Aia Group Ltd S/Adr

Good morning and thank you for joining AIA's 2025 Interim Results Presentation. I will take you through our performance in the first half of the year and provide an update on our strategic outlook. Let's begin with the financial highlights. AIA delivered excellent results with double-digit growth across our key financial metrics. Value of new business increased by 14% to a record high of $2.8 billion. Underlying free surplus generation per share grew by 10%, and operating profit after tax per share rose by 12%. We returned $3.7 billion to shareholders in the first half, and today, the Board has declared a 10% increase in the interim dividend per share, highlighting our confidence in future growth. These results demonstrate AIA's ability to deliver compounding new business growth that drives both cash generation and higher earnings for many years to come. Importantly, our results come from a portfolio of high-quality recurring profit streams anchored in protection, health, and long-term savings that are resilient across economic cycles. In Hong Kong, we achieved record VOMB of $1.1 billion, up 24%, with higher momentum in the second quarter. Demand was strong in both the domestic market and from mainland Chinese visitors, with broadly equal contributions, showing how our customer base is diversified and expanding. AIA's premier agency remains the number one in Hong Kong and Macau and continues to be the main driver of growth. VOMB from agency increased by 35% to a record high, supported by both a larger active agent base and substantial productivity gains. New recruits were up by 15%, expanding our capacity to capture future demand. Within partnerships, Bank Assurance VOMB grew by 27% and the IFA and broker channels showed solid quarter-on-quarter growth with VOMB up 33% in the second quarter. Overall, with our distribution leadership and comprehensive product range, AIA Hong Kong remains exceptionally well positioned for continued growth. Moving now to AIA China. VOMB was $743 million in the first half, with growth accelerating to 15% in the second quarter. Our professional primary agency is what sets AIA apart, contributing more than 80% of VOMB and achieving productivity levels three times the peer average. This is a major advantage in attracting and retaining the very best candidates, positioning us firmly as the number one for MDRT in the market. Recruitment increased 18%, alongside strong growth in new leaders as we continue to expand our market-leading agency. The OMB margin remained very strong, at more than 65%, reflecting our differentiated product mix. Traditional protection is our largest product category and sits at the heart of our customer propositions. Our participating products deliver higher expected returns to policyholders while generating earnings with low sensitivity to interest rates. In addition, we are a leading provider of tax-incentivized private pension products. Selective bank partnerships broaden our reach in the affluent and high net worth customer segments, where we sell large average case sizes and see strong profitability. AIA's long-term opportunity in mainland China is unique. We have grown very successfully over many years in our original five regions. Yet, we have still only captured a small proportion of the potential market. With our expansion since 2019, AIA now operates in 14 regions. The nine new regions we have entered grew by 36% in the first half and contributed more than 8% of AIA China's VOMB. Looking ahead, we expect new business from these new regions to accelerate with compound annual VOMB growth of 40% over the next five years. Our proven ability to replicate success across regions combined with the sheer scale of the opportunity gives us great confidence in our future and in the delivery of our ambition. We have also provided further detail on our Mainland China strategy in a separate presentation by Fisher Zhang, our Regional Chief Executive. Turning now to ASEAN, where AIA is the leading life and health insurer. This region represents more than one-third of Group VOMB, making this our second largest growth engine. VOMB grew by 20% to over $1 billion for the first time. We delivered strong performances across both agency and partnership distribution channels, with agency VOMB up by 22% in the first half and partnerships up by 16%. Our agency is the most professional in the region, while our strategic band partnerships remain a key long-term asset, giving us scale, reach and privilege access to acquire quality customer segments. Across ASEAN, AIA is the number one rank for protection. 95% of our VOMB comes from traditional protection and long-term savings products, generating high quality earnings and a VOMB margin of around 70%. With our strong competitive advantages, AIA is exceptionally well placed to meet the growing customer needs in this region. In India, Tata AIA Life delivered another excellent performance with VOMB up by 38%. Our business continues to rank number one for persistency and it is a market leader in retail protection. Agency now contributes more than half of total VOMB with high productivity and a clear focus on quality, making it the most professional in India. Our bank and broker partners complement our agency, extending our customer reach and driving equally strong growth. Tata AIA's protection-focused strategy, leading distribution and proven execution ensure that we are well on our way to capture India's huge potential. Today's excellent results are the outcome of a growth strategy that plays directly to AIA's core strengths. Asia is the most attractive region in the world for life and health insurance and AIA is uniquely positioned to unlock its full potential. The demographics are compelling. By 2030, Asia will have nearly 2.6 billion people of working age and 700 million aged 60 and above. That means a rapidly expanding base of customers with protection, health and retirement needs. At the same time, wealth generation in the region is unmatched. Personal financial assets in Asia, excluding Japan, are projected to grow at 8% a year, far outpacing other major regions of the world. Healthcare demand is rising sharply. Annual healthcare expenditure across Asia, excluding Japan, is already more than $1.4 trillion, and around 45% of that is out of pocket. This creates a clear role for private insurance solutions. What differentiates us is our competitive advantages. Unrivaled distribution. innovative propositions, and a leading customer experience, all powered by world-class technology and digital capabilities. This is why AIA is the insurer of choice and Asia's most powerful brand. And it is why we have absolute confidence in our ability to deliver sustainable growth and long-term value for our shareholders. Let me now take you through how we are extending these competitive advantages. AIA's multi-channel distribution platform is unrivaled in both scale and quality. Agency continues to be the main source of profitable new business, delivering 73% of the group's VOMB through more than 96,000 active advisors. Our agents are highly professional, building lifelong relationships with customers and advising them as their needs evolve. We have the world's leading agency, having been number one MDRT globally for the last 11 years. The success of our model is self-reinforcing, as it attracts more high-caliber agents to join AIA, extending our industry leadership further. Fast-growing partnerships provide complementary growth, reaching hundreds of millions of customers through our network of strategic bank and broker partners. Together, our agency and partnership channels create a powerful model that drives long-term growth and sets AIA apart. Our propositions are designed to meet the needs of Asia's rapidly growing middle-class and affluent populations. Our solutions are about changing behavior, By rewarding positive choices and integrating health into financial solutions, we create an advantage that goes beyond pure product design. This model is deeply embedded in how we engage with customers, and it cannot be easily replicated. In the first half, we sold new policies to more than 2 million customers, with loyalty from existing policyholders remaining very high. 89% of the group's VOMB comes from protection and fee-based insurance products. Protection generates underwriting earnings unaffected by capital market volatility, while long-term savings deliver fee-based insurance income with limited guarantees. This diversified portfolio is further strengthened by our integrated healthcare strategy, which enhances customer value and supports sustainable profitability. Our ambition is to make healthcare and health insurance more accessible, more affordable, and more effective. AIA is already the leading private health insurer in Asia, and continuous innovation is making our health products more personalized. By integrating more closely with healthcare providers, we help customers receive the right care in the right setting. Our strategy is powered by Amplify Health, our AI-driven health technology and analytics company. In the first half, we delivered higher VOMV growth and a 250 basis point improvement in loss ratio, demonstrating tangible progress. These improvements strengthen customer outcomes, enhance profitability and reinforce the long-term sustainability of our health business. Over the past five years, we have built a strong foundation in cloud, digital platforms and structured data. This means we can now deploy generative AI across the group at speed and scale. This transformation goes well beyond efficiency gains. It unlocks greater value for our customers, distributors and operations. For customers, this means more personalized engagement, faster service and better outcomes. For distributors, it means higher quality leads, smarter product matching and improved productivity. Our operations benefit from intelligent automation at scale, freeing our people to focus on the relationship-driven work that matters the most. As we expand our uses of AI, these innovations will reinforce AIA's position as a trusted, forward-looking leader in life and health insurance. In summary, We are executing a growth strategy that plays directly to our core strengths and sharpens our competitive advantages. We are driving strong momentum across key financial metrics, demonstrating our ability to execute with discipline. I am confident that our ability to deliver compounding new business growth will sustain higher earnings and cash flow generation well into the future. Our growth ambitions are bolder than ever and with the scale, resilience and unique advantages we have built, I'm certain we are well placed to deliver our commitments as we realise AIA's full potential. Thank you. I will now hand over to Garth who will take you through the financial results in more detail.

Good morning everyone. I'll now take you through our financial results. As Yunsheng highlighted, AI delivered an excellent performance in the first half of 2025, with double-digit growth across our key financial metrics of VOMB for new business, OPAT for earnings, and UFSG for cash generation. VOMB was up 14% to $2.8 billion. This drove a 290 basis points increase in operating ROEV to 17.8%. and growth in EV equity to $73.7 billion. The layering of new business onto our Inforce portfolio saw UFSG, our key operating measure of cash generation, increase by 10% per share to $3.6 billion. OPAT also grew to $3.6 billion, up 12% per share, and operating ROE jumped to a record 16.2%. During the first six months, we returned $3.7 billion to shareholders through dividend and share buybacks, which reduced the shareholder capital ratio, in line with our expectations, to 219%. Based on this excellent financial performance, the Board has declared an increase in the interim dividend per share of 10%. I'll take you through further details in three sections. First, the embedded value results, which show how we generate increased shareholder value. AIA is dedicated to writing profitable new business, which compounds over time to support higher earnings and cash generation for the long term. VOMB growth of 14% came from growth in both volumes and margin, with AMP up 8% and margin up 3.4 percentage points. Our VOMB is geographically diverse, with broad base growth from 13 markets. We also grew both our agency and partnership channels. Our financial discipline, products innovation and regular repricing, backed by our powerful distribution platform, have delivered a strong track record of new business profitability. However, the high quality of our new business cannot be judged by VOMV margin alone. We are focused on products that deliver for both our customers and our shareholders. Our traditional protection products provide valuable and affordable cover for families, and generate underwriting profits that are not driven by capital markets. Participating in unit-linked products target attractive expected long-term returns for customers while delivering fee-based insurance earnings. Plus, 90% of BNB comes from these preferred products with a very low average guarantee, producing sustainable, strong, and predictable cash generation. New business has consistently delivered an IRR above 20%. And as we have reduced capital intensity, we generate more VOMV per dollar of capital we invest in the business. Every dollar we invest is paid back rapidly and generates nearly $4 of distributable earnings in just 10 years. 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. Compounding layers of profitable new business, prudent assumptions, and proactive, enforced management together drive higher EV operating profit, which increases EV equity and, in turn, cash generation. EV operating profit grew to $5.9 billion, mainly from the higher VOMV and improved operating variances, supported by our management actions on medical business. Since IPO, we have achieved positive operating variances every single year. And in total, these have added $4.6 billion to EV equity, demonstrating the ongoing prudence in our assumptions. As a result of the strong increase in EV operating profit, operating return on EV increased by 290 basis points to 17.8%. EV equity grew by 8% to $77.4 billion before shareholder returns. with EV operating profit the key driver. Non-operating items were small, as negative investment return variances were largely offset by the positive effects of exchange rates. After the $3.7 billion of dividend and share buybacks, EV equity was $73.7 billion, up 5% per share over the first six months of the year. EV equity represents the value to shareholders of our large, enforced portfolio. which we have built from many years of writing high-quality, profitable new business, which compounds over time to support higher earnings and cash generation for the long term. The future earnings from the Inforce are mainly from protection and long-term savings products with recurring and resilient cash flows. The combination of our high-quality product mix and prudent approach to asset liability matching delivers predictable cash flow and low sensitivity to interest rates. While earnings continue for decades into the future, the inflows is highly cash generative, with close to $50 billion emerging within the next 10 years. From this, we can fund both increased returns to shareholders and organic new business investment. which further grows our stock of future earnings. New business investment in the first half of 2025 supported a $3 billion increase in distributable earnings over the next 10 years, demonstrating the virtuous circle between VOMB and higher cash generation. UFSG is our key operating measure of cash generation after tax and is shown before reinvestment in new business and central costs. The key component of UFSG is the expected distributable earnings from in-force business, which increased by 7% in the first half, reflecting growth in the business. Operating variances improved from our proactive in-force management, while the expected return on free surplus reduced due to share buybacks. Overall, UFSG grew to $3.6 billion, up by 10% per share. Now moving to the IFRS results. the IFRS results provide an accounting view of our business. EV and UFSG are more reflective of shareholder value, because they consider regulatory reserves and capital, which drive the earnings that can be distributed to shareholders. Even so, IFRS 17 has some similar concepts to EV, in particular the Contractual Service Margin, or CSM. The CSM represents our accumulated stock of expected future IFRS earnings, with each cohort of new business adding further to this stock. New business CSM grew by 15% and supported strong growth in the CSM balance to $61.4 billion at 30 June 2025. The underlying CSM growth net of releases increased to 10.3%, demonstrating our strong organic growth. As a result of stable release rate and a larger stock, the CSM release increased to $3 billion and was the key driver of OPAP. One simple way to understand how OPAP moves from period to period is to look at the drivers of revenue and expenses. A 9% increase in the CSM release and an improvement in operating variances were the main drivers of higher revenue. Improved claims variances were supported by progress in our integrated healthcare strategy. while our disciplined expense management created significant operating leverage. OPAT in 2025 is net of the first-time effect of the OECD global minimum tax regime, with our resulting effective tax rate in line with previous guidance. Overall, OPAT was up 12% per share and increased to $3.6 billion. Our excellent business fundamentals, consistent execution and financial discipline mean that we are well on track to achieve our 9-11% OPAT per share CAGR target. Strong growth in OPAT and our ongoing capital management actions supported a strong increase in operating ROE, which reached a record level of 16.2%. Comprehensive equity provides a more economic view of IFRS shareholders' equity by adding the CSM on a net of tax basis to include the value of future earnings. New business growth and positive operating variances supported a 9% increase over the first half, and after returning $3.7 billion to shareholders, comprehensive equity was $92.1 billion as of 30 June 2025. Finally, capital management. We follow a robust internal capital management framework. Backed by strong financial discipline, our unwavering focus on profitable growth delivers substantial free surplus generation. This supports a prudent, sustainable and progressive dividend and in addition we look to return capital to shareholders that is surplus to our needs. All while retaining sufficient financial flexibility to capture the huge growth opportunities available to us. AIA's clear capital management policy sets out how we deliver sustainable and growing returns to shareholders over time through dividends and share buybacks. The first part is a payout ratio target of 75% of annual net free surplus generation. The second is a commitment to review our capital position and regularly return capital in excess of our needs. We believe that AI's ability to deliver across growth, earnings and cash sets us apart from our competitors. Following our established dividend policy, the Board has declared a 10% increase in the interim dividend per share. In the first half, net free surplus generation, after reinvestment into new business, was $2.4 billion. We expect a similar seasonal pattern of net FSG in 2025 as in previous years. The total 2025 net FSG will determine the overall shareholder payout for the year from the first part of the capital management policy. The final dividend and the balance of the 75% target payout will be announced at the 2025 annual results. Now moving to our capital position, which is best viewed through free surplus and the shareholder capital ratio. Looking at the development of free surplus since the start of 2022, when we commenced our first share buyback program, you can see three major components. You can also see that variances over time and our inorganic capital investments have both been small. The first component, NetFSG, after investments made into organic new business at highly attractive returns, has generated $14.5 billion of capital. This NetFSG comfortably supported the second component, $8.6 billion of shareholder dividends. Our commitment to return excess capital resulted in the third component, which saw us deploy a further $13.3 billion through share buybacks. In aggregate, we have returned $22 billion to shareholders through our disciplined capital management. As a result, you can see that our shareholder capital ratio has reduced progressively in line with our expectations and stood at 219% at 30 June 2025. In conclusion, the Group has delivered an excellent financial performance in the first half of 2025. with double-digit growth across our key financial metrics of new business, earnings and cash generation. We remain confident in our outlook. AIA is exceptionally well positioned to capture the enormous growth opportunities in Asia, the most attractive region in the world for life and health insurance. We believe that our strong balance sheet, financial flexibility and clear growth strategy set us apart. while our proven track record gives us great confidence in our execution capabilities. We are focused on driving high-quality, profitable new business growth with highly attractive reinvestment economics. This adds further substantial layers of recurring earnings and cash generation well into the future that in turn will generate highly attractive returns for shareholders. Thank you.

from AIA Central in Hong Kong. Welcome to our 2025 Interim Results Analyst Briefing. I'm Lance Burbage, Chief Investor Relations Officer for the AIA Group. Together with me on stage today are Li Yuansong, our Group Chief Executive and President, Garth Jones, our Group Chief Financial Officer, and our four Regional Chief Executives, Jackie, Fisher, Haklei, and Leo. We have other members of our Group Executive Committee with us in the room. Before we start the Q&A, let me just remind you that we've shared on our website a separate video on AIA China's growth strategy. I hope if you haven't had a chance to watch it, you will be able to later. With that, we can begin our Q&A session. If you want to ask a question, please make sure you're logged in to the Zoom webinar. Operator, over to you, please.