Aia Group Ltd S/Adr

Good morning and a warm welcome to AIA's annual results presentation. I am delighted to report that AIA has delivered an excellent financial performance in 2024. We achieved double-digit growth across our key metrics for new business, earnings and cash generation, demonstrating the benefits of our growth strategy. Let me now take you through the highlights. Value of new business was up by 18% to a record high of $4.7 billion, building on the strong momentum we have generated in previous years. EV equity increased to $71.6 billion, up by 9% per share, after returning $6.5 billion to shareholders. Operating profit after tax also reached a record high, up by 12% per share. And underlying free surplus generation, our key operating measure of cash generation grew by 10% per share. Following our capital management policy, the Board has recommended an increase of 10% in the final dividend per share, and announced a new share buyback of $1.6 billion. As you can see, we are delivering profitable new business growth, which is driving both strong earnings and cash flow generation. In this way, we create a virtuous circle, funding further capital investment in organic new business, growing our large stock of future earnings, and delivering cash returns to shareholders. Premier Agency is the main driver of profitable growth for the Group, contributing 74% of our VONB. We have the world's leading agency, which has ranked number one globally by MDRT members for the last 10 years, and we hold the top position in nine markets. In 2024, Agency delivered 16% VOMB growth driven by higher activity and productivity, combined with an increase in VOMB margin. Recruitment was also up by 18% with positive growth across the vast majority of our markets. These strong results are the direct outcome of AIA's Premier Agency Strategy, designed to enhance both customer satisfaction and agent performance. We attract high-quality and motivated individuals, equipping them with extensive training and leading digital tools to support their long-term career growth with AIA. A highly professional agency enables AIA to advise sophisticated and affluent customers on their more complex needs, improving customer experience and increasing demand for our services. In turn, this attracts more high-caliber agents to join AIA, creating a self-reinforcing cycle, contributing to our industry leadership, and delivering high-quality new business growth at attractive returns for shareholders. This is what sets AIA apart. Our fast-growing, profitable partnerships also present a valuable growth opportunity for AIA and our partners. In 2024, DOMB was up by 28% to $1.3 billion, driven by an excellent performance in bank assurance, which grew by 39%. We have a proven model of partnering with leading banks for the long term, reflecting the aligned growth ambitions of both partners. Integrating AIA's leading technology enables us to run advanced analytics models that better target customers, making our professional insurance specialists even more productive. In this way, we drive long-term regular premium business with attractive margins and returns. As a result, over the last three years, VOMB through our bank assurance channel has more than doubled, with an increase in margin to more than 40%. AIA's extensive network of high-quality strategic partners significantly extends our reach, creating opportunities to engage with more than 100 million target customers across Asia, providing a growing source of profitable new business. Our twin distribution engines drive growth across the Group, and I will now take you through the highlights of our performance by market segment. AIA Hong Kong was again the largest contributor to the Group's DONB in 2024, delivering a record $1.8 billion, up 23%. Demand was very strong across both domestic and mainland Chinese visitor customer segments, with broadly equal VOMB contributions from each, reflecting our diversified and growing customer base. AIA's premier agency is the leader in Hong Kong and Macau, and our main source of new business in this market. The 23% increase in VOMB from agency was supported by both growth in active agents and higher productivity. New recruits were up by 16% as we add greater capacity to meet the growing demand for AIA's products and services. Our agency also achieved strong sales from mainland Chinese visitors, with the fourth quarter recording the highest VOMB since cross-border travel resumed in early 2023. VOMB from our partnerships grew by 25%, following double-digit growth in our bank assurance as well as RFA and broker channels. Overall, the combination of our leading distribution platform and attractive products keeps us well positioned for future growth in this important market. AIA China achieved 20% growth in VOMB to over $1.2 billion, driven by higher volumes and profitability. Our ability to achieve substantial growth in a challenging local environment marked by low interest rates demonstrates the resilience of our strategy and the quality of our business model. AIA, China's premier agency, is the world leader in MDRT members and at the heart of our growth strategy. Our agents are highly professional, with incomes double the industry average, enabling us to attract and retain the best candidates. As a result, new recruits grew by 18% and active agent numbers increased by 9%, demonstrating the health of our business. AIA is uniquely focused on meeting the needs of middle-class and affluent customers in mainland China with professional advice and high-quality, personalised products. Long-term customer relationships help sustain full-time careers for our agents, and in turn, help more customers to achieve their protection, long-term savings and retirement goals. This is demonstrated by our