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AIA Group – 3Q Results Will Remain Very Challenging

AIA Group – Interesting Indian Transaction

Gravity Works As WeWork Doesn't; Now Plan B

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*VONB Better Linked Quarter: AIA Group (1299.HK) {AIA} reported 3Q20 Value of New Business (VONB) of USD 706 mn, increasing 22% linked quarter with positive growth noted in Malaysia, Singapore and India – but VONB declined 28% YOY;*Greater China Challenges: Hong Kong’s pure domestic business reported modest linked quarter growth in VONB, but is still likely struggling with mainland Chinese clients as the border remains closed due to quarantines. Mainland China too was weaker as demand for protection products remains challenged. AIA China's VONB in 3Q20 was broadly in -line with 2Q20, but was likely lower YOY given the savings shift, and lower VONB margin; and* Watch The Investment Portfolio: Yields drive the bottom-line at life insurers. Rates have been reduced to all-time lows in most markets globally, and investment returns at AIA’s bottom-line will continue to be challenged. In addition, ratings agency downgrades are expected to negatively impact AIA solvency margins.  With over USD 220 bn in corporate debt issues likely on the verge of downgrade by the venerable ratings agencies (which is greater than the actual USD 147 bn downgraded during the GFC) the market must be prepared for substantive hits to AIA’s investment portfolio.

*VONB Better Linked Quarter: AIA Group (1299.HK) {AIA} reported 3Q20 Value of New Business (VONB) of USD 706 mn, increasing 22% linked quarter with positive growth noted in Malaysia, Singapore and India – but VONB declined 28% YOY;*Greater China Challenges: Hong Kong’s pure domestic business reported modest linked quarter growth in VONB, but is still likely struggling with mainland Chinese clients as the border remains closed due to quarantines. Mainland China too was weaker as demand for protection products remains challenged. AIA China's VONB in 3Q20 was broadly in -line with 2Q20, but was likely lower YOY given the savings shift, and lower VONB margin; and* Watch The Investment Portfolio: Yields drive the bottom-line at life insurers. Rates have been reduced to all-time lows in most markets globally, and investment returns at AIA’s bottom-line will continue to be challenged. In addition, ratings agency downgrades are expected to negatively impact AIA solvency margins.  With over USD 220 bn in corporate debt issues likely on the verge of downgrade by the venerable ratings agencies (which is greater than the actual USD 147 bn downgraded during the GFC) the market must be prepared for substantive hits to AIA’s investment portfolio.

China Pacific Insurance (Group) Co., (601601 CH)

AIA Group – Greater China and Investments Remain Risks

AIA Group Ltd

AIA Group – Greater China and Investments Remain Risks