AIA Growth Beats Estimates as Chinese Buy Insurance in Hong Kong

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  • Value of new business rises 25%, topping estimated 21% gain
  • Mainland visitors undettered by curbs on capital outflows

AIA Group Ltd., the third-largest Asia-based insurer, said the value of new business written last quarter rose a greater-than-estimated 25 percent, driven by sales of policies to Chinese visitors to Hong Kong and the expansion of its mainland business.

The measure of the projected future profitability of new policies surged to a record $689 million in the three months ended Aug. 31, from $552 million a year earlier, the Hong Kong-based company said in a regulatory filing Friday. That beat the median estimate of six analysts of 21 percent growth. Chief Executive Officer Mark Tucker has used new business value as the key gauge of management performance.

AIA is benefiting from a surge in mainland Chinese visitors buying insurance in Hong Kong, undeterred by government curbs introduced to stem capital outflows. About half of sales by AIA’s Hong Kong unit were generated from Chinese visitors, Tucker said in July. Annualized new premiums, a gauge of new business sales, soared 83 percent in Hong Kong in the six months ended May 31 from a year earlier.

Overall annualized new premiums rose 42 percent to $1.3 billion in the third quarter, said AIA, which didn’t disclose a geographical breakdown for the period. New business margin, the value of new business as a percentage of annualized new premiums, narrowed by 6.9 percentage points to 50.7 percent.

Shares Gain

AIA shares rose 1.5 percent to HK$52.25 at 11:58 a.m. in Hong Kong. The shares, which hit a record high last week, have advanced 12 percent this year.

Sales of insurance to Chinese visitors in Hong Kong have surged since August 2015, when a surprise devaluation of the country’s currency, the first since 1994, stoked fear of further yuan weakening and led citizens to move money offshore. China has been progressively tightening rules governing Hong Kong insurance sales to mainland residents as part of its attempts to curb capital outflows.

Still, Chinese visitors bought a record HK$16.9 billion ($2.2 billion) of insurance and related investment policies in the three months through June, according to numbers released by the Office of the Commissioner of Insurance in Hong Kong.

China Growth

“We expect the strong sales momentum to mainland visitors to continue” in the third quarter at AIA, BNP Paribas SA’s Dominic Chan wrote in an Oct. 11 note.

In China, AIA’s new business value may have grown 38 percent in the third quarter, according to estimates from Goldman Sachs Group Inc. analysts led by Mancy Sun. Recent regulatory curbs on wealth management product-like policies would favor companies focused more on providing traditional insurance protection such as AIA’s China unit, Kim Eng Securities (HK) Ltd. analyst Ma Ning wrote in an Oct. 6 note. China was AIA’s second-largest market by new business value in the first half.

The insurer, which collects premium income mostly in local currencies and reports financial figures in U.S. dollars, also got a boost from stabilizing Asian currencies and rebounding stock markets. New business value would have grown 27 percent without considering currency fluctuations, said the insurer.

Currencies in the markets AIA operates have remained flat against the dollar after the second quarter, and stock markets strengthened on average by about 7.5 percent, an Oct. 3 note from Credit Suisse Group AG said.