AIA Group Limited (1299.HK) is the largest independent publicly listed pan-Asian life insurance group with either wholly owned branches or subsidiaries in 18 markets across Asia-Pacific. Founded 1919 in Shanghai the group is today headquartered in Hong Kong and listed on HKEX since October 2010. AIA rose around 20bn USD at that time which made it the world’s third largest IPO ever. The stock can be also traded in the US and in Germany.
The company offers various insurance, protection, savings, investment, and retirement products, as well as other financial services for individuals and businesses. 72% of AIA’s new business is generated through agents. Further distribution channels are bancassurance distribution partners, direct marketing, and other partnership channels, including independent financial advisers, brokers, private banks, and specialist advisers. With a total of 168bn USD in assets AIA serves the holders of more than 29m individual policies and over 16 million participating members of group insurance schemes.
Despite a backdrop of volatile global capital markets AIA shows a strong operating performance with a superior profitable growth and a strong cash flow, already the fifth year in a row. The group had a very positive start into 2016 with a growth in new business of 44%. This record first quarter was the result of a strong business in China and Hong Kong, a resilient and well-diversified business model, the quality of its proprietary distribution and the consistent execution of its strategy in these countries. Nevertheless some risks are seen in China’s efforts to restrict money outflows through insurance purchases in Hong Kong.
But the group remains well-positioned to benefit directly from the fundamental social, demographic and economic changes taking place in these currently most attractive markets for life insurance in the world. Rapid urbanization and industrialization are generating and spreading new wealth, leading to significant increases in disposable incomes, particularly within an expanding middle class.
The increase of its stake in the Indian market joint venture, Tata AIA Life Insurance Company Limited, to 49%, will open AIA further opportunities in another growth market for insurance products.
With a staff of around 20,000 and revenues of 23,274m USD AIA generated a net profit of 2,714m USD in 2015. 22% less than a year ago, mainly due to equity market losses. The share is currently priced at 27 times its earnings, well above industry average. But this high multiple has to been seen in the light of a strong new business growth and AIA’s leading position in Asia. The solvency ratio is at stable 428% and the group’s free surplus above required regulatory capital stand at 7.5bn USD. 19 out of 22 covering analysts recommend the stock currently as buy or outperformer. We are going to add a position to our model portfolio Tuesday.
AIS Rating: ★★★★☆
| 2011 | 2012 | 2013 | 2014 | 2015 | |
|---|---|---|---|---|---|
| EPS (US cents) | 13.3 | 25.1 | 23.5 | 28.7 | 22.4 |
| -40% | 89% | -6% | 22% | -22% | |
| P/E: P/E (Industry): P/B: Debt/Capital: |
27.2 15.3 19.3 82 |
