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Bangkok Life Assurance

Although BLA has to increase premium reserve following Gross Premium Valuation (GPV) as a result of decreasing yield curve in July-August 2014, the impact will be alleviated by a number of maturing insurance policies. A recovery is still projected in 2H14.

Bangkok Life Assurance Plc (BLA)

- Limited impact from decreasing yield curve in 2H14

BLA explained that it had to increase the premium reserve by B1.45bn in

2Q14 as a result of substantially decreasing yield curve in the quarter. While

the value of the company's assets, mostly investment assets; 90% of which

are held-to-maturity investments, will be estimated by a capital price and

thus not benefit from the decreasing interest rate, the value of insurance

liabilities will be estimated by fair value. Accordingly, the decreasing interest

rate will result in the amount of Gross Premium Valuation (GPV) over the

amount of the Net Premium Valuation (NPV), leading to the aforementioned

reserve increase. However, the effect from the decreasing interest rate will

be limited in 2H14, thanks to new products (long-term products, helping

alleviate the impact from GPV) and a number of maturing insurance policies

in 2H14.

- Way exceed FY2014 target. To focus on long-term products in rest of 2014

Total premium income in 1H14 grew as much as 64.0%yoy, exceeding

BLA's FY2014 target of only 25.2%yoy and the industry's growth of

19.2%yoy. First year premium income soared 162.92%yoy, versus

49.0%yoy targeted, while renewal year premium income increased

25.5%yoy, versus 16.3%yoy targeted. BLA has been able to increase its

overall market share to the third of the market rankings (following AIA and

MTL) or 14.43%. The market share of its first year premium income was at

the second rank (following MTL) at 17.94%, helping reduce the pressure for

the business growth in 2H14. Regarding the products, instead of

endowment products, the company will focus more on long-term products

through selling agents for its higher margin and lower burden on capital.

- Hold for interim dividend

We reiterate to hold BLA for its interim dividend. The current share price still

has an 13% upside from a new 2014 fair value of B73 (2014 embedded

value of B21 plus VNB of B52), versus B81 previously.

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