AIA Group Limited announced on March 12 financial results for the year ended 31 December 2019.
Growth rates are shown on a constant exchange rate basis below:
Robust growth in value of new business
• 6 percent growth in value of new business (VONB) to US$4,154 million
• 16 percent growth in VONB excluding Hong Kong
• Annualized new premiums (ANP) up 2 percent to US$6,585 million
• VONB margin increased by 3.0 pps to 62.9 percent
Increased operating profit and attractive returns
• Operating profit after tax (OPAT) up by 9 percent to US$5,741 million
• Embedded value (EV) operating profit increased by 6 percent to US$8,685 million
• Operating return on EV (operating ROEV) at 15.9 percent
Strong cash flow and resilient capital position
• EV Equity of US$63.9 billion and EV of US$62.0 billion, both up 12 percent
• Underlying free surplus generation of US$5,501 million, up 13 percent
• Free surplus increased to US$14.9 billion
• Net remittances of US$3.7 billion
• Solvency ratio for AIA Co. remained strong at 362 percent on the HKIO basis, after the effect of the acquisition of The Colonial Mutual Life Assurance Society Limited (CMLA) in Australia
Total dividend up 11 percent
• 10 percent growth in final dividend to 93.30 Hong Kong cents per share
• Total dividend of HK$1.266 per share, up 11 percent (excluding special dividend in 2018)
Ng KengHooi, AIA’s group chief executive and president, said:
“AIA has delivered a resilient performance in 2019, despite a challenging operating environment, with continued growth in all our main financial metrics. Headline VONB growth of 6 percent was the result of very strong growth in the first half of the year set against a second half significantly affected by social unrest in Hong Kong. VONB grew strongly at 16 percent excluding Hong Kong. Operating profit after tax increased by 9 percent, underlying free surplus generation grew by 13 percent, and EV Equity grew by 12 percent.
" Our wholly-owned operation in Mainland China once again delivered a very strong performance with 27 percent growth in VONB. I am also pleased that OPAT from Mainland China exceeded US$1 billion for the first time, illustrating the attractive financial dynamics of our business. Following the announcement late last year of the further opening of Mainland China to foreign life insurers, we submitted an application for regulatory approval to convert our Shanghai branch into a subsidiary. Subject to regulatory approval, this will form the new foundation for our geographical expansion plans in Mainland China, which began with the opening of new sales and service centres in Tianjin and Shijiazhuang, Hebei during 2019.
“The 5 percent VONB reduction in Hong Kong reflected a decline in sales from Mainland Chinese visitors in the second half of 2019, broadly tracking the fall in the number of visitor arrivals as previously highlighted. Our domestic customer segment in Hong Kong continued to deliver a strong performance with double-digit VONB growth for the year.
“VONB growth in Thailand and Malaysia was supported by our Premier Agency strategy and bancassurance partnerships. Other Markets achieved 27 per cent growth in VONB, led by strong performances in Australia, the Philippines and Vietnam.
“AIA’s proprietary agency distribution delivered 11 per cent VONB growth as we focused on our quality recruitment programs to drive an increase in the number of active agents. Our partnership distribution business reported slightly lower VONB as strong VONB growth in the bancassurance channel was offset by a significant decline from the retail IFA channel in Hong Kong in the second half. Excluding Hong Kong, agency distribution VONB grew by 16 per cent and partnership distribution VONB increased by 19 per cent for the year.
“The board has recommended a 10 per cent increase in final dividend for 2019 to 93.30 Hong Kong cents per share, following AIA’s established prudent, sustainable and progressive dividend policy allowing for future growth opportunities and the financial flexibility of the Group within the context of the immediate macroeconomic and capital markets environment.
“While our insurance benefits provide financial support to our millions of customers when they need it most, we continue our journey of moving beyond the traditional transaction-focused insurance model towards being a lifelong partner to our customers. The further growth in the membership of our wellness programs to 1.7 million reflects our commitment to helping millions of people live Healthier, Longer, Better Lives.
“Over the last century, AIA has successfully managed through many different economic cycles. Some of our markets are facing near-term headwinds from the lower interest rate environment and the past two months have seen COVID-19 emerge as a new global risk. We have seen a significant disruption in the Group’s new business sales in the first quarter from reduced face-to-face interactions and have taken a number of proactive measures including a rapid acceleration of digital platforms to further support agency recruitment, training and sales activities. AIA’s agency recruitment pipeline in Mainland China remains strong. Our local businesses in affected areas have also been assisting communities with enhanced benefits and expedited claims procedures. Our thoughts are with the families and communities who have been affected by this public health emergency.
“The strong domestic drivers of demand and major demographic trends in Asia provide powerful structural support for the long-term prospects of AIA’s business. We have unrivalled distribution capabilities and a diversified, high-quality portfolio of businesses across 18 markets, the latest addition being our recently- launched operation in Myanmar, and we are continuing our preparations for further geographical expansion in Mainland China. The need for AIA’s insurance products will continue to grow strongly given rising incomes, low levels of private insurance penetration and limited social welfare coverage and I am confident that AIA is ideally positioned to deliver long-term sustainable growth.”