Aia Group Ltd S/Adr

Good afternoon from AIA Central in Hong Kong, and welcome to our third quarter 2023 Q&A. I'm Lance Burbage, Chief Investor Relations Officer for AIA Group. Together with me today are Li Yuanxiong, our Group CEO and President, and Garth Jones, our Group CFO. We also have other members of the Group Executive Committee with us in the room or joining us from Singapore on Zoom. Today, this morning, we published our third quarter new business highlights on the Hong Kong Stock Exchange and our corporate website. I'm sure you've had a chance to go through the document. Given the current environment, we thought it would be helpful to host a call. But before we start our Q&A, Yuen Siong will make some opening remarks on the third quarter performance.

Good afternoon, everyone. Let me start with some highlights from another excellent quarter for AIA. VOMB was up 35% to $994 million. This is the Group's highest-ever third quarter and reflects the strong demand for our products and services across Asia. We have built on our very strong first-half performance with further double-digit increases from our key growth engines of mainland China, Hong Kong, ASEAN and India. Both our agency and partnership distribution channels delivered excellent VOMB growth. Agency VOMB grew by 27%, supported by higher agent activity and a very strong increase in agent productivity. We also saw a quarter on quarter increase in high quality recruitment for the group and in each of our five largest markets. Working with our unrivaled network, our partnership channel delivered a 62% increase with growth in all of our reportable segments. A favorable product mix shift helped the group's VOMB margin increase from the first half to 51.2% in the third quarter. AIA China's VOMB margin improved through the third quarter, driven by product mix and repricing. As recruitment momentum has increased quarter on quarter during the year, we have seen an increased proportion of sales coming from customers new to AIA. I am also delighted that we recently received regulatory approval to upgrade our Sijiazhuang licence to cover the whole of Hebei Province. In September, we also received approval for a new city in Hubei Province, Xiangyang, where we expect to open in the first quarter of 2024. Just yesterday, we received another approval for setting up a new operation in Luzhou in Sichuan Province. AIA Hong Kong delivered another quarter of excellent growth with sales to mainland Chinese visitors continuing to represent about half the total VOMD. In Thailand, strong momentum has continued in the third quarter with similar growth to the first half. AIA Singapore and AIA Malaysia grew across our agency and partnership channels. Finally, other markets were up, excluding Vietnam, with strong double-digit growth from India and the Philippines. Our business in India continued to generate strong double-digit DONB growth, driven by excellent performance of its proprietary agency. Tata AIA Life is now the largest contributor to VOMB in the other markets segment and ranked No. 3 in Indian private life insurance. In summary, these new business results again reinforce the strength, quality and diversification of AIA's businesses. We are confident that the continued execution of our strategic priorities uniquely positions AIA to capture the enormous long-term opportunities in the Asian life and health insurance market and deliver long-term sustainable value for all our stakeholders.

Now over to you for questions. Thanks, Yun Xiong. And we're ready for your questions. So over to you, Kelly. Thanks.

Ladies and gentlemen, we will now begin our Q&A session. If you wish to ask a question, you need to make sure that you are logged into the Zoom webinar. Please click the hand raising button and wait for your name to be announced. After I call your name, please press the unmute button on your screen and ask your question. If at any time you need to cancel your request, please unclick the hand raising button.

let's proceed and our first question comes from charles show of ubs charles please press the unmute button on your screen and ask your question okay great thanks uh congratulations i think you know this is another very strong quarter and i think the value of new business also beat the market expectations so i have a two question The first one, I do want to ask about the MCV business in Hong Kong. My understanding is that the value of new business from the MCV in Hong Kong declined queue on queue. So could you maybe just talk a little bit about this one? And also, I believe, you know, both the sell side or maybe the buy side, people also expect, you know, the recovery rate compared with 2018 will just, you know, probably keep increasing. So how do you see this one? Because, you know, when we track the individual, you know, MCV arrival in Hong Kong, I think, in terms of the number of the MCV arrival of, you know, compared with the same period in 2018 actually peak in August, and then we see the recovery ratio actually decline. in September and also in October. So do you feel that this will be the new normal, or do you think that the MCV business could also recover going forward, maybe even exceed the 2018 level? Overall, I just want to hear your thoughts about the MCV business going forward and perhaps also in October. Shall we expect better growth going forward? And what's the normal recovery for the MCV business? So this is my first question. Second question, you know, let's talk about margin. I know this is probably, you know, probably leave you, you know, boring, but I do receive, you know, the question from the investor asking me about the margin. So we're glad to see the Q and Q margin improve by two percentage points. But I also want to talk about the margin in China. So we noticed that your margin actually progressively improved throughout the quarter. So shall we expect this trend to continue? And do you still see the margin as maybe one of the key focus for you guys? And can you maybe give us the margin split between the agency and bank assurance helping us to better understand? And lastly, maybe this is, you know, this is also the question for, you know, Yuanxiang. So what do you see, you know, like what is the real moat of AIA China, you know, compared with domestic peers? Do you see higher margin is one or do you feel the premium agency is the key? Thank you.

