Aia Group Limited · HKEX:1299

Aia — H1 2015 Earnings Presentation

68 slides from Aia's earnings presentation, Jul 24, 2015

  1. Slide 1: 2015 Interim Results Presentation

    2015 INTERIM RESULTS PRESENTATION 24 July 2015

  2. Slide 2: Disclaimer

    Disclaimer This document (“document”) has been prepared by AIA Group Limited (the “Company”) and its advisers solely for use at the presentation (the “Presentation”) held in connection with the announcement of the Company’s financial results. Document in this disclaimer shall be construed to include

  3. Slide 3: Mark Tucker, Group Chief Executive

    Mark Tucker Group Chief Executive

  4. Slide 4: Excellent Financial Results

    Excellent Financial Results  VONB up 21% to $959m, 25% on CER  OPAT up 12% to $1,630m, 15% on CER  EV Equity of $40.5b  Free surplus generation of $2.1b  AIA Co. solvency ratio of 453%  Interim dividend increase of 17% 4

  5. Slide 5: Agenda

    Agenda Presenter Position Topic Mark Tucker Group Chief Executive 1H2015 Group Review Garth Jones Group Chief Financial Officer 1H2015 Financial Results Gordon Watson Regional Chief Executive Hong Kong, Korea, Other Markets Bill Lisle Regional Chief Executive Malaysia Ng Keng Hooi Regional Chief Exe

  6. Slide 6: Aligned Growth Platforms and Priorities

    Aligned Growth Platforms and Priorities Growth Growth Growth Drivers Platforms Priorities Large  Sustain competitive advantages in Premier Agency Premier Population  Recruit, develop and promote next generation of agents Agency Growth  Enhance productivity and service through iPoS technology  Ex

  7. Slide 7: Premier Agency Delivery

    Premier Agency Delivery Premier Agency VONB ($m) Premier Agency Delivery 756  VONB up 21% on AER, 24% on CER +21% 623  Quality recruitment focus  Expanding AIA Premier Academy training  Benefited from iPoS technology  Total active agents up 8% 1H2014 1H2015 MDRT Registered Members Global MDRT R

  8. Slide 8: Profitable Partnership Expansion

    Profitable Partnership Expansion Partnership Distribution VONB ($m) Profitable Partnership Expansion 292  VONB up 23% on AER, 30% on CER +23%  Accelerating bancassurance growth 237  Strong DM growth across the region despite heightened regulation in Korea  Further expanded relationships with IFA

  9. Slide 9: The Right Distribution and Product Mix

    The Right Distribution and Product Mix 1H2015 Distribution Mix(1) 1H2015 Product Mix(1) Others 14% Traditional Partnerships Protection 37% Unit-linked 35% 20% Agency 63% Participating 31% Contribution to Growth by Channel(2) Contribution to Growth by Product(2) % of Growth Since IPO % of Growth Sinc

  10. Slide 10: Substantial Growth from Existing Customer Marketing

    Substantial Growth from Existing Customer Marketing Existing Customer Marketing (ECM) YoY Results Significant Growth Opportunity +30% +33%  Substantially enhanced value from existing 1H2014 customers since ECM launch in 1H2012 1H2015  VONB trebled; 28% of Group VONB from targeted existing customer

  11. Slide 11: New Business Growth with Increased Returns

    New Business Growth with Increased Returns VONB ($m) New Business Strain as % of VONB 959 3.2x (52)pps 303 1H2010 1H2015 2010 1H2015 OPAT ($m) Interim Dividend Per Share (HK cents) 1,630 18.72 1.8x 1.7x 11.00 899 1H2010 1H2015 1H2011 1H2015 11

  12. Slide 12: Sustained Growth Momentum

    Sustained Growth Momentum VONB ($m) EV Equity ($m) 959 40,478 1.8x 36,915 3.2x 792 33,277 645 29,091 27,612 512 399 22,178 303 1H2010 1H2011 1H2012 1H2013 1H2014 1H2015 1H2010 1H2011 1H2012 1H2013 1H2014 1H2015 OPAT ($m) Free Surplus ($m) 1,630 8,349 1.8x 2.1x 1,457 6,704 1,269 6,058 5,821 5,935 1,0

