AIA new business value soars 27%, adds US$2bil to buybacks

NEW YORK: AIA Group Ltd posted a 27% 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 buyback.

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

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

The firm will add US$2bil to the existing US$10bil buy-back programme “given 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 travellers 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, said.

Mainland Chinese visitors and residents contributed “broadly similar” shares to the unit’s new business value growth in the three months, the company said.

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

AIA’s success in 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 April 24.

The Citigroup analysts also expected Thailand’s new business value to grow 18% on sales increases, stripping out exchange rate fluctuations. AIA described Thailand’s growth as “double-digit”.

“Importantly, the results directly addressed many investor concerns,” Chang said in a note yesterday. 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 US$7.2bil 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 said.

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