AIA Surged Ahead 1st Q 2016

AIA Group Ltd, the third-largest Asia-based insurer, advanced in Hong Kong trading after its first-quarter new business value grew twice as fast as analysts’ estimates.

Shares of the Hong Kong-based insurer rose as much as 4.5% to HK$48, the highest intraday price since Dec 10, and was trading at HK$46.85 as of 10:28 a.m. Its new business value, a measure of projected future profitability of new policies, rose 36% to US$578 million in the three months to Feb 29, from US$425 million a year earlier, according to a statement to the city’s stock exchange Friday.

The average estimate of four analysts surveyed by Bloomberg was 19.5%, while analysts cited in an April 18 report by China International Capital Corp had an 18% consensus estimate.

The life insurer that operates in 18 Asian markets trumped market estimates at a time when China tightened rules to curb capital flight through insurance purchases in Hong Kong. Money outflows from the country hit US$1 trillion last year, according to Bloomberg Intelligence, as China’s economy slowed, the currency weakened and domestic stock markets wobbled.

Chinese visitors spent US$10 billion on insurance in Hong Kong in 2015, 1% of the country’s total capital outflows, Goldman Sachs Group Inc. analysts led by Mancy Sun estimated in a March 14 report. The Chinese government has since last year tightened scrutiny of its citizens’ insurance purchases in Hong Kong, first by stricter enforcement of a US$5,000 per transaction ceiling for payments made through UnionPay cards and then by limiting purchases settled by electronic transfers.

The Hong Kong business delivered "another outstanding quarter," AIA said, without giving further details. China and Malaysia also drove the growth.

AIA’s first-quarter new business value may have been bolstered by previously hesitant Chinese visitors rushing to buy policies in Hong Kong as new restrictions loomed, driving sales, CICC’s analyst Tang Bolun wrote in the April 18 report. About 80% of the regular-premium policies that AIA’s Hong Kong unit sold to Chinese visitors were below US$5,000 a year, the Goldman Sachs analysts wrote.

The insurer’s annualized new premium increased 23% to US$1.1 billion in the three months, according to the statement.

AIA’s new business value would have jumped 44% and its annualized new premium 31%, had local currencies in which it collects premium income not depreciated in the reporting period. The insurer collects premium income mostly in local currencies and reports financial figures in US dollars.
New business margin widened by 4.8 percentage points to 51.6%.