Insurance Sector

Insurance Sector  

 

- Premium income rises significantly in April but remains weak in 4M15 

April total direct premium income of the life insurance business was B38.8bn, growing 8.2%yoy; first-year premium income slipped 3.1%yoy to B12.6bn, while renewal-year premium income rose by 14.7%yoy to B26.2bn. Overall, 4M15 total premium income of the life insurance business was B172bn, climbing 0.9%yoy, B52.1bn from first-year premium income (down 18.0%yoy) and B120bn from renewal-year premium income (up 12.1%yoy). Persistency rate remained at 84%. 4M15 total direct premium income made up 31% of the Office of Insurance Commission's (OIC) target of B549bn, growing 10.0% yoy. 

- BLA's profit to make turnaround in 2Q15 

In terms of 2Q15 earnings of life insurance companies under our coverage, BLA's 2Q15 net profit is projected to revive from B765m in 1Q15 since it would not recognize as large as B1.7bn premium reserves like in 1Q15. As of June 2, 2015, ten-year bond yield has risen by 10bp from end-1Q15 to 2.78%, so the life insurance business is likely to face smaller loss, given that premium reserves return to normal at 68-69% of total premium income. THREL's 2Q15 net profit is projected to slip from 1Q15 since combined ratio that was unusually low in 1Q15 would increase back to normal in 2Q15. Meanwhile, total premium income may drop because some major customers of non-conventional products would not renew their insurance. Although there will be new major customers of BLA's non-conventional products, profit is not expected to grow significantly because of high startup cost. 

- Top pick: BLA 

The sector's top pick is BLA([email protected]) for its solid fundamental factor, potential growth if the economy rebounds, and high upside.