Okay. Thank you for your, I think you got three questions instead of two. But anyway, first question, I think I'll hand over to Jackie to talk more about MCV business. But I, As I have emphasised often in the past, the demand for Hong Kong insurance products amongst mainland Chinese consumers is very strong and robust. As I said before, I think it is even higher than it was pre-pandemic and for the reasons which I have elaborated many times before. Jackie?

Thank you for the question. First of all, I am very pleased that Air Hong Kong and Macau delivered another excellent increase in VOMP in the third quarter of 2022. It is really driven by a strong PMI agency of a double-digit increase in number of active agents and also a very strong increase in productivity in terms of AMP per active agent. In fact, in the so-called quarter-to-quarter, but as you understand, we always emphasize we manage our business on a whole-year basis. On a quarter-to-quarter, there could be fluctuation or seasonal change. In fact, our domestic business in the third quarter remains very strong. We have quarter-to-quarter growth in the domestic business. On the MCV segment, I also want to mention that, in fact, we continue to track the MCV business versus the arrival of mainland tourists. It is still broadly in close correlation with the visitor number. And in terms of the average case size, as we said in the first half result, we observed a big increase in the average case size from the MCV customer compared to the pre-pandemic level. And that big increase, yeah, there is still a big increase in the average case size. But in the third quarter, we observed a slight reduction in the average case size for the saving plan. It is just less than a 10% kind of reduction, but compared to the pre-pandemic level, it is still a big increase. We observed that in the third quarter, The agency MCV business, in fact, remain relatively stable in terms of the business momentum number of case. In the IFA broker channel, we observe a slight reduction in the number of cases through our IFA broker channel. And there could be various reasons causing that. Maybe I think many of our analysts also aware in the IFA broker channel in Hong Kong market, it is under very fierce competition in terms of giving out the broker compensation. But AIA Hong Kong, we always remain financially disciplined in this area. So we will continue to sharpen our proposition and ecosystem service, et cetera, for the MCV business across all the channels, instead of competition on price or compensation. But as a whole, I just want to draw your attention that, in fact, the strong growth of AI Hong Kong in third quarter, they are supported by very strong fundamental in our business underlying drivers.

Your second question around the margin, specifically about the China margin. Again, I'll ask Jackie to talk about it more in detail. But first of all, as you know, we are always focused on VOMB growth, right? So this is what we always focus on. We don't target any particular level of VOMB margin. That said, I think as we have explained before, The economics of the new business that we write in China or in other markets remain very, very attractive. The new business that we write attracts an internal rate of return well in excess of 20% with very short payback periods. The DOMB margin that we write in mainland China remains very, very healthy.

