Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

If anyone doubted that insurance in Asia was a great business, look no further than AIA Group Ltd.

Cash-flush, with what Sanford C Bernstein Ltd. analyst Linda Sun-Mattison called a "fortress-like" solvency margin of 404 percent last year, the Hong Kong-based company raised its final dividend by 25 percent. Profitability was buoyant, to say the least, even as as Beijing tightened the screws on one of AIA's biggest source of customers: Chinese residents who have swooped into Hong Kong since the yuan began falling a couple of years ago.

In October, Beijing banned most payments using China UnionPay Co. credit and debit cards in Hong Kong, a semi-autonomous city that maintains its own currency and passport controls. That effectively closed down what had been a popular method of buying dollar-denominated insurance policies, which offered a haven from the depreciating yuan.

These aren't fringe customers for AIA. Chief Executive Officer Mark Tucker said in a media call that mainland Chinese residents made up around half the value of new business, which measures the expected profit from policies, last year in Hong Kong, the insurer's largest single market.

While AIA didn't break out numbers for the fourth quarter, indications are that the clampdown has had a limited impact so far. Nomura analysts figure the value of new business continued to grow, albeit more slowly, since the ban.

Less Heady Than Before
Growth in the value of AIA's new business slowed during the fourth quarter
Source: Nomura Research

The UnionPay embargo took effect toward the end of AIA's fourth quarter, which closed on Nov. 30. Still, the fact that the slowdown wasn't more pronounced is a testament to the strength of AIA's Asia franchise -- as well as to the ingenuity of Chinese investors, who are likely to have found other ways to buy dollar policies in the former British colony.

For its part, AIA said it had made an "excellent start" to 2017 with strong growth in the value of new business after a 25 percent surge last year.

The insurer's track record suggests its Hong Kong sales may prove resilient. Even before the yuan began its descent against the dollar in late 2015, the city was a fast-growing market for AIA. The value of new business has grown a compound rate of 30 percent a year in Hong Kong since the former American International Group Inc. unit's 2010 IPO, according to Tucker.

To be sure, AIA is more than its Hong Kong operation. China, the company's second-biggest market, continues to deliver, with the value of new business surging 54 percent last year, outpacing even Hong Kong's 42 percent growth. AIA is the only wholly owned foreign insurer in the country.

Losing Traction
AIA shares outperformed the benchmark Hang Seng Index on Hong Kong insurance sales but have lagged since China clamped down
Source: Bloomberg

The 25 percent dividend hike to 63.75 Hong Kong cents a share also provides a reason for investors to remain on board. With fellow financial heavyweight HSBC Holdings Plc abandoning its promise of "progressive" payouts, AIA's rising dividends may find more fans among those favoring income. With the latest increase, its full-year distribution has climbed 2.5 times since 2012.

Still, investors are a fussy lot. AIA shares fell in Friday morning trading in Hong Kong, showing that concern over China's regulatory stance continues to be an overhang. While further actions from Beijing can't be discounted, AIA's growth is unlikely to be stunted. The pessimism is unwarranted.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Nisha Gopalan in Hong Kong at

To contact the editor responsible for this story:
Matthew Brooker at