  13. Slide 13: Garth Jones, Group Chief Financial Officer

    Garth Jones Group Chief Financial Officer

  14. Slide 14: Excellent Financial Results – Across All Key Metrics

    Excellent Financial Results – Across All Key Metrics ($m) 1H2015 1H2014 GROWTH VONB 959 792 21% VONB Margin 50.2% 46.2% 4.0 pps Growth ANP 1,878 1,690 11% EV Equity(1) 40,478 39,042 4% Operating Profit After Tax 1,630 1,457 12% Earnings TWPI 9,633 9,004 7% Operating Margin 20.6% 19.5% 1.1 pps Free S

  15. Slide 15: Key Metrics on Constant Exchange Rates

    Key Metrics on Constant Exchange Rates ($m) 1H2015 1H2014 AER Growth CER Growth VONB 959 792 21% 25% ANP 1,878 1,690 11% 15% Operating Profit After Tax 1,630 1,457 12% 15% EV Equity(1) 40,478 39,042 4% 5% Average YoY Currency Depreciation Against USD in 1H2015 15% 12% 9% 6% 3% 0% Australia New Zeala

  16. Slide 16: Growth, Earnings, Capital and Dividends

    Growth Earnings Capital and Dividends 16

  17. Slide 17: VONB up 21% on AER, 25% on CER

    VONB up 21% on AER, 25% on CER VONB ($m) ANP ($m) 1,878 959 +11% +21% 1,690 792 1H2014 1H2015 VONB Margin 1H2014 1H2015 50.2% 46.2% +4.0pps AER Growth CER Growth VONB 21% 25% ANP 11% 15% 1H2014 1H2015 17

  18. Slide 18: Sustained Growth in New Business Profitability

    Sustained Growth in New Business Profitability VONB ($m) 1,845 1,490 1,053 959 1,188 845 792 932 676 645 667 533 512 399 364 303 1H2010 2H2010 1H2011 2H2011 1H2012 2H2012 1H2013 2H2013 1H2014 2H2014 1H2015 1H2010 vs 1H2015 3.2x 18

  19. Slide 19: 1H2015: VONB Margin Improvement

    1H2015: VONB Margin Improvement 4.0 pps Increase in VONB Margin +1.2 pps (0.4) pps +2.6 pps +0.6 pps 50.2% 46.2% 1H2014 Product Mix Geographical Channel Mix Economic 1H2015 VONB Margin Mix and Others Assumption VONB Margin Changes 19

  20. Slide 20: 1H2015: PVNBP Margin Improvement

    1H2015: PVNBP Margin Improvement PVNBP Margin by Product 14% 12% 9% 8% 8% 7% 7% 6% 6% 6% Overall Traditional Participating Unit-linked Others Protection 1H2014 1H2015 20

  21. Slide 21: High Quality New Business Portfolio

    High Quality New Business Portfolio AIA HK New Regular Premiums (1) AIA HK Product Mix by Payment Term 99% Unit-linked & Others 11% Traditional Protection 30% 53% 47% Participating Participating 59% 59% Traditional Protection and Packaged Critical Illness 1% 60% <5 Years ≥5 Years AIA HK Market(2) No

  22. Slide 22: Diversified Growth Portfolio

    Diversified Growth Portfolio VONB ($m) 1H2015 VONB by Market Segment AER CER 335 +29% +29% Hong Kong 260 Other Markets 183 11% +13% +14% Thailand 162 Hong Kong 142 32% +12% +19% Singapore 127 China 18% 78 +11% +22% Malaysia 70 187 Malaysia +56% +58% China 7% 120 Thailand 17% 23 Singapore (34)% (32)%

  23. Slide 23: EV Equity of $40.5b – Strong Operating Performance

    EV Equity of $40.5b – Strong Operating Performance 1H2015 EV Equity Movement ($m) EV Operating Profit of $2.4b up 14% on CER 277 (668) 959 60 (33) (525) 1,366 41,394 40,478 39,042 Group Expected VONB Operating Finance Group Investment Exchange Dividend Group EV Equity Return on EV Variances and Cost

