Thaire Life Assurance

Thaire Life Assurance Plc (THREL)

 

Profit for 2Q15 was slightly down

THREL posted 2Q15 earnings of Bt92m, an increase of 2% YoY but down 26% QoQ. The result was 14% below both our forecast and that of the Bloomberg consensus due to a lower premium figure. The firm received premiums of Bt412m, which was 6.4% below our forecast of Bt440m. Hence, its 1H15 earnings represent 47% of our FY15 earnings estimate. 

Results highlights

Premium revenue gained 10% YoY (but down 7% QoQ) to Bt412m. That figure was 6% below our forecast, and was caused by poorer sales on conventional products. Note that THREL’s conventional premium revenue was flat YoY and down 26.5% QoQ to Bt250m, whereas its non-conventional premium income jumped 29.5% YoY and 59.2% QoQ to Bt161m. The firm set aside provisions of Bt176m for its life-policy reserve (loss ratio+claim) in 2Q15, equal to 42.8% of total premiums (up from 34.8% set aside in the same period last year and 36.0% in the last quarter).

Its commission ratio dipped to 32.8% in the quarter from 36.4% in the same period last year. The decline was due to strong sales growth for non-conventional products. However, THREL’s combined ratio rose to 72.2% in 2Q15 from 71.2% in the same period last year (and 68.8% in last quarter due to poorer sales for conventional products).

ROI slipped to 3.46% in 2Q15 down from 4.01% in the same period last year and down from 4.25% in the last quarter. Revenue from investments decreased 16% YoY and 11% QoQ to Bt12m.

Outlook

We expect THREL to deliver higher YoY net insurance premium revenue growth for 3Q15. This is because THREL booked extra claims and losses of Bt60m in the 3Q14 for non-conventional products.

What’s changed? 

Our FY15 earnings forecast stands at Bt459m, a gain of 24% YoY and Bt520bn for FY16, a rise of 13% YoY.

Recommendation

Although THREL delivered a slightly poor premium on its conventional products, we believe that the firm is able to sustain its strong earnings growth profile through boosting its non-conventional products in 2H15 with the help of both Muang Thai Life Assurance and Bangkok Life Assurance. Besides that, its combined ratio was 72.2% in 1H15, which was below our FY15 number of 74.5%. Provisioning requirements for the life-policy reserve and commission ratio that were lower than was currently assumed would mean scope for upside to our earnings forecasts. We maintain a BUY rating with a YE15 target price of Bt19.8, pegged to embedded value of Bt3.46/share and total VNB of Bt16.34.