Aia Group Ltd S/Adr

Good morning from Hong Kong and welcome to AIA's Interim Results Presentation for 2023. I am delighted to announce very strong results in the first half, with excellent new business momentum and growth in all of our key financial metrics. Let me provide some highlights from the results. AIA's unrivaled distribution platform has powered a very strong acceleration of sales momentum in the first half. DOND grew by 37% for the group. AIA Hong Kong delivered an outstanding performance, more than doubling its VONB, and we delivered double-digit growth in mainland China, ASEAN, and Tata AIA Life in India. Our excellent new business performance contributed to growth in EV equity to $70.6 billion and operating ROEV of 13.3%. up nearly 4 percentage points from the full year 2022. Our large and diversified in-force portfolio drove growth in operating profit after tax and underlying free surplus generation, and our operating return on equity increased by 120 basis points to 14.2%. The Group's capital position remained very strong, with free surplus of $16.3 billion, and the Board has declared an increase of 5% in the interim dividend. In addition, we have now returned $5.5 billion to shareholders through our ongoing share buyback program. These results again demonstrate the power of AIA's business model that enables us to capture the growth opportunities across Asia and deliver cash returns to shareholders. Let me explain how we have delivered the excellent VOMB results. Our proprietary premier agency is the core of our unrivaled distribution platform and generated 75% of the group's VOMB in the first half. Critically, AIA's consistent focus on quality and dedicated support over many years enabled us to grow and enhance our agency during the pandemic. As each market reopened, our initial emphasis has been on uplifting the activity and productivity of our existing high-quality agents. Our success in the first half of 2023 is clear, with 27% VOMB growth and higher agent incomes. We have also grown both agency leaders and new recruits as we focus on increasing the scale and reach of our agency force. Our differentiated primary agency is the clear leader in Asia. AIA Group has been the number one MDRT company globally for the last nine years, and we are also number one in mainland China, Hong Kong, ASEAN, and India. The excellent first half performance has driven a 49% increase in the number of MDRT qualifiers, and our significant investments in TDA help to ensure that AIA is the company of choice for professional agents, positioning us to fully capture AIA's growth opportunities in life and health insurance. Our strategic partnerships with banks, brokers and digital platforms bring us complementary access to large customer pools across our markets. We have seen excellent performance in the first half, and our partnerships in total generated DONB growth of 62%. Within this, Bank Assurance delivered an increase of 38%, and the return of mainland Chinese visitors to Hong Kong helped to more than double our IFA VOMB. These results reflect the breadth and quality of our partnerships. In Bank Assurance, our approach is to build long-term strategic partnerships with high-quality banks, We are partnered with leading banks in Hong Kong, across ASEAN, Australia, and New Zealand, and most have more than a decade to run. In mainland China, we adopt a differentiated model, leveraging postal savings banks' vast network, targeting affluent customers with tailored products from AIA China, and assessing the mass market segment through our investment in China Post Life. and in India, Tata AIA Life's digital capabilities allow us to successfully partner with multiple banks in open architecture models. AIA's extensive capabilities in product, distribution, digital and analytics help our bank partners better engage with their customers, delivering profitable growth to our partners and AIA. Let me now take you through the performance from each of our key growth engines, starting with mainland China. In mainland China, as the surge in COVID cases subsided, AIA China saw a rapid return of strong momentum, with 29% VOMB growth from February. In our premier agency, we focus on uplifting agent productivity to leverage the reopening, driving strong growth and recruitment momentum. Protection is a core component of our customer proposition, and AIA China has grown DOMB from critical illness products post-reopening. We have also seen strong customer demand for our long-term savings products, where we focus on long-duration products that address our customer needs. AIA China has a unique opportunity from geographical expansion and we continue to make excellent progress. In May, we successfully launched our newest branch in Zhengzhou, Henan, and we have nearly doubled new recruits across new operations compared with the first half of last year. While still small, our partnerships provide incremental VOMV growth for AIA China. Here, we saw VOMB more than treble, driven by excellent results from Postal Savings Bank and BEA. AIA China's ability to deliver long-term sustainable