  24. Slide 24: Interest Rates and EV Sensitivity

    Interest Rates and EV Sensitivity AIA Long-term Assumptions vs Market Rates Sensitivity of EV Weighted Average by Geography (1) As at 31 May 2015 5.0% Interest rates + 50 bps 0.4% 4.5% 4.0% Interest rates - 50 bps (0.5)% 3.5% 3.0% Equity prices + 10% 2.3% 2.5% 2.0% Nov-10 Nov-11 Nov-12 Nov-13 Nov-14

  25. Slide 25: Currency Sensitivity

    Currency Sensitivity EV ($m) VONB ($m) (2.6)% 38,598 2.6% (3.5)% 959 3.5% 5% fall in 5% rise in 5% fall in 5% rise in local market local market local market local market currencies vs currencies vs currencies vs currencies vs US dollar US dollar US dollar US dollar 1,018 34 1H2015 (34) 1H2015 EV VON

  26. Slide 26: Growth, Earnings, Capital and Dividends

    Growth Earnings Capital and Dividends 26

  27. Slide 27: IFRS Operating Profit up 12% on AER, 15% on CER

    IFRS Operating Profit up 12% on AER, 15% on CER Operating Profit After Tax ($m) Operating Margin 1,630 20.6% +12% +1.1pps 1,457 19.5% 1H2014 1H2015 Expense Ratio 1H2014 1H2015 8.5% (0.2)pps 8.3% AER Growth CER Growth OPAT 12% 15% 1H2014 1H2015 27

  28. Slide 28: Diversified Earnings

    Diversified Earnings OPAT ($m) 1H2015 OPAT by Market Segment AER CER 540 +17% +17% Hong Kong 460 Other 281 Markets +1% +2% Thailand 11% 279 Korea 6% 210 Hong Kong +3% +10% Singapore 34% 203 China 10% 138 (1)% +9% Malaysia 140 Malaysia 167 9% +27% +27% China 132 Thailand 89 Singapore 17% Korea 13% +1

  29. Slide 29: Stable Investment Yield

    Stable Investment Yield Investment Income ($m) Total Investments of $129b % as of 31 May 2015 2,831 Dividend 2,617 Cash & Cash 333 Equivalents and Properties Rental 275 4% 1% Income Equity 11% Interest 2,498 2,342 Income Fixed Income(1) 84% 1H2014 1H2015 Investment Yield 4.8% 4.6% (FY14: 4.7%) Inves

  30. Slide 30: Net Profit up 41%

    Net Profit up 41% Net Profit ($m) 1H2015 1H2014  Net profit includes mark-to-market Operating Profit After Tax 1,630 1,457 of equities  Operating profit excludes any actual Net gains from equities 590 47 or assumed gains  Average non-operating gains of Other non-operating items (40) 42 $378m for

  31. Slide 31: IFRS Shareholders' Equity Movement

    IFRS Shareholders’ Equity Movement IFRS Shareholders’ Equity Movement ($m) Allocated Equity Movement up 7% 5,634 2,180 ( 525 ) ( 50 ) 31,752 26,118 24,513 Allocated Equity Net Profit Dividend Other Capital Allocated Equity Fair Value Reserve Shareholders' Equity End of 2014 Paid Movements End of 1H2

  32. Slide 32: Growth, Earnings, Capital and Dividends

    Growth Earnings Capital and Dividends 32

  33. Slide 33: Self-financed Growth at Attractive Returns

    Self-financed Growth at Attractive Returns Free Surplus up 7% on the HKICO Basis ($m) 2,101 (878) (143) (525) 7,794 8,349 Free Surplus FS Generated New Business Unallocated Dividend Free Surplus End of 2014 Investment Group Office Paid End of 1H2015 Expenses and Others 33

  34. Slide 34: Increased Returns and Capital Efficiency

    Increased Returns and Capital Efficiency VONB Growth New Business Strain as % of VONB 959 3.2x (52)pps 303 1H2010 1H2015 2010 1H2015 IRRs Consistently above 20% Decreasing Payback Periods (Years) 5 +14% (1) year 4 2010 1H2015 2010 1H2015 34