middle-class customers holding over six policies on average and a 9% increase in the number of new customers in 2024, providing additional future growth opportunities for our agency. Highly selective bank assurance partnerships accelerate AIA China's growth, and we delivered a significant uplift in new business and VOMB margin in 2024. This was achieved through our focus on meeting the needs of the most affluent customers with average case sizes above US$20,000. Taken in combination with our world-leading premier agency, we have the right model to capture future value in this market. The high-quality new business that we are able to generate through our premier agency differentiates AIA in mainland China. We have a well-balanced product mix, with traditional protection delivering close to half of our agency VOMB. Nearly all our agents sold a protection policy in 2024, and demand remains strong, with a 26% year-on-year VOMD increase. Protection is an essential part of financial planning and provides an important source of diversified earnings. AIA also leads the market in tax-incentivized products targeted at affluent customers, and we broaden our range of products further during the year. By repricing our long-term savings products, withdrawing certain products early, and shifting our focus towards participating products, we are proactively navigating the low interest rate environment. In the first two months of the year, our agency has already successfully shifted the vast majority of our new business savings portfolio to par products, as shown here. These offer policyholders a higher expected return from a broader range of assets and are more resilient to interest rate movements. Our comprehensive suite of products, supported by a powerful ecosystem of value-added services and leveraging our distribution strength, enables us to deepen customer engagement, expand our potential customer base and drive long-term growth. And there is significant headroom for AIA to grow in mainland China. We continue to deepen our reach within our established geographies of Beijing, Shanghai, Jiangsu, Guangdong, and Shenzhen, where just 3% of our target base of 140 million are existing AIA customers. Since 2019, we have established branches in five additional regions, bringing a further 100 million accessible customers within our reach. We are rapidly growing these operations and in 2024, we launch three new major cities in Sichuan and Hubei provinces. As we replicate our premier agency model in these recently established geographies, growth remains strong with DOMB up by 27%. In the fourth quarter of 2024, we received approvals for four new branches in Anhui, Shandong, Chongqing and Zhejiang. These add another $100 million to our addressable market, and all four regions have now received approval to commence operations. As you can see, our geographical expansion has more than doubled our target customers to over 340 million across 14 geographies in mainland China. We are still in the early stages of replicating our platform, and I'm confident the AIA scalable model ensures that we will capitalize on growth opportunities while maintaining our business resilience through changing economic conditions. Turning now to ASEAN, where AIA is the leading life and health insurer. This region is an important growth engine and generated more than one-third of the group's VOMB. In aggregate, ASEAN delivered over $1.7 billion of VOMB in 2024, up 15%. Our performance was broad-based, with double-digit growth from Thailand, Singapore and Malaysia, and the other ASEAN operations grew by 30%. Across ASEAN, AIA's powerful multi-channel distribution is exceptionally well-placed to meet the growing customer needs across the region. We have the world's leading agency and our long-term strategic partnerships are a key asset, helping AIA bridge the huge protection gap for a growing population of more than 600 million people. Finally, onto our joint venture in India, Tata AIA Life. As you will recall, new business in the first quarter of 2023 was distorted by strong sales ahead of personal tax changes. VOMB was up by over 20%, excluding the first quarter of 2024, and reported VOMB growth was still positive with this tax effect. Our leading agency contributes more than half of our VOMB and we are the most productive in the market. We were again the number one MDRT company and our focus on agency quality has delivered consistent outperformance compared with the industry. Our agency is complemented by high quality bank and broker partners, extending our customer reach. Through its multi-distribution platform, Tata AIA Life has cemented its position as the market leader in retail protection. We also rank number one for persistency, and we are the third largest private life insurer in the industry. Our protection-focused strategy, quality distribution and proven execution ensure that Tata AIA Life is well on its way to capturing India's vast potential. Today's excellent results are the outcome of executing a clear growth strategy that plays to our core strengths. We are uniquely positioned in Asia, the world's most dynamic insurance market and the fastest growing region globally. Our focus is clear, capturing the immense opportunities from rising populations, increasing wealth and an ageing demographic with limited social welfare coverage. Despite strong economic expansion, private insurance remains low, driving an urgent and growing demand for quality life and health insurance. AIA is at the forefront of meeting these evolving needs, backed by the right products, services and distribution capabilities. In 2024, we welcome over 2 million new customers to AIA and repeat sales within our existing customer base grew by 15% as we continue to nurture long-term relationships through professional advice and best-in-class service. Our integrated product ecosystems are a key differentiator, empowering consumers to achieve their financial security, health and wellness goals in ways that are more relevant, personalised and impactful than ever before. At the core of our success is AIA's highly productive and growing distribution platform, bringing unrivalled expertise and a scalable way to address individual customer needs with compelling propositions. These strengths enable us to generate high-quality new business, deliver sustainable earnings growth, and generate strong surplus cash flows, creating long-term value for shareholders. The execution of our strategy is powered by market-leading technology, digital capabilities and advanced analytics that enhance efficiency, scalability and customer engagement. Modern infrastructure, applications and high automation accelerate the adoption of digital tools and emerging technologies, boosting productivity while strengthening risk management. Rich and structured data provides the foundation for deploying advanced analytics and AI, enabling better decision-making and deeper insights. Our investment in TDA has already achieved recurring expense and claims efficiencies of more than $180 million. Digital tools power our unrivalled distribution, expanding our reach and bringing high-quality advice and services across Asia. More than 21 million customers actively engage with AIA through digital channels, including AIA+, our flagship customer app, contributing to higher net promoter scores. Amplify Health achieved major milestones in 2024, including the launch of AI-powered solutions, transforming health claims management, payment integrity and provider management, reinforcing our integrated healthcare strategy. AIA has invested heavily in foundational technology upgrades, process optimisation and data integrity, ensuring that as we integrate AI, it delivers maximum impact and seamless functionality across the business. I firmly believe that GenAI will reshape the future of insurance, achieving better outcomes for customers, agents and our business. To date, we have already deployed over 50 use cases, and we are realizing significant gains in key parts of our operations. In distribution, our AI-driven training tool simulates real customer interactions, sharpening our agents' engagement skills and boosting productivity. In our contact centres, AI-powered co-pilots summarise customer enquiries, reducing response times by over 50% and streamlining service. Gen-AI document processing cuts review times in half, enhancing both customer satisfaction and operational efficiency. More than 3,000 software developers benefit from our proprietary software engineering AI platform, reducing development time by 55% and accelerating speed to market. Our investment in GenAI is not just about operational efficiency. It's about delivering substantial benefits across the business, building on the significant claim savings and productivity uplifts already achieved through our TDA program. I'm confident that our continued expansion of GenAI will strengthen our market leadership and accelerate AIA's growth strategy in the years ahead. In closing, today's financial performance reiterates our confidence in AIA's strategy and business model. With our clear priorities and strong competitive advantages, we are well placed to fully capture the immense opportunities ahead. Our excellent VOMB growth builds on the momentum generated in prior years, with successive layers of profitable new business growing our large stock of future earnings and delivering future cash to shareholders. AIA's enhanced capital management policy and OPEC per share growth target introduced in 2024 reflect both our ambition and our proven ability to execute. Importantly, our financial flexibility provides the resilience to navigate market challenges and support long-term value creation. I am certain the AIA is exceptionally well positioned to achieve our objectives in 2025 and beyond. Thank you.

Good morning, everyone. I'll now take you through the highlights of our financial performance. As you've heard, AI has delivered an excellent set of results across growth, earnings, and capital and cash. VMB was up 18% to a record $4.7 billion, which drove EV operating profits of more than $10 billion and operating ROEV up to 14.9%. EV equity increased by 9% per share and ended the year at $71.6 billion after we returned $6.5 billion to shareholders. OPAT grew by 12% per share, supporting an increasing operating ROE of 130 basis points, and comprehensive equity of $87.6 billion was up 10% per share. UFSG, our key operating measure of cash generation, increased by 10% per share. Given these excellent results, the Board has recommended a 10% increase in the final dividend per share. The Board has also announced a new share buyback of $1.6 billion following our capital management policy. This increased dividend and new share buyback reflects our confidence in the future prospects of the Group. Let me now take you through more details, beginning with growth. Our excellent VOMB performance with 18% growth overall was driven by double digit increases across all of our reportable segments. Hong Kong delivered 23% VOMB growth to a record $1.8 billion. AA China was up 20% from growth in active agents, a step up in bank assurance VOMB, and a 4.9 percentage point increase in VOMB margin. I would remind you that in the first quarter of 2024, AA China saw 38% growth, which is a very high comparative for the first quarter of this year. And as Yunxiong mentioned, our agency has successfully shifted the vast majority of our new business savings portfolio to par products. While the reported VOMB margin for par products is lower, they are more resilient to lower interest rates. And we expect AA China's VOMB margin to remain over 50% in the first quarter. Thailand grew VOMB by 15% to $816 million, driven by both our market-leading agency and our strategic partnership with Bangkok Bank. AA Singapore was also up by 15%, with strong performances across both our agency and partnership channels. while Malaysia was 10% higher. Other markets grew by 18% to $467 million, with all markets delivering positive growth and Tata AI Life contributing more than a quarter of the total. Our new business generates attractive returns with an IRR on capital invested consistently above 20% and short payback periods. We delivered improvements in new business capital efficiency and higher margins overall, supported by a more favorable product mix and repricing actions. Overall, PVMBP margin increased to 11% and VMB margin grew to 54.5%. Our ability to write large scale, high quality and profitable new business with a very attractive financial profile is a key differentiator for AIA and a major factor in our confidence in the group's future growth. EV operating profit per share grew by 19%. The increase in operating profit included 700 million of VOMB above the 2023 level. Operating variances improved by 171 million, supported by disciplined expense control, improved persistency variances, and proactive medical business management. Since IPO, we have achieved positive operating variances every single year. And in total, these have added 4.1 billion to EV equity, demonstrating the ongoing prudence in our assumptions. Together with a higher expected return that reflects higher U.S. interest rates, EV operating profit exceeded $10 billion for the first time. EV operating profit is a key driver of the increase in EV equity over the year and resulted in a 200 basis points increase in operating return on EV to 14.9%. Investment return variances were small as favorable equity market movements broadly offset lower Chinese and Thai interest rates. Currency translation into a stronger U.S. dollar for reporting purposes and other non-operating items reduced EV equity by $2 billion. After returns to shareholders through dividends and share buyback, EV equity finished the year at $71.6 billion, up 9% per share. A direct result of AA's financial discipline is our resilience to market movements. As you can see on the left-hand side, embedded value sensitivities to equity and interest rate movements remain small for the group. And for AA China, a further 50 basis point reduction in Chinese government bond yields is just 0.8% reduction to the Group EV. I'll now explain the prudence within our EV methodology, as it is important to understand some crucial differences when comparing with peers. First, we use actual yields to maturity on existing fixed income assets. This is in line with how we invest in practice using an ALM driven investment strategy and holding long dated fixed income assets to match our insurance liabilities. The second difference is the treatment of new investments. Here the assumed yield varies according to when the investment is made. We start at current spot market rates in year one and grade over many years to our ultimate long term assumption. This approach is applied across each of our businesses. For example, new investments into 10-year Chinese government bonds started earning 1.68%, the current market spot yield. Only by year 30 do we invest at our long-term assumption of 2.7%. And we've reduced this assumption by 80 basis points at the end of 2024. An important point to note is that after reflecting current market conditions and assumption changes and post-remittances to the group, AA China's EV continued to grow in 2024. We believe this prudent and realistic approach sets AA apart from the industry and provides confidence in the robustness of our VOMB and embedded value. Now moving to IFRS earnings. Operating profit after tax was up 12% per share. The main driver of this was the 12% increase in the insurance service result. The CSM release was up by 7% to $5.6 billion, reflecting the compounding of large-scale, profitable new business each year. Operating variances improved by $172 million, benefiting from management actions on our medical business. Adjusting for the impact of the share buyback, the net investment results increased by 6% on an underlying basis. Other revenue and expenses, including finance costs, remain broadly stable compared with 2023. Overall, operating margin remains strong at 16%. The contractual service margin represents our stock of expected future IFRS earnings. This growth in CSM came from 7.7 billion added by new business and 2.8 billion from expected return on in-force. The CSM release rate was stable at 9.4%, with the resulting CSM release up by 7%, providing a $5.6 billion contribution to OPAT. Variants and others were mainly driven by the effect of higher U.S. interest rates on our Hong Kong participating business and some modeling refinements. Exchange rates reflect the strengthening of our U.S. dollar reporting currency relative to Asian currencies. Ending CSM was $56.2 billion, with a strong underlying growth rate of 9.1%. Shareholders' allocated equity remained broadly flat over the year, as $6.5 billion in returns to shareholders balanced out our strong net profit. Higher OPAT helped drive a 130 basis points increase in operating ROE to 14.8%. Net profit was slightly higher than OPAT at $6.8 billion, with a small impact from non-operating items. Comprehensive equity, which provides a more economic view of equity by including net CSM, increased to $87.6 billion, up by 10% per share. I have great confidence that we are on track to achieve our earnings target. As I said earlier, the strong new business performance in 2024 builds on the momentum from prior years and adds another substantial layer of recurring earnings to our Inforce business and the CSM. Underlying CSM growth after the release into earnings was 9.1%. Combined with our effective management of the Inforce portfolio, this supported strong growth in the insurance service results and OPAP per share, both up 12%. We've made an excellent start towards our three-year OPAP per share growth target. Our confidence in delivering this target is underpinned by our strong business fundamentals, consistent execution, and financial discipline. Finally, turning to capital and cash. UFSG is our key operating measure of cash generation after tax and is shown before reinvestment in new business and central costs. There are four components that make up UFSG. First, 4.3 billion of expected distributable earnings from our large Inforce book that delivers recurring releases year on year. Next is the expected return on assets backing free surplus and medium term notes, which added 1.4 billion. Third, the addition of new business further diversifies our Inforce portfolio leading to a reduction in reserves and required capital. This item recurs each year, an increase broadly in line with VOMB growth. Other operating variances improved by more than $350 million compared to 2023 levels due to effective management of our enforced business. Overall, UFSG grew to $6.3 billion, up 10% per share in 2024. Over the next 10 years, our large in-force portfolio is expected to generate close to $47 billion of distributable earnings before allowing for any future new business. During 2024, the profitable new business we added supported an increase in the 10-year total of $3.7 billion. Since these projections are consistent with EV, they already reflect current market spot yields in mainland China. The key driver of future UFSG growth is successive cohorts of profitable new business adding to our large, in-force book. You can see this on the right of the slide as layers of profitable new business compound over time to drive UFSG growth. This is why VUMB growth is such an important focus for AIA. The group's financial position remained very strong, with free surplus increasing by 19% over the year to $19 billion before returns to shareholders. We reinvested $1.5 billion of UFSG into profitable new business, up by 17%. After deducting central costs, net free surplus generation was $4 billion. Investment return variances and other non-operating items include interest rate and foreign exchange movements, as well as changes to regulatory capital requirements in South Korea. After returning $6.5 billion of capital to shareholders, closing free surplus was $12.6 billion. This is the first year that we have applied our enhanced capital management policy. The annual payout target based on net free surplus generation amounts to $3 billion for 2024. Based on our excellent financial performance, the Board has declared a 10% increase in the final dividend per share, which results in total dividends of $2.4 billion for the year. This leaves a balance of $600 million in the form of share buyback. Following a review of our capital position, the Board has announced an additional $1 billion share buyback. In aggregate, this will result in $4 billion return to shareholders in respect to 2024's financial results. Our enhanced capital management policy introduced a shareholder view of the group's capital. Shareholder total capital resources comprises free surplus plus eligible debt and required capital, as stated in our EV report. Required capital includes the prescribed capital levels for our various businesses as set out by our regulators. Allowing for the new share buyback announced today, the pro forma free surplus was $10.3 billion and shareholder capital ratio was 223% at the 31st of December, comfortably above 200%. AIA's financial discipline and commitment to shareholder value creation set us apart. Our prudent, sustainable and progressive dividend policy has seen total dividend per share increase progressively over time to more than five times the 2011 level. And through proactive capital management, we have returned $12 billion in the form of share buyback since March 2022, reducing the share count by 11.7%. Over 2022 to 2024, through our capital management actions and dividends, we've returned a total $18.2 billion. In summary, the group delivered an excellent financial performance in 2024 with double-digit growth in our key financial metrics. EV equity of 71.6 billion was up by 9% per share after returning 6.5 billion to shareholders, powered by VOMB growth of 18%. Our performance in 2024 and AA's unparalleled competitive advantages provide us with confidence in meeting our OPAP per share growth target. Operating returns increased with ROEV up to 14.9% and ROE up to 14.8%. Our capital management policy delivers a total yield of 6%, with a 10% increase in the final dividend per share and a new $1.6 billion share buyback. There are substantial opportunities for AA to continue to deliver attractive returns for shareholders well into the future, and I have every confidence that we will do so. Thank you.

Good morning from AIA Central in Hong Kong, and welcome to our 2024 Annual Results Analyst Briefing. I'm Lance Burbage, Chief Investor Relations Officer. Together with me on stage, we have Li Yuan Song, our Group Chief Executive and President, Garth Jones, our Chief Financial Officer, and our Regional Chief Executives, Jackie Chan, Fisher Zhang, Hak-Lei Tan, and Leo Grepin. And last but not least, our Group Technology Officer, Biswa Misra. We also have the other members of our group executive committee with us in the room. With that, we'll now begin our Q&A session. So if you want to ask a question, please make sure that you are logged into the Zoom call. Operator, over to you.