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October 18, 2011updated 13 Apr 2017 8:47am

AIA Group firing on all cylinders

Asia is the most attractive place in the world in which to operate as a life insurer," Tucker stressed in his review of AIAs third-quarter 2011 results

By LII editorial

Bar chart showing value of new business at AIA GroupMark Tucker, CEO of Hong Kong-headquartered insurer AIA Group, has a clear cut view on the future of Asia’s insurance market.

“Asia is the most attractive place in the world in which to operate as a life insurer,” Tucker stressed in his review of AIA’s third-quarter 2011 results.

Tucker, the former CEO of UK insurer Prudential and AIA’s CEO since July 2010, has good reason to feel positive. AIA, Asia’s third-largest insurer, romped home in the three months to September to deliver an exceptional set of results.

A highlight of the results was the value of new business (VONB) which came in 53% up on the third quarter of 2010 at $245m, a new record for AIA.

This brought the VONB in the first nine months of 2011 to $644m, an increase of 39% compared with the same period in 2010.

Annualised new premium income in the third quarter was up 52% at $766m while during the first nine months it reflected an improvement of 34% to $1.86bn.

“AIA’s 53% growth in VONB builds on the strong momentum reported at the half-year,” Tucker added. “The figures reflect the group’s early successes in launching new product initiatives targeted at meeting the life insurance protection and savings needs of the Asian consumer.”

According to AIA all the major markets in which it operates generated strong performance with most reflecting double-digit increases in premium income which boosted the insurer’s total weighted premium income by 13.5% in the third quarter of 2001 at $3.752bn.

Weighted premium income in the first nine months of the year was up 12.8% at $10.517bn.

AIA has operations in Hong Kong, Thailand, Singapore, China, Malaysia, Korea, the Philippines, Australia, Indonesia, Taiwan, Vietnam, New Zealand, Macau, Brunei and India.

AIA’s new business margin also reflected a positive trend, rising from 32.9% in the first three quarters of 2010 to 36% in the first three quarters of 2011.

Tucker attributed this improvement and the strong growth in VONB to a number of recently launched strategies, including its Premier Agency initiative -aimed at increasing the size and efficiency of its agency force.

While no data was provided on the initiative’s impact in the third quarter, AIA disclosed in its 2011 half year results that it had delivered a $103m (42%) increase in the VONB generated by its agency force compared with a year earlier.

The size of the agency force had been increased by a far lower 9%.

Tucker also highlighted other AIA volume and profitability drivers, including new product launches targeting the under-penetrated protection market, ongoing repricing actions of existing products and shifts in product mix towards regular premium products with higher life insurance content.

AIA is also actively seeking to expand its bancassurance partnerships.

So far this year new partnerships with US bank Citi and Australian bank Australia and New Zealand Bank (ANZ) and have been concluded. Citi brings additional exposure for AIA in 16 major Asia Pacific countries and ANZ additional exposure in 15.

AIA was floated off by American International Group (AIG) and listed on the Hong Kong Stock Exchange in October 2010 following a $17.8bn initial public offer in October 2010 at HK$19.68 ($2.50) per share, and went on to perform strongly, its share price reaching a high of just on HK$29 in July 2011. AIG retains a 33% stake in AIA.

However, despite AIA’s solid results and prospects, its share price has not been immune to equity market turmoil and is currently trading 17% below its peak at around HK$24.

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