AIA Quarterly New Business Value Rise Beats Estimates

Apr 10, 2014 10:43 pm ET

(Corrects the spelling of analyst’s name in 15th paragraph.)

April 11 (Bloomberg) -- AIA Group Ltd., the second-largest Asia-based insurer by market value, said the value of new business rose 22 percent in the first quarter, beating analysts’ estimates.

The measure of projected future profitability of new policies increased to $354 million in the three months to Feb. 28, from $291 million a year earlier, the Hong Kong-based company said in a statement to the city’s stock exchange today. The median estimate of seven analysts polled by Bloomberg put AIA’s new business value at $340 million.

AIA has kept growth of the key performance figure above 20 percent since going public in October 2010, as Chief Executive Officer Mark Tucker has tried to boost new business and agent productivity. The first quarter increase came despite weaker Asian currencies, in which the insurer collects premiums, and business disruptions in Thailand and Korea.

“Our business in Korea was temporarily affected by the regulatory, industrywide suspension of outbound telesales,” said the statement. “Other markets experienced a slower start to the year from unfavorable exchange rate movements and liquidity tightening in the first quarter.”

The insurer, which reports financial figures in dollars, said new business value expanded by 28 percent during the three months on a constant exchange-rate basis, suggesting a bigger currency impact than some analysts had expected.

Currency translation could have resulted in a 3.4 percent drag on its first-quarter new business value, mainly from depreciation of the Thai, Malaysian, Indonesian and Australian currencies, Goldman Sachs Group Inc. analysts Mancy Sun and Yao Lu wrote in an April 9 report.

China Performance

China was AIA’s strongest-performing business in the quarter, according to its statement, which didn’t provide country-by-country numbers.

Direct marketing in Korea has been halted since late January on the back of a government telemarketing ban on financial companies, the Goldman Sachs analysts wrote.

Thailand delivered “double-digit” new business value growth alongside Hong Kong, Singapore and Malaysia, according to AIA’s statement.

The insurer’s annualized new premium fell 11 percent in Thailand in the first quarter, both from a weaker local currency and the political unrest, the Goldman Sachs analysts wrote in their report, citing regulatory data.

New Premium

AIA’s companywide annualized new premium, the sum of first- year premiums and 10 percent of single-premiums, grew 7 percent to $799 million in the first quarter, it said. It would have increased 13 percent without local currency depreciation, according to the statement.

New business margin, or the value of new business as a percentage of annualized new premium, expanded by 5.4 percentage points to 43.8 percent.

“Asian economies have proven resilient and strong through recent economic cycles and are well-positioned as global interest rates begin to normalize in 2014,” Tucker said in the statement.

AIA’s Hong Kong-listed shares fell 1.2 percent this year. The stock almost doubled from the initial public offering price through the end of last year.

“We do not believe this prices in its strong new business value growth outlook,” JPMorgan Chase & Co. analysts M.W. Kim and Josh Klaczek wrote in an April 4 note, adding a share price recovery of its Chinese peers can also provide protection from further declines.

China, Malaysia and Indonesia are gradually taking over from Hong Kong, Singapore and Thailand as AIA’s business growth drivers, the analysts said.