BLA – 3Q24: Miss on investment loss

With a miss on investment loss, 3Q24 results showed strong QoQ growth in total premiums on seasonality, QoQ better underwriting margin and QoQ lower ROI from investment loss. We maintain our Outperform rating with a hike in TP to Bt27 as we expect continued good earnings growth in 2025 from larger PAD release.

3Q24: Miss on investment loss. BLA reported 3Q24 earnings of Bt614mn, down 5% YoY and 25% QoQ, 32% below our estimates. The miss was on investment loss.

Highlights:

1) Premium growth: In 3Q24, total premiums were down 4% YoY and up 34% QoQ; with new business premiums down 12% YoY and 17% QoQ and renewal premiums up 2% YoY and 55% QoQ. We cut our 2024F premium growth to 2% from 3% with zero growth in new business.

2) Underwriting margin: -18 bps YoY and +544 bps QoQ to -16.16% in 3Q24. Life policy reserve and benefit payment ratio eased 2 bps YoY and 359 bps QoQ to 107.31% (-301 bps YoY) due to a larger release of provisions for adverse deviation (PAD) reserve on matured policies. Commission ratio decreased 6 bps YoY and 132 bps QoQ in 3Q24.

3) ROI: +14 bps YoY (lower yield on investment and smaller investment loss) but -55 bps QoQ (lower yield on investment and a flip from investment gain to a loss).

Earnings outlook. 9M24 earnings accounted for 79% of our full year forecast. We expect 4Q24F earnings to rise YoY (lower ECL) and QoQ (turnaround of investment loss to gain). We raise our 2025F by 5% as we revised investment gain upward to reflect a recovery in the stock market. Under current accounting practices, we expect continued good earnings growth in 2025 due to a larger release of PAD reserve on matured policies. BLA guides to a fall in life policy reserve & benefit payment ratio from 111% in 2023 to 106-107% in 2024 (vs. 107% in 9M24) and below 100% in 2025 and 2026, due to release of 5% provisions for PAD reserve on matured policies and a shift in product mix to high-margin products.

Maintain Outperform rating with a hike in TP. We maintain our Outperform rating with a hike in TP to Bt27 (based on 0.8x PBV for 2025, derived from 9% L-T ROE) as we look for a continued strong recovery in 2024 and 2025 upon better combined ratio from a release of PAD reserve on matured policies.

Risk considerations. Key risks include: 1) pressure on customer purchasing power, 2) capital market volatility, 3) bond yield movement, 4) the implementation of new accounting standards, particularly IFRS17 and 5) ESG risk on market conduct.