Yeah, thank you for this question. So once again, I will want to start by saying that it is very pleased to see that AI China's growth actually accelerated from the first half 2023 to our third quarter, actually with a real and big goal of over 20% in the third quarter. And this underlying growth is driven by a very strong agency fundamental because agency channel is our core channel in China. It is driven by double digit increase in number of active agents and also enhance the productivity of our PMI agency in mainland China. And in terms of grow from a different kind of product. In fact, we have growth from both protection and savings business. And protection product, yeah, remain the largest in terms of number of new business in the third quarter. So I just want to give a little bit color on the margin, as Yongsheng already mentioned. Actually, we grow the whole VOMP volume, not just focusing on margin or AMP volume alone. Now, by channel and channel, in fact, our margin increased or improved from second quarter to third quarter. Agency margin broadly stable, but a little bit increased compared to second quarter. And for the bank-as-run channel, the margin also increased in the third quarter compared to the second quarter. As you know, in China, there is a product repricing actually that has more impact on the bank assurance product and we saw the margin from bank assurance also improved from second quarter to third quarter. As a whole, the overall margin in China in the third quarter is also affected by the changes in the channel mix as in our first half result we already mentioned about this. For the third quarter in A China, according to a channel mix, Bank Assurance Channel actually make up a slightly higher proportion of the business compared to the second quarter. As a result of the repricing, especially on the Bank Assurance product side, there are more sales of the Bank Assurance product before the new repriced product in the Bank Channel kick in.

And then on your third question, Director and me, I think it is clear to me that what you refer to as AI China's mode, which is our What differentiates us from the market is clearly our premier agency model, which is highly differentiated and very different from the agency model that we see amongst some of the local or the other international players in mainland China. We have the most productive agency channel, full-time. and very focused on selling protection business. I think another very unique point about AIA China is the fact that our ability to expand into new provinces, which gives us access to even much greater numbers of middle class and affluent customers in the future. So this, I think, is really what differentiates AIA China from the rest of the market. And I continue to be very optimistic about the prospects of AIA China going forward.

The next question comes from Klesh Mistry of HSBC. Klesh, please press the unmute button on your screen and ask your question.

Hi, good evening. It's Kailash here from HSBC. I guess my questions are just coming back to China. Just wanted to understand a little bit about if you could just provide a little bit more colour on the product mix, in particular in savings. Is it mainly par business that you're selling or has there been a material sort of pickup in pensions business and You know, if you can make any comments on margin, that would be helpful. And ditto on the critical illness side, you know, has there been any major product changes there to make it more attractive? I guess my second question is around, you know, how the new business value translates into new business CSF.

You have to speak louder.

Yeah. Is that better?

Yes, yes.

Yeah, my second question is around how the new business value translates into new business CSM. If I understood correctly, at the half year, that ratio fell partly driven by business mix. In this quarter, we're seeing better business mix. So should we infer that that ratio falls? starts to move back up again, which is obviously important for our CSM forecast. And just one last one, if I can just squeeze it in. There's a lot of noise in China about the Institute of Actuaries recommending lower investment returns, which obviously leads to lower risk discount rates. I don't want you to comment on whether you would do that because obviously you'll let us know at the full year, but just wanted to understand Is the sensitivities that you provide at the group level, is it the same for China or should we be thinking there's something materially different for, you know, for example, a 50 basis points decrease in interest rates overall? Thank you.

So thank you, Kilesh. So let me take the first question about the product mix of A China. So I continue to emphasize our premier agency and our premier agency, their DNA actually is to sell a very balanced product and also protection focus. So I want to reiterate, in terms of new business cases in the third quarter, again, more than half of it, they are protection business. And there are critical units product make up something like 70%. of our protection business. And as we already mentioned in the first half, we saw, we do see a stronger interest for long-term saving product in mainland China, especially our Pima agency. They are reaching to the F1 and above customer segment. In fact, one of the key product in the third quarter remain the tax-favorable or tax-deductible personal pension benefit product that remain our top selling product in the agency channel. And our other saving product are also long-term saving. So just to give you a little bit color, we also continue to see that the tax-deductible private pension product drive more acquisition of new customer. And many of our new agents, they also seize this opportunity to make use of this long-term saving plan to acquire new customers. In fact, roughly 40% of those private pension benefit customers, they were new to AIA, and we start to see the repurchase of these customers. for our AIA agency. So far, we see that at least the repurchase rate from this private pension customer was above 10%. So I would say that AIA, with the PMAC agency, we are able to capture all these long-term saving opportunity in China.

Yeah. Yeah, thanks, Kailash, and glad you got your question in this time. Firstly, on the new business CSM, just to maybe help you with, it does vary by product and by market and so on, but to give you some help with your forecasts, the multiple in the third quarter was similar to the first half, so that should help you with your forecasting. In terms of the China interest rate, For the embedded value, we've said the sensitivities are small, and you'll see that in China, it's no different in that regard. For VMB, yes, there is a negative, as there is for the rest of the group when you look at it overall. But, you know, again, as we've seen, we can reprice, and that has a positive impact. So you have to look at the pricing as well, the repricing that we've already done this quarter. Thanks, Garth.

