Five down, nine to go
? AIA announced on 30 May it has received approval to start preparations to
establish a new branch in Henan, the fifth region it will enter since mid-2019.
? AIA targets entry into nine other regions by 2030. We expect 3.7 – 6.0
months before AIA can formally begin sales in Henan.
? Entering new regions has historically been positive for AIA’s share price (Fig
1). We reiterate our Add call with a TP of HK$94.
Henan is first new region in China to be granted approval in 2022
? During AIA’s 1H21 results briefing, it had stated that it was targeting entry into 10 new
provinces and municipalities.
? This was after AIA had obtained approval for entry into Sichuan and Hubei in 2021 and
Tianjin and Hebei in 2019, with a 17-year gap from its last approval (Jul 2002, Jiangsu).
? As pointed out in Countdown in China, dated 22 Jun 2021, we think the remaining nine
regions targeted for entry by AIA are Zhejiang, Shandong, Fujian, Chongqing, Anhui,
Liaoning, Hunan, Shanxi and Shaanxi.
Historically been very positive for AIA’s share price
? AIA’s share price outperformance over the Hang Seng Index (HSI) in the one month
after receiving regulatory approval to begin preparations to open a branch in a new
province has historically ranged from 5%-pts to 12%-pts over the HSI (Fig 1).
Expect 3-6 months before AIA can formally start sales
? We expect a gap of 3.7 – 6.0 months, before AIA formally obtains approval to start sales
in Henan, based on past trends (Fig 1).
The eastern regions remain out of reach… for now
? Since early 2020, the last few regions that AIA was approved entry into were in Western
China (Sichuan) or in Central China (Hubei and Henan) (Fig 3). In our view, this may be
due to regulators wishing that foreign insurers would help support the development of
insurance in the middle and western parts of China.
? We had pointed out in New frontiers, dated 2 Feb 2019 based on considerations which
we thought were important to AIA at that time, that the coastal provinces of Zhejiang,
Shandong and Fujian were the most attractive.
Retain Add with a GGM-based TP of HK$94, still a top pick
? Potential re-rating catalysts: Higher bond yields and borders reopening. Downside risks
include currency volatility, weak equity markets and a prolonged Covid-19 outbreak.