Insurance sector

Insurance sector

 

- Premium growth weakens for both life and non-life 

Both life and non-life insurance businesses have slowed down significantly in 5M15. Gross direct premium income from both life and non-life insurance businesses was B299bn, growing only 1.90% from the same period last year; direct life premium income grew 2.42%yoy to B214bn, while direct non-life premium income rose only 0.62%yoy to B85.9bn. The Office of Insurance Commission (OIC) is considering revising down a forecast of gross direct premium income growth in FY2015 from 10%yoy to 5-6%yoy to reflect the sluggish economic rebound and a very slow growth of gross premium income in 1H15; Non-life premium is projected to grow 4-6%yoy and life premium is projected to grow 8%yoy. The gross premium income growth forecast is a double of the recent GDP growth forecast we made at 2.5%, but still lower than the recent premium income growth forecast made by the Thai Life Assurance Association (TLAA), which had been reduced from 13%yoy to 7%yoy (a growth of 5%yoy for first-year premium income, a decrease of 7.6%yoy for single premium, and a growth of 11%yoy for renewal-year premium). 

- Life to grow, non-life to weaken in 2Q15. BLA stands out 

Earnings from the core business in 2Q15 would stay flat from 1Q15, given the slow economic rebound and a low season. Gross premium income from non-life insurance would show sluggish growth; a major driver is still personal line premium (health insurance and non-IAR miscellaneous insurance), while commercial line premium (property insurance) would barely grow. On the other hand, gross premium income from life insurance would show a better growth, though still lower than the OIC and the TLAA’s FY2015 targets of around 5-7%yoy. Nevertheless, the premium growth would accelerate in a high season in 2H15, driven mainly by life insurance business, probably due to improving earnings of BLA from 1Q15, whereas profit from non-life insurance business would decrease for there is no longer recognition of extraordinary income from THRE like in 1Q15. 

- Top picks are BKI, BLA 

We select BKI and BLA as top picks. They are non-life and life insurance companies that have strong business base and are ready to show more steady growth when the economic situation normalizes. The share prices still have upside.