Bangkok Life Assurance

Bangkok Life Assurance Plc (BLA)

- BLA’s 2014 goal too optimistic
At the analyst meeting last Friday (21 February), BLA’s management revealed its vision
for the life insurance and investment businesses for the next five years. For the life
insurance business, understanding its disadvantage, BLA would focus on increasing
competitiveness in order to increase its market share from the fifth to the third of the
industry ranking (which is highly possible if considered from the company’s success in
climbing to top five rank in 2013 through launching of endowment products for selling
through bancassurance and selling agents. At the same time, the company would
improve efficiency of selling channels, both bancassurance and selling agents, for better
understanding and brand awareness among clients. For the investment business, the
company would increase returns from investment by distributing its investment to
property fund, infrastructure fund, and foreign bonds (investment grade). For its shortterm
business goal in 2014 that was quite aggressive, the company explained that it
had set the goal before the political turmoil and admitted that, if the political problem
dragged longer, it might fail to achieve total premium income growth of 24%yoy, which
was higher that the industry’s projected growth of below 15%yoy, with 47%yoy growth
in first-year premium income through bancassurance. For the whole life and credit life
products, BLA aimed at double growth in credit life premium income in 2014 from the
very low base in 2013.
- ASP’s forecast more conservative
We maintain our forecast for 2014-2015, projecting the net profit growth of 11.8%yoy
and 14.8%yoy, respectively. Under our more conservative method, we project the total
premium income growth of only 15%yoy in 2014, with 30%yoy growth in first-year
premium income and 2014 ROI down revision to 5.08% amid unfavorable capital
market.
- Good choice for long-term investors
We reiterate to buy BLA, viewing it as a good choice for long-term investors who want
to accumulate stocks that have promising business growth in the long run following
growing GDP and domestic life insurance business. 2014 fair value is B81 (2014
embedded value is B28.03; VNB is B52.97), or 2014 PBV of 3.1x, lower than 6x of
THRE’s.