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Bangkok Life Assurance

Dream comes true! No.1 of premium income BUY

Bangkok Life Assurance Plc (BLA)

- Succeed in boosting premium income to No.1

BLA revealed the success of its 1Q14 marketing strategy in boosting total

premium income to the top of the industry (only for bancassurance, while

premium income from sales agents remained the fifth in the sector rankings

with AIA at the top) at B26.7bn or the growth of 219.9%qoq and

105.8%yoy. The major driver was a short-term saving product Gain 1st 5/1

(one year premium payment for five years protection), sold through

bancassurance, that had received a good response from customers for its

returns of over 3% p.a. plus life insurance benefit, especially amidst

decreasing deposit interest rate. The new product also helped enlarge

customer base; in the future if BLA continuously launches interesting

products, both short-term and long-term, we believe they would get a

sound response from this group of customers as well. Since the total

premium income in 1Q14 already made up 55% of BLA's FY2014 growth

target of 24%yoy (versus the sector's target of 15%yoy), it helped reduce

pressure for the remainder of 2014. Accordingly, BLA would shift its focus

to a life protection product sold through sales agents that still had

disappointing growth; lower premium reserve would help reduce a loss from

the insurance business while liquidity surplus of over B10bn from the total

premium income would be used for short-term investment to generate

returns for paying maturing contracts in the next year.

- Profit surge foreseen after bottom out in 2Q14

We slightly revise down our 2014-2015 net profit forecast. Total premium

income growth forecast is increased to match the aggressive growth in

1Q14, but premium reserve forecast is increased as well, as shown in the

table. After the revision, 2014-2015 net profit growth is estimated at

8.7%yoy and 16.3%yoy, respectively. The net profit in 2Q14 would touch

B1.2bn or the growth of 10%qoq; although total premium income would

contract significantly, premium reserve would also decrease at the same

rate. In addition, income from the investment business would not drop

significantly despite after the dividend payment period since there would be

a support from substantial fund flow in late 1Q14.

- 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).


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