How was AIA’s performance in 2012?
On 27 Feb, 2013 we announced record results for year ending 30 Nov, 2012 across all three of our key performance metrics:
- A 27% increase in the value of new business (VONB) to $1.188bn.
- A 12% rise in operating profit after tax to $2.159bn.
- A 15% increase in embedded value to $31.408bn.
Since our IPO, AIA has achieved a great deal of progress. In just the past three years, we have more than doubled our VONB – our main performance measure. Our embedded value has increased by over 50% since the end of 2009 – by more than $10bn – to over $31bn.
What was the rationale behind the acquisition of ING Malaysia in December last year?
This was a rare opportunity to acquire a high-quality company that is an excellent strategic fit with AIA, and one that plays directly to our corporate strengths and priorities. ING is a high-quality business with top-quality people that complements our own by having a strong agency force along with an exclusive 10-year agreement with Public Bank, the second-largest bank in Malaysia. It makes AIA the number one ranked life insurance provider in Malaysia, a key market for AIA, where we have over 60 years’ experience and expertise. We have said that our focus remains primarily on organic growth, but that we would review opportunities that make good business and financial sense for our shareholders – and this deal was exactly that.
This is a very attractive acquisition opportunity that is an excellent fit with AIA’s strategic strengths and priorities and it will generate significant upside for AIA’s shareholders, customers and employees.
What types of client does AIA target?
We serve middle-class individuals and families throughout the region with savings and protection needs. We do have specific product offerings for HNW customers, but ultimately we aim to meet a wide range of clients’ needs through their different life stages.
We serve the holders of over 25 million individual policies and 13 million group scheme members. We believe there is a great deal more we can do to drive incremental sales to our existing customers through improved knowledge and more targeted product propositions.
Where are you seeing the strongest sales this year both in terms of region and products?
AIA continues to deliver VONB growth across all of our market. In 2012, VONB in Hong Kong, our largest market, increased by 20% while Thailand reported 26% growth. In Singapore, AIA’s VONB grew by 38%, with China, our fourth-largest market, delivering 22% growth.
In addition to our ongoing focus on protection products, we have strengthened our range to address our customers’ long-term savings needs. We are now seeing the returns from our improved unit-linked products, with growth of 35% against a difficult market backdrop over most of last year.
What is your product strategy?
AIA aims to deliver a broad range of products that meet our customers’ needs for life cover, accident and health, and long-term regular savings. We identified a need for increased A&H cover and other types of protection insurances (e.g. mortality), and, which was an opportunity for us, to stimulate regular premium retirement savings for middle-income groups and opportunities to penetrate the SME market with group employee benefits schemes – a comparatively new field in Asia outside the multi-national community.
Our focus, therefore, includes next-generation unit-linked products, critical illness insurance and other accident and life insurance products.
However, having the right products are only one part of the equation. Our product strategy goes hand in hand with our distribution strategy to provide consumers with the right face-to-face advice on the types of products they need through our agency distribution channel.
How does AIA Group differentiate from its competitors?
We have a rare and advantaged franchise built up over many decades. We were the first international insurer to set up operations in most of the region’s major economies, and this early mover advantage resulted in AIA now being the only life insurer with a pan-Asian presence based on 100%-owned subsidiaries and branches – something which cannot be replicated by others. Our 100% ownership structure allows us to capture the full economics for our shareholders.
We have the market-leading brand that is universally recognised and respected. We have also been able to build over time a depth of distribution – especially in the dominant tied agency channel – that others cannot match.
AIA’s highly effective agency distribution across the region is a huge competitive advantage for us and is the cornerstone of our high-quality growth. Our proprietary distribution provides direct access to both new and existing customers, helping provide the advice that will tap into the significant and growing needs of consumers in Asia.
The Asian insurance market offers us tremendous growth opportunities, driven by large protection gaps, favourable demographic trends and economic development in the region
We have a strong track record in innovation and a broad capability across a full range of products to meet our customers’ needs, while responding to evolving market trends.
Finally, as can be seen from our 2012 results, our financial strength and the cash flows generated from our in-force book of business allow us to finance significant growth and our progressive dividend policy.
What regions of the world have the most potential?
The Asia Pacific region. The Asian insurance market offers us tremendous growth opportunities, driven by large protection gaps, favourable demographic trends and economic development in the region.
Asian economies have much stronger and more resilient fundamentals than other parts of the world.
Public debt is less than half of GDP with a forecast GDP growth rate of over 6% pa, significantly exceeding just over 1% for the G7 countries.
The rapid growth in the urban population, expected to increase by 360 million people comes with a phenomenal increase in the number of households with disposable incomes above $10,000 – a critical level when it comes to purchasing life insurance.
In contrast, the take-up of pensions and life insurance per capita across the region is very low.
This all adds up to a vast latent need for life insurance of all types –long-term savings, mortality protection, and accident and health.
We have an advantaged distribution and product platform that is strongly supported by these major economic and demographic drivers of growth and profitability in Asia. This is especially so given we are 100% focused in this attractive region without dilution or distraction.
Does the company plan to target any new markets geographically?
We have no plans at this time. AIA now has operations in 16 countries and will focus on maximising our growth in these markets.
Looking ahead, what are AIA Group’s priorities?
While we have achieved a great deal since the IPO, we are still early in our journey. Looking forward, we believe AIA can take full advantage of the outstanding opportunities presented in all of our markets.
The growth momentum and very strong capital position that we maintained in 2012 position us well for 2013. Today, we are the fifth-largest insurance company in the world and the leading pan-Asian company. We are confident in our ability to achieve higher levels of success and that growth will be reflected in steadily increasing value for shareholders.
Going forward, we will implement our growth strategy by launching innovative new products, improving and expanding the quality and productivity of our distribution network, leveraging our strong capital and brand position continuing to empower our local operations to take optimum advantage of their local market opportunities; and encouraging each and every one of our employees to develop their technical skills and motivation to excel.