The next question comes from Thomas Wang of Goldman Sachs. Thomas, please press the unmute button on your screen and ask your question.

Thank you. Thank you for the opportunity to answer the question. Just a couple one. First one, a quick one. In terms of number policy, especially CI policy in the MCV sales, I think we talked about first quarter, second quarter being, I think, 35, 38. Can you just give us an update? So what's the CI number policy mix in MCV sales in the third quarter? And then secondly, staying on MCV, I think Jackie talked about sales is broadly, still broadly tracking the number of visitors. But obviously, the number of visitors was actually quite a lot, up a lot, 27% in the third quarter versus second. But sales was actually lower. I'm just thinking, looking ahead, fourth quarter, number of visitors, I mean, I understand third quarter is a lot of tourism. But thinking about fourth quarter, if we think about normalizing, is it normalizing to a second quarter type of visitor number and the sort of sales tracking that? Is that something we should think about? Just that, yeah. Thank you.

Hey, Thomas, your first question on MCV, you say 35, 38, what is it? I think the CI mix of MCV business. Oh, CI. Yeah, the CI mix. Yeah. No? Yeah, already unmute. So yeah, the CI mix remain largely unchanged. In fact, we see a little bit increase in the average case size of CI in the first quarter, just to let you know. So the CI mix remain largely, so it is still account for 38% of the number of policy in the first quarter. So the need for CI from mainland Chinese customer remain very high. So, in fact, our MCV business, we always emphasize that the MCV business in Hong Kong and Macau has been there for more than a decade. And they continue to have the fundamental attractiveness of the kind of product and services available in Hong Kong and Macau. that continue to attract the mainland Chinese customer, especially the more affluent and above segment who are interested for more flexible product, for diversification of wealth management, et cetera, and long-term saving. So we see that this need, this fundamental driver of those needs remain very, very strong. So we continue to have a very strong confidence in the MCV business in Hong Kong and Macau.

I was just going to add on the tracking of visitor numbers. I think when you look at it, even at an industry level, you'll see it's less than 1% of visitors that buy insurance policies. So I think having too much reliance on visitor numbers, especially from a quarter-to-quarter perspective, and you mentioned seasonality, that I think it's something that I would steer you away from.

The next question comes from Andrea Green of Autonomous. Andrea, please press the unmute button on your screen and ask your question.

Good morning or good afternoon. A couple of questions actually. Firstly, I wanted to get a bit more detail around this issue about agency recruitment growth in China, which you say is very strong double digit. that having had a flatlined agency numbers through the lockdown, as you grow that number, could you give us a sense as to how fast it's growing and how fast new recruits come through into active agents so that we can get a sense of the power in the engine in 24? And then secondly, a very simple question, how long do you think the malaise in Vietnam lasts?

I think I'll ask Jackie to talk about the agency recruitment trends in mainland China, but I'd like to also emphasize that at AIA, we are very focused on quality, so we ensure that the people that we recruit and put on maintain high standards of quality.

Actually, we are also very pleased that the new agent recruitment momentum continues to build the attraction in the third quarter of this year. It is a very good growth of a number of new agents recruit across both our existing province The President at least something like four times of selection. So we continue to maintain a strong focus to grow quality new agent. And also want to let you know that, in fact, we also see that our new agent active ratio, as you also talked about the activation of new recruit, our new agent active ratio was also uplifted very strongly, especially with our good proposition of the private pension product. So this really supports the new agents activation and onboarding.

Okay, can I ask Harkley to talk about Vietnam?

Thanks, Yen Siong. Thanks, Andrea, for the question. As we mentioned before, the life insurance industry in Vietnam was adversely affected by the negative sentiment that affects the whole industry because of adverse excellent environment. At AIA, we remain focused on building the strong foundation for our agency force, particularly to transform our agency force to the primary agency, primary full-time agency model, as what we have successfully implemented in many markets. And for the bank insurance business that we have in Vietnam, we have stepped up the effort to further strengthen the customer proposition to differentiate products for each segment within the bank. And really, as you know, life insurance is a long-term business. We remain very optimistic about the long-term opportunities of life insurance in Vietnam, given the size of the economy and the underlying drivers.

