Insurance Sector

Insurance Sector  

 

- Weakness seen from both life and non-life premiums 

Both life and non-life insurance businesses have decelerated significantly in 5M15. Gross direct premium income from both life (1H15) and non-life insurance (5M15) was B299bn, growing only 1.90% from the same period last year; direct life premium income grew 2.42%yoy to B214bn, while direct non-life premium income rose only 0.62%yoy to B85.9bn. The Office of Insurance Commission (OIC) recently revised down a forecast of gross direct premium income growth in FY2015 from 10%yoy to 5-6%yoy to reflect the sluggish economic rebound and a very slow growth of gross premium income in 1H15. Still, the gross premium income growth forecast is a double of the recent GDP growth forecast we made at 2.5% (4-6%yoy growth for non-life premium income and 8.0%yoy for life premium income) and higher than the recent premium income growth forecast made by the Thai Life Assurance Association (TLAA), which had been reduced from 13%yoy to 7%yoy (a growth of 5%yoy for first-year premium income, a decrease of 7.6%yoy for single premium, and a growth of 11%yoy for renewal-year premium). 

- Good profit for THRE, BKI in 3Q15. BLA to shrink again 

Earnings from the core business in 3Q15 would stay flat from 2Q15, given the slow economic rebound and a low season. However, an accelerated growth is foreseen in 4Q15, especially October, in which non-life premium income usually surges mainly from insurance renewals by government and public enterprises; THRE and BKI’s profit would grow from 2Q15. For the life insurance business, life premium income in 3Q15 would stay flat from 2Q15, but would grow better in 4Q15, which is a high season; BLA’s net profit would contract in 3Q15 for there is no reversal of premium reserve expense like in 2Q15.  

- Top picks are BKI, BLA 

We select BKI and BLA as top picks of the sector. They are non-life and life insurance companies that have strong business base and are ready to show more steady growth when the economic situation normalizes. The share prices still have upside as well.