Insurance Sector

8M14 life insurance premium grows despite unfavorable economy Neutral

Insurance Sector

- 8M14 life insurance premium grows strongly both first-year and renewal-year

According to TLAA, total life insurance premium income in 8M14 was B331bn, growing

15.5%yoy; first-year premium income grew 17.0%yoy to B116bn, while renewal-year

premium income grew 14.7%yoy to B214bn, with the retention rate of 86%. Top five

market shares of first-year premium income are 1) 21% for Muang Thai Life Insurance,

2) 15% for BLA, 2) 14.3% for AIA, 4) 10.8% for Krungthai AXA, and 5) 10.4% for SCB

Life. However, considering total premium income, the top five companies are 1) AIA

21.6%, 2) Muang Thai Life Insurance 15.2%, 3) BLA 12.5%, 4) Thai Life 11.9%, and 5)

SCB Life 9.6%. The future growth of domestic life insurance premium income will be

supported mainly by the low number of Thai citizens who hold insurance policies, which

is only 4.5% of the GDP (and only 1.7% for non-life insurance), versus 13.9% of

Taiwan, 10.1% of Hong Kong, and 7% of South Korea. Another supporting factor is an

attempt of life insurance companies to launch new products that better meet customers’

demand, which would help boost the premium income growth several fold above the

GPD growth.

- Life insurance, major driver for 2H14

Overall earnings performance of the sector would remain dull in 2H14. Three companies

under over coverage: BLA, THREL, and THRE, are projected to suffer net loss. Yet, a life

insurance business of BLA and THREL would be able to show net profit growth from

1H14. Particularly, BLA’s net profit in 2H14 would comprise as much as 58% of our

FY2014 forecast after it has made substantial premium reserve in 2Q14, while the

capital market uptrend would benefit BLA’s proprietary portfolio in 2H14.

- We like BLA. THREL fully valued. BKI recommended for non-life play

We select BLA (FV@B73) as a top pick of the life insurance sector; the share price still

has a 17% upside (dividend yield included). For THREL ([email protected]), we recommend

holding for dividend because the current share price is getting fully valued. We also

recommend buying BKI ([email protected]), a non-life insurance stock, for its strong

financial status, growing investment portfolio amidst the reviving capital market, and

regular dividend payment.