Thanks, Zachary. Thanks, Andrew. Next question, please.

Our next question comes from Michelle Ma of Citi. Michelle, please press the unmute button on your screen and ask your question.

Yeah, thank you. Thank you for giving me this opportunity. This is Michelle Ma from Citi. I also have two questions, both on China. So the first thing is, I noticed there is an extra disclosure on the investment portfolio of AIA China's policyholder and shareholder investment portfolio. So I appreciate this, but I also noticed the allocation looks different quite conservative with like 85% of the portfolio was allocated to fixed income type products. And also mostly that's government and government agency bonds with equity just 11%. So just wondering with the ever declining interest rate in China, what will be your like investment strategy going forward and how we manage your cost of your insurance contracts. So this is our first question. And the second one is also for Jackie. I think you must be super busy recently given the Chinese regulator has been rolling out so many like potential new regulations such as what already happened, the renegotiation of the Bank Assurance Contract Commission, and also the potentially that's also going to happen in the agency channel, the alignment of registered expense loading with actual practice, the Bao Xing He Yi, and also starting from March next year, we will have the new management rules for agents So with so many changes, could you share with us what have you prepared for these changes and how it will going to impact Mainland China's business momentum for next year? Thank you.

Thank you, Michelle. I think maybe we let Jackie talk about the regulatory issues before we ask our Chief Investment Officer, Mark, to talk about China's investment strategy.

Michelle, thank you for the question. In fact, at AIA, we see that there is opportunity for a better bankers' run market. with all these kind of changes. So the bank commission changes, you know, for AI in China, bank channel is not a major channel. It is a relatively small channel. Our core channel is still agency. But with this commission rationalization rule in mainland China, that actually provide us with an opportunity to grow a more profitable, sustainable bank assurance business. And for AIA in China, that is really our advantage because we don't have that legacy and we can grow right from a small base of bank insurance to a more complementary kind of bank insurance business, which will be a win-win-win for customers, for bank and for the insurance company. So the renegotiation, et cetera, they are largely in good progress, and many of the the banks are already able to sign up and we will continue to sign up the rest for the renegotiated commission rate for our bank partner in mainland China. And as to the so-called extension of the fee and commission loading for the other channel, In AIA China, you know we are always very emphasized on our financial discipline, so we don't overpay. So in fact, we will continue to observe closely the development of all this, and we believe AIA will be very able to fulfill the requirement very well. In terms of the coming or the other coming regulation, in terms of the right product for the agent, so there will be more complicated product, probably need agent to have some more experience or even kind of training requirement. In fact, we see that the regulation coming out that to be effective in March next year. Actually, they are broadly in line with the draft that came out in July this year. So far, the association, the industry association, continue to work closely with the regulator on the detailed implementation. But as I always emphasize, AIA China's key differentiation is our premier professional agency force, and we believe all this regulation actually to AIA shouldn't be a problem, but for the whole industry, it is a good direction to go towards a more professional, well-trained, qualified intermediary market. It's good for the whole industry development.

So in summary, I think We are very supportive of the new regulatory initiatives. I think it will put the industry on a much more healthy footing. AIA, we are well prepared and well able to make any necessary adjustments to our operations here. Mark.

Thanks, Xinxiong. Thanks, Michelle, for the question. I think the way we operate the investment portfolio and the program in China is consistent with the way we operate across the entire group. The starting point really is our ALM approach, given the long-dated nature of our liabilities. that will lead to a domination of fixed income within the portfolios, as is very common. So in China, over 80% of the allocation is in fixed income, of which 90% or over 90% is in government and government agency bonds. I think as we go forward, what we're likely to see is more reflective pricing in the credit markets. So we've been building up our credit team and applying the same underwriting standards that we've developed over many years across the entire group. So we would expect to see some more diversification over time. And as the credit market develops alongside that, we do expect to see more diversification more generally in the program.

The next question comes from Edwin Liu of CLSA. Edwin, please press the unmute button on your screen and ask your question.

