HK fifth-wave damage worse than 2020
? 1Q22 domestic annualised new premiums (ANP) fell 29% amidst HK’s fifth
Covid-19 wave, worse than in 2020 (1Q20: -25%; 2Q20: -26%) (Fig 1).
? AIA’s HK 1Q22 ANP fell 60% when adjusted for its BEA acquisition (-30% on
an unadjusted basis) (Fig 3), driven by bancassurance (-88% yoy).
? Given the positive 1Q22 growth of AIA’s HK value of new business (VONB),
this suggests significant tailwinds in its HK VONB margin.
? Pru outperformed HK-listed peers in 1Q22 ANP. FWD continues to rely
heavily on brokers. Retain sector Overweight, and AIA as our top sector pick.
1Q22 impact from HK’s fifth Covid-19 wave worse than in 2020
? The damage to annualised new premium (ANP) of the domestic customer segment
looks to be worse in 1Q22 amidst Hong Kong’s (HK) fifth wave of the Covid-19
outbreak, compared to when Covid-19 first hit in 2020. 1Q22 domestic ANP fell 29%
yoy, worse than 1Q20’s -25% yoy and 2Q20’s -26% yoy (Fig 1).
? While 1Q22 ANP from mainland Chinese visitors (MCV) rose 98% yoy (Fig 3), this
segment only accounted for 1% of system ANP, vs. 46% at its peak in 4Q16 (Fig 4).
AIA: Bancassurance a drag; margins save the day
? While AIA’s HK ANP fell just 30% yoy in 1Q22, this was helped by the consolidation of
its BEA Life acquisition. Including BEA Life in its 1Q21 base, AIA’s adjusted 1Q22
ANP fell 60% yoy (Fig 5), dragged down by bancassurance (1Q22: -88% yoy), while
its higher-margin agent ANP declined only 36% yoy in 1Q22.
? Given the 1Q22 positive growth of AIA’s HK value of new business (VONB) (see
Moving past the worst quarter, 29 Apr 2022), this suggests significant tailwinds from
margins amidst rising US rates (see Decoding HK: Margin-driven growth, 11 Apr
2022).
Pru: Outperforming HK-listed peers in 1Q22 for ANP growth
? As Prudential’s (Pru) 1Q22 HK ANP fell just 22% yoy, it outperformed HK peers (AIA: –
30%; Manulife: -24%; FWD: -24%) (Tailwinds add up; initiate with an Add, 18 May
2022).
FWD seems to be heavily relying on brokers to grab market share
? FWD’s 1Q22 proportion of ANP from the broker channel was 45% (2021: 41%), much
higher than HK-listed peers (AIA: 7%, Pru: 1%, Manulife: 11%). This helped it attain a
1Q22 HK ANP market share of 4% (AIA: 7%, Pru: 5%, Manulife 7%).
? In our view, the broker channel tends to be a relatively low margin channel, and growth
can be more volatile. FWD’s 1Q22 mix of ANP from the high-margin agent channel
was only 24%, markedly lower than other HK-listed insurers (AIA: 78%; Pru: 52%;
Manulife: 66%). This should be somewhat expected, in our view, as FWD only had
about 3,400 agents in HK at end-2021 (AIA: 19,000; Pru: 22,000; Manulife: 11,645).
AIA remains our top pick. Retain sector Overweight
? Potential catalysts: higher interest rates, recovery of premium growth.
? Key downside risks: more waves of Covid-19 and a severe economic slowdown.