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AIA Results Bolstered by Life Insurance Performance

Source: WSJ - Fiona Law

Posted on 01 Aug 2011

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Asian insurance giant AIA Group Ltd. reported better-than-expected fiscal first-half results that were lifted by the strong performance of its life insurance business, which the company expects to continue to grow.

The Hong Kong-traded insurer said net profit for the six months ended May 31 rose 24% to US$1.31 billion from US$1.06 billion. AIA said the value of its new business, which measures the profitability of its life insurance operations, jumped 32% to US$399 million from US$303 million in the same period a year earlier, thanks to strong growth in its key markets of Hong Kong, Singapore and China.

Analysts had expected the insurer—in which American International Group Inc. (AIG) owns a roughly one-third stake--to report US$1.15 billion in net profit for the period, according to a poll of four analysts by Dow Jones Newswires.

"We expect our new business to continue to grow rapidly by boosting agent productivity and improving product mix," AIA Chief Executive Mark Tucker said in a conference call, though he declined to comment on the business momentum in the third quarter. AIA didn't break out second-quarter results.
Investors pushed shares of the Asian insurer to a record high of 29 Hong Kong dollars, up 4.7%. They finished up 3.4%.

The insurer said it will pay HK$0.11 per share as a half-year dividend, its first dividend payment since its listing in Hong Kong on Oct. 29. The interim dividend would represent about one-third of its 2011 full-year dividend, if conditions remain as expected, the insurer said in a statement.

Mr. Tucker declined to provide a targeted dividend payout ratio for the whole year.
Citigroup analyst Darwin Lam said in a report earlier that he expects the insurer will pay 20% of earnings as dividend in 2011.

The value of new business in Hong Kong grew 27% to US$121 million, while Singapore grew 59% and China increased 47% in the first half.
Investment income for the period rose 17% to US$2.04 billion from US$1.75 billion, despite volatility in global capital market.

Mr. Tucker said the insurer sees no major impact from sovereign debt woes in the U.S. and euro-zone. "We have no exposure in U.S. treasury and only have tiny exposure in the troubled European sovereign debt," he said, adding the majority investment of the company rests in Asia in order to match its assets and liability locally.

Mr. Tucker declined to comment on AIG's potential share sale when the lock-up period expires at the end of October. The company was spun off by AIG in a US$20 billion Hong Kong listing in October, backed by strong investor interest in its pan-Asian exposure and strong brand recognition. The share sale contributed US$120 billion as repayment of U.S. taxpayers funds used in AIG's rescue.