Oh, thank you and good afternoon. I have two questions. Firstly, still on China, given that you have expanded to new regions, I just want to ask if there's any difference in terms of product mix or distribution mix between your new and existing regions. In particular, have you seen perhaps more or less protection product sales in your new region? My second question is in terms of interest rate. In general, life insurer should benefit from high interest rate environment. In particular, we have seen perhaps we used to be in the inverted U-curve environment. Now, we are getting to more normal environment. How does that affect your business And in particular, from financial reporting perspective, how do we see the benefit from rising interest rate to be reflected in your either EV or new accounting financial numbers? Thank you.

Yeah, thank you for the question. In fact, as I always emphasize, protection product actually is the DNA of the AIA agency because from the time new agent being recruited and joined in China, the first thing we train them to sell is the critical illness product. Because of this whole life critical illness product, nature, long payment term, the commission rate with the relative policy size, we'll be able to make the agent make a good living and survive. So we do track and also study the so-called product mix by the tenure of agent. And interestingly, I want to let you know, we see that this kind of emphasize in a protection product mix actually continue to carry forward for different tenure of the agency force. So we don't see a big difference in the product mix of the new province compared to existing one, because the new province, of course, obviously has more new agent. But Over time, as I also mentioned, because AIA, we are able to rely on those new tax-deductible pension benefit plan. So when that was available in a certain city, we also observed that our agents are able to capture all these opportunities. So as a whole, in general, we don't see a significant difference in terms of product mix between new cities, new province, and existing one. Now in terms of channel mix, I would say largely, Agency channel continue to dominate in the new province and new cities, especially we emphasizing the recruitment of quality agent in the new province and new cities that we are in. So generally speaking, especially for new province, New city, in order to support the bank channel, we also need to mobilize, also develop resources. And you can imagine, if we are just a new setup in a city or new province, the POS that we can support will also be limited. So in terms of channel mix, actually, I would say that agency, obviously. A-China

I just want to add that I'm quite pleased with the fact that we were able to receive approval to upgrade the Sijiazhuang city licence to a Hebei provincial licence because this is quite significant. It means that all the new territories that we expanded into, including Tianjin, including now Hebei, Hubei, Sichuan and Henan are all full provincial or municipality licences. Now, as we explained to you all before, whenever we enter a new province, we actually go and start in the provincial capital. So we started in Chengdu in Sichuan, we started in Wuhan in Hubei, In Hebei, now we have Sijiazhuang, which is the provincial capital. Subsequently, we will expand within each province into the other cities within the province. Many of these provinces would have many, many cities with large population base. For example, Sichuan itself has something like 17 cities within Sichuan province and we are only now in Chengdu. So I'm also quite pleased that we are also able to take the next step in Sichuan and in Hubei, whereby in Hubei, we are now able to prepare for the launch of the next city, which is in Xiangyang, also a prosperous city with a good population base. And in Sichuan, we can go to Luzhou, which is also another major city within Sichuan province. What I've explained to you all before, step by step we are seeing it happen, expanding to new provinces and then within each province we start with the provincial capital, then we go to the next cities and subsequent cities. So I'm quite pleased with that. Garth?

Yeah, on interest rates, we've got disclosed sensitivities and you'll see that Rates up for the group overall is a small negative to EV and a positive for VOMB. The small negative for EV is largely because of US interest rates and our free surplus and capital that we hold at the corporate center being largely denominated in US dollars. So the bonds that we hold would go down in values slightly because of that. On the VOMB side, higher rates are overall generally positive for VOMB. And I think the other point to note is that higher rates also tend to stimulate demand for savings products in particularly, and that's what we've seen over the last 12 months, yeah.

Okay, thanks. And next question, hopefully may even not be on China.

The next question comes from Michael Chang of CGS CIMB Securities. Michael, please press the unmute button on your screen and ask your question.

Sorry, Lance, I might have to disappoint you. I do have some questions on China, but I'll ask also in relation to Thailand.

If it's worth a try.

