Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AIA Group Ltd (AAGIY, Financial) reported a strong 10% growth in OPAT per share on a constant rate basis for the first half of 2024.
- The company provided a double-digit guidance for OPAT growth, ranging from 9% to 11% for the next three years.
- AIA Group Ltd (AAGIY) saw a 36% growth in Value of New Business (VONB) in China, driven by both existing and new geographies.
- The company experienced a significant increase in the number of active agents, with a 26% growth in recruitment.
- AIA Group Ltd (AAGIY) extended its bancassurance partnership with BCA in Indonesia to 2038, indicating strong future growth potential in the region.
Negative Points
- The macroeconomic environment in Mainland China remains challenging, with falling interest rates and a difficult equity market.
- The company's India business showed relatively weaker new business value growth in the first half due to a high base effect from the previous year.
- There are ongoing uncertainties regarding the potential approval and impact of composite licenses in India.
- The political turmoil in Thailand could potentially impact the business operations, especially in the Bangkok area.
- The company faces challenges in managing asset and liability matching in a low-interest-rate environment, particularly in China.
Q & A Highlights
Q: What are the reasons and drivers behind the 10% growth in OPAT and USFG, and can you provide guidance for the next three years?
A: The primary driver is the new business growth, which adds future streams of earnings. Active management of the in-force book also contributes positively. The target of 9% to 11% growth reflects confidence in delivering new business and managing the in-force portfolio. (Garth Jones, Group CFO)
Q: Do you have any updates on opening new branches in China this year?
A: We are making good progress in new geographies like Tianjin, Seichuan, and Hubei. We expect to obtain one to two new provincial licenses per year. (Jacky Chan, Regional Chief Executive and Group Chief Distribution Officer)
Q: How are you dealing with the challenging macro environment in Mainland China, including falling rates and equity market challenges?
A: We match our assets and liabilities closely, predominantly in long government bonds. We also reprice and redesign products to adapt to interest rate changes, moving towards participating products. (Garth Jones, Group CFO)
Q: Can you clarify the OPAT per share target and the underlying assumptions?
A: The target is a per share CAGR, reflecting the use of surplus capital for buybacks and dividends. The new business CSM remains stable, adding significantly to the existing CSM. (Garth Jones, Group CFO)
Q: What is the outlook for the India business, and how would potential regulatory changes impact it?
A: India is a growth engine with strong performance and partnerships. The potential composite license is still under discussion, and its impact on industry dynamics is yet to be determined. (Leo Grepin, Regional Chief Executive and Group Chief Strategy Officer)
Q: Can you provide more details on the strong growth in Singapore and Thailand?
A: Singapore's growth is broad-based across channels and products, driven by a strong agency force and bespoke long-term savings products. Thailand's growth is due to a market-leading agency force and a diversified product mix, with no major shifts in product demand despite economic challenges. (Hak Leh Tan, Regional Chief Executive)
Q: What are the drivers behind the strong domestic growth in Hong Kong?
A: The growth is driven by a strong agency force, increased number of active agents, and recruitment. The domestic market has a large protection gap and a growing population, including new migrants. (Jacky Chan, Regional Chief Executive and Group Chief Distribution Officer)
Q: How should the investment community value AIA going forward under the new accounting standards?
A: Embedded value (EV) remains the key metric, reflecting the value to shareholders through distributable earnings and new business growth. The target provides confidence in earnings growth, and the capital management program shows how VONB translates to cash returns to shareholders. (Garth Jones, Group CFO)
Q: What is the outlook for the bancassurance business in Mainland China?
A: The bancassurance strategy is focused on affluent customers with large average case sizes. The product mix includes long-term savings and protection products, with strong growth in traditional protection products driven by the agency force. (Jacky Chan, Regional Chief Executive and Group Chief Distribution Officer)
Q: How does the current share price factor into your capital management decisions?
A: The capital management framework considers business needs, current capital levels, and net free surplus generation. We will provide more details in March next year. (Garth Jones, Group CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
