Pan-Asian insurer AIA Group (1299.HK) is scheduled to release its third quarter new business highlights on 20 October.
Daiwa analyst Leon Qi expects the value of new business (VNB) – an industry gauge of future profitability – to rise 21% year-on-year in the third quarter, with mainland China continuing to be the main growth driver. Qi expects 50% year-on-year VNB growth for AIA China bolstered by effective execution of its premier agency strategy, geographical expansion into tier-2/tier-3 cities, product upgrades and cost savings.
The value of new business in Hong Kong, which is the insurer’s largest market, should moderate after extraordinarily high one-off growth in the first half of 2017. The value of new business rose 54% year-on-year in the first half despite a government crackdown on the use of China UnionPay credit cards, which many feared would weigh on the ability of mainland Chinese to buy insurance products in Hong Kong. However, Qi says AIA Hong Kong’s annualised new premium growth should be underpinned by its premier agency strategy and continued protection demand from mainland visitors.
Elsewhere, AIA should receive regulatory approval for its AUD3.8 billion acquisition of the Australian operations of the Commonwealth Bank of Australia (CBA.AU). Qi also expects the value of new business to remain flat in Thailand and Singapore.
Daiwa reiterates its buy rating of AIA and target price of HKD75 a share, implying 26% upside to its current price of HKD59.60 a share. AIA shares have gained 36% so far this year.
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