(Bloomberg) -- AIA Group Ltd.’s shares surged after the pan-Asian insurer’s new business value jumped 21% to a record in the first half, fueled by Hong Kong and China business.
The measure of future profitability of new policies sold climbed to $2.46 billion in the six months, from $2.03 billion a year earlier, it said in a statement Thursday. The stock rose as much as 4.7% in morning trading in Hong Kong, the biggest intraday advance in almost four months.
Investors are closely tracking the recovery at the company that accounts for more than 8% of the city’s benchmark Hang Seng Index, the fourth heaviest weight. The end of Covid-era restrictions in 2023 unleashed pent-up demand in China and Hong Kong, its two largest markets.
The increase in new business value was in line with the 20.5% average estimate of 10 analysts surveyed by the company. The growth rate would have been 25% on constant exchange rate basis, after stripping out the impact of currency fluctuations, on both higher sales and increased profitability of new policies.
The numbers put AIA “on track to meet or even exceed consensus expectations of a 17% gain for the full year,” Bloomberg Intelligence analyst Steven Lam wrote in a note Thursday.
AIA’s mainland China unit saw new business value jump to $782 million, a 36% increase over a year earlier on a constant exchange rate basis. Chinese residents have been turning to insurance as property and stock markets slump and bank savings yield little. AIA, known for its own agency forces, got a particularly strong lift from its bancassurance partnerships in China in the first half.
The results modestly beat analyst estimates “on all fronts,” Citigroup Inc. analysts led by Michelle Ma wrote in a note.
In Hong Kong, new business value rose 26% to $858 million. Mainland Chinese visitors accounted for about half of that indicator, group Chief Financial Officer Garth Jones said in an interview with Bloomberg Television on Thursday. In the six months, new business value growth from sales to Hong Kong residents outpaced that of mainland Chinese visitors by four percentage points, according to the statement.
Singapore led new business value growth among the remaining markets, up 27%. Thailand and Malaysia delivered mid-teen increases during the six months.
Overall annualized new premiums, a sales figure, expanded 17%. AIA declared an interim dividend of 44.50 Hong Kong cents, a 5% increase over a year earlier.
AIA announced a new annual growth target of 9% to 11% for operating profit after tax per share from 2023 to 2026. The measure grew 10% in the first half on a constant exchange rate basis.
The insurer has been trying to boost shareholder returns. In April, it added $2 billion to a share buyback plan, boosting it to $12 billion. Since the repurchase program began in March 2022, it has returned nearly $8.9 billion to investors this way, shrinking its outstanding shares by about 8%. In the first half of this year, it returned nearly $3.4 billion to investors through a combination of share buybacks and dividends.
Still, its Hong Kong-listed shares declined 24% this year through Wednesday, while the Hang Seng Index edged up 2%.
Apart from the pressure to match the post-pandemic business growth, Hong Kong’s insurance regulator has also been stepping up scrutiny over sales compliance. The Insurance Authority raided the offices of a licensed insurance broker and a referral company, it said in April. The broker was suspected of using unlicensed referrers to help advise and sell insurance.
During its annual results announcement that month, AIA acknowledged its usage of the unidentified broker. CFO Jones stressed that the broker only contributed about 3% of new business value for AIA’s Hong Kong unit in the first quarter.
The Insurance Authority earlier this month also slapped AIA with a HK$23 million fine for “technical issues” with its anti-money laundering system and associated algorithm. It was the result of a regulatory inspection of its business from March 2016 to October 2022.
(Updates with share price in second paragraph, analyst reactions in fifth and seventh)
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