AIA New Business Value Advances 21% in First Half on China

By | July 24, 2015

AIA Group Ltd., the third-largest Asia-based insurer by market value, posted a 21 percent increase in new business value as China became its second-largest market for the first time by that measure.

The gauge of projected profitability of new policies rose to $959 million in the six months through May, from $792 million a year earlier, the Hong Kong-based insurer said in a Friday statement to the stock exchange. The growth rate, which would have been 25 percent without currency translation losses, is in line with the median estimates of eight analysts polled by Bloomberg News.

China, the fourth-largest market a year earlier, led new business growth followed by Hong Kong, a special administrative region of China. Chief Executive Officer Mark Tucker has used new business value as the key measure of management success since taking over the former unit of American International Group Inc in 2010.

“AIA’s new business value growth outlook remains much stronger than that of its peers,” HSBC Holdings plc analysts led by James Garner wrote in a July 9 note, which forecast the measure to rise at an annual average of 24 percent from 2014 to 2017 for AIA, 10 percentage points faster than its Chinese rivals.

The stock has advanced 19 percent this year through yesterday, more than triple the gain in the Hong Kong Hang Seng Finance Index tracking banks and insurers.

New Business

New business value surged 56 percent in China for the period, and gained 29 percent in Hong Kong, which retained its position as the largest market by the measure. It contracted 34 percent in South Korea. AIA, which traces its roots to Shanghai more than 90 years ago, operates in 18 Asian markets.

AIA’s net income climbed 41 percent to $2.2 billion in the first half, or 18.15 cents a share, from $1.5 billion, or 12.9 cents a share, a year earlier. The figure missed the median estimate of five analysts surveyed by Bloomberg News of $2.25 billion, the second time it came below analyst expectation in AIA’s 10 half-year periods as a listed company.

Stock market gains of $590 million, more than 12-fold of the figure a year earlier, boosted profit.

Operating profit after tax, which excludes paper gains or losses from equity investments, surged 12 percent to $1.63 billion. Six analysts surveyed by Bloomberg News gave a median estimate of $1.6 billion.

Increasing sales and widening margins helped cushion the effects of depreciating Asian currencies in the six months.

Depreciating Currencies

Currencies in AIA’s markets including Malaysia, Indonesia, Singapore, Thailand and China, depreciated as much as 7.8 percent in the six months, according to data compiled by Bloomberg. AIA booked a $421 million currency translation loss in its income statement. The insurer sells policies in local currencies and reports financial results in the greenback.

AIA’s annualized new premium, combining first-year premiums and 10 percent of single-premiums, grew 11 percent to $1.9 billion, according to the statement. New business margin, the value of new business as a percentage of annualized new premium, expanded 4 percentage points to 50.2 percent.

AIA declared an 18.72 Hong Kong cents per share interim dividend, a 17 percent increase from a year earlier.

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