AIA’s Value of New Business Returns to Growth in H2, but Embedded Value Down on Investment Losses

We maintain our HKD 96 per share fair value estimate following AIA Group's 2022 results. Value of new business, or VONB and operating profit after tax, or OPAT, were slightly below our expectation, but our major assumptions remain unchanged. 2022 VONB contracted 8% year on year, or by 5% in constant currency. OPAT recorded slower but nonetheless resilient growth of 3% in constant currency terms, versus 6% growth in 2021. As expected, embedded value, or EV, declined on investment losses and the effect of AIA's share buyback. These reduced opening EV by 7% and 5%, respectively, leading to a 5.5% year-on-year decline. On a per-share basis, EV was down 2%.