Citibank bancassurance deal expected to add to strong sales growth for AIA

PUBLISHED : Friday, 21 February, 2014, 2:57pm
UPDATED : Saturday, 22 February, 2014, 4:52am

AIA, the second-largest Asian insurer by market value, expects to expand its business this year by way of organic growth and through its new regional bancassurance deal with Citibank, chief executive Mark Tucker said.

The Hong Kong-listed insurer reported yesterday a 16 per cent rise in operating profit after tax to US$2.5 billion for the year to November, thanks to strong sales of new policies.

Net profit, however, fell 7 per cent to US$2.82 billion owing to a drop in the mark-to-market value of its equity holdings as a result of the decline in stock markets in the second half of last year.

AIA's new business value, a measure of projected future profitability of new policies, increased 25 per cent to US$1.49 billion from a year earlier.

This beat the consensus estimate of 23 per cent growth according to a Credit Suisse research note.

New business in Hong Kong, the insurer's largest market, jumped 28 per cent to US$468 million.

The growth in the company's new business value was also driven by its acquisitions of ING's Malaysian business and Sri Lanka's Aviva NDB Insurance, completed in December 2012.

Tucker would not rule out more acquisitions.

"Ninety-nine per cent of our focus would be on organic growth. But when there would be buying opportunities that make financial sense, AIA has the capacity and appetite to do the takeover," he said at the results briefing.

One of AIA's priorities this year will be to implement the exclusive 15-year bancassurance distribution deal with Citibank in December, for which the insurer made an upfront payment of US$800 million.

Under the deal, Citi will sell AIA's products to its corporate clients and 13 million banking customers in 11 markets across Asia.

Credit Suisse analyst Arjan van Veen said the Citibank deal would benefit AIA.

"We believe this deal will effectively lock in new business growth for AIA for the next couple of years and has the ability to add 10-plus per cent each year," he said, although the upfront payment was not cheap.

Tucker said the Citibank deal did not mean it would use fewer agents, who form AIA's core sales channel.