UOB Kay Hian
Date of Report: Friday, 22 August 2025
AIA Group Delivers Robust 1H25 Results: Strong OPAT Beat, Margin Expansion, and China Growth Ambitions Drive Investor Optimism

Overview: AIA Group’s Stellar 1H25 Performance

AIA Group Limited (1299 HK), a global life insurance leader, posted an impressive set of 1H25 results. The report highlights robust value of new business (VONB) growth, a solid beat in operating profit after tax (OPAT), margin expansion, and ambitious growth targets in mainland China. The performance across key markets such as Hong Kong, Thailand, and Singapore underlines AIA’s strength, while strategic initiatives and capital discipline continue to reinforce investor confidence.

Stock Snapshot

• Share Price: HK\$73.45
• Target Price: HK\$91.00 (Upside: +23.9%)
• Market Cap: HK\$771.6 billion (US\$98.8 billion)
• 3-month Avg Daily Turnover: US\$306 million
• 52-week High/Low: HK\$77.50 / HK\$48.60
• FY25 EV/Share: US\$7.34
• FY25 Shareholder Capital Ratio: 220.1%

Key Financial Highlights and Metrics

Geographic Performance Breakdown

Business Segment Highlights

Hong Kong: Key Growth Engine

• AIA Hong Kong delivered 24% YoY VONB growth in 1H25.
• Mainland China visitor segment surged by 30% YoY, spurred by promotional sales ahead of new cap regulations on participating products.
• Domestic segment saw 18% YoY VONB growth.
• Agency channel (over 70% of VONB) led with 35% growth, while partnership (bancassurance and broker) only rose 10% amid intensified broker competition.
• New long-term savings products gained strong traction, boosting ongoing sales momentum.

Mainland China: Navigating Economic Headwinds, Eyeing Expansion

• Reported VONB declined 4% YoY, mainly due to economic assumption changes and a 7% drop in annualised new premium (ANP).
• Excluding assumption changes, underlying VONB growth in 1H25 would have been 10% (with a faster 15% YoY in 2Q25).
• Margin surprised to the upside, rising 2.0 ppt to 58.6%, helped by proactive repricing and longer premium payment policies.
• The nine new regions entered since 2019 reported 36% VONB growth to US\$61m in 1H25, now 8% of AIA China’s total VONB.
• Targeting a 40% VONB CAGR from these new geographies between 2025-2030, supported by more than 1,700 new agents recruited in the four regions launched in April 2025.

ASEAN: Thailand and Singapore Lead, Malaysia Faces Challenges

• ASEAN segment posted 20% VONB growth in 1H25.
• Thailand was the standout with 35% VONB growth, attributed to front-loaded sales of high-margin medical products before new co-payment rules took effect, boosting margin by 22.6 ppt to 115.7%.
• Singapore VONB rose 16% YoY, mainly due to strong unit-linked savings products in 1Q25.
• Malaysia saw a 3% YoY VONB decline due to agency sales disruptions from regulatory changes in medical repricing.

Financial and Operating Performance

Operational Metrics and Key Ratios

• Implied 2Q25 VONB growth was 19%, accelerating from 13% in 1Q25.
• OPAT per share rose 12% YoY, ahead of forecasts, buoyed by a 9% increase in contractual service margin (CSM) release and positive operating variances.
• CSM balance increased 9.2% half-on-half to HK\$61.4 billion, driven by new business and favorable forex impact.
• Net underlying free surplus generation jumped 13% per share, reflecting higher distributable earnings, operating variances, and capital savings from product mix shifts.
• Interim dividend up 10% YoY to HK\$0.49, exceeding expectations.
• Shareholder capital ratio stands at 219%, well above the 200% target.

Earnings Revision and Valuation

• 2025-27 VONB estimates revised up by 2.1%, 1.3%, and 0.3%, respectively, reflecting 1H25 results and higher margin assumptions in China and Thailand.
• 2025-27 OPAT forecasts raised by 2.3%, 3.4%, and 1.0%, respectively, incorporating stronger CSM growth and improved variances, partly offset by a higher tax rate under the global minimum tax regime.
• Target price maintained at HK\$91.00, implying 1.6x 2025F PE, in line with historical averages.

Comprehensive Balance Sheet Highlights

Key Operating Ratios and Metrics

• Shareholders’ funds/total assets: 13.9% (2025F), up from 13.3% (2024)
• Total assets/equity: 7.2x (2025F)
• Liquid assets/total assets: 4.7% (2025F)
• P/EV (x): 1.3 (2025F)
• Adjusted P/E (x): 13.9 (2025F)
• Dividend Yield: 2.6% (2025F)
• Payout ratio: 35.9% (2025F)

Growth and Profitability Outlook

• Gross premiums YoY growth: 11.5% (2025F)
• Net profit YoY growth: 7.2% (2025F)
• VONB margin: 57.4% (2025F), rising to 58.4% (2026F)
• Reported ROE: 17.2% (2025F)

Capital Management and Shareholder Returns

• Interim dividend raised by 10% YoY to HK\$0.49, slightly ahead of expectations.
• No new share buyback announced, but management reiterated its commitment to annual capital reviews and returning excess capital to shareholders.
• Shareholder capital ratio stands robust at 219% post-buyback and final dividend payment, comfortably exceeding the 200% target range.

Analyst Recommendation and Strategic Outlook

• Recommendation: Maintain BUY
• Target Price: HK\$91.00
• Rationale: Strong OPAT and VONB growth, margin expansion in key regions, and ambitious China expansion plan underpin the positive outlook.

Conclusion

AIA Group’s 1H25 results reinforce its position as a leading pan-Asian life insurer, with strong profit growth, disciplined capital management, and clear strategic ambitions in China. The company’s ability to deliver operational beats, expand margins, and adapt to regulatory changes in core markets provides a compelling investment case. With a robust balance sheet, growing dividends, and a well-articulated growth roadmap, AIA remains a top pick for investors seeking exposure to Asia’s long-term insurance and savings growth story.