  35. Slide 35: Regulatory Solvency Ratio of 453%

    Regulatory Solvency Ratio of 453% Solvency Ratio on HKICO Basis for AIA Co. Ongoing Capital Strength 427% 453%  Resilient solvency position +26pps  Prudent HKICO reserves and capital  Strong retained earnings  AIA Co. S&P Rating of AA- and Moody’s Rating of Aa3 Required Level of 150% 2014 1H2015

  36. Slide 36: Prudent, Sustainable and Progressive Dividend

    Prudent, Sustainable and Progressive Dividend Interim Dividend Per Share (HK cents) 1.7x +17% +15% +13% +12% 18.72 16.00 13.93 12.33 11.00 1H2011 1H2012 1H2013 1H2014 1H2015 36

  37. Slide 37: Sustained Delivery Through Market Cycles

    Sustained Delivery Through Market Cycles VONB ($m) OPAT ($m) 959 1,630 3.2x 1.8x 1,457 792 1,269 645 1,080 967 512 899 399 303 1H2010 1H2011 1H2012 1H2013 1H2014 1H2015 1H2010 1H2011 1H2012 1H2013 1H2014 1H2015 Interest Rate and Equity Market Volatility % USD 4 650 3.5 600 3 550 2.5 500 2 UST Yield

  38. Slide 38: Gordon Watson, Regional Chief Executive

    Gordon Watson Regional Chief Executive

  39. Slide 39: Hong Kong: An Excellent Start to 2015

    Hong Kong: An Excellent Start to 2015 VONB ($m)  Premier Agency 335  Delivered excellent VONB growth 260 +29%  Next generation recruitment  Active agents up 12%  Active agent productivity up 17%  Strong growth in MDRT qualifiers  Profitable Partnerships  Strong performance in all key channel

  40. Slide 40: Korea & Other Markets: Financial Results

    Korea & Other Markets: Financial Results Korea Other Markets VONB ($m) VONB ($m) 115 +31% 88 (32)% 34 23 1H2014 1H2015 1H2014 1H2015 ANP ($m) 182 132 ANP ($m) 294 367 VONB VONB 18.6% 17.5% 29.7% 31.2% Margin Margin Note: Comparatives for 1H2014 are shown on a constant exchange rate basis. 1H2014 VON

  41. Slide 41: Other Markets: VONB up 31% on CER; 20% on AER

    Other Markets: VONB up 31% on CER; 20% on AER Australia Philippines  #1 ranked in IFA individual risk market  Excellent VONB growth  Strategic partnerships protection focus  Active agent productivity up 23%  Significant increase in OPAT  Bancassurance VONB doubled Indonesia Vietnam  Strong do

  42. Slide 42: Bancassurance: Accelerating Momentum

    Bancassurance: Accelerating Momentum Bancassurance VONB Bancassurance Highlights  VONB up 51% on AER, 61% on CER 51%  Diversified range of bank partnerships  Growth acceleration through focus on key strategic partners across the region  Maintain product and pricing discipline 1H2014 1H2015 Citib

  43. Slide 43: Bill Lisle, Regional Chief Executive

    Bill Lisle Regional Chief Executive

  44. Slide 44: Malaysia: Broadening our Growth Platform

    Malaysia: Broadening our Growth Platform VONB ($m)  Premier Agency  Agency VONB increased by 26% 78 +22%  Recruitment targeting younger agents 64  iPoS submission rate of 90%  Agency Takaful VONB more than doubled  Profitable Partnerships  Excellent performance from Public Bank  Direct Marke

  45. Slide 45: Ng Keng Hooi, Regional Chief Executive

    Ng Keng Hooi Regional Chief Executive

  46. Slide 46: Singapore: Strong Execution

    Singapore: Strong Execution VONB ($m)  Premier Agency 142 +19%  Strong 2Q VONB growth  Unit-linked protection focus 119  iPoS established as primary sales tool  Profitable Partnerships  Excellent VONB growth across all channels  Products and Customers  Expanded product range with packaged 1H

