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AIA targets higher dividends; Prudential aims for 15%-20% CAGR

Felicia Tan
Felicia Tan • 5 min read
AIA targets higher dividends; Prudential aims for 15%-20% CAGR
Prudential has a presence in 13 Asian markets including Singapore. Photo: Albert Chua/The Edge Singapore
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Based on 1QFY2024 results for the January-March quarter, AIA Group comes out ahead as investors’ favourite. More than that, CEO Lee Yuan Siong is targeting to return a 75% payout ratio to shareholders.

AIA reported a total value of new business (VONB) of US$1.33 billion ($1.8 billion) for the 1QFY2024 ended March 31, 27% and 31% higher on an actual exchange rate and constant exchange rate, respectively.

The number marked a quarterly high for the group, registering double-digit VONB growth across its segments. During the quarter, VONB margin grew by 1.9 percentage points y-o-y to 54.2%. On a constant exchange rate, VONB margin was up by 2.1 percentage points y-o-y. 

Annualised new premiums for the quarter stood at US$2.45 billion, 23% higher y-o-y on an actual exchange rate and 26% higher y-o-y on a constant exchange rate.

“[The results] demonstrate that AIA has the right strategic priorities and that consistent execution will deliver the right results for all our stakeholders,” Lee says.

Lee also announced that the group was embarking on an enhanced capital management policy with an enlarged share buyback programme to reward AIA’s shareholders with higher annual distributions.

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The group will also target to return a payout ratio of 75% of annual net free surplus generation (net FSG) to its shareholders through dividends and buybacks. The policy will begin from its FY2024 results. The group will also review its capital position and return capital it does not need.

“In view of AIA’s very strong financial position and our confidence in our future operational and financial delivery, the board has approved a US$2 billion addition to our existing share buyback programme, which will bring the total to US$12 billion,” says Lee. “These actions underscore our commitment to systematically return capital that exceeds our needs whilst continuing to deliver organic new business growth at attractive returns.”

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Prudential, which has a presence in 13 Asian markets including Singapore, Malaysia, Hong Kong, Taiwan, China and India, reported a new business profit (NBP) of US$726 million for the 1QFY2024 ended March 31, 2.29% lower than the new business profit of US$743 million for the same period last year.

Excluding economic impacts, NBP rose 11% y-o-y for the January-March quarter to US$810 million. However, total new business margin for the quarter stood at 45%, three percentage points lower y-o-y. (NBP is measured in accordance with European Embedded Value Principles and reflects the value of future profit streams which are not fully captured in shareholders’ equity in the year of sale under the International Financial Reporting Standards or IFRS.)

Annual premium equivalent (APE) sales rose by 4.23% y-o-y to US$1.56 billion as the group registered APE growth in Hong Kong, Singapore and Malaysia, offset by its mainland Chinese joint venture Citic Prudential Life and its Indonesian market.

The group’s businesses in its “growth markets and other” segment also saw a y-o-y increase in APE sales, mainly from higher sales in Thailand, Taiwan, India and Africa, which offset continued weakness in Vietnam.

On a constant exchange rate basis, the quarter’s new business profit dipped by 0.14% y-o-y, while APE sales rose by 7.33% y-o-y. Excluding economic impacts, new business profit rose 9.02% y-o-y to US$810 million, while the total new business margin was 50%. APE remained the same.

“Against a strong prior period comparator that reflects our outperformance in 1QFY2023 when the border between Hong Kong and the Chinese mainland reopened, I am pleased the group has delivered new business profit growth of 11%, excluding economic impacts,” says Prudential’s CEO Anil Wadhwani.

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“Our continued focus on the quality of business written is reflected in new business profit (excluding economic impacts) growing more than APE sales. Our total APE sales have grown sequentially each quarter since 3QFY2023, reflecting resilient consumer demand across Asia and demonstrating the strength of our multi-market and multi-channel distribution model,” he adds.

“We are increasingly confident of achieving our 2027 financial and strategic objectives. We remain focused on accelerating value creation for our shareholders and expect to provide an update on our capital management plans by 1HFY2024 results,” Wadhwani continues.

In August 2023, Wadhwani announced that the group intends to grow its new business profit at a CAGR of 15% to 20% from 2022 to 2027. This will be achieved through multi-market growth engines in Greater China, Asean, India and Africa, focusing on customer, distribution and health.

The group also aimed for a double-digit gross OFSG CAGR during the same period. OFSG refers to the operating free surplus generated from the group’s in-force insurance business.

The group also expects its value in force to monetise into US$11 billion of free surplus in five years. The group’s August 2023 announcement added that it has a growth opportunity of some US$1 trillion, with its markets growing twice as fast as the rest of the world.

Great Eastern Holdings

Over at Great Eastern Holdings G07 -

(GEH), its largest shareholder Oversea-Chinese Banking Corp aims to privatise the company this year. Hence, this is likely to be GEH’s final quarterly business update.

For the 1QFY2024 ended March 31, GEH reported earnings of $306.7 million, 26% higher y-o-y, due to higher profit from its insurance business and shareholders’ fund from a favourable investment performance.

GEH’s total weighted new sales for the quarter was up 34% y-o-y to $524.2 million as the group’s operations in Singapore, Malaysia and Indonesia grew. The group’s core distribution channels in the three countries drove the growth. As a result, new business embedded value rose by 21% y-o-y to $163.2 million.

Photos: Bloomberg, Albert Chua/The Edge Singapore

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