20221102-招银国际-友邦保险-01299.HK-Long-term_growth_intact,_expect_2H22_recovery_44页_2mb

AIA Group Ltd. (1299 HK) Summary

Core Content

AIA Group Ltd. (1299 HK) is a leading pan-Asian life insurer with a strong position to capture growth in emerging markets. The report outlines its long-term growth strategy, market recovery expectations, and the role of its new health insurance franchise in driving protection sales and margin improvement.

Main Points

1. Long-term Growth in Mainland China

• AIA has been expanding its presence in mainland China since 2020, with new branches in Sichuan, Hubei, Tianjin, and Shijiazhuang.
• The insurer is projected to achieve a 20% CAGR in Value of New Business (VNB) in the mainland market from 2023E to 2030E.
• AIA's Premier Agency strategy enables faster market entry and enhanced customer reach, outperforming peers in operational efficiency and market penetration.
• The China Post Life (CPL) partnership strengthens bancassurance channels, providing access to 40,000 bank branches and over 600 million retail customers.

2. Expected Recovery in Southeast Asia (SEA) in 2H22-2023

• SEA markets (Singapore, Thailand, Malaysia, etc.) were severely impacted by the pandemic, leading to low VNB growth in 2H21.
• With easing of travel and quarantine restrictions, AIA expects a recovery in VNB growth in 2H22 and 2023.
• The low base effect from 2H21 is expected to drive significant growth in the latter half of 2022 and into 2023.
• The report outlines a timeline of restrictions for key SEA markets, showing a gradual relaxation from strict lockdowns to normalized measures.

3. Amplify Health: A Strategic Health InsurTech Initiative

• In February 2022, AIA launched Amplify Health, a pan-Asian health InsurTech joint venture with Discovery.
• Amplify Health aims to enhance protection sales, optimize claims management, and strengthen AIA's health insurance position.
• The platform leverages Discovery's IP and data to deliver tailored healthcare solutions in a fragmented market.
• It also diversifies revenue streams and supports cost efficiency through outsourcing to healthcare operators.

4. Valuation and Investment Outlook

• The target price for AIA is set at HK$91, based on a 19x New Business Multiplier and 1.9x FY23E P/EV.
• The current stock price is at 1.3x FY23E P/EV, below historical average.
• The report initiates with a BUY rating, citing the expected rebound in VNB momentum and improved share price performance.

Key Information

• Revenue and VNB Growth: AIA's FY20A revenue was US$50,359 million, while FY22E revenue dropped to US$31,739 million due to pandemic impact. However, FY23E is projected to rise to US$53,083 million.
• EPS Growth: EPS is expected to grow from $0.5 in FY20A to $0.7 in FY23E.
• P/E and P/EV: P/E is projected to be 11x in FY23E, while P/EV is 1.2x, indicating a discounted valuation.
• Market Cap: AIA's market cap is HK$757,490 million as of the latest data.
• Share Performance: The stock has underperformed in the past 3 months with a -24.7% drop, but is expected to rebound with improved VNB growth.
• Shareholding Structure: Major shareholders include Bank of New York Mellon (9.95%), JPMorgan Chase & Co (8.66%), and The Capital Group (7.04%).

Financial Projections

Strategic Partnerships and Distribution

• AIA's agency distribution is a key strength, with 20% YoY growth in new business value in FY21.
• The Premier Agency strategy is supported by cutting-edge digitalization, enhancing agent productivity and customer reach.
• AIA has a diversified distribution mix, including agency and partnerships, with a focus on digital channels and bancassurance.

Market Position and Outperformance

• AIA is ranked among the top 3 insurers in Southeast Asia.
• It has outperformed peers in terms of VNB growth and margin expansion.
• The insurer is well-positioned for long-term growth in both mainland China and SEA markets.

Conclusion

AIA Group Ltd. (1299 HK) is well-positioned for long-term growth in the pan-Asian market, driven by geographic expansion in China, recovery in SEA markets, and innovative health insurance initiatives. The target price of HK$91 suggests a potential upside of +43.5%, and the BUY rating reflects confidence in the rebound of VNB momentum and improved financial performance.