Insurance sector - life assuance

10M14 life premium income beats target already Neutral

Insurance sector - life assuance

- 10M14 life premium income strong for both first-year and renewal-year

According to TLAA, total direct life insurance premium income in 10M14 was B412bn,

growing 14.56%yoy, very high when compared with TLAA’s estimate for total life

insurance premium income of the industry in FY2014 of B496bn or the growth of at

least 12%yoy. First-year premium income was B106bn, increasing 13.0%yoy, while

renewal-year premium income was B327bn, increasing 11.0%yoy, with the retention

rate of 81%. Single premium income is estimated at B62bn or the growth of 15.0%yoy.

In terms of the structure of 10M14 total premium income, total new business premium

income (first-year premium income plus single premium income) was B142bn, growing

14.96%yoy, while renewal-year premium income was B269bn, growing 14.35%yoy,

with the retention rate of 86%. Top seven market shares of total premium income

(85.42% of the total market share, while the rest 14.58% are from 17 other

companies) are from AIA (21.99%), Muang Thai Life Insurance (15.25%), Thai Life

Insurance (12.31%), BLA (11.36%), SCB Life (9.81%), Krungthai AXA (9.48%), and

Allianz Ayudhya Life (5.22%). The growth of domestic life insurance premium income

has been supported mainly by the low number of Thai citizens who hold insurance

policies, which is only 5.46% of the GDP (at end-1H14), versus 13.9% of Taiwan,

10.1% of Hong Kong, 7% of South Korea, and 4.3% of Singapore. Another supporting

factor is an attempt of life insurance companies to launch new products that can better

meet customers’ demand and with a tax exemption benefit, which would help boost the

premium income growth several folds above the GPD growth.

- 4Q14 profit to recover significantly for both life and non-life insurance

We estimate 4Q14 earnings of the insurance sector to rebound significantly and make a

new quarterly high of the year. Among four insurance companies under our study (BLA,

BKI, THREL, and THRE), BLA and THRE’s earnings are projected to revert to net profit.

- Top picks: BLA, THREL, BKI

We select BLA([email protected]) and THREL([email protected]) as top picks of life-insurance plays

and BKI(FV@B450) as a top pick of non-life insurance plays.