Aia Group Ltd S/Adr

Good morning from AIA Central in Hong Kong. Welcome to our first quarter 2024 update Q&A session. 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 either with us in the room or joining us remotely. Before we start the Q&A, Jens-Elmer Garth will take you through a short presentation on our first quarter new business performance and our new capital management policy.

Jens-Elmer. Good morning, everyone. Today, I am very pleased to announce both policies, clearly demonstrating the strength of AIA's business model and our financial discipline. Value of new business for the group grew by 31% in the first quarter of 2024. We delivered AIA's highest-ever quarterly new business result, building on our very strong VOMV performance in 2023. Our new capital management policy provides greater clarity as to how we will deliver higher annual capital returns to shareholders. Following this new policy, the Board has approved a further $2 billion buyback, which increases our existing share buyback programme to a total of $12 billion. I am confident that AIA is exceptionally well positioned to capture the highly attractive opportunities available to us across the region. We continue to focus on driving high-quality, profitable new business growth that delivers increased future earnings, free surplus generation, and greater shareholder value. Let me now take you through the first quarter new business highlights. VOMD was $1.3 billion, a record high for a quarter, and up by 31%. We delivered double-digit growth from all our reportable segments, with VOMB margin increasing by 2.1 percentage points to 54.2%. AIA China was up 38%, driven by very strong double-digit growth from our premier agency, supplemented by growth from our highly selective bank assurance partners, where VOMB margin increased to around 40%. Growth was broad-based across our established operations and new branches, and the VOMD margin for AIA China increased further from the second half of 2023 to 54.6%. AIA Hong Kong grew by 43%, with double-digit growth from both the domestic and mainland Chinese visitor customer segments. New business from mainland Chinese visitors continued to build momentum, with VOMB in the first quarter higher than in the fourth quarter of 2023. Our three largest ASEAN markets, Thailand, Singapore and Malaysia, all grew by double digits, with combined VOMB growth of 16%. and our other market segment was up by 10%, with excellent growth from Tata AIA Life in India and strong performances from Australia, the Philippines, and South Korea. Today's announcement clearly demonstrates the strength and diversification of AIA's businesses, which enables us to capture the significant growth opportunities across Asia and deliver capital returns to shareholders. I will now hand over to Garth.

Thank you, Yunxiong. There are two key components to our enhanced capital management policy announced today. The first component is an annual payout target ratio target that supplements our progressive dividend policy with annual share buybacks. The second component is a commitment to regularly review our capital position and return capital that is excess to our needs at least annually. As a result of this, we are adding $2 billion to our existing share buyback programme. We expect this to commence as soon as practicable and to complete in around 12 months. Let me now explain how this policy works in practice and how we assess our capital position from a shareholder's perspective. While the Group LCSM surplus is our principal regulatory solvency measure, we have always said that free surplus provides a more representative view of the capital position for shareholders. Since the introduction of the LCSM framework, we've shown a reconciliation of the group LCSM surplus and free surplus consistently in our interim and annual results. Free surplus removes items included in the LCSM that are not available for distribution to shareholders, for example, the surplus within PAR funds. We calculate the group's total capital resources by adding free surplus to eligible Tier 2 debt and required capital. On this basis, the ratio of total capital resources to required capital was 269% at the end of 2023. The first priority within our capital management framework is to maintain a strong and resilient balance sheet. While required capital includes the prescribed capital levels for our various businesses set by our regulators, we hold additional capital that allows us to withstand a range of extreme but plausible stress scenarios. whilst also ensuring we do not constrain organic new business growth. For example, we include a repeat of the GFC, pandemics, persistent high and low interest rate scenarios. We also allow for combinations of these scenarios at the same time. Based on our assessment of our current capital needs, including these scenarios, we target for shareholder total capital resources to comfortably exceed 200% of required capital. On completion of the remaining $2.8 billion from the existing share buyback programme, together with the additional $2 billion buyback announced today, our free surplus on a pro forma basis, as at the end of 2023, reduces to $11.5 billion. The pro forma ratio of shareholder total capital resources to required capital reduces to 238%. Our new enhanced capital management policy provides greater clarity and will deliver higher annual capital returns to shareholders. Starting from our 2024 annual results, we will target a payout ratio of 75% of annual net free surplus generation through dividends and share buybacks. Net free surplus generation is calculated as shown using figures that we have consistently included in our results announcements. Net free surplus generation is calculated before investment return variances. While investment return variances, foreign exchange and other non-operating items create free surplus volatility from year to year, they have averaged under $80 million a year since our IPO. This formulaic approach automatically adjusts for further organic investment in profitable new business. As we grow the business, the balance sheet and required capital will increase, driving the need to retain some net free surplus generated. However, with a 75% payout ratio, we expect the total capital resources to required capital ratio to fall over time from 238% as we grow and regularly return capital to shareholders. For clarity and completeness, our policy of delivering prudent, sustainable and progressive dividends remains unchanged. The balance of the payout above dividends with a target 75% aggregate payout ratio will be provided by way of share buybacks announced at the annual results each year. Let me now illustrate how our capital management policy will work in practice based on our 2023 annual results. As I said, there are two components to the policy and it is important to consider these together. Net free surplus generation was $3.9 billion after new business investment of $1.3 billion. Under the first component of the policy, based on the 75% payout ratio target, $2.9 billion would have been returned to shareholders. The 2023 interim and final dividends totaled $2.3 billion. The $0.6 billion balance would therefore have come in the form of an additional share buyback. we will announce this year's net FSG, final dividend and additional share buyback at our 2024 annual results. Under the second component of the policy, the regular review of our capital position, we have today added $2 billion to our existing share buyback programme. This is in addition to the $2.8 billion we will return in 2024 and the annual dividend payment. Together, these amount to roughly 10% of our recent market capitalisation. In conclusion, you can see that overall our new capital management policy provides both greater clarity and higher capital returns to shareholders. I'll now hand back to Yun Xiong.