PACIFIC SECURITIES: Initiates "Buy" rating on AIA Group as new business value steadily grows

According to the Zhitong Finance APP, Pacific Securities has released a research report stating that it is initiating coverage on AIA Group (01299) with an "Overweight" rating. The company is expected to achieve operating revenues of USD 33.178 billion, USD 35.139 billion, and USD 37.447 billion for the years 2025-2027, with net profits attributable to shareholders of USD 6.367 billion, USD 7.055 billion, and USD 8.013 billion, respectively. The net asset value per share is projected to be USD 4.26, USD 4.70, and USD 5.17, corresponding to a PB valuation of 2.18, 1.97, and 1.79 times based on the closing price on October 20. The company maintains a leading position in the Asian life insurance market, with strong growth in the Hong Kong and Thailand markets, improved profit margins in mainland China, and sustained high growth in emerging markets such as ASEAN and India.

The main points of Pacific Securities are as follows:

Event: AIA Group releases its mid-year performance report for 2025

In the first half of the year, the company achieved after-tax operating profit of USD 3.609 billion, a year-on-year increase of 6%; net profit attributable to shareholders was USD 2.534 billion, a year-on-year increase of 23.5%; new business value grew by 14% to USD 2.838 billion, with a new business value profit margin up by 3.4 percentage points to 57.7%; basic free surplus was USD 3.569 billion, a year-on-year increase of 4%; embedded value was USD 70.853 billion, an increase of 2.6% compared to the beginning of the year.

Steady growth in new business value, supported by multiple regions

During the reporting period, the new business value in the Hong Kong market grew by 24% to USD 1.063 billion, with a 15% increase in newly recruited agents and a 25% increase in active new agents. The new business value from agents rose by 35%, with the agent channel accounting for over 70% of new business value. Influenced by the excellent performance of East Asia Bank, the new business value from partner distribution increased by 10%. The new business value in mainland China was USD 743 million, which, excluding the impact of economic assumption changes, represented a year-on-year increase of 10%, with the profit margin rising to 58.6%; the Thailand market grew by 35% to USD 522 million, with a profit margin of 115.7%, mainly benefiting from one-time sales before the implementation of new regulations; the Singapore market grew by 16% to USD 259 million; other markets overall grew by 14% to USD 249 million. Annualized new premiums increased by 8% to USD 4.942 billion, and the improvement in new business value profit margin indicates significant results from regional and product structure optimization.

Channel structure optimization, with collaboration between agents and bancassurance

New business value from the agent channel grew by 17% to USD 2.22 billion, with the total number of agents exceeding 1.1 million and continuous improvement in productivity. New business value from bank and partner channels grew by 8% to USD 804 million, with Thailand, Malaysia, and Hong Kong showing outstanding performance. The company deepened cooperation with regional leading banks such as Bangkok Bank, Public Bank, and Citibank to expand the high-net-worth and cross-border customer market, resulting in a more balanced channel structure and enhanced value contribution.

Profitability and capital strength are robust, with ample cash flow

In the first half of the year, the operating profit from embedded value was USD 5.893 billion, a year-on-year increase of 9%, with an annualized embedded value operating return rate of 17.8%. After-tax operating profit was USD 3.609 billion, a year-on-year increase of 6%, with a return on equity for shareholder distributions of 16.2%. Basic free surplus was USD 3.569 billion, a year-on-year increase of 4%; net free surplus was USD 2.430 billion, a year-on-year increase of 13% The company announced an interim dividend of HKD 0.49 per share, a year-on-year increase of 10%, and returned a total of USD 3.71 billion to shareholders through dividends and share buybacks. As of the end of June, the shareholder equity ratio was 219%, maintaining a strong level.

Risk Warning: Significant fluctuations in the capital market, slower-than-expected progress in reforms, and substantial fluctuations in exchange rates