Bangkok Life Assurance
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Dividend payment season boosts 1Q14 profit BUY Current price (B) 70.75 Fair Value (B) 81.00 Market cap (B bn) 84.90
Bangkok Life Assurance Plc (BLA)
Investment business boosts 1Q14 profit
Reviewing forecast
Buy for long-term investment
-Investment business boosts 1Q14 profit
BLA posted 1Q14 net profit at B1.09bn, growing 21.1%qoq and
18.9%yoy, 7% better than our projection, driven mainly by the
investment business. Interest income and dividend income were higher
than expected since it was a dividend payment season of listed
companies whereas profit from investment trading was lower than
expected because of the sluggish capital market. However, overall ROI
rebounded to 4.80% from 4.66% in 4Q13. For the life insurance
business, a continuous loss was still seen at B228m; even though BLA
has launched a short-term product (Gain 1st 5/1) through
bancassurance to boost the premium income, it was still not able to
achieve its ambitious target for first-year premium income growth of
47%yoy. On the contrary, renewal year premium grew substantially in
this quarter, thanks to a short-term product, Gain 1st 263 (10/3),
launched in 1Q13. Accordingly, net premium income in 1Q14 could make
a quarter high with strong growth of 219.9%qoq and 105.8%yoy.
However, premium reserve also made a historical growth to 83.9% of
total premium, while insurance claim payment remained high from
maturing insurance contracts in 2014, making the combined expense
95.3% of the income. Therefore, the life insurance business did not help
to boost the net profit in 1Q14.
- Reviewing forecast
We are reviewing our earnings forecast for 2014-2015, mainly by
revising total premium income growth forecast since massive renewal
premium income helped boost total premium income substantially above
projection and peers’s against the slowing economy as a result of the
prolonged political turmoil. However, this will have insignificant impact
on the net profit forecast. For 2Q14 outlook, total premium income is
projected to decline significantly because renewal premium would
decrease due to no new product had been launched in 2Q13 and firstyear
premium would remain weak. For the investment business, ROI is
projected to weaken from the prior quarter because the dividend
payment season already passed. Nevertheless, 2Q14 net profit would
not contract following the premium income because premium reserve
would decrease significantly as well.
- Buy for long-term investment
We reiterate to buy BLA; the business tends to show good growth in the
long run following the GDP growth and a bright future of the life
insurance business in Thailand. 2014 fair value is B81 (2014 embedded
value is B28.03; VNB is B52.97), or 2014 PBV of 3.1x, lower than almost 6x of THRE's.
