(Bloomberg) — AIA Group saw new business value rise 27% at constant exchange rates in the first quarter, driven by growth in Hong Kong and mainland China, and announced additional share buybacks.
The Asian insurer said in a statement on Monday that a measure of the future profitability of new insurance sold jumped to $1.3 billion from $1.05 billion a year earlier. Annualized new premiums increased 23% to $2.4 billion.
Excluding exchange rate effects, new business value increased by 31% and annualized new premiums increased by 26%. New business value for the Hong Kong business increased by 43%, and in mainland China it expanded by 38% excluding currency effects.
“Given AIA's very strong financial position and confidence in its future operational and financial performance,” the company's existing $10 billion The company said it would add $2 billion to its buyback program. has set a new target of paying out 75% of its annual net free surplus generation, which will result in increased distribution to shareholders from this year's annual results through dividends and share buybacks.
AIA operates in 18 markets in Asia Pacific, with its home base of Hong Kong and mainland China being its largest market contributing significantly to new business and insurance policy sales. The same period last year was a low bar for comparison as both markets were just emerging from the turmoil of the COVID-19 era, including mandatory quarantines for cross-border travelers and other social distancing measures.
Citigroup analysts led by Michelle Ma said in a note last week that the number of mainland Chinese tourists visiting Hong Kong had rebounded to 71% of 2018 levels by the first quarter. The company said mainland Chinese visitors and local residents contributed “in similar proportions” to the sector's three-month new business value increase.
Rising in popularity
Insurance is also becoming more popular as a wealth management tool in mainland China, and the profitability of over-the-counter banking is also improving, Citigroup analysts wrote. Michael Chan, head of Asia finance at CGSI Securities, wrote on April 24 that AIA's success in selling tax-deferred pension savings products in mainland China continued in the first quarter. Citigroup analysts also expect Thailand's new business value to increase by 18%, calculated based on sales growth excluding exchange rate fluctuations. AIA described Thailand's growth as “double digits.”
“Importantly, this result directly addresses the concerns of many investors,” Chan said in a note on Monday, adding clarity on future capital management policies, including increased share buybacks and shareholder dividend rates. .
AIA's Hong Kong-listed shares have fallen 38% since 2022, despite a 30% growth in new business value last year. This is despite $7.2 billion in share buybacks that reduced outstanding shares by 6% in the 21 months ended December.
Bloomberg Intelligence analyst Steven Lamb said April 23 that the company's price-to-embedded value ratio of about 1x is the lowest since its 2010 initial public offering and about 40% below the average of the past three years. He said there was.
He added that investors' bearish attitude toward Hong Kong and mainland Chinese companies and concerns about slowing growth in new business value contributed to the recession.
Regulatory inquiries
Chan noted that investors may also have been spooked by regulators' crackdown on unlicensed insurance sales earlier this month.
On April 11, regulators announced that the Hong Kong Insurance Authority had raided the offices of licensed insurance brokers and introduction companies. The broker is suspected of using unlicensed introducers to help advise and sell insurance. Hong Kong's insurance regulator said on its website on April 22 that executives from the Hong Kong insurance regulator also met with officials from the Macau Financial Supervisory Authority to discuss issues such as tackling unauthorized cross-border sales. said in a statement on the day.
AIA said more than 60% of the new business value its Hong Kong division received from visitors from mainland China in the first quarter was generated by its agents.
(Updates details and analyst reaction starting in 4th paragraph)
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