AIA Group Beats Estimate With 89% Growth in 2012 Profit

AIA Group Ltd., the third-largest Asia-based insurer by market value, reported higher-than-expected 89 percent growth in net income last year, helped by market value gains in investments and product improvements.

Profit rose to $3 billion, or 25.1 cents a share, in the 12 months to Nov. 30, from $1.6 billion, or 13.3 cents, a year earlier, the Hong Kong-based company said in a statement to the city’s stock exchange today. The number beat the $2.7 billion average estimate of 12 analysts surveyed by Bloomberg.

The value of new business rose 27 percent to a record $1.19 billion, the first time it topped $1 billion in at least four years. Chief Executive Officer Mark Tucker has been focusing on the indicator of projected future profitability of new policies after AIA was hurt by financial trouble at former parent American International Group Inc. and Prudential Plc’s attempted takeover in 2010.

“We have built the momentum,” said Tucker in today’s statement. “There is a lot more to come.”

AIA, under the leadership of Tucker since July 2010, has more than doubled its annual new business value and lifted its embedded value, used to assess the economic worth of life insurers, by 50 percent over 2009, it said today. The shares have risen 67 percent over the price of AIA’s October 2010 initial public offering, beating the about 8 percent slide in the Hang Seng Finance Index.

Keeping Momentum

Today’s results will help the stock maintain the momentum, Credit Suisse Group AG analyst Arjan van Veen said in an e-mail. Investors and analysts will probably focus more on operating profit after tax, which rose 12 percent to $2.2 billion, instead of net income that includes the bigger-than-expected fair-value gains in equity investments, he added.

AIA shares rose 4.1 percent, the most since Sept. 7, to close at HK$32.85 after the results announcement.

Stocks in AIA’s six-largest markets advanced a weighted average of 12 percent in the second half, adding to the 5.5 percent gain in the previous six months, analysts led by van Veen wrote in a Feb. 20 report.

Currencies in the six -- Hong Kong, Thailand, China, Singapore, Malaysia and Korea -- strengthened 3.1 percent against the dollar in the second half, they said, bolstering results of AIA, which sells policies in local currencies while reporting earnings in U.S. dollars.

Wider Margin

The market-value loss of stock investments led to a 41 percent net income decline in 2011 for the insurer that books fair-value changes of equity holdings through profit and loss accounts.

AIA’s full-year new business value increase in 2012 beat the average estimate of $1.15 billion of seven analysts including those at UBS AG, Deutsche Bank AG and Goldman Sachs Group Inc.

It booked a 9 percent increase in annualized new premium, which tracks new policy sales, to $2.7 billion. New business margin -- the value of new business as a percentage of annualized new premium -- expanded 6.4 percentage points to 43.6 percent as the company shifts to more profitable policies with lower premium size, it said.

Embedded value climbed 15 percent to $31.4 billion in the year to Nov. 30 from a year earlier, the insurer said today.

AIA declared a final dividend of 24.67 Hong Kong cents a share, resulting in a 12 percent increase in total payout for the year to 37 Hong Kong cents.

Overseas Expansion

AIA completed the $1.8 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 and almost doubling its market share to 25 percent, it said in a statement in October.

The addition will start to contribute to AIA’s first-quarter operating numbers, Tucker said during a call with reporters today. The insurer set up its first note program as a public company that gives it the flexibility to issue medium-term notes to help refinance the purchase, he said.

AIA, which operates in 16 Asian markets after entering Sri Lanka last year, has received provisional approval to open a Myanmar representative office later this year, one of the first foreign companies to do so, Tucker said during the call. The country, an attractive market, won’t have a material impact on AIA for at least five years because foreign companies are not allowed to operate there until after 2015, he added.

(Closes share prices in fifth and seventh paragraphs.)
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