Economic fallout from COVID-19 has adversely affected BLA’s premium sales more severely than we had anticipated. And if bond yields were to decline much further, the life assurance company would need to set heavier provisions for its life policy reserve against re-investment rate risk than we currently assume. But the stock price implies a cheap PBV of 0.6x (3.5SDs below its long-term mean) and dividend yields of 2.5% for 2020 and 3.0% for 2021. Our HOLD rating stands.
2Q20 earnings were 51% below our estimate
BLA delivered a 2Q20 profit of Bt631m, down 38% YoY but up 174% QoQ. The result was 51% below our estimate, due to heavier provisions, partly for adverse deviation for risky investment asset value and loan loss provisions. The firm set provisions of Bt308m for its life policy reserve and deviation of risky investment assets and loan loss provisions of Bt190m for 2Q20. 1H20 earnings plunged 63% YoY to Bt861m, which represents just 20% of our old full-year projection of Bt4.2bn.