【行业研究报告】友邦保险-2H22 recovery in line; Upbeat trend in HK and mainland China in 2M23

13Mar202313Mar2023CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdateAIAGroupLtd.(1299HK)2H22recoveryinline;UpbeattrendinHKandmainlandChinain2M23AIArecorded6%YoYgrowthofvalueofnewbusiness(VNB)in2H22onaconstantFXrate(CER)basis,translatinginto4.5%YoYVNBgrowthin4Q22.Thelifeinsurerreportedpositivenewbusinessmomentumacrossitsmajormarketsin2H22,with1)MainlandChina’sVNBgrowthturnaroundto+3%YoYonaCERbasisdespitethenegativeimpactfromOmicronpeakinDec2022,2)13%VNBgrowthofASEANbusinessin2H22drivenbymulti-channelstrategy,and3)5%YoYgrowthofHKVNB.Duringtheanalystbriefing,themanagementindicatedthat1)theVNBgrowthofmainlandvisitors(MCV)businesswasstrongin2M23astheborderreopened;2)despitetheslightVNBdeclineofAIAChinainJan2023amidOmicronoutbreaks,thenewbusinessmomentumquicklybouncedbacktodoubledigitinFebandbrought2M23ChinaVNBgrowthtopositive.Thepositivedataof2M23reconfirmourviewthatAIAwillrecordstrongVNBrecoveryinFY23.ReiterateBUY.UpbeattrendinHK/Chinamarketsin2M23.ThemanagementindicatedthattheVNBfromMCVbusinessinHKmorethantrebledin2022,withstrongmomentumsustainedinto2M23,asAIAhasretaineditspremieragencywithaMCV-specializedteamof6,800agents,similarinscaletothatof2018,whichenabledittowellcapturethepent-updemandsposttheborderreopening.InMainlandChina,AIAsawdouble-digitVNBgrowthinJul-Nov2022.DespiteanoccasionalinterruptiongivenresurgenceofCOVIDcasesinDec2022-Jan2023,thenewbusinessmomentumofAIAChinaimmediatelybouncedbacktodoubledigitonceagaininFeb,turningthe2M23VNBgrowthtopositive.OverallpositiveimpactfromanadoptionofIFRS9&17.Asdisclosed,undertheIFRS17,AIA’scontractualservicemargin(CSM,notablyareplacementofresidualmargin),amountedtoUS$55bnasof1Jan2022,edgingupthecomprehensiveequity(bookvalue+CSM)toanaggregateofUS$101bn.ForP&L,theimpactofnewaccountingrulesadoptiontoOPATwouldbetrivialatlessthan5%,whiletoFY22NPATwouldbemorestrikingwithatleastUS$2bnhigherthanasreported.OnB/S,thebookvalueresultedfromthenewstandardwouldbe7%lowerthanreportedasof1Jan2022,buthigherinend-FY22.Soundcapitalposition.IfexcludedtheimpactofUS$3.6bnsharebuybacksin2022,theGroupLCSMPCRcoverratiowouldstandat296%byendFY22(vs291%proformaayearahead),bolsteredbyarobustfreesurplusgeneration.TheLCSMcoverratioremainedresilientamidcapitalmarketvolatilities,withlessthan6pptsensitivityto±50bps/±10%chg.ininterestrate/equityprice.Valuation.Thestockisnowtradingat1.5xP/EVFY24E,belowa2-year/5-yearhistoricalaverageP/EVat1.7x/1.9x.Lookingforward,weexpecttheuptickinHKandmainlandChinabusinesswillcontinuetounderpinstrongVNBgrowthforAIAthroughoutFY23.ReiterateBUY.TargetPriceHK$118.00(PreviousTPHK$118.00)Up/Downside44.7%CurrentPriceHK$81.55ChinaInsuranceGigiCHEN,CFA(852)39163739gigichen@cmbi.com.hkNikaMA(852)39000805nikama@cmbi.com.hkStockDataMktCap(HK$mn)951,675Avg3mthst/o(HK$mn)1,923.8252wHigh/Low(HK$)93.70/57.25TotalIssuedShares(mn)11,670Source:FactSetShareholdingStructureBankofNewYorkMellon10.23%JPMorganChase&Co8.04%Source:BloombergSharePerformanceAbsoluteRelative1-mth-2.7%5.6%3-mth0.0%-0.1%6-mth14.4%11.1%Source:FactSet12-mthPricePerformanceSource:FactSetAuditor:PricewaterhouseCoopersRecentReports:1.AIAGroupLtd.(1299HK)–Long-termgrowthintact,expect2H22recovery(link)2.AIAGroupLtd.(1299HK)–Pent-updemandstoboostHKgrowth;RaiseTP(link)EarningsSummary(YE31Dec)FY21AFY22AFY23EFY24EFY25ENetprofit(US$mn)7,4272827,4428,2669,198EPS(Reported)(US$)0.620.020.640.730.83ConsensusEPS(US$)n.an.a0.620.700.82VNB/share(US$)0.320.260.320.380.45YoYgrowth(%)13.9(18.5)22.620.218.7Groupembeddedvalue/share(US$)6.35.96.36.97.8Premiumincome(US$mn)34,44433,91240,01647,21955,719Premiumincomegrowth(%)3.3(1.5)18.018.018.0P/B(x)2.13.22.72.52.2P/Embeddedvalue(x)1.61.81.61.51.3Dividendyield(%)1.71.92.12.42.6ROE(%)12.00.618.218.418.7Source:Companydata,Bloomberg,CMBIGMestimates|Note:thestockpricewasquotedbymarketcloseat4:00pmonMar.10,2023.