growth is centred on our high-quality and differentiated Premier Agency that targets the rapidly growing and attractive middle-class and affluent customer segment, with our broad range of compelling propositions to meet their evolving needs. In our premier agency, our commitment to quality recruitment, a full-time model, and extensive digitalization differentiates our agents, and they are significantly more productive than the industry. Our premier agents are experienced professionals with the skills, tools, and products to successfully meet the increasing demands of mainland China's expanding middle-class and affluent customers. This segment contributes 85% of AIA China's AMP, with an average customer holding over six AIA policies. Our digitally powered needs-based advice process identifies individual protection gaps and sees our customers increase their critical illness sum assured by a factor of almost three times. And the third component is our propositions. The majority of our new policies are protection, and more than 90% of our agents sold protection in the first half. And our long-term savings products help our customers meet their broader financial goals, with 75% sold to existing customers, almost all of whom already have an AIA protection policy. For example, our popular new private pension products launched in April take advantage of tax benefits, and many of our products include additional retirement planning and medical services tailored to our customers' needs. It is AIA's unique combination of our differentiated primary agency, underinsured wealthy customers, and our compelling propositions that enables AIA China to build on its track record of sustained value creation across both our established and new operations. Also, in the mainland, our strategic investment in China Post Life targets the mass market opportunity and complements AIA China. CPL has continued to deliver excellent results with VOMV up 55% in the first half to more than $1.1 billion. Supported by dedicated experts from AIA Group Office, CPL has continued to advance its strategic priorities. We have seen a further shift towards higher quality new business and an excellent increase in critical illness sales. Our investment in China Post Life enables AIA to capture significant additional upside in mainland China. Moving to Hong Kong, VOMB more than doubled, and AIA Hong Kong became the largest contributor to the group's VOMB in the first half. We achieved excellent growth across all channels and customer segments. While increased demand from mainland Chinese visitors was the main driver of growth, we also delivered double-digit VOMB growth from domestic customers. AIA's premier agency remains the leader across Hong Kong and Macau, and the combination of higher agent activity and productivity drove VOMB growth of 82%. We are focused on increasing the scale of our agency with new leader numbers up 29% and new recruits up 60%. Through our partnerships channel, we saw VOMB more than treble, with excellent growth from our bank partners and a return to market leadership in IFA. As visitor numbers increased, we have delivered very strong quarter-on-quarter VOMB growth in our MCV business. Sales have been to visitors from across mainland China with around 60% coming from outside the Greater Bay Area. In the second quarter, we have seen an increase in demand for protection with close to 40% of new policies from critical illness products. And while average case size has remained stable, we have seen a strong increase in sales to customers who are new to AIA. We are confident that demand is strong and sustainable as we scale our recruitment and build new capabilities to attract and retain our target customers. AIA is well positioned to capture the opportunities in Hong Kong and the GBA by meeting customer needs across our extensive distribution channels. Turning to our ASEAN markets, the region is a key growth engine for the Group, and accounted for over one-third of total VOMB in the first half. Excluding Vietnam, where industry-wide issues have impacted new business sales, we have delivered aggregate VOMB growth of 16%, and we continue to rank number one in ASEAN by new business sales. Awareness and demand for insurance continues to rise across the region, driving a 20% increase in traditional protection VOMB. Our powerful multi-channel distribution platform is exceptionally placed to meet growing customer needs, with both our agency and partnerships delivering strong growth. We have the most professional agency in the region and achieved increases in overall productivity and active new agents. Our long-term strategic partnerships are a key asset, and we delivered excellent growth with Bangkok Bank in Thailand, Citibank in Singapore, and BPI in the Philippines. ASEAN offers enormous potential for AIA with a huge protection gap and growing middle class and affluent population that will exceed 500 million by 2030. Our largest ASEAN business is in Thailand, where we achieved 28% DOMB growth in the first half, supported by excellent performance across distribution channels, and