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AIA quarterly new business value rises 20%, meets estimates

[HONG KONG] AIA Group Ltd, the third-largest Asia-based insurer, said its value of new business rose 20 per cent, as fast growth in China offset moderating sales through independent financial advisers in Hong Kong.

The measure of projected future profitability of new policies climbed to US$824 million in the three months ended Aug 31, from US$689 million a year earlier, the Hong Kong-based insurer said in a statement Friday. Five analysts polled by Bloomberg News had a 21 per cent median growth estimate.

Investors are watching new chief executive officer Ng Keng Hooi's ability to sustain the insurer's growth momentum as policy sales to mainland Chinese visitors slowed after currency depreciation expectations eased and China introduced more payment curbs late last year.

Insurers in Hong Kong had seen such sales surge in the past two years as a surprise devaluation of the Chinese currency in August 2015 heightened fears of further yuan weakening and prompted mainlanders to move money offshore.

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AIA's China unit was its fastest growing business, bolstered by improving agent productivity and "a significant increase" in the number of active agents, it said in the statement, without giving a figure.

Hong Kong's value of new business expanded by double-digits, helped by an increase in the number of active agents and a shift to more profitable products. Yet sales through independent financial advisers moderated, it added.

AIA's China unit collected 33 per cent more in gross premiums in the third quarter, according to data reported to the country's insurance regulator. This may have translated into new business value growth of about 50 per cent, according to estimates from Morgan Stanley and Daiwa Capital Markets analysts.

CHINA GROWTH

The China growth would have been driven in part by the insurer's expansion into smaller cities, Daiwa's Leon Qi and Susie Liu wrote in an Oct 10 report.

AIA's annualised new premiums climbed 3 per cent to US$1.4 billion in the third quarter, according to the statement, which didn't give a geographical breakdown for the period. New business margin, the value of new business as a percentage of annualised new premiums, widened by 8.4 percentage points to 59.1 per cent.

While Hong Kong remains by far AIA's largest market and China a growth engine, Mr Ng has stepped up efforts to find new drivers and rejuvenate major markets that have stagnated in recent years.

AIA this month signed a 15-year exclusive agreement to sell protection and long-term savings products through Bangkok Bank PCL, the largest bank by total assets in Thailand, the insurer's third-largest market by new business value.

AIA's Thai unit had previously trailed peers in new sales growth, likely due to the lack of strong bancassurance partnerships, Kim Eng Securities (HK) analyst Ma Ning wrote in an Oct 13 note.

"The bank's 16 million customer base effective fills AIA's missing piece in the banca channel which has caused its below-sector volume growth in recent years," he said.

Last month, AIA agreed to buy Commonwealth Bank of Australia's life insurance business for A$3.8 billion (S$4.07 billion) and to enter a 20-year bancassurance partnership with the lender in Australia and New Zealand in its most ambitious foray beyond its existing core markets.

BLOOMBERG

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