20160219-高盛-友邦保险-01299.HK-Recalibrating_for_macro,_still_solid_on_micro,_reiterate_CL-Buy_17页_480kb

AIA Group Summary: Recalibrating for Macro, Still Solid on Micro, Reiterate CL-Buy

Core Content and Main Points

This report provides an analysis of AIA Group's financial performance and valuation in the context of a challenging macroeconomic environment, particularly lower long bond yields. The report reiterates the "CL-Buy" recommendation and sets a 12-month price target of HK$57, which offers a 45% upside from the current price of HK$39.35. The key focus areas include growth, fundamentals, balance sheet resilience, and valuation analysis.

Main Viewpoints

• Macro Environment Impact: The current macroeconomic conditions, especially lower long bond yields, pose headwinds for life insurers. However, AIA is viewed as more resilient due to its strong balance sheet and consistent focus on both asset and liability quality.

• Growth Outlook: While there may be short-term negative impacts on VONB (Value of New Business) growth from FX translation, the structural demand for AIA's primary protection products remains resilient. The report forecasts a 15% VONB growth in 2016 and a long-term CAGR of 17% for 2016–2018.

• Fundamentals and Actuarial Assumptions: AIA's fundamentals are considered more robust compared to peers, especially due to its prudent actuarial assumptions on investment yields and risk discount rates, which are only 25bps above the market spot yield. This is seen as a relatively conservative approach, enhancing resilience during macro volatility.

• Balance Sheet Resilience: AIA's balance sheet is deemed strong, with a significant portion of its investment book remaining resilient even during the 2008 financial crisis. The report notes that the current macro environment is not yet severe enough to cause major concern.

• Valuation: AIA's relative valuation is considered reasonable compared to global peers, especially given its less growth and more balance sheet risks. The report suggests that the current price has not fully reflected further de-rating for global financials under a more pessimistic macro scenario.

Key Information and Highlights

Valuation Metrics

Financial Forecast (11/14–11/17E)

Balance Sheet (11/14–11/17E)

Scenario Analysis

Key Risks

• Sharp fall in Asian equity markets, currencies, and bond yields
• Weak VONB growth

Investment List Membership

• Asia Pacific Buy List
• Asia Pacific Conviction Buy List
• GS SUSTAIN Focus List

Coverage View: Neutral

Summary of Financials

Profit Model (2014–2017E)

Earnings Growth Drivers (2014–2017E)

Conclusion

Despite the macroeconomic headwinds, AIA Group is positioned to benefit from its resilient balance sheet, strong capital position, and focus on primary protection products. The report reiterates the CL-Buy recommendation and suggests that the current valuation offers a compelling risk/reward profile. The long-term growth trajectory remains intact, and the potential upside to the 12-month price target is attractive.