AIA New Business Value Soars 27%, Adds $2 Billion to Buyback

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

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

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

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-era disruptions, such as mandatory quarantine for cross-border travelers and other social-distancing measures.

By the first quarter, mainland Chinese visitor arrivals in Hong Kong had recovered to 71% of the 2018 level, Citigroup Inc. 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.

Popularity Rises

In mainland China, insurance was also gaining popularity as a wealth management tool, while bancassurance profitability has improved, the Citigroup analysts wrote. AIA’s success of selling tax-deferred pension savings products in mainland China continued into the first quarter, Michael Chang, CGSI Securities Ltd. head of Asian financials, wrote on Apr. 24. The Citigroup analysts also expected Thailand new business value to grow 18% on sales increases, stripping out exchange rate fluctuations. AIA described the Thailand growth as “double-digit.”

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

AIA’s Hong Kong-listed shares have lost 38% since 2022, even with new business value growth of 30% last year. That’s also despite $7.2 billion of buybacks that cut outstanding shares by 6% 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% below its three-year average, Bloomberg Intelligence analyst Steven Lam wrote on Apr. 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.

Regulator Inquiries 

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

Hong Kong’s Insurance Authority raided the offices of a licensed insurance broker and a referral company, regulators announced on Apr. 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 Apr. 22.

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

(Updates with details and analyst reaction from fourth paragraph)

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Published: 29 Apr 2024, 05:31 AM IST