Insurer AIA’s profit jumps 15% on strong policy sales to mainland Chinese visitors in Hong Kong

AIA Group reported a 15 per cent profit jump last year, benefiting from demand for insurance products from the return of mainland Chinese visitors to Hong Kong in search of better returns and as a hedge against a weakening yuan.

Hong Kong-based AIA, Asia’s largest insurer, reported a net profit of US$3.76 billion, or 32.68 US cents per share, according to an exchange filing on Thursday. Operating profit after tax, which excludes any valuation gain or loss in its investment portfolio, fell 1 per cent to US$6.21 billion.

The insurer adopted the new IFR17 accounting standards in 2023 and adjusted the comparable figure a year earlier.

AIA’s value of new business (VONB), an important measure of sales and future growth in insurance, rose 33 per cent to US$4.03 billion in 2023. The big jump came after Hong Kong relaxed its inbound travel restrictions from January 2023 after three years of closed borders during the Covid-19 pandemic.

“Our diversified business portfolio and unrivalled distribution platform have enabled us to generate higher VONB from our key growth engines of Asean, Hong Kong, mainland China and India, as well as double-digit growth from 10 markets,” said Lee Yuan Siong, AIA’s group chief executive and president.

Hong Kong, AIA’s largest market, saw its VONB jump 82 per cent because of strong growth in policy sales to mainland visitors.

AIA’s new business in China grew 20 per cent last year, 21 per cent in Thailand, 10 per cent in Singapore and 7 per cent in Malaysia.

Analysts at Jefferies said that the breadth of growth was notable. “We believe that it’s more important that growth is broad based, with 10 markets growing at a double-digit rate.”

Mainland Chinese tourists spent HK$59 billion (US$7.6 billion) on insurance policies in Hong Kong last year, representing about 32.6 per cent of all sales, according to data from the Insurance Authority.

Mainland customers spent US$7.6 billion on Hong Kong insurance policies in 2023

Last year’s tally was a significant jump compared with HK$2.1 billion in 2022, HK$700 million in 2021 and HK$6.8 billion in 2020. It was also higher than the pre-Covid era of HK$43.4 billion in 2019, HK$47.6 billion in 2018 and HK$50.8 billion in 2017.

Many mainland customers turned to higher yielding bank deposits and insurance and investment products in Hong Kong as the yuan weakened. The Chinese currency has lost 14 per cent against the US dollar since March 2022, when the current interest rate rise cycle started.

AIA’s shares fell more than 2.5 per cent on Thursday morning after the earnings announcement, which was released before the market opened.

Under Lee’s leadership, AIA has expanded via acquisitions, spending HK$2.2 billion (US$280 million) on health insurer Blue Cross (Asia-Pacific) a year ago, and HK$5.07 billion on BEA Life in March 2021. It also invested 12 billion yuan (US$1.86 billion) on a 25 per cent stake in China Post Life Insurance in mid-2021.

The insurer will pay a second dividend of 119.07 HK cents, bringing the full-year payout to 161.36 HK cents per share, versus 153.68 HK cents in 2022.