Next time, maybe, next time. Okay, so on the China front, given that the demand for critical illness products have accelerated to strong double-digit BOMD growth versus the mid-single digit in the first half, could maybe management shed some light on how broad-based is this demand for protection across the different customer segments and across the different geographies so i think earlier on it was mentioned that it seems that even in the inland regions or the new regions the reason that the protection demand is very strong for cr is this the case across mass market as well as the more high-end segments that are the aia is in so that's just why i'm just trying to get a sense of how How sustainable is this pickup of the CI growth? Secondly, then, in relation to the agent numbers as well, if we strip out the new regions, which are obviously seeing very strong growth rate for the agent numbers, are we also seeing very strong agent growth numbers in the existing regions? And then lastly, in relation to Thailand, I noticed that Thailand's momentum is actually still very strong in 3Q. It continues on the first half, excellent growth rates. And in fact, I think it's probably the strongest in the ASEAN region. Can management shed some light over there on what initiatives are being done and how sustainable can that be going forward? Thanks.

Jackie, can you quickly answer the questions on China?

Again, on China, this is also a favourite topic because it looks like there are rumours in the market saying the old CI product is very hard to sell. But in the case of AIA, we don't believe it. We continue to see that there should be strong demand on CI because for people who already bought the CI policy. In fact, the CI summer sewer coverage actually is still low, roughly on average is 100,000 RMB only. And for AI China, our agents are working with the F1 and above customer segment, and we are able to, together with our financial needs analysis tools, we enable our agent to do a good financial planning with the customer and analyze the need. And with that, the customer see that, oh, actually they need to increase their CI some. So we do see this opportunity continue to be very big there. And in April this year, we revamped or upgraded our product to include the cancer shield kind of ecosystem. I think this really showed that in the third quarter, this really continued to work very well because customers really see that, in fact, they do need more CI or cancer recovery coverage together with a better ecosystem and services. Now, in terms of the agent number or recruitment number, in fact, I just mentioned, in fact, we see a broad-based kind of growth in terms of the agent recruitment across both existing provinces and also the new provinces and cities.

Yeah, I think in terms of CI demand, At our interim results, we also explained to the market about how we have developed a tool for our agents to do a full needs-based analysis with the customers. And as you know, our target customer segment is the middle class and affluent customers, whereby the demand for CI protection remains strong. And after a full needs-based analysis, we've seen some assurance of CI grow three times before doing the needs-based analysis. so the demand for CI remains, I believe, strong. You need to have the right agents, you need to have the products, and you need to have the right customers, plus you have to provide them with the right training and support and tools to help them service the protection needs of the customers. We are very happy with the performance in Thailand. I'll hand over to Hak Lee to talk about Thailand.

Thank you, Yuanxiang. Thanks for the question, Michael. As noted, AI Thailand continue our strong first half momentum into third quarter and deliver excellent BNB growth across both our agency and PD channel. And that's very much supported by higher sales volume, enhanced productivity, and overall more favorable product mix. In Thailand, we remain very much focused on growing protection and unit link business. while the overall market's growth so far this year was driven mostly by sales and endowment policies. Our agency channel developed very strong VNB growth in third quarter, with growth in both the number of active agents as well as the overall agency productivity. And for agency quality recruitment is our key priority. We've seen very significant growth in number of new recruits, especially full-time financial advisors in third quarter this year. And for the PD partners, particularly our partnership with Bangkok Bank, we've seen strong BNB growth driven by very favorable shift in product mix to more protection riders. And we continue to drive an increase in the overall productivity of our insurance specialists supporting the Bangkok Bank partnership. So overall, we are very pleased with the continuous strong momentum of our business in Thailand.

The next question comes from Leon Chi of Daiwa Securities. Leon, please press the unmute button on your screen and ask your question.

Hi, sure. Thanks for taking my questions. I have three questions again today. Firstly, student on China, just appreciate you actually mentioned very strong double-digit BOMB. I want to understand that whether this is the cells to new customers or mostly coming from the upsells from existing customers. Because indeed, I noticed that three months ago in your interim results, you mentioned that the need-based analysis has been proven very effective to increase the sum of assured of your existing customers. So just wondering in the third quarter, are we seeing more results coming from upsells that has led to this very strong OMB-crossing critical illness? That's the first one. And secondly, in Bank Assurance Channel, very glad to see that BOMB margin has been recovering on a sequential basis. Just looking at long-term, the China market in particular features very fierce competition in terms of... There are certain level of BOMB margin below which we will actually not go down. So if there are a minimum threshold of VNB margin for us in our bank assurance channel. And lastly, Thailand. I appreciate the color just now, but I have a more specific question on FA channel. What is the VNB margin in FA channel? Because I do understand the FA channel reform has been moving from strength to further strength.

