AIA Advances to Record on New Business Growth: Hong Kong Mover

AIA Group Ltd., the second-largest Asia-based insurer by market value, rose to a record in Hong Kong trading after its value of new business climbed a stronger-than-expected 26 percent in the third quarter.

The insurer surged 4.4 percent, the most in more than 13 months, to close at HK$40.05. The stock, which touched HK$40.10 earlier in the day, was the most actively-traded stock by value in the 50-member benchmark Hang Seng Index today.

AIA’s new business value, measuring projected future profitability of new policies, increased to a record $379 million from $300 million a year earlier, the Hong Kong-based company said in a statement to the city’s stock exchange today. The increase beat the consensus estimate of about 20 percent, according to a Credit Suisse Group AG research note today.

Credit Suisse analysts Arjan van Veen and Frances Deng raised the insurer’s earnings estimate this year by 9 percent, citing in their report “subsiding macro headwinds in the last couple of months”.

AIA has sustained a quarterly rise of more than 20 percent in new business value even as currencies in several of its major markets depreciated against the dollar amid anticipation of a reduction of monetary stimulus in the U.S. The insurer sells policies in local currencies and reports its financial results in dollars.

“Debate over the timing of supportive U.S. monetary policy caused capital market volatility in the third quarter and tested those countries running current account deficits,” AIA’s management said in today’s statement. “Asian central banks responded appropriately.”

Asian Currencies

Larger regional economies continue to benefit from a shift toward domestic sources of growth and the more trade-dependent markets will benefit from a pickup in global trade as a result of an improved economic outlook in China and Japan, AIA said in the statement.

Depreciating Southeast Asian currencies may moderate AIA’s new business value growth over the short term, Goldman Sachs Group Inc. analysts Mancy Sun and Yao Lu wrote in an Oct. 16 report. AIA generates about half of its new business value growth from Southeast Asia, they said.

The Thai bhat and Singapore dollar have depreciated more than 1.3 percent against the dollar this year. Thailand, which has seen a widening current-account deficit, and Singapore are AIA’s second- and third-largest markets by new business value in the first half, behind Hong Kong.

ING Purchase

The currency in Malaysia, where AIA completed a $1.7 billion acquisition of ING Groep NV’s business in December to become the largest life insurer in the market, lost 3 percent of its value against the dollar this year.

The Organization for Economic Cooperation and Development warned earlier this month that emerging Asia’s medium-term economic growth faces risks from the reduction of monetary stimulus by the U.S. Federal Reserve. Exchange-rate fluctuations and rapidly rising wages in Southeast Asia and China may curb demand from advanced economies for their manufacturing exports over the next five years, it added.

AIA’s annualized new premium, the sum of first-year premiums and 10 percent of single-premiums, grew 21 percent to $839 million, it said.

New business margin, or the value of new business as a percentage of annualized new premium, expanded by 2.1 percentage points to 44.7 percent on improved product mix.

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