THREL’s 3Q24 earnings met expectations, with strong premium growth offset by a higher combined ratio. The growth was driven by the health insurance market and increased group health insurance premium rates to address rising medical inflation. The Underperform rating is maintained with a target price of Bt1.6 due to weak profitability.
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THREL - 3Q24: Still weak, despite robust premiums
THREL’s 3Q24 earnings were in line with our expectation as stronger-than-expected premium growth was offset by higher-than-expected combined ratio. Backing the robust premium growth was the health insurance market and an upward adjustment in group health insurance premium rates to cope with rising medical inflation. We maintain Underperform with an unchanged TP of Bt1.6 in view of weak profitability as it fights medical inflation.
3Q24: Still weak as expected, despite robust premium growth. THREL reported 3Q24 earnings of Bt14mn (-52% YoY, +8% QoQ), in line with estimates. A stronger premium growth than expected was offset by a higher combined ratio than anticipated.
Highlights:
- Premium growth: In 3Q24, gross written premiums shot up 73% YoY and 56% QoQ and earned premiums surged 75% YoY and 71% QoQ. Behind this outstanding growth was the health insurance market and a 25-30% upward adjustment in group health insurance premium rates to reflect rising medical inflation. We raise our 2024F earned premiums growth to 27% from 8%.
- Combined ratio. +1.52 ppt YoY (rising medical inflation) but -1.21 ppt QoQ (upward adjustment in group health insurance premium rates) to 99.8%. We maintain our 2024F combined ratio at 103.2% (+3.1 ppt) vs. 104.02% in 9M24, expecting a gradual ease in 4Q24 from adjusting pricing to cope with rising medical inflation.
- ROI: -84 bps YoY (investment loss) and -161 bps QoQ (seasonally lower dividend income).
Earnings outlook. We expect 4Q24F earnings to be essentially flat both YoY and QoQ, with premiums falling QoQ after the exceptional high in 3Q24 and a gradual ease in combined ratio. We expect earnings to turn around but still be weak in 2025 on a better combined ratio after phasing in the upward adjustment in group health insurance premium rates.
Maintain underperform with unchanged TP. We maintain Underperform with an unchanged TP of Bt1.6 (based on 0.75x PBV or 12 PE for 2025F) due to weak profitability.
Risks. 1) Risk to loss ratio from rising medical inflation, 2) capital market volatility, 3) the implementation of new accounting standards and 4) ESG risk from market conduct.