  47. Slide 47: Thailand: Resilient Delivery

    Thailand: Resilient Delivery VONB ($m)  Premier Agency 183  Recruitment programme targeting young +14% and highly-educated agents 161  Significant investment in training  Unit-linked licensed agents up 73%  Profitable Partnerships  Strong performance in direct marketing  Products and Customer

  48. Slide 48: China: Sustained Outperformance

    China: Sustained Outperformance VONB ($m)  Premier Agency 187  Focus on agent support and professional +58% career development  Active agents up 28% 118  Active agent productivity up 15%  MDRT members up 58%  Profitable Partnerships  Strong VONB growth 1H2014 1H2015  Products and Customers 

  49. Slide 49: Mark Tucker, Group Chief Executive

    Mark Tucker Group Chief Executive

  50. Slide 50: Long-term Structural Growth Drivers

    Long-term Structural Growth Drivers Large  4.1 billion people by 2020; increase of 700 million people since 2000 Population  4x the population of the G7 in 2020 Growth Rapid  1.7 billion urban dwellers by 2020, an additional 720 million in 20 years Urbanisation  2x the urban population of the G7

  51. Slide 51: A Catalyst for Economic Growth and Development

    A Catalyst for Economic Growth and Development Competitive Advantages at Work Unprecedented Scale of Opportunity Economic 18 marketsFor every additional dollar of464 life million insurance premium, Growth exclusivelywe create an additional $1.5 tohouseholds in Asia $3.4 of incremental GDP reaching $

  52. Slide 52: Excellent Financial Results

    Excellent Financial Results  VONB up 21% to $959m, 25% on CER  OPAT up 12% to $1,630m, 15% on CER  EV Equity of $40.5b  Free surplus generation of $2.1b  AIA Co. solvency ratio of 453%  Interim dividend increase of 17% 52

  53. Slide 53: Q&A Session

    Q&A Session AIA confidential and proprietary information. Not for distribution.

  54. Slide 54: Definitions and Notes

    Definitions and Notes  Annualised new premiums (ANP) excludes pension business.  Change on constant exchange rates is calculated using constant average exchange rates for current period and prior period.  EV Equity is the total of embedded value, goodwill and other intangible assets attributable

  55. Slide 55: Appendix

    APPENDIX THE REAL LIFE aN COMPANY 41

  56. Slide 56: Asia's Significant Growth Opportunity

    Asia’s Significant Growth Opportunity Population by Region Rapid Urbanisation (Billions) Urban population (Millions) 4.3 4.1 558 3.7 548 3.4 537 315 523 299 515 282 265 248 1,539 1,714 0.9 0.9 0.9 0.9 1,353 995 1,169 0.3 0.3 0.4 0.4 2001 2010 2020E 2030E 2000 2005 2010 2015E 2020E Asia ex-Japan Nort

  57. Slide 57: 1H2015 Working Capital Movement

    1H2015 Working Capital Movement Working Capital Movement ($m) 177 ( 94 ) 1,018 ( 525 ) ( 113 ) 7,077 6,614 Working Capital Net Funds Increase in Purchase of Cost of Change in Fair Working Capital End of 2014 Remitted Borrowings Shares Held by Dividend Value Reserve End of 1H2015 Employee Share- Paid

  58. Slide 58: Capital Fungibility

    Capital Fungibility Net Funds Remitted to Group ($m) Group Working Capital ($m) 7,077 1,018 964 972 5,908 844 5,383 782 4,290 3,088 1H2011 1H2012 1H2013 1H2014 1H2015 1H2011 1H2012 1H2013 1H2014 1H2015 58

  59. Slide 59: Fixed Income Portfolio

    Fixed Income Portfolio Debt Securities by Accounting Classification Debt Securities by Type Other Policyholder & Shareholder FVTPL Unit-linked & 1% Structured Consolidated Investment Funds Securities FVTPL 1% 4% Par Funds FVTPL 19% Government Bonds Corporate 44% Bonds 55% Other Policyholder & Shareh

