AIA Group said that it remains hopeful new business growth will pick up in the second half, as the easing of travel restrictions in China and other Asian markets could help revive sales, which fell 37 per cent in the first-half because of the coronavirus pandemic.
The largest life insurer in Asia by market capitalisation said it was also increasing its investment in China. In June, its Shanghai branch won regulatory approval to be incorporated as AIA’s only wholly owned subsidiary. Group chief executive and president Lee Yuan Siong said the Shanghai subsidiary was planning to apply for more licences to expand to other provinces, including Sichuan and Henan.
Lee, who joined AIA this year from Ping An Insurance (Group) where he was the co-chief executive officer and took over the top role from retiring industry veteran Ng Keng Hooi, said initially the insurer plans to focus on the “10 to 12 most important provinces of China”.
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“China is a unique opportunity for AIA. As the only [foreign] life insurer with a wholly owned subsidiary … we are progressing rapidly and we are hopeful of getting more licences,” said Lee.
The expansion plans come even as new business in China fell 13 per cent to US$594 million in the first half. Currently, apart from Shanghai AIA also has a presence in three provinces – Jiangsu, Guangdong and Hebei, and three cities – Beijing, Tianjin and Shenzhen.
But Lee said he has seen signs of business recovering in China in the second quarter onwards, as travel restrictions were largely eased. This is in contrast to other countries in Asia which continue to battle an upsurge in coronavirus cases eight months since the virus first emerged in Wuhan, Hubei province, in late 2019.
On Thursday morning, AIA reported that the group’s value of new business plunged 37 per cent as reduced face-to-face meetings due to governments’ stringent measures to contain the coronavirus continued to dampen sales.
The Hong Kong-listed insurer said new business totalled US$1.41 billion, from US$2.28 billion a year ago. The company recorded a decline in new policies issued across all five of its key markets, including Hong Kong, China, Thailand, Singapore and, Malaysia, but the biggest drop was seen in Hong Kong, where new business dropped as much as 68 per cent to US$306 million.
Net profit in the six months to June dropped 35 per cent to US$2.2 billion, from US$3.36 billion a year ago, below analysts’ forecast of US$3.12 billion polled by Bloomberg. Revenue declined 19 per cent to US$19.66 billion from US$24.28 billion a year earlier.
“New business sales were most affected by containment measures,” the company said in its first-half results filed to the Hong Kong stock exchange on Thursday, adding that measures to contain the spread of Covid-19 across the markets in which it operates have limited face-to-face sales.
However, “we saw encouraging signs of recovery in sales for our markets where containment measures were relaxed during May, June and July, including the domestic customer segment of AIA Hong Kong,” said Lee.
This has come despite the third wave of the pandemic in Hong Kong, which now has more than 4,500 confirmed cases and over 70 deaths caused by Covid-19. The pandemic has dragged the city’s economy into a recession and pushed the unemployment rate to 6.1 per cent in July, the highest in 15 years.
Amid the pandemic, the company said over 40 per cent of the policies in the second quarter were issued digitally through video conferencing tools and mobile signatures.
Despite the disappointing results, AIA, which is the second-largest stock by index weighting after Tencent in the blue chip Hang Seng Index, has increased interim dividend to 35 HK cents, up from 33.3 HK cents a year ago.
In afternoon trading, AIA shares were down 3.8 per cent at HK$71.75.
More from South China Morning Post:
- China is considering an ‘insurance connect’ that would lower barriers to Hong Kong insurers, enable local offices to process claims
- ‘Insurance connect’ will be next big step for Greater Bay Area, with two services centres expected to be set up by end of year
- AIA expects sales in China to take a significant hit from coronavirus pandemic after profit doubles in 2019
This article AIA plans to fast-track China expansion under new president, pins hopes on easing Covid-19 restrictions first appeared on South China Morning Post