AIA Group hikes dividend, keeps bet on Asia

Friday, 26 February 2016 00:00 - - {{hitsCtrl.values.hits}}

Reuters: AIA Group Ltd reported a 26 % rise in new business and offered a higher-than-expected annual dividend in a show of confidence in the growth prospects of its Asian base despite recent volatility that hit its bottom line.

The world’s No.2 life insurer by market capitalisation said on Thursday the value of new business, a key yardstick for growth that measures expected profits from new premiums, rose to $2.20 billion at constant exchange rates in 2015 from $1.85 billion a year earlier, driven by surging demand in its main market Hong Kong and in China.

Net profit for the year fell 18 % to $2.69 billion, hit by market losses from equities and foreign exchange gyrations in Asia.

AIA, which listed in Hong Kong in 2010 after a spin-off from bailed-out U.S. insurer AIG, still planned to increase its total dividend by 39 % to HK$0.6972 ($0.0897) a share, a move that boosted shares.

“AIA reported a strong set of results, despite sharp depreciation of Asian currencies against the U.S. dollar, its reporting currency and decline of equity markets across Asia,” Bernstein analyst Linda Sun-Mattison noted shortly after the results were published.

“Dividend growth of 39 % came as a positive surprise, highlighting the strong free surplus generation of the business and the ongoing improvement in capital efficiency.”

Operating profit after tax and before the equities losses rose 16 %to $3.21 billion.

Confidence in asia

chief Executive Mark Tucker told a media call Asia would continue to deliver growth and this would in turn allow the company to raise its dividend again next year.

“Despite the recent volatility and uncertainty in global financial markets, Asia remains the most attractive and dynamic region for life insurance in the world,” Chief Executive Mark Tucker said in a statement.

Asked about a possible interest in Hong Kong’s Dah Singh 0440.HK insurance business, which is currently on the market, Tucker said AIA was 99.9 % focused on organic growth but had the capability to conduct acquisitions if the right opportunity arose.

AIA, originally founded in Shanghai nearly 100 years ago, was the first foreign insurer to be granted a licence in China.

China and Hong Kong together account for about 50 % of AIA’s new business growth globally. ($1 = 7.7683 Hong Kong dollars)