AIA Group Ltd.’s shares surged following a record 21% increase in new business value for the first half of the year, driven largely by robust performance in Hong Kong and China.
In a statement released on Thursday, AIA reported that the measure of future profitability of new policies reached $2.46 billion, up from $2.03 billion the previous year. This impressive growth led to a 4.7% rise in the stock price during morning trading in Hong Kong, marking the largest intraday gain in nearly four months.
The surge in new business value aligns with the 20.5% average estimate provided by 10 analysts. Adjusting for currency fluctuations, the growth rate would have been 25%, reflecting both higher sales and increased profitability of new policies.
Analyst Steven Lam from Bloomberg Intelligence noted that AIA is “on track to meet or even exceed consensus expectations of a 17% gain for the full year.” The company’s mainland China unit saw a substantial increase in new business value, rising 36% to $782 million on a constant exchange rate basis. This uptick is attributed to a shift towards insurance amidst declining property and stock markets and lower bank savings yields.
Hong Kong also contributed significantly, with new business value rising 26% to $858 million. Notably, mainland Chinese visitors were responsible for around half of this figure. Growth from sales to Hong Kong residents surpassed that of mainland visitors by four percentage points during the six months.
Among other markets, Singapore led with a 27% increase in new business value. Thailand and Malaysia also saw mid-teen percentage growth rates. Overall, annualised new premiums grew by 17%, and AIA declared an interim dividend of 44.50 Hong Kong cents, reflecting a 5% increase from the previous year.
The insurer has set a new annual growth target of 9% to 11% for operating profit after tax per share for the 2023 to 2026 period, with the measure increasing by 10% in the first half on a constant exchange rate basis.
In its efforts to boost shareholder returns, AIA expanded its share buyback plan by $2 billion in April, raising the total to $12 billion. Since the programme’s inception in March 2022, it has returned nearly $8.9 billion to investors, reducing outstanding shares by approximately 8%. In the first half of this year alone, AIA returned nearly $3.4 billion through share buybacks and dividends.
Despite these positive developments, AIA’s Hong Kong-listed shares have declined by 24% year-to-date as of Wednesday, while the Hang Seng Index has gained 2%. The company faces additional pressure to match post-pandemic business growth and comply with increased regulatory scrutiny.
Hong Kong’s Insurance Authority has intensified its oversight, recently raiding the offices of a licensed insurance broker suspected of using unlicensed referrers. AIA acknowledged using this broker, which contributed about 3% of new business value for its Hong Kong unit in the first quarter.
Earlier this month, AIA was fined HK$23 million for “technical issues” with its anti-money laundering system, following a regulatory inspection covering the period from March 2016 to October 2022.
Source: Bloomberg
