HONG KONG – AIA Group posted a 27 per cent actual exchange rate jump in new business value in the first quarter, led by growth in Hong Kong and China, while announcing an additional share buyback.

The measure of future profitability of new policies sold surged to US$1.3 billion (S$1.77 billion), from US$1.05 billion a year earlier, the Asia insurer said in a statement on April 29. Annualised new premiums jumped 23 per cent to US$2.4 billion.

Stripping out the effect of exchange rate fluctuations, new business value surged 31 per cent while annualised new premiums rose 26 per cent. Its Hong Kong new business value jumped 43 per cent, while in China, the measure expanded 38 per cent, on a constant exchange rate basis.

The firm will add US$2 billion to its existing US$10 billion buyback programme, “in view of AIA’s very strong financial position and our confidence in our future operational and financial delivery”, its group chief executive Lee Yuan Siong said in the statement.

The company also set a fresh target to pay out 75 per cent of its annual net free surplus generation, which will result in a higher distribution to shareholders through dividends and share buybacks, starting from 2024’s annual results.

AIA operates in 18 Asia-Pacific markets, while counting its home base of Hong Kong and China as the largest contributors of new business and policy sales by a wide margin.

The year-ago quarter provided a low base for comparison, as the two markets were just emerging from Covid-19-era disruptions, such as mandatory quarantine for cross-border travellers and other social-distancing measures.

By the first quarter, Chinese visitor arrivals in Hong Kong had recovered to 71 per cent of the 2018 level, Citigroup analysts led by Ms Michelle Ma wrote in a note last week. Chinese visitors and local residents contributed “broadly similar” shares to the unit’s new business value growth in the three months, the company said.

Popularity rises

In China, insurance was also gaining popularity as a wealth management tool, while bancassurance profitability has improved, the Citigroup analysts wrote.

AIA’s success of selling tax-deferred pension savings products in China continued into the first quarter, Mr Michael Chang, CGSI Securities’ head of Asian financials, wrote on April 24.

“Importantly, the results directly addressed many investor concerns,” Mr Chang said in a note on April 29. He cited the increased share buyback and clarity on future capital management policy, including the shareholder payout ratio.

AIA’s Hong Kong-listed shares have lost 38 per cent since 2022, even with new business value growth of 30 per cent in 2023. That is also despite US$7.2 billion of buybacks that cut outstanding shares by 6 per cent over the 21 months through December.

Investor bearishness on Hong Kong and Chinese companies, and concerns about growth slowdown for new business value partly contributed to the slump, said Bloomberg Intelligence analyst Steven Lam.

Investors may have also been spooked by a regulatory crackdown on unlicensed insurance sales earlier in April, Mr Chang noted.

Hong Kong’s Insurance Authority raided the offices of a licensed insurance broker and a referral company, regulators announced on April 11. The broker was suspected of using unlicensed referrers to help advise and sell insurance.

Senior Hong Kong insurance regulators also met with officials from the Monetary Authority of Macau, discussing topics such as combating unlicensed cross-border sales, the Hong Kong regulator said in a statement on its website April 22.

AIA said more than 60 per cent of its Hong Kong unit’s new business value from Chinese visitors were generated by its own agents in the first quarter. BLOOMBERG