Thaire Life Assurance

Thaire Life Assurance Plc (THREL) 

 

Profit for 3Q15 was below our numbers

THREL posted 3Q15 earnings of Bt72m, a rise of 27% YoY but down 22% QoQ. The result was 30% below both our forecast and the Bloomberg consensus due to loss ratio (big claim) than expected. We expected its loss ratio of 45% against its released loss rate of 54%. The 9M15 earnings was up 12% YoY to Bt289m, which is 63% of our old FY15 earnings estimate. 

Results highlights

Premium revenue rose 20% YoY and 27% QoQ to Bt522m. The premium was in line with our forecast, boosted by sales on non-conventional products. Note that THREL’s net non-conventional premium revenue jumped 50% YoY and 18% QoQ to Bt190m, whereas its net conventional premium income rose 8% YoY and 33% QoQ to Bt332m. The firm set provisions and claims of Bt280m for its life-policy reserve (loss ratio+claim) in 3Q15, equal to 54% of total premiums (up from 41% set aside in the same period last year and 43% in the last quarter).

Its commission ratio dipped to 30% in the quarter from 46% in the same period last year. The decline was due to strong sales growth for non-conventional products. However, THREL’s combined ratio rose to 83% in 3Q15 from 87% in the same period last year (and 71% in last quarter due to due to bigger claims for non-conventional products).

ROI slipped to 3.45% in 3Q15 down from 4.86% in the same period last year and from 3.46% to previous quarter. Revenue from investments decreased 17% YoY and 6% QoQ to Bt11m.

Outlook

We expect THREL to deliver earnings growth of 5% YoY in 4Q15. THREL is expected to post big loss ratio for 4Q15 further.

What’s changed? 

Given bigger claim trend from non-conventional products, we have raised our combined ratio forecast to 78.5% in FY15 from old 74.5% and to 78.7% in FY16 from old 75.0%. Hence, we have cut our THREL’s earnings forecast by 11% in FY15 to Bt409m and by 11% in FY16 to Bt464m. 

Recommendation

Given the greater emphasis on non-conventional products, we view that THREL requires a higher combined ratio (especially on loss ratio) than the past. This triggers us to slash its earnings estimates to drop 11% in FY15 and another 11% in FY16 a mentioned above. This reflects bigger risk aversion on higher claims for non-conventional products than conventional products. We have slashed our YE15 target price of THREL by 18% to Bt16.25, pegged to embedded value of Bt3.41/share and total VNB of Bt12.84. Given a 19% upside to our new target price, we reiterate our BUY rating for THREL.