TLI - 3Q24: Better ROI, lower insurance profit

With a miss on insurance profit offset by ECL reversal, TLI’s 3Q24 results reflected lower insurance profit but a recovery in ROI. In 9M24, VNB slipped YoY, in line with a decrease in APE with stable VNB margin. We stay Neutral with a lift in TP to Bt11 to reflect better investment gain and ECL reversal.

3Q24: Miss on insurance profit offset by ECL reversal. TLI reported 3Q24 earnings of Bt2.5bn (+20% YoY, -10% QoQ), close to expectations, with a miss on insurance profit offset by ECL reversal.

Highlights:

1) Premium growth: In 3Q24, total premiums fell 19% YoY and grew 3% QoQ, with new business premiums falling 34% YoY and growing 19% QoQ and renewal premiums falling 10% YoY and 2% QoQ.

2) Underwriting margin: -3.95 ppt YoY, -10.13 ppt QoQ in 3Q24, on a rise in life policy reserve and benefit payment ratio (+98 bps YoY, +745 bps QoQ) and a rise in commission ratio (+191 bps YoY, +204 bps QoQ). The rise in life policy reserve and benefit payment ratio was primarily due to lower maturity benefit and coupon payments with a partial offset by higher surrender, medical claims and death claims. A rise in commission ratio arose primarily from an increase in incentive payments to boost sales.

3) ROI: -3 bps YoY, +81 bps QoQ (on a turnaround of investment loss to gain). Yield on investment slipped 2 bps YoY and QoQ.

4) ECL: There was a reversal of expected credit loss of Bt703mn in 3Q24

4) Value of new business (VNB): In 3Q24, VBN rose 24% QoQ, underpinned by a 33% QoQ rise in annual premium equivalent (APE) and a decrease in VNB margin to 62.41% in 3Q24 from 64.81% in 2Q24. In 9M24, VNB slid 3.5% YoY, in line with a 3.5% YoY drop in APE, with a YoY stable VNB margin at 62.41%.

Raise earnings forecast. We raise our 2024F by 14% and 2025F by 11% as we revise investment gain up to factor in a recovery in the stock market and reduce ECL to fine tune with 3Q24 results. 9M24 earnings accounted for 73% of our revised 2024F. We expect 4Q24 earnings to rise YoY (turnaround of investment loss to gain) and QoQ (seasonal fall in life policy reserve and benefit payments).

Maintain Neutral. We maintain our Neutral rating with a hike in TP to Bt11 (based on 1x 2025F PBV) in recognition of a peak in VNB margin and pressure from a downtrend in bond yield in the long term.

Risk considerations. Key risks: 1) pressure on customer purchasing power from inflation headwinds, 2) capital market volatility, 3) bond yield movement, and 4) the implementation of new accounting standards