Insurance Sector - Life Assurance

11M14 life premium income to beat target again Neutral

Insurance Sector – Life Assurance

- 11M14 life premium income strong for both first-year and renewal-year

According to TLAA, total direct life insurance premium income in 11M14 was B453bn,

growing 14.37%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. Based on TLAA’s estimate, first-year premium income would be B106bn,

increasing 13.0%yoy, while renewal-year premium income would be 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 11M14 total premium

income, total new business premium income (first-year premium income plus single

premium income) is projected at 157bn, growing 15.44%yoy, while renewal-year

premium income is projected at B296bn, growing 14.04%yoy, with the retention rate of

over 80%. 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

(22.0%), Muang Thai Life Insurance (15.2%), Thai Life Insurance (12.3%), BLA

(11.4%), SCB Life (9.8%), Krungthai AXA (9.5%), and Allianz Ayudhya Life (5.2%).

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 14.5% of Taiwan, 11.7% of Hong Kong, 7.5% of South

Korea, and 4.4% of Singapore, thus indicating room for the business growth. 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.