Sunday, December 16, 2007

Thai Life to add more foreign investments

Business News - Monday December 17, 2007

Bangkok Post

Thai Life to add more foreign investments

Asian securities can give higher resturns

CHAROEN KITTIKANYA

Thai Life Insurance, the country's second largest life insurer, intends to increase foreign investments next year to diversify its portfolio and seek lucrative returns.

''We're looking forward next year to raising our foreign investment exposure up to the limit set by the regulators,'' said Varang Srethbhakdi, the company's vice president in charge of investment. ''Frankly speaking, we need to raise our exposure (in foreign investment) up to 20% if the authorities allow.''

Currently, Thai Life has foreign investments worth about 7.6 billion baht, or 7% of assets, mainly in foreign-denominated bonds issued by the Thai government and large Thai companies. The foreign investments exclude additional exposure of two billion baht through foreign investment funds.

The foreign investment exposure was upped from 5.7 billion baht after the Commerce Ministry raised offshore investment limits for insurance companies in July to 8.5% of assets from 7%. The ministry also allowed insurers to invest more of their assets in foreign stocks that are large and have good liquidity, apart from bonds issued by governments and state enterprises.

According to Ms Varang, foreign investments offered slightly more attractive returns, generally around 0.5-1% more than domestic ones, even after expenses for cross-currency swaps.

However, she said Thai Life's foreign investment would focus mainly on Asian securities. ''In the recent period, the US and European markets have been hard hit by the sub-prime mortgage crisis and financially troubled financial institutions. We believe that international capital is expected to flood instead into Asia and emerging markets, notably China, '' she said.

Thai Life has investment assets of 100 billion baht, 40% of which are in government and state enterprise bonds; 40% in bank deposits, bill of exchange and promissory notes; 15% in debentures; and 5% in stocks and unit trusts.

The company's expected investment yields are about 5.29% this year, mainly boosted by higher interest rates, up from 4.7% in 2006.

According to Ms Varang, the company expected that Thai Life's investment portfolio would grow by over 10 billion baht by year end. She said that low domestic interest rates have convinced savers to invest more in life insurance products, particularly for single premiums, which made up about 50% of the company's sales this year.

The company's single-premium policies offer interest rates of about 5-6% compared with 2-2.25% for the bank fixed accounts.

Thai Life projected its first-year premiums would grow by 30% this year to six billion baht, with total premiums increasing 13% to 26 billion baht.

Ms Varang said Thai Life has been raising its exposure to bonds because the new government is expected to invest in mega-projects to spur the economy. State and state enterprise bonds were expected to account for about 50% of the company's investments next year.

''We believe in the country's improved economic prospect next year, particularly once the new government is in place,'' she said.

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