we continue to lead the market in new business sales. Our agency is the largest and most professional in the market by far, and we continue to uplift quality and standards year on year. Our financial advisor program continues to grow and further differentiates our market-leading agency with VOMB more than double the first half 2019 levels, driven by greater headcount, productivity, and enhanced product mix. Only AIA's agents can deliver the superior mix of integrated unit link and protection products that makes us the market leader in these segments. We have a differentiated strategy focused on growth through quality protection and long-term savings products, and there is still substantial headroom for growth for AIA in Thailand. Finally, turning to India, where our joint venture Tata AIA Life continued its excellent track record with VOMB up by 48%. We are the number three private life insurer, the market leader in retail protection, and we have a balanced multi-channel distribution platform. Our primary agency strategy has made us the number one MDRT life insurer, and our focus on scaling and enhancing our agency delivered ANP growth of 80%. We delivered more than 30% ANP growth through our six high-quality bank partners with the potential to reach more than 165 million customers. And we have the number one share of wallet through our key brokers, driving AMP growth of 45% in our digitally enabled partnerships. India's economic growth and increasing population is driving compounding demand for life and health insurance. Our protection-focused strategy, quality distribution and proven execution ensure that Tata AIA Life is well on its way to capturing India's massive potential. In summary, our unrivaled distribution platform and multiple engines of growth have achieved a return to excellent momentum and VOMD growth of 37%. In mainland China, we saw a rapid recovery post reopening, and our differentiated strategy can capture the full potential of this market. AIA Hong Kong more than doubled DOMB with double digit growth in the domestic customer segment and very strong and sustained sales to mainland Chinese visitors. We are the leader in ASEAN, where we delivered strong VOMB growth and excellent results in Thailand, our largest business in this region. Our fast-growing industry-leading business in India has achieved another excellent result with VOMB up by 48%. Asia continues to offer the best prospects in the world for life and health insurance, and I am confident that they will only get stronger over time. high levels of private savings, growing yet ageing populations, low levels of insurance penetration, and limited welfare coverage create an urgent need for AIA's personalised products and high-quality advice. Our strategy is aligned to these structural growth trends, and we have the superior financial strength to capture the full economics of growth in the region. AIA is the right business to deliver sustainable long-term value for all our stakeholders. Thank you.

Good morning. In the first half of 2023, AIA has delivered excellent VOMV growth and a very strong financial performance overall. I will now take you through the financial results in more detail across growth, earnings and cash, starting with growth. VOMB grew by 37% in the first half of 2023, with growth from all of our reportable segments and distribution channels. AA Hong Kong more than doubled VOMB, driven by very strong demand from mainland Chinese visitors, while we also delivered double-digit growth in our Hong Kong domestic business. AA China was up 14% for the whole of the first half. As the effects of the pandemic subsided, strong momentum returned, and VNB growth was 29% from February to June. AA Thailand delivered growth of 28%, reflecting a very strong performance from both agency and partnership channels and a stable VNB margin compared with the second half of 2022. AA Singapore was up by 5%, supported by a strong performance from our Bank Assurance channel. And for AA Malaysia, growth in all distribution channels delivered an increase of 10% in total. Other markets increased 8% in aggregate, with very strong growth, offset by substantially lower sales in Vietnam. We delivered very strong double-digit growth from the rest of the markets, including the Philippines, Australia and New Zealand, and an outstanding performance from Tata AA Life in India. Overall, the group delivered excellent VOMB growth, powered by AA's unrivaled distribution platform and our consistent financial discipline. Our continued focus on writing high-quality, profitable new business generates attractive returns over time. We grew VOMB to more than $2 billion, supported by 49% growth in AMP and a VOMB margin of 50.8%. We saw growth in the sales of traditional protection products in Hong Kong and also experienced very strong demand for our long-term savings products. This is reflected in the higher contribution from participating business in our product mix. The group's PVMBP margin remained stable at close to 10%. Our ability to meet the full range of customer needs across protection, long-term