AIA Rises to Five-Month High on New Business: Hong Kong Mover

AIA Group Ltd., the second-largest Asia-based insurer by market value, rose to a five-month high in Hong Kong trading after its first-quarter value of new business growth beat analysts’ estimates.

Shares of the Hong Kong-based company climbed 3.1 percent to close at HK$39.65, the highest since Nov. 1. The stock, the fifth-most-traded by value on the Hong Kong stock exchange today, gained as much as 4.4 percent earlier in the day.

AIA said the value of new business rose 22 percent to $354 million in the first quarter ended February, beating the $340 million median estimate of seven analysts polled by Bloomberg.

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.

“We believe investors should focus on AIA’s underlying strong growth momentum, with exchange-rate fluctuations largely near-term noises,” Sanford C. Bernstein (Hong Kong) Ltd. analysts led by Linda Sun-Mattison wrote in a note today in response to AIA’s statement, reiterating their “outperform” rating.

AIA has now “effectively locked in” above 20 percent new business growth for both this and next year, to be helped by a bancassurance deal with Citibank that will start selling its policies from the second quarter, Credit Suisse Group AG analysts Arjan van Veen and Frances Feng wrote in a note today.

Today’s advance helped the stock reverse an year-to-date decline of 1.2 percent through yesterday. The stock is up 1.9 percent so far in 2014 and has doubled from the initial public offering price in 2010.

Currency Impact

The insurer reports financial figures in dollars. The measure of the projected future profitability of new policies expanded by 28 percent during the three months on a constant exchange-rate basis, it said a statement to the city’s stock exchange today, 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.

Some markets “experienced a slower start to the year from unfavorable exchange rate movements and liquidity tightening in the first quarter,” according to the statement.

Best China

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

Direct marketing in Korea (1299) has been halted since late January on the back of a government telemarketing ban on financial companies, the Goldman Sachs analysts wrote.

“Our business in Korea was temporarily affected by the regulatory, industrywide suspension of outbound telesales,” said the statement.

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.

China, Malaysia and Indonesia are gradually taking over from Hong Kong, Singapore and Thailand as AIA’s business growth drivers, JPMorgan Chase & Co. analysts M.W. Kim and Josh Klaczek wrote in an April 4 note.

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net Tomoko Yamazaki

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