AIA’s Q3 VONB Growth Turned Positive in China, Thailand, and Singapore

AIA Group’s third-quarter financial highlights reported the year-on-year contraction in nine-month valuation of new business, or VONB, on an actual exchange rate, or AER, basis declined to 11% from 15% in the first half. The results reflected resilient demands for life and health insurance products across AIA’s geographically diversified portfolio of business in Asia. Notably, AIA achieved positive VONB growth in all major markets despite challenging macroeconomic conditions in mainland China and Hong Kong. This resulted in a 1% year-on-year VONB growth in the third quarter, first turning positive from the 19% and 10% respective declines in the first and second quarters. Despite the healthy growth momentum, we expect recent further weakness in local currencies against U.S. dollars across AIA’s major markets except for Hong Kong to take a toll on new business growth and investment income. To factor in local currency depreciation and potential disruptions to sales activities in mainland China as result of its firmly held zero COVID-19 policy, we reduced our 2023 premium growth and investment income projection by 3 percentage points and 7%, respectively. The assumption change resulted in a 10% decline in our fair value estimate for AIA to HKD 96 per share.