AIA to expand its insurance sales to 10 Chinese cities and provinces, betting on 226 million middle-class customers for growth
- Hong Kong’s listed insurer says it is targeting to expand to 10 more Chinese provinces, municipalities as it eyes 226 million potential customers
- First-half new business value from China grows to twice the size of Hong Kong, as the city’s growth is stifled by Covid travel restrictions
AIA, the largest insurer in Hong Kong by capitalisation, is planning to expand in mainland China to capture the growth opportunity of a region that contributes to the lion’s share of its operating profit.
The insurer, which traces its roots to 1919 in Shanghai, is awaiting regulatory approvals to expand to 10 more provinces and municipalities in mainland China, with the potential to serve 226 million potential customers with income levels defined as “middle class,” executives said.
The plan shows how China, the first major global economy to emerge from Covid-19 lockdowns, underpins AIA’s corporate earnings as it looks for growth. The new delta strain of the coronavirus disease had been identified in China, resulting in new confirmed cases in Jiangsu and Henan provinces in recent days. Even so, AIA remained confident that China’s near-term growth outlook remained positive, said its regional chief executive Jacky Chan during a media call in Hong Kong.
“We believe that Covid would remain under control in China,” he said. “We saw that our digital sales and our online engagement in China have been well-received (throughout) the pandemic.”
AIA’s first-half net profit rose 47 per cent to US$3.2 billion, beating the analyst estimates in a Bloomberg poll. Sales increased 23 per cent to US$24.2 billion.
New business grew 22 per cent to US$1.8 billion, in stark contrast to the 37 per cent decline a year ago. All 18 markets that AIA operates in, except Hong Kong, said new businesses grew at a faster pace in the first half than pre-pandemic levels. In mainland China, the biggest earnings driver, new business value grew 15 per cent to US$738 million from last year.
AIA raised its interim dividend by 8.6 per cent to 38 Hong Kong cents. The company’s shares rose before interim results were announced, closing 3 per cent higher amid a declining market to HK$96.95.
AIA sells life insurance policies in Beijing, Shanghai, Shenzhen, Tianjin, Shijiazhuang and throughout the provincial powerhouses of Guangdong and Jiangsu. It launched its Sichuan branch in March and received the regulator’s approval to open another one in Hubei province.
AIA raised US$20.5 billion in Hong Kong in 2010, in what still counts as the world’s sixth-largest initial public offering (IPO). The city remains AIA’s biggest single contributor of operating profit, increasing in value by 5 per cent in the first half.
The GBA, a cluster of 11 cities in southern China including Hong Kong and Macau, has a combined economy of US$1.75 trillion and a population of 70 million people.
Hong Kong’s insurance used to get a lift from mainland Chinese visitors, who were driven by the dearth of investible options to flock to the city to park their assets. Those numbers have dwindled, as mainland Chinese visitors stayed away during Hong Kong’s 2019 street protests, and during the travel lockdowns to contain the coronavirus pandemic. Excluding sales to Chinese visitors, new business value rose 16 per cent, to US$313 million in Hong Kong.
The standing committee of the National People’s Congress, China’s top legislative body, is expected to adopt the law into the mini constitutions of Hong Kong and Macau at its next four-day meeting beginning on Tuesday, bringing them in line with mainland law.
“We are confident that we are operating fully in compliance with all the rules applicable to the group,” said AIA general counsel Mitch New.
