Posted on Oct 14, 2011 by Sergio Ulloa
AIA Group Ltd, Asia's third largest insurer, has posted record numbers in terms of new business performance for the third quarter ending August 31 2011, driven in part by sustained premium income growth in Malaysia and China over the past year. The Hong Kong-based insurance company has been able to build on the strong sales momentum garnered earlier in the year to provide life insurance protection and savings solutions to an increasing number of clients worldwide.
In a company statement released to the Hong Kong Stock Exchange today, AIA reported that the value of its new business (VONB) had risen by a remarkable 53 percent during the three months ending in August. The insurer's VONB, a key indicator of projected future profitability for new business, improved to US$245 million, its highest-ever quarterly value and up from the US$160 million reported from a year earlier. The underlying VONB margins meanwhile rose by 4.5 percentage points to 36 percent from a year ago. These figures all managed to beat out a consensus of industry analyst's estimates, which roughly anticipated a 30 percent increase to around US$200 million in new business value for AIA during the quarter.
AIA's strong third quarter performance has come on the back of a particularly productive year
for the pan-Asian insurance giant. Through the first nine months of the year, AIA's new business value has grown by an aggregate of 39 percent, upwards from the 32 percent hike presented in the company's half-year report. According to the company statement, annualized new premiums (ANP), a periodic gauge for new business sales, grew by 52 percent up to US$766 million in the third quarter. AIA's nine-month ANP totals now stands at US$1.86 billion, up 34 percent on last year's figures. Total weighted premium income (TWPI), which measures long-term business volume, meanwhile improved by 14 percent to US$3.75 billion in past three months and US$10.5 billion for the year.
AIA attributed the substantial increase in new business value to an improved agency force, productivity enhancements, product pricing improvements and margin expansion over the past year. Under the company's Premier Agency strategy, AIA has continued to develop and improve its agency model in the large Asia Pacific insurance markets it operates in. The company stated that the number of active agents had increased during the third quarter and that productivity had also risen, although exact figures were not released. AIA has then in turn been introducing the traditional higher-margin life, health and accident insurance policies into these large developing markets and encouraging agents to sell more riders and supplemental products to these populations with newfound disposable income.
AIA has also worked hard in the past year to increase the number of its regional bank partners and improve its alternative bancassurance and direct promotion and distribution platforms, which currently account for about a quarter of the company's business. AIA has now launched bancassurance partnerships with several prominent firms in the Asia Pacific region, including Australia's ANZ Bank and Citibank, who have branches in 14 major Asian markets. In addition, AIA has both upgraded the value of and increased sales of its banacassurance products by adjusting and re-pricing the products sold through its bank partners. According to AIA's half year report, these measures have helped the insurer's bancassurance business to grow by almost 20 percent so far this year. Overall, during the third quarter AIA was able to expand its margins and boost earnings though new product launches targeting under-penetrated markets, repricing existing protection products and improving its product mix towards regular premium products with greater insurance content.
While AIA recognized that every geographic region had contributed to its strong sales momentum in 2011, the insurer singled out Malaysia and China for their market's performance in the second half of the year. Malaysia's insurance market
, in conjunction with sustained overall macroeconomic development, has reacted particularly well to ongoing repricing actions, enabling AIA to improve their margins in the South Asian country. AIA also noted an increase in sales of investment-linked and life protection products as more Malaysian become aware of the benefits of stable and secure investment solutions. The Chinese market
meanwhile saw its strong growth rate in new business value continue, with increased sales in AIA's innovative comprehensive protection products a particular highlight. China has become AIA's third largest growth driver in the past year. The value of AIA's new business portfolio in China grew by 47 percent in the first half of 2011 to US$44 million. AIA's ability to continually reprice and move away from lower margin products in these Asian economies would continue to boost earnings.
Going forward, AIA remain committed to developing their business in the Asia Pacific region in lieu of deteriorating economic prospects in Europe and the United States as well as prolonged concerns over European sovereign debt issues. In AIA's opinion, Asian economies, with their generally younger populations and higher savings rates, remain in a more secure foundation for sustained premium growth
and appear more willing than their Western counterparts to enact appropriate economic stimulus measures after a summer of heightened global financial market volatility and considerable catastrophe losses. The rise in per capita wealth and affluence in Asia has come in conjunction with skyrocketing global healthcare costs and demands for secure and stable long-term savings and investment solutions. "Against this backdrop, AIA continues to focus on the key business fundamentals and executing its growth strategy. AIA is in a unique position within the region to meet this rising demand and we remain highly confident about AIA's growth prospects in Asia," AIA said in the statement.
Asia's promising long-term economic projections, in conjunction with the region's favorable demographics, will continue to fuel a substantive demand for AIA's savings, investment-linked and life protection products. The company has been able to maintain limited exposure to the sovereign debt problems in the United States and in Europe. Going forward, AIA has intimated that the majority of the company's investment rests in Asia in order to match its assets and liability locally. AIA CEO Mark Tucker concluded in the statement that there would be much more to come from the Asian insurance giant as it aims to close the trillion dollar gap in coverage between the West and the East. "We remain confident that the [Asia Pacific] region's dynamic economic growth and vast demand for savings and protection products will continue to provide the Group with significant profitable growth opportunities for many years to come."
Insurance Company Mentioned
AIA is a Hong Kong-based life insurance company doing business across Asia that has been in business since 1919. They service over 20 million policies through 23,000 employees and 300,000 agents throughout markets in Asia, including: Vietnam, Thailand, Taiwan, South Korea, Singapore, Philippines, New Zealand, Malaysia, Macau, Indonesia, India, Hong Kong, Mainland China, Brunei and Australia.