BKI and THREL are top picks Neutral
Insurance sector
The life insurance business has shown the strongest growth, while
non-life insurance business has been depressed by decreasing auto
insurance premium. Top picks are BKI and THREL as they still have
potential growth in the long run.
- Total premium makes new high despite slowing economy
For the first five months of 2014 (5M14), non-life and life insurance
businesses could show good growth from 2013. Gross direct premium made
a quarterly high at B293bn or the growth of 16.4%yoy. Direct life insurance
premium surged 20.7%yoy, while direct non-life insurance premium
increased only 0.6%yoy. Insurance premium growth is usually in line with
the GDP growth. Most importantly, the current number of Thai citizens who
hold insurance policies is only 6.2% of the GDP (4.5% for life insurance and
1.7% for non-life insurance), versus 13.9% of Taiwan, 10.1% of Hong
Kong, and 7% of South Korea, reflecting potential for significant growth of
total premium income in the long run if there is not an interruption from an
accident or disaster like the flood crisis in late 2011.
- Life insurance, major driver for 2H14
Overall earnings performance of the sector would remain dull in 2H14. All
three companies under over coverage, BLA, THREL, and THRE, are
projected to suffer net loss. Yet, life insurance business of BLA and THREL
would be able to grow from 1H14.
- Top picks are BKI and THREL
We select BKI and THREL as top picks of the sector; while the share prices
still provide an upside, their fundamental factors are also strong, with
promising growth following the overall economy. For BKI, with its strong
financial status and capital, the company is able to keep its regular dividend
payment at B12/share, while the PBV is only 1.2x, very low when compared
with the regional average of 1.9x. THREL has a potential for long-term
growth since it is the only Thai reinsurance company in Thailand.
