Summary of AIA Group Q1 2024 Update Company Overview - The conference call is hosted by AIA Group, a leading insurance and financial services company based in Hong Kong [1] Key Points Discussed - The session is led by Lance Burbage, Chief Investor Relations Officer, along with Group CEO Li Yuanxiang and Group CFO Garth Jones [1] Additional Important Information - Other members of the Group Executive Committee are present either in person or remotely, indicating a collaborative approach to the Q&A session [1]

Summary of AIA Group Q1 2024 Update Company Overview - The conference call is hosted by AIA Group, a leading insurance and financial services company based in Hong Kong [1] Key Points Discussed - The session is led by Lance Burbage, Chief Investor Relations Officer, along with Group CEO Li Yuanxiang and Group CFO Garth Jones [1] Additional Important Information - Other members of the Group Executive Committee are present either in person or remotely, indicating a collaborative approach to the Q&A session [1]

Financial Data and Key Metrics Changes - The Value of New Business (VONB) reached $1.3 billion, marking a record high for a quarter and an increase of 31% [2][67] - The VONB margin improved by 2.1 percentage points to 54.2% [2] - The total capital resources to required capital ratio is projected to decrease from 238% as the business grows and capital is regularly returned to shareholders [6][71] Business Line Data and Key Metrics Changes - AIA China reported a 38% increase in VONB, driven by strong growth from the Premier Agency and selective bancassurance partners, with a VONB margin of around 40% [2][68] - AIA Hong Kong experienced a 43% growth in VONB, with double-digit growth from both domestic and Mainland Chinese visitor segments [68][104] - The agency channel's VONB margin remained strong, with the average case size holding steady at approximately $19,000 [99][126] Market Data and Key Metrics Changes - The three largest ASEAN markets (Thailand, Singapore, and Malaysia) saw a combined VONB growth of 16% [104] - The Other Markets segment grew by 10%, with notable performances from Tata AIA Life in India, Australia, the Philippines, and South Korea [104] Company Strategy and Development Direction - The company aims to maintain a strong and resilient balance sheet while regularly reviewing its capital position to return excess capital to shareholders [79][105] - A new capital management policy was introduced, targeting a 75% payout ratio of annual net free surplus generation through dividends and share buybacks [71][107] - The focus remains on driving high-quality, profitable new business that enhances future earnings and free surplus generation [76][114] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term sustainability of the MCV business in Hong Kong, despite ongoing investigations into certain brokers [13][116] - The company noted that the demand for long-term saving products remains strong, particularly among affluent customers [60][152] - Management highlighted the importance of underlying free surplus generation as a key metric for shareholder value [114][121] Other Important Information - An additional $2 billion was added to the existing share buyback program, bringing the total to $12 billion [7][103] - The company continues to focus on the affluent customer segment, with a strong average case size in the agency channel [19][126] Q&A Session Summary Question: Does AIA have any long-term targets for free surplus generation? - Management acknowledged the need for projections but emphasized that profitable new business translates into underlying free surplus generation [11] Question: What is the outlook for the MCV business following the investigation? - Management welcomed the initiative by the Hong Kong Insurance Authority and stated that the MCV business remains strong, with new business suspended from the concerned broker [13][116] Question: Can you provide more details on the capital target of comfortably above 200%? - Management explained that the target is based on regular reviews of capital needs and maintaining a strong balance sheet [16][118] Question: What is the product mix in China for the first quarter? - The product mix included a focus on protection business, with participating products making up about 10% of agency VONB [23][40] Question: How does the company view the impact of the recent regulatory inspection on the MCV business? - Management believes the long-term impact will be positive for the sustainability of the MCV business, with minimal short-term effects [116][132]

Investment Rating - The report assigns a "Buy" rating to the company, with a current price of 54.00 HKD and a target value of 76.6 HKD per share [16]. Core Insights - The company reported a strong growth in new business value (NBV) for the first quarter, reaching 1.33 billion USD, a year-on-year increase of 27%. The annualized new premium was 2.45 billion USD, up 23% year-on-year. This growth was driven by both volume and price increases, alongside strong growth in partner distribution channels [14]. - All operational segments of the company achieved double-digit growth in NBV, benefiting from increased activity in individual insurance channels and strong savings demand in bank insurance channels. The NBV margin (NBVM) improved by 1.9 percentage points to 52.4% [14]. - The company optimized its capital management policy, increasing its share buyback program to 2 billion USD, reflecting confidence in its financial position [14]. - Earnings per share (EPS) forecasts for 2024, 2025, and 2026 are projected at 0.62, 0.68, and 0.84 USD, respectively, with an estimated enterprise value (EV) multiple of 1.6x for 2024 [14]. Financial Summary - The company's revenue for 2022 was 5,466 million USD, with a projected decline to 5,091 million USD in 2023, followed by a recovery to 5,343 million USD in 2024. The net profit attributable to shareholders is expected to grow significantly from 3,331 million USD in 2022 to 8,856 million USD in 2024 [15]. - The report indicates a significant increase in the company's return on equity (ROE), projected to rise from 0.63% in 2022 to 17.64% by 2026 [15].

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Financial Performance - AIA Group reported total assets of $286 billion as of December 31, 2023[15]. - The company achieved insurance payouts and claims of $21 billion in 2023, an increase of $2 billion compared to 2022[16]. - AIA reported a total weighted premium income of US$340 million in 2023, reflecting a growth compared to US$262 million in 2022[53]. - The annualized new premiums reached US$71.2 billion in 2023, showing a slight decrease from US$71.2 billion in 2022[36]. - New business value increased by 33% to $4.034 billion, with double-digit growth in 10 markets and all distribution channels[62]. - The operating profit attributable to underlying value per share rose by 37%, driven by the growth in new business value, resulting in an operating return on embedded value increase of 350 basis points to 12.9%[111]. - The embedded value operating profit increased by 33% to $8.890 billion, reflecting significant growth in new business value and higher expected returns due to rising interest rates[157]. - The basic free surplus generated was $6.041 billion, with a per share increase of 5%, driven by higher interest rates, partially offset by medical claims experience[160]. - The contract service margin rose to $53.115 billion, with a basic contract service margin growth rate of 8.4%, driven by the continued achievement of large-scale and high-quality new business[158]. - AIA recorded a strong financial performance in 2023, with new business value increasing by 33% to $4.034 billion, supported by double-digit growth in 10 markets[154]. - The local capital adequacy ratio reported at 275% as of December 31, 2023, indicating strong financial health[184]. Shareholder Returns - AIA has returned US$7.2 billion to shareholders through an ongoing share buyback program, part of a total plan of up to US$10 billion[42]. - The group returned USD 5.9 billion to shareholders through increased dividends and ongoing share buyback programs, with free surplus before capital return increasing by 25%[103]. - The board proposed a final dividend of HK$1.1907 per share, a 5% increase, resulting in a total dividend of HK$1.6136 per share for 2023[64]. - The total dividend for 2023 reached HKD 1.6136 per share, a 5% increase from 2022[140]. - The share buyback program repurchased approximately 740 million shares for a total value of $7.207 billion, reducing the number of shares outstanding by 6% since the program's launch in March 2022[161]. - The company plans to return excess capital of $3.637 billion to shareholders through a share buyback program, in addition to a dividend of $2.293 billion[138]. Market Expansion and Operations - AIA Group's business covers 18 markets, with a focus on Asia, and serves over 42 million individual policyholders and more than 18 million group insurance plan participants[16]. - The company opened a new branch in Henan, upgraded its Shijiazhuang center to a branch, and is preparing to expand into Hubei and Sichuan provinces[19]. - AIA's joint venture Tata AIA Life is the third-largest private life insurance company in India and the leading retail protection provider[20]. - The company operates in 12 markets and has expanded its community initiatives across 18 markets in 2023[29][49]. - New business value in mainland China grew by 28% from February to December 2023, with total new business value for the year increasing by 20% to USD 1.037 billion[107]. - AIA's new business value in Singapore increased by 10% to USD 0.394 billion, supported by strong performance from agency and partner distribution channels[109]. - The investment in China Post Life Insurance, representing a 24.99% stake, provided additional growth opportunities and a complementary customer base[108]. - The company is expanding its operations into new major cities in Hubei and Sichuan provinces in China[133]. Technology and Digital Transformation - The company has been recognized as the "Digital Insurer of the Year" for three consecutive years by InsuranceAsia News[5]. - AIA's cloud technology adoption rate reached 90%, significantly higher than the global financial services and insurance industry average[44]. - AIA's digital transformation led to over 20 million existing and potential registered customers using its app, with over 85% of customer transactions completed digitally[115]. - The end-to-end processing ratio improved from 35% in June 2020 to 85% by December 2023[142]. Sustainability and ESG Initiatives - AIA Group has become the first life and health insurance group in the Asia-Pacific region to have its short-term reduction targets verified by the Science Based Targets initiative[24]. - The company launched a climate transition plan aiming for net-zero emissions by 2050, integrating climate factors into its core business[46]. - The company received recognition for its leadership in ESG, being awarded top industry and regional badges for three consecutive years[68]. - AIA's commitment to sustainability was highlighted by becoming the first life and health insurance group in the Asia-Pacific region to have its near-term reduction targets verified by the Science Based Targets initiative (SBTi)[170]. Employee Engagement and Corporate Culture - AIA has been recognized with the "Gallup Exceptional Workplace Award" for the second consecutive year, highlighting high employee engagement[44]. - The company remains confident in growth opportunities, focusing on achieving substantial profitability in new business growth while maintaining financial discipline[185]. Product and Service Development - The company launched the "AIA Junyu Wealth Management Center" and "AIA Junyu Health Garden" in Hong Kong, offering integrated health and wealth management services[19]. - AIA's comprehensive ecosystem combines various new products and services to meet a broader range of financial and health protection needs for customers[116]. - Approximately 60% of new customers opted to include "AIA Vitality" in their policies when given the choice[49]. - AIA's distribution platform, supported by the "Best Agents" strategy, accounted for 76% of the total new business value, growing by 23%[167]. Market Performance - New business value in Hong Kong increased by 82% to $1.43 billion, contributing significantly to the group's new business performance[132]. - The new business value in China grew by 55%, with the company now operating 10 branches in the mainland[133]. - In Thailand, new business value rose by 21% to $713 million, with the company holding a 41% market share[134]. - The overall new business value in other markets remained flat at $406 million, but excluding Vietnam, it increased by 15%[137]. - New business value from partner distribution channels surged by 58%, with bank insurance channels achieving a 42% increase[143].

Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook for investors [3][16]. Core Insights - The company has demonstrated strong growth in new business value, with a 33% year-on-year increase to $4.034 billion as of December 31, 2023. Notably, the new business value in mainland China grew by 20%, while Hong Kong saw an impressive 82% increase [3][16]. - The annualized new premium increased by 45% to $7.650 billion in 2023, driven by a shift towards long-term savings products and increased contributions from bank insurance in mainland China [3][16]. - The company's new business value margin decreased to 52.6% for the year but improved to 54.5% in the second half of 2023, reflecting operational enhancements [3][16]. Financial Metrics - Total assets for 2023 are reported at $286.32 billion, with total liabilities at $244.7 billion, resulting in a net asset value of $44.75 billion [1][10]. - The company’s operating profit after tax for 2023 was $6.213 billion, with a return on equity (ROE) of 9.0% [17][31]. - The intrinsic value increased by 7% to $76.083 billion, and the new business value is projected to grow to $4.87 billion in 2024, with a year-on-year growth rate of 20.8% [15][22].

Investment Rating - The report maintains a "BUY" rating for the company with a revised target price of HK$96.50, implying a 1.8x FY24E P/EV [18][19]. Core Insights - The company reported a full-year Value of New Business (VNB) growth of 33% year-on-year to US$4,034 million, with Annualized New Premium (ANP) increasing by 45% to US$7,650 million, aligning with forecasts [18]. - The VNB margin narrowed to 52.6%, but improved sequentially by 3.8 percentage points to 54.5% in the second half of 2023 [18]. - The company is expected to sustain mid-double digit VNB growth in the first quarter of 2024, driven by strong momentum in the MCV segment [18]. Summary by Sections Financial Performance - The company achieved a net profit of US$3,781 million in FY23, with an EPS of US$0.33 [19]. - The return on equity (ROE) is projected to increase from 8.8% in FY23 to 15.0% in FY24E [19]. - The operating return on embedded value is expected to rise from 13.0% in FY23 to 14.2% in FY24E [15]. Valuation Metrics - The report indicates a P/Embedded Value of 1.3x for FY23, projected to decrease to 1.2x in FY24E [19]. - The dividend yield is expected to increase from 2.1% in FY23 to 2.9% in FY24E [19]. - The average risk discount rate for the group has been revised down from 10% to 9.5% [20]. Embedded Value and Growth Projections - The embedded value for FY23 is reported at US$67,447 million, with projections of US$71,790 million for FY24E [24]. - The long-term growth rate is set at 3.0%, with VNB growth expected to be 11.5% in FY24E [24]. - The company’s new business multiplier is projected to be 22.8x for FY24E [24]. Market and Economic Assumptions - The report highlights a trend of negative investment variances impacting profitability, alongside higher medical claims [18]. - The average long-term investment return is estimated at 8.6%, reflecting a prolonged low-interest-rate environment [20].

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |----------------------------|--------|----------------|------------------------|-----------------|--------------------------|--------|--------|--------|--------|--------|--------------| | 表 1 绝对估值法得到公司 | 2024E | 2024 \n2025E | 年每股评估价值 \n2026E | 91.38 \n2027E | 港元（百万美元） \n2028E | 2029E | 2030E | 2031E | 2032E | 2033E | 未来年份 NBV | | 折现因子 | 92% | 84% | 77% | 70% | 64% | 59% | 54% | 49% | 45% | 41% | 41% | | NBV （折现 后） | 4149 | 4145 | 41 ...