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Bangkok Life Assurance

Dividend payment season boosts 1Q14 profit BUY Current price (B) 70.75 Fair Value (B) 81.00 Market cap (B bn) 84.90

Bangkok Life Assurance Plc (BLA)

Investment business boosts 1Q14 profit Reviewing forecast

Buy for long-term investment

-Investment business boosts 1Q14 profit

BLA posted 1Q14 net profit at B1.09bn, growing 21.1%qoq and

18.9%yoy, 7% better than our projection, driven mainly by the

investment business. Interest income and dividend income were higher

than expected since it was a dividend payment season of listed

companies whereas profit from investment trading was lower than

expected because of the sluggish capital market. However, overall ROI

rebounded to 4.80percent from 4.66% in 4Q13. For the life insurance

business, a continuous loss was still seen at B228m; even though BLA

has launched a short-term product (Gain 1st 5/1) through

bancassurance to boost the premium income, it was still not able to

achieve its ambitious target for first-year premium income growth of

47%yoy. On the contrary, renewal year premium grew substantially in

this quarter, thanks to a short-term product, Gain 1st 263 (10/3),

launched in 1Q13. Accordingly, net premium income in 1Q14 could make

a quarter high with strong growth of 219.9%qoq and 105.8%yoy.

However, premium reserve also made a historical growth to 83.9% of

total premium, while insurance claim payment remained high from

maturing insurance contracts in 2014, making the combined expense

95.3% of the income. Therefore, the life insurance business did not help

to boost the net profit in 1Q14.

- Reviewing forecast

We are reviewing our earnings forecast for 2014-2015, mainly by

revising total premium income growth forecast since massive renewal

premium income helped boost total premium income substantially above

projection and peers's against the slowing economy as a result of the

prolonged political turmoil. However, this will have insignificant impact

on the net profit forecast. For 2Q14 outlook, total premium income is

projected to decline significantly because renewal premium would

decrease due to no new product had been launched in 2Q13 and firstyear

premium would remain weak. For the investment business, ROI is

projected to weaken from the prior quarter because the dividend

payment season already passed. Nevertheless, 2Q14 net profit would

not contract following the premium income because premium reserve

would decrease significantly as well.

- Buy for long-term investment

We reiterate to buy BLA; the business tends to show good growth in the

long run following the GDP growth and a bright future of the life

insurance business in Thailand. 2014 fair value is B81 (2014 embedded

value is B28.03; VNB is B52.97), or 2014 PBV of 3.1x, lower than almost 6x of THRE’s.

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