um and it is a key factor driving our margin uplift in thailand so just want to understand the margin within that a particular channel thank you very much jackie on ci yeah again on ci in fact um right now i think we don't have a so-called detailed analysis or the ci coming from new and existing however from what i have i already described i would say it should come from both new and existing because existing customer, our agent will continue to have the needs-based analysis with them. As I said, we do observe this kind of increase in the CI summer sewer with those needs-based analysis tools on, of course, the existing customer. And again, we continue to expand in new problems where we put new agent and we train the new agent to sell CI products. The growth of CIR comes from both new and existing customers. And in terms of the bank channel margin, I just want to say that we emphasize AIA, we always emphasize a very strong financial discipline. So we do have a kind of risk and return kind of view when we go into a new channel, develop product, et cetera. So in this sense, we do have a certain discipline. in working with the bank in the bank channel. Although, as I said, we start from almost nothing of bank insurance, but now it is really a much improved opportunity for AIA to go into this bank insurance channel due to the product repricing and a more reasonable kind of commission-free income to the bank.

Thanks for the question. The FAA channel refers to a group of sub-channel within our agency. F.A. stands for Full-Time Professional Agents. It's a strategic initiative that I've been working on for the last several years. It is, as you correctly pointed out, it's a channel that's been growing, that's been contributing to our growth. And because of the selection process, the FA agents are agents that are committed full-time to Thailand. A large majority of them qualified to sell not just traditional policy, but also investment-linked products. They are more productive than the non-FA agents. They are selling more investment-linked products with more protection riders.

Thanks, Ackley. And thanks for the questions. We've got time for one more question, I think.

The last question comes from Charles Zhou of UBS. Charles, please press the unmute button on your screen and ask your question.

Okay, thanks for giving me the opportunity to ask a question again. I mean, I just have a very last, very quick question. As you may know, one of your key regional peers see India as a strategically important market in their strategy update. So I would like to understand how do you, like, what's your view for India in a group perspective for the next five years or 10 years? Thank you.

I think India is a very exciting long-term opportunity for AIA. It's a massive market. I think in this market, it's very important to have a very good partner. In India, we have a very, very good partner. In my opinion, it's the best partner that you can have in India. The working relationship that we have is very strong. Personally, I know Chairman Chandra very well. And I've been to India four times in the last two years. So the business is performing very well, growing very, very strongly. As we reported during the interim results and this time now, we are already the number three player in the private life insurance market in India. India. I think India is also experiencing the regulatory tailwinds. The new chairman of the IRDA is much more focused on developing a healthy life insurance market in India and he's been working vigorously to come up with new policies to support healthy development of the life insurance market and in India. India obviously has all the right factors for a strong, healthy life insurance market. The demographics is working in its favour. Increasingly high levels of digitalisation, the very large protection gap, and As we've demonstrated and explained in the past, we have a multi-distribution channel model that's highly digitalized and working very well. And we also have a very, we have also the best-in-class agency channel in India. Garth is looking after India, so he's very keen to say a few words.

Yeah, no, thanks. No, I think you can tell Charles that Particularly Yoon Seong and I are very enthusiastic about India. I was there again last week, and you can feel the energy and momentum both in the country and in the business. We had excellent growth in the agency channel in particular, and that agency is going from strength to strength. We really see, in terms of productivity, number one, persistency, number one, And in terms of things like new agent growth, number one, as well as retail summer short, I think, was something like 92% of LICs retail summer short aggregates retail summer short in the first half in India, you know, their first house three months off. So, so really excited about that business. And we see it just going from from strength to strength, really fantastic business.

Thanks, Cath. Thanks, Yunxiong. And thanks, Charles, for the question and for everybody else on the call, especially on a Friday evening for those of us in Hong Kong. If you've got any follow-up questions, obviously, please come through to the Investor Relations Department and have a good weekend. Thank you.

Ladies and gentlemen, this concludes AIA's third quarter 2023 Q&A. Thank you for your participation.