20230313-招银国际-友邦保险-01299.HK-2H22_recovery_in_line__Upbeat_trend_in_HK_and_mainland_China_in_2M23_13页_1mb

AIA Group Ltd. (1299 HK) Summary

Core Content and Key Highlights

AIA Group Ltd. (1299 HK) has demonstrated a positive recovery in its value of new business (VNB) in 2H22 and a strong uptick in 2M23, especially in the Hong Kong and mainland China markets. The company has maintained a solid capital position and has shown resilience in its financial performance despite the challenges posed by the pandemic.

Main Points

• VNB Growth in 2H22 and 2M23:

  • In 2H22, AIA recorded a 6% YoY growth in VNB on a constant FX rate (CER) basis, translating to 4.5% YoY growth in 4Q22.
  • In 2M23, AIA's VNB growth turned positive, with:
    • Mainland China: VNB growth bounced back to double-digit in February 2023, following a slight decline in January due to Omicron.
    • Hong Kong: VNB growth increased by 5% YoY, driven by strong momentum from the MCV (Mainland China visitors) business.
    • ASEAN: VNB growth reached 13% YoY in 2H22, attributed to a multi-channel strategy.
    • Overall: The positive data reconfirm the expectation of a strong VNB recovery in FY23.

• Impact of IFRS 9 & 17:

  • AIA's contractual service margin (CSM) amounted to US$55bn as of 1 Jan 2022.
  • The adoption of IFRS 17 slightly reduced book value at the start of FY22 but increased it by the end of the year.
  • The impact on operating profit after tax (OPAT) was minimal, while net profit after tax (NPAT) saw a notable increase.

• Capital Position:

  • AIA's LCSM PCR cover ratio stood at 296% by end FY22 (vs. 291% pro forma a year ahead).
  • The company has a robust free surplus generation and a resilient capital position with less than 6ppt sensitivity to interest rate and equity price changes.

• Valuation:

  • The stock is currently trading at 1.5x P/EV FY24E, below its 2-year and 5-year historical average of 1.7x and 1.9x, respectively.
  • The BUY recommendation is reiterated due to the expected continuation of strong VNB growth in FY23.

Financial Performance Overview

Market Trends and Strategic Initiatives

• Mainland China:

  • VNB growth turned positive in 2M23, with a rebound to double-digit in February 2023.
  • The MCV business showed a strong new business momentum in 2022, with VNB growth more than tripling.

• Hong Kong:

  • The MCV business continues to drive growth, with a strong agent team of 6,800 agents.
  • VNB growth in 2M23 was positive, reinforcing the outlook for FY23.

• ASEAN:

  • AIA's ASEAN business saw 13% YoY growth in 2H22, driven by a multi-channel strategy.

• Other Markets:

  • VNB growth varied, with some markets showing declines and others showing modest growth.

Capital and Financial Ratios

• LCSM PCR Cover Ratio:

  • 296% by end FY22, showing resilience against market volatility.

• Free Surplus:

  • Robust free surplus generation supports the company's capital position.

• Investment Portfolio:

  • AIA's investment portfolio in FY22 includes:
    • Total fixed income securities investment: US$173,668 mn
    • Total equity securities investment: US$61,955 mn
    • Real estate assets: US$7,444 mn

Analyst Recommendations

• CMBIGM Rating: BUY
• Target Price: HK$118.00
• Current Price: HK$81.55
• Up/Downside: 44.7%

Shareholding and Market Performance

• Shareholding Structure:

  • Bank of New York Mellon: 10.23%
  • JPMorgan Chase & Co: 8.04%

• Stock Performance:

  • 1-month: -2.7%
  • 3-months: 0.0%
  • 6-months: 14.4%
  • 12-months: 11.1%

• Market Cap: HK$951,675 mn

• Average 3-months Turnover: HK$1,923.82 mn

• 52-week High/Low: HK$93.70 / HK$57.25

Risk and Disclaimer

• The report contains general information and is not tailored to individual investors.
• Past performance is not indicative of future results.
• There are risks involved in investing in securities, and actual events may differ from those in the report.
• Investors are encouraged to consult a professional financial advisor before making investment decisions.

Conclusion

AIA Group Ltd. is showing signs of recovery and strong performance in key markets, supported by a resilient capital position and positive VNB growth. The BUY recommendation is maintained due to the expected continuation of this growth trend and the company's strong fundamentals. The current valuation suggests potential upside, with the stock trading at a discount relative to historical averages.