savings and retirement products is a key differentiator for AIA and a major factor in our confidence in the group's future growth. EV operating profit was $4.4 billion, up 20% per share, driven by the excellent VMB result and an increase in the expected return, reflecting higher government bond yields and risk discount rates. Operating experience variances were positive and added $0.2 billion. We have experienced increased medical claims compared with the lower levels seen during the pandemic and have included a temporary claims provision within operating assumption changes for prudence as we continue to reprice our health insurance portfolios. Our consistently favourable operating variances have added $3.9 billion to EV equity since IPO. Operating return on EV of 13.3% was up by nearly 4 percentage points from the full year 2022 level. And EV equity was $70.6 billion after returns to shareholders of $3.6 billion. Our EV methodology uses spot market yields and trends over time to our long-term assumptions, which aims to smooth out short-term market volatility. While AA is not immune to capital market movements, you can see from the sensitivities that our EV remains highly resilient to short-term market volatility from both interest rate and equity market movements. We have a substantial allowance for risk in our discount rates, with a risk premium of close to 5% for the group, consistent with the levels used since IPO. Now moving to IFRS earnings, which we are reporting under IFRS 9 and 17 for the first time. Under IFRS 17, the Contractual Service Margin, or CSM, is the key driver of OPAT. The CSM represents the stock of expected future profits that are yet to be re-earned on our in-force business, and these will release over time into OPAT and net profit. We've built up a very large CSM over time through the addition of successive cohorts of profitable new business, with a discounted value of more than $50 billion at the start of the year. In the first half, the CSM grew by 19.3% on an annualised basis before variances, exchange rates and the CSM release into OPAT. The growth was driven by a new business of $3.4 billion and an expected return of $1.2 billion. Variances and others of $1.4 billion mainly related to market movements. The annualized CSM release rate remained stable at 9.7%, as $2.6 billion was released into OPAC from the CSM at the end of the first half. On an underlying basis, CSM grew strongly by $2 billion over the first half of the year. As you saw in the previous slide, the addition of large-scale profitable new business is the main driver of future growth in the CSM. while the release of CSM forms the vast majority of the insurance service result, and this in turn is the largest component of our OPAT. The insurance service result was stable at $2.8 billion, as growth in the CSM release was offset by higher medical claims within operating variances, similar to EV. Net investment results after expenses increased by 9% to $1.7 billion due to higher equity asset balances and increased long-term investment return assumptions. After reflecting higher finance costs and a more normalized level of tax, OPAC remained stable compared with the same period in the prior year, and operating margin was strong at 17%. After the positive effects of the ongoing share buyback program, OPAP per share increased by 4%. AIA's sources of earnings are high quality, with 73% from insurance services. Regular premiums make up 99% of our total weighted premium income, providing additional future premiums, a very strong cash flow, and ample liquidity on our large enforced book. Taken together with our geographically diverse portfolio of businesses, this underpins the resilience of the group's earnings and balance sheet. Our disciplined strategy of focusing on value and quality has helped deliver consistent growth in OPEC per share to over three times the IPO level, uninterrupted by the adoption of IFRS 17. Shareholders' allocated equity provides a clearer reflection of the underlying drivers of the change in equity by excluding the fair value reserve and insurance finance reserve contained within other comprehensive income. As a reminder, under IFRS 17, virtually all mark-to-market movements from participating business flow to insurance contract liabilities, reducing the volatility of net profit compared to the prior accounting basis. Before returns to shareholders, allocated equity increased to $48.7 billion, as net profit increased by 50% to $2.3 billion. The combination of $3.3 billion of OPAT and the share buyback helped drive operating ROE up by 1.2 percentage points compared with the full-year 2022 level to reach 14.2%. A new measure under IFRS 17, Comprehensive Equity, is the sum of shareholders' equity and the CSM, net of tax, reinsurance and non-controlling interests. Comprehensive Equity represents the aggregate value of historical and expected future profits from the in-force business, net of cumulative cash returns to shareholders. as at 30 June 2023, comprehensive equity of $83 billion was evenly split between shareholders' equity and