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.

Investment Rating - The report maintains a "BUY" rating for the company, indicating a potential return of over 15% over the next 12 months [14]. Core Insights - The company reported a strong performance in Life OPAT, with a year-on-year increase of 6.1% to RMB 27.6 billion, surpassing forecasts. Group OPAT rose 2.5% YoY to RMB 34.4 billion, and net profit increased significantly by 64.9% YoY to RMB 45.0 billion, exceeding profit alerts by 55%-70% [1]. - The company achieved a notable 57.7% increase in NBV on a like-for-like basis, despite revising down long-term investment return assumptions by 50 basis points to 4.0% [1][9]. - The report highlights the insurer's effective asset/liability management and strong fundamentals, positioning it favorably against peers [1]. Financial Performance - For FY24, net profit is projected at RMB 46.4 billion, with EPS expected to be RMB 4.67. The consensus EPS for FY25 is RMB 4.29, indicating a slight downward revision from previous estimates [2][9]. - The company's P/B ratio is expected to decline from 0.8 in FY24 to 0.7 in FY25, reflecting a more attractive valuation [2][12]. - The combined ratio for P&C insurance is projected to be 98.6% for FY24, indicating a slight deterioration compared to the previous year [12]. Valuation Metrics - The target price for the company is set at HK$34.00, representing a 37.1% upside from the current price of HK$24.80 [2][10]. - The stock is trading at 0.54x FY25E P/EV and 1.05x P/B, suggesting it is undervalued relative to its embedded value [10][12]. - The report notes a significant increase in total investment income, which soared 131% YoY to RMB 120.4 billion, driven by higher dividends and fair value gains [8]. Share Performance - The company's market capitalization is approximately HK$238.6 billion, with a 52-week high of HK$33.15 and a low of HK$14.14 [3]. - Over the past month, the stock has appreciated by 7.8%, outperforming the market [5].