  60. Slide 60: High-Quality and Long-Duration Asset Base

    High-Quality and Long-Duration Asset Base Fixed Income Portfolio Duration Fixed Income Portfolio by Rating(1) BB and Below & AAA Others 6% 10+ Years & No Fixed 7% Maturity 52% 53% AA 17% BBB 28% 5 – 10 Years 25% 25% A 42% 1 – 5 Years 18% 17% ≤1 Year 5% 5% As of As of 30 Nov 2014 31 May 2015 Note: (1

  61. Slide 61: 1H2015 ANW Movement

    1H2015 ANW Movement ANW Movement ($m) 1,769 ( 571 ) 104 ( 277 ) 365 ( 525 ) ( 27 ) ( 33 ) 16,489 16,156 15,351 ANW Expected Contribution Operating Finance ANW Investment Other Non- Exchange Cost of ANW End of 2014 Return to Variances Costs Before Return operating Rates and Dividend Paid End of ANW f

  62. Slide 62: 1H2015 VIF Movement

    1H2015 VIF Movement VIF Movement ($m) 1,530 87 ( 88 ) ( 54 ) ( 432 ) ( 403 ) 23,016 22,442 21,802 21,399 VIF Expected Contribution to Operating VIF Investment Other Non- Exchange VIF End of 2014 Return VIF from VONB Variances and Before Return Variances operating Rates and End of 1H2015 Assumption N

  63. Slide 63: 1H2015 IFRS Shareholders' Equity and ANW

    1H2015 IFRS Shareholders’ Equity and ANW Reconciliation of IFRS Shareholders’ Equity to ANW ($m) ( 6,717 ) 2,549 ( 2,136 ) 1,239 ( 128 ) ( 10,403 ) 31,752 26,559 16,156 Equity Difference Mark-to-market Elimination of Deferred tax Non-controlling Group ANW Adjustment to Group ANW End of 1H2015 betwee

  64. Slide 64: Robust Capital Structure

    Robust Capital Structure Solvency Ratio AIA Capital Structure ($b) on HKICO Basis for AIA Co. 1H2015 Leverage Ratio(1) 9.1% 453% 433% 427% Borrowings 3.2 353% 311% Total Equity 31.9 2011 2012 2013 2014 1H2015 Note: (1) Leverage ratio defined as Borrowings / (Borrowings + Total Equity) 64

  65. Slide 65: Operational Efficiency

    Operational Efficiency Operating Variances & Persistency Rate Assumption Changes ($m) 95% 78 76 94.4% 69 94% 60 60 93% 92% 91% 90% 1H2011 1H2012 1H2013 1H2014 1H2015 65

  66. Slide 66: Risk Discount Rate and Risk Premium

    Risk Discount Rate and Risk Premium As at 30 Nov 2010 As at 30 Nov 2014 Risk Discount 10-year Risk Risk Discount 10-year Risk % Rates Govt Bonds Premium Rates Govt Bonds Premium Australia 8.75 5.65 3.10 7.75 3.37 4.38 China 10.00 3.74 6.26 9.75 3.74 6.01 Hong Kong 8.00 3.53 4.47 7.00 2.50 4.50 Indon

  67. Slide 67: Sensitivity Analysis – EV

    Sensitivity Analysis – EV Sensitivity of EV as at 31 May 2015 Equity prices + 10% 2.3% Equity prices - 10% -2.3% Interest rates + 50 bps 0.4% Interest rates - 50 bps -0.5% Presentation currency 5% appreciation -2.6% Presentation currency 5% depreciation 2.6% Lapse/discontinuance rates + 10% -1.1% La

  68. Slide 68: Sensitivity Analysis – VONB

    Sensitivity Analysis – VONB Sensitivity of VONB as at 31 May 2015 Interest rates + 50 bps 5.9% Interest rates - 50 bps -7.0% Presentation currency 5% appreciation -3.5% Presentation currency 5% depreciation 3.5% Lapse rates + 10% -6.6% Lapse rates - 10% 7.1% Mortality/morbidity rates + 10% -15.2% Mo

AIA Group — H1 2015 Earnings Presentation on 6ix