EUR 850.00 For Business Accounts Only

Morningstar | 01299 Updated Forecasts and Estimates from 11 Sep 2018

Since its restructuring and its stock market debut in 2010, AIA Group has seen strong momentum in the life insurance business in most of the markets in which it operates in the Asia-Pacific region, thanks to a reputable brand, successful strategic focus, and strong agency force.AIA has unique access to major Asian markets with strong economic momentum and favorable demographic dynamics. More than 55% of annualized new premiums are from advanced economies, including Hong Kong, Singapore, and Korea, with the balance from emerging economies such as Thailand, China, and Malaysia. An aging population and growing disposable income drive strong life insurance premium growth. AIA also benefits from diversified life insurance demand, given the region's diverging age structure. As a result, the company can sell high-margin medical, health, and annuities products in mature markets including Hong Kong, Singapore, and Thailand, while younger demographics in Malaysia, China, and Indonesia bode well for long-term savings products and growth potential in the bancassurance channel. AIA has achieved industry-beating average growth of 27% since its initial public offering in 2010. However, we expect the momentum will slow in the near term. Most of the past strong momentum came from the firm's margin expansion via product mix optimization and robust sales in China, but we believe the market expansion is unsustainable, given rising competition and a growing customer base. We expect greater performance divergence among geographic regions, where Thailand, Singapore, and Korea will drag on growth because of the ongoing business transformation. Also, tighter restrictions on mainland customer purchases in Hong Kong will place downward pressure on the firm's near-term growth. Despite such challenges, we believe AIA's powerful distribution networks, strong product offerings, and diversified geographic mix in Asia enable it to capitalize on rising insurance demand in the region. This should justify its valuation premium against major peers. The diversity in distribution channels, geographies, and product offerings should translate to a relatively steady future revenue stream.