Insurance giant AIA will buy back US$10 billion of shares over three years as new policy sales, M&A deals drive profit growth
Hong Kong-based AIA Group, the largest listed insurer in Asia, announced it will buy back US$10 billion of its shares over the next three years after it reported better-than-expected results for 2021.
"The share buy-back programme enhances return to shareholders while retaining the financial strength that allows AIA to continue investing in the significant growth opportunities available to it," said Lee Yuan Siong, group chief executive and president, in a stock exchange filing.
AIA, which traces its roots to 1919 in Shanghai, joins a wave of financial firms buying back stock.
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HSBC announced a US$1 billion share buy-back last month, adding to a US$2 billion programme announced late in 2021. Standard Chartered plans to buy back US$750 million of shares.
"Buying back the shares will cut down the number of shares in circulation and hence will help boost the share price of the company. It is positive news for its shares price," said Tom Chan Pak-lam, chairman of the Hong Kong Institute of Securities Dealers.
"However, a share buy-back will reduce cash for acquisitions or other investments. This may mean the company wants to take a pause from mergers and acquisitions."
AIA's shares rose 2.4 per cent to HK$76.75 at 11am, while the Hang Seng Index plummeted 3.2 per cent.
The insurer conducted a number of deals last year, which helped boost its net profit by 28 per cent to US$7.48 billion, beating analysts' estimates of US$6.47 billion in a Bloomberg poll.
Last week it agreed to spend HK$2.2 billion (US$280 million) buying health insurer Blue Cross (Asia-Pacific) from Bank of East Asia, after spending HK$5.07 billion on BEA Life in March last year.
AIA also spent 12 billion yuan (US$1.86 billion) on a 25 per cent stake in China Post Life Insurance last summer.
The profit growth was also driven by sales of new policies, which increased 18 per cent to US$3.37 billion. All 18 markets that AIA operates in, except Hong Kong, said the value of new business grew at a faster pace than the pre-pandemic levels of 2019.
In mainland China, the company's biggest market, representing a third of sales, new business grew 10 per cent to US$1.1 billion last year.
In Hong Kong, which suffered a huge loss of business from mainlanders unable to freely travel to the city to buy insurance products because of the pandemic, AIA saw a 37 per cent increase in new business to US$756 million as domestic customers bought more insurance cover. This was still below the level seen before the coronavirus first struck.
AIA's Thailand operation reported an increase in new business of 34 per cent last year. In Malaysia it jumped 26 per cent and in Singapore it rose by 6 per cent.
"New Covid-19 variants such as Omicron are causing short-term volatility in new business sales" in the first quarter of 2022, Lee said in the result statement.
However, he remained "cautiously optimistic" and expected to see "a strong recovery in activity levels and consumer demand" once the worst of the pandemic has subsided.
"Though Hong Kong is still facing the fifth wave of the outbreak, the impact will be temporarily," Lee said in a results briefing.
"Hong Kong and mainland China are two major markets for AIA as they contribute half of all business. After the [coronavirus] cases have peaked and declined, we believe Hong Kong's business will recover quickly ."
AIA will pay a final dividend of HK$1.08 per share, bringing the full-year dividend to HK$1.46, which is 8 per cent higher than a year earlier.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.
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