Bangkok Life Assurance (BLA): BBL-AIA bancassurance effects on BLA October 17, 2017

BBL in bancassurance deal with AIA: BBL has reached an agreement to conduct bancassurance business with AIA through the bank’s distribution channels for a 15‐year period. BBL will, however, continue to sell BLA’s life insurance products.

Impact unclear yet but sales through BBL likely to drop: Currently BLA, BBL and AIA are discussing selling life insurance products that are not the same as those already offered by BLA. BLA will cease to sell its whole life insurance products through BBL and allow AIA to take charge of selling them instead. The sales of whole life products account for 7% of BLA’s total insurance sales through BBL. In our view, the change is likely to affect BLA’s first-year premiums in its sales through BBL and, as a result, we downgraded our premium growth estimate for FY18 from 5% to 4%. Its reserve also tends to rise as we believe BLA needs to rev up sales of short‐term protection plans.

Rating cut to ‘NEUTRAL’ with a downwardly revised target price of Bt41/share and FY18 profit view lowered: We cut our FY18 premium outlook by 16.2% to Bt4bn from previously Bt4.9bn on assumptions that BLA’s net premiums will drop and reserve will grow. We also slash our dividend estimate from Bt0.72/share to Bt0.60/share. With all things considered, we downgrade our rating on BLA shares from ‘BUY’ to ‘NEUTRAL’ and revise down target price from Bt48/share to Bt41/share.

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