Lee Yuan Siong, AIA’s Group Chief Executive and President, said:
“AIA’s geographically diversified portfolio of businesses is well positioned to capture the long-term opportunities across Asia, the world’s most attractive region for life and health insurance. While the Omicron variant of COVID-19 caused a temporary disruption to new business sales in