net CSM. Our financial leverage ratio, including the net CSM, was 11.9% at 30 June 2023, further supporting AA's financial flexibility and our strong credit ratings. With comprehensive equity significantly higher than our EV equity, the prudence of AIA's embedded value reporting is clear. Finally, capital and dividends. The LCSM coverage ratio is the group's principal regulatory solvency measure, taking a fully consolidated view of local business requirements, and is calculated on a prescribed capital requirement basis. While the LCSM is consistent with the capital requirements used to assess regulatory solvency, free surplus continues to be more representative of the capital position for shareholders. Before the effects of the share buyback and other non-operating items, the LCSM ratio was stable over the first half of the year. Other non-operating items include temporary effects from internal capital movements that will reverse and changes to the regulatory regimes in South Korea and New Zealand. The sensitivity of our LCSM coverage ratio to mark-to-market movements on equities and interest rates is low, reflecting the strength of our balance sheet and our robust risk management. AA's capital position remains very strong, with a group LCSM coverage ratio of 260% at 30 June 2023. Our high-quality investment portfolio is constructed to match our insurance liabilities as closely as possible. Our participating business asset allocation aims to achieve attractive returns over the long term for policyholders above a base level, while non-participating investments are positioned more defensively. As a result, 81% of non-par and surplus assets are fixed income, with the vast majority either government and government agency bonds or investment-grade corporate bonds. Within this, the $29 billion corporate bond portfolio is well diversified across sectors and geographies, and is comprised of bonds from more than 1,900 issuers with an average holding of $15 million. The average credit rating of our corporate bond portfolio at A- is unchanged from the full year, and there was no material increase in expected credit loss provision in the first half of 2023. The Group's exposure to real estate and local government financing vehicles in mainland China is small, And almost all of AIA China's fixed income assets are government and government agency bonds. In summary, we have strong asset liability management and a high-quality diversified investment portfolio. In the first half, free surplus increased by $2 billion to $19.9 billion before returns to shareholders. The increase was driven by underlying free surplus generation of $3.3 billion, up 10% per share, and reinvestment of $0.7 billion in new business at attractive long-term returns. The $3.6 billion return to shareholders included $2 billion through the share buyback. As a result, free surplus closed the first half at a very strong $16.3 billion. The Board has declared a 5% increase in the interim dividend to HK$42.29 per share. The Board continues to follow AIA's established prudent, sustainable and progressive dividend policy, allowing for future growth opportunities and the financial flexibility of the Group. In addition to regular dividends, our ongoing $10 billion share buyback programme has to date returned $5.5 billion to shareholders. A total of $22.5 billion has now been returned to shareholders since IPO. In conclusion, in the first half of 2023, the group delivered excellent VOMB growth and very strong financial results overall across growth, earnings and cash. VOMB was up 37%, with VOMB in Hong Kong more than doubling, and double-digit growth in each of mainland China, our ASEAN businesses and Tata AA Life in India. EV operating profit increased 20% per share, and operating ROEV jumped to 13.3%. OPAC per share was up 4%, and operating ROE increased to 14.2%. Underlying free surplus generation grew by 10% per share, and our capital position remains very strong with free surplus of $16.3 billion. The Board has declared an increase of 5% in the interim dividend, and we are around halfway through our $10 billion share buyback programme. AIA's robust balance sheet is a key competitive advantage, ensuring we retain our unmatched financial flexibility to invest in the enormous potential for profitable new business growth in the region, fully harnessing the exceptional qualities of AIA that are clearly demonstrated by today's results. Thank you.

Good morning from AIA Central in Hong Kong. Welcome to our 2023 Interim Results Question and Answer session. I'm Lars Burbidge, Chief Investor Relations Officer. Together with me today, we have Li Yuanxiao, our Group CEO and President, and Garth Jones, our Group CFO. We also have our Regional Chief Executives and other members of our Group Executive Committee with us in the room. I know this is a busy morning, but I hope you've had the chance to watch the two video presentations which we posted to the website earlier today, or read the transcript. Before we start the Q&A, Yuanxiang will make some opening remarks to tell you some key messages from the results.