AIA Group: VONB Growth Beats Market Expectations Despite Lower VONB Margin

AIA Group’s first-half value of new business, or VONB, growth on an actual exchange rate, or AER, basis further accelerated to 37% year on year, ahead of our expectation. But we expect growth momentum to moderate in the second half of 2023 on a higher base, so we keep our 2023 VONB growth forecast at around 24%. As results were largely in line, we retain our HKD 96 per share fair value estimate for AIA. The stock is undervalued, trading at 1.4 times 2023 embedded value, or EV, equity per share. Investor sentiment for AIA was pressured by fears for China market VONB margin dilution given the customer trend toward high-yield savings products and AIA’s increasing sales from bancassurance and lower-tier cities. However, we believe its premier agency force and ongoing mainland China expansion plan should support better-than-peer long-term growth.