AIA Group (1299.HK) 1H25 Preview Summary Company Overview - AIA Group is set to report its 2Q/1H25 results on August 21, 2025, before market opening [1] Key Financial Metrics - **Value of New Business (VONB)**: Expected to grow by 14% year-over-year (yoy) to US$2,809 million in 1H25, with a faster growth rate of 16% yoy in 2Q25 compared to 13% in 1Q25 [7][12] - **Net Free Surplus Generation (NFSG)**: Anticipated to increase by 9% yoy to US$2.442 billion in 1H25, up from a 2% increase in FY24 [9][12] - **Operating Profit After Tax (OPAT)**: Expected to rise by 3% yoy to US$3.49 billion in 1H25, slower than the 6% growth in FY24 [8][12] - **Embedded Value (EV)**: Projected to increase by 2% to US$70.1 billion in 1H25 [10][12] Market Performance Insights - **Hong Kong**: Anticipated to be the main driver of VONB growth, with a projected increase of 23% yoy in 1H25 [6][11] - **Mainland China**: Expected to see a decline of 6% yoy in VONB for 1H25, primarily due to negative impacts from economic assumption changes [6][11] - **Thailand**: Forecasted to show a decline in VONB in 2Q25 due to demand being pulled forward ahead of regulatory changes [6][11] Strategic Focus Areas - Emphasis on underlying growth drivers such as: 1. Growth in mainland China and newly established regions 2. Sales momentum in Hong Kong 3. Factors contributing to NFSG growth, including operational variances and capital efficiency improvements [2] Valuation and Target Price - The target price has been adjusted to HK$83 from HK$90, based on a 1.4X FY26E P/EV, implying an 18% upside [3] - The medium-term Return on Embedded Value (ROEV) is estimated at 14.7%, with a Cost of Equity (COE) of 11.2% and a long-term growth rate of 2% [3][24] Additional Insights - The company does not expect any additional buybacks for FY25, suggesting a focus on growth rather than capital return strategies [2] - The anticipated increase in interim dividends per share (DPS) is 8% yoy to US$0.062 [10][12] - AIA's valuation methodology has shifted from a discounted model-based valuation to a P/EV multiple approach, reflecting a greater emphasis on capital generation capabilities [18][23] Conclusion - AIA Group is positioned for growth in 1H25, with strong performance expected in Hong Kong, while facing challenges in mainland China. The strategic focus on underlying growth drivers and adjustments in valuation methodology indicate a proactive approach to navigating market dynamics.