AIA announced new business value (NBV) information for the third quarter. NBV increased 16% year on year (fixed exchange rate) (1H24 25%) in the third quarter. Considering the depreciation of the reporting currency, the US dollar, the real exchange rate increased 17% year over year (1H24 21%), indicating a decline in growth in the third quarter. However, with a 23 year high base, we think this growth rate is resilient. All major markets achieved NBV growth in the third quarter. In the third quarter, agent channel NBV achieved a 15% year-on-year increase, the same as 1H24; NBV, a cooperative channel with banks/financial advisors, etc., increased 16%, and 1H24 grew 39.5%. Maintain “buy-in.”

Mainland China: NBV increased by 9%

Under the fixed exchange rate, the value of new business in mainland China increased by 9% year on year, down from the 1H24 growth rate of 36%. If we assume 2024, the NBV growth rate will increase significantly under a comparable caliber. 3Q23 Mainland China has a high NBV base (over 20% year-on-year growth), and AIA withdrew some products from the market before interest rates were cut, but the company still achieved a good growth rate. By channel, the NBV of the agent channel and the banking insurance channel have both increased. The NBV of the agent channel is 10% compared to the same period, which is faster than the banking insurance channel. At the same time, AIA's business footprint in mainland China continues to expand, and has obtained regulatory approval. It is expected that it will contribute new momentum to growth by establishing branches in Anhui and Shandong provinces.

Hong Kong, China: NBV increased 24%

The value of AIA Hong Kong's new business increased by 24% year on year, slightly down from 26% in the first half of the year. Despite a high base in '23, the growth rates of local business in Hong Kong, China/MCV business for mainland Chinese tourists were 28% and 20% respectively. The growth rate of local business is relatively fast, showing strong growth resilience.

AIA's MCV business is agent-led and is expected to maintain good sustainability. Currently, professional intermediaries engaged in MCV business are being examined by the regulatory authorities in dry port and port. We believe that the impact on AIA is manageable. Since full customs clearance in February 2023, the company's agent channel NBV has maintained a positive trend. In the third quarter, NBV from visitors from mainland China reached the highest level since customs clearance.

Southeast Asia (up 8% year over year) and other markets

The overall NBV of the three Southeast Asian countries (Thailand, Singapore, and Malaysia) increased 8% year over year, down from about 18% in the first half of the year. Thailand is the largest market in Southeast Asia, and NBV grew in the third quarter.

The Singapore business achieved double-digit NBV growth over the same period, mainly driven by investment and insurance. The Malaysian business NBV achieved double-digit growth, and NBV's profit margin also increased compared to 1H24. Other markets achieved a strong NBV growth rate in the third quarter, and we estimate that the overall NBV contribution was about 10%.

Profit forecasting and valuation

Taking into account investment fluctuations, we adjusted our 2024/2025/2026 EPS forecast to USD0.56/0.63 (previous value: USD0.52/0.57/0.64) and maintained the HKD90 target price and “buy” rating.

Risk warning: NBV has deteriorated drastically, and investment has suffered significant losses.