AIA new business value soars 27%, Hong Kong-based insurer adds US$2 billion to buy-back plan

AIA Group posted a 27 per cent actual exchange-rate jump in new business value in the first quarter, led by growth in Hong Kong and mainland China, while announcing an additional share buy-back.

The measure of future profitability of new policies sold surged to US$1.3 billion, from US$1.05 billion a year earlier, the Asia insurer said in a statement Monday. Annualised new premiums jumped 23 per cent to US$2.4 billion.

Stripping out the effect of exchange-rate fluctuations, new business value surged 31 per cent while annualised new premiums rose 26 per cent. Its Hong Kong new business value jumped 43 per cent, while in mainland China, the measure expanded 38 per cent, on a constant exchange-rate basis.

The firm will add US$2 billion to the existing US$10 billion buy-back programme, “in view of AIA’s very strong financial position and our confidence in our future operational and financial delivery”, Lee Yuan Siong, group CEO, said in the statement. The company set a fresh target to pay out 75 per cent of its annual net free surplus generation, which will result in a higher distribution to shareholders through dividends and share buy-backs, starting from this year’s annual results.

Lee Yuan Siong, AIA’s group CEO and president, appears at a press conference at AIA Central on March 14, 2024. Photo: Jonathan Wong

AIA operates in 18 Asia-Pacific markets, while counting its home base of Hong Kong and mainland China as the largest contributors of new business and policy sales, by a wide margin. The year-ago quarter provided a low base for comparison, as the two markets were just emerging from Covid-19-era disruptions, such as mandatory quarantine for cross-border travellers and other social-distancing measures.

By the first quarter, mainland Chinese visitor arrivals in Hong Kong had recovered to 71 per cent of the 2018 level, Citigroup analysts led by Michelle Ma wrote in a note last week. Mainland Chinese visitors and local residents contributed “broadly similar” shares to the unit’s new business value growth in the three months, the company said.

In mainland China, insurance is also gaining popularity as a wealth-management tool, while bancassurance profitability has improved, the Citigroup analysts wrote.

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AIA’s success selling tax-deferred pension savings products in mainland China continued into the first quarter, Michael Chang, head of Asian financials with CGSI Securities, wrote on April 24. The Citigroup analysts also expect Thailand new business value to grow 18 per cent on sales increases, stripping out exchange-rate fluctuations. AIA described its Thailand growth as “double-digit”.

“Importantly, the results directly addressed many investor concerns,” Chang said in a note Monday. He cited the increased share buy-back and improved clarity on AIA’s future capital management policy, including the shareholder payout ratio.

AIA’s Hong Kong-listed shares have lost 38 per cent since 2022, even with new business value growth of 30 per cent last year. That is also despite $7.2 billion of buy-backs that cut outstanding shares by 6 per cent over the 21 months through December.

Its price-to-embedded value ratio of about one time was the lowest since its 2010 initial public offering, and about 40 per cent below its three-year average, Bloomberg Intelligence analyst Steven Lam wrote on April 23.

Investor bearishness on Hong Kong and mainland Chinese companies and concerns about growth slowdown for new business value partly contributed to the slump, he added.

Investors may have also been spooked by a regulatory crackdown on unlicensed insurance sales earlier this month, Chang noted.

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Hong Kong’s Insurance Authority raided the offices of a licensed insurance broker and a referral company, regulators announced on April 11. The broker was suspected of using unlicensed referrers to help advise and sell insurance. Senior Hong Kong insurance regulators also met with officials from the Monetary Authority of Macau, discussing topics such as combating unlicensed cross-border sales, the Hong Kong regulator said in a statement on its website April 22.

AIA said more than 60 per cent of its Hong Kong unit’s new business value from mainland Chinese visitors was generated by its own agents in the first quarter.



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