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AIA First-Half Profit Jumps 34% to Record, Beating Estimate

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July 26 (Bloomberg) -- AIA Group Ltd., the second-largest Asia-based insurer by market value, reported a high-than-expected 34 percent increase in first-half profit, helped by acquisitions and paper gains from equity investments.

Net income for the Hong Kong-based insurer climbed to a record $1.93 billion in the six months to May 31, or 16 cents a share, from $1.44 billion, or 12 cents, a year earlier, it said in a statement to the city’s stock exchange today. Six analysts had a $1.6 billion median adjusted profit estimate, according to data compiled by Bloomberg.

Today’s announcement marked the fifth time AIA beat analyst profit estimates in six half-year periods as a publicly listed company, according to data compiled by Bloomberg. AIA overtook Ping An Insurance Group Co. as the second-largest Asia-based insurer by market value this year.

“It’s strong result across the board,” Arjan van Veen, a Hong Kong-based analyst at Credit Suisse Group AG, said in an e-mail. “It should be well received.”

AIA’s shares rose 0.4 percent to HK$35.85 at the close of trading in Hong Kong. They extended this year’s gain to 19 percent, compared to the 0.8 percent drop in the Hang Seng Finance Index tracking 12 banks, insurers and the city’s exchange operator.

AIA’s after-tax operating profit grew 17 percent to $1.3 billion. Value of new business increased 26 percent to a six-month record $645 million, exceeding the median estimate of $633 million of eight analysts surveyed by Bloomberg.

New Businesses

Chief Executive Officer Mark Tucker has been focusing on new business value, or projected future profitability of new policies, as a gauge of his success in rejuvenating a company that lost market share during the global financial crisis. Stronger premium growth in lower-margin markets, including Malaysia and South Korea, helped boost it in the six months.

Annualized new premium, which tracks new policy sales, increased 29 percent to $1.53 billion. New business margin, or new business value as a percentage of annualized new premium, slipped 1 percentage point to 41.6 percent.

AIA’s embedded value, a measure used to assess the economic worth of life insurers, gained 3 percent to $32.2 billion over the six months. It declared an interim dividend of 13.93 Hong Kong cents a share, a 13 percent increase over a year earlier.

“Our positive growth momentum has been sustained for the first half of 2013,” Tucker said of the results on a conference call with journalists today. “We’ve just begun to tap the potential for growth in our markets.”

Asia Expansion

AIA has been expanding in smaller markets and pushing more profitable add-on policies such as accident and health products.

It completed the $1.7 billion purchase of ING Groep NV’s Malaysia business in December, boosting its market standing in one of Southeast Asia’s most promising life insurance markets to first from fourth, it said in a statement in October.

Malaysia contributed 10 percent of AIA’s annualized new premium in the six months, up from 6 percent a year earlier. Its share of the company’s new business value rose almost two percentage points to 7.6 percent.

“That’s a terrific start,” Tucker said of the Malaysia business during the call. “This will be an enduring effect.”

AIA’s net mark-to-market gains from equity investments doubled to $659 million from a year earlier, boosting profit. Stocks in AIA’s largest markets rose 9 percent in the six months, Credit Suisse’s van Veen and Frances Feng wrote in a June 26 report.

Currency Impact

The insurer cautioned against volatility arising from uncertainty over when the U.S. Federal Reserve will start withdrawing liquidity support and over China’s efforts to rein in credit growth.

AIA operates in 17 Asian markets. The insurer, which collects local-currency premiums in those countries yet reports financial figures in dollar, booked a $168 million loss from foreign-exchange movements in its embedded value calculation.

Morgan Stanley analysts led by Ben Lin cut forecasts for AIA’s 2013 to 2015 full-year new business value growth by as much as 4 percent because of expeccted Asian currencies depreciation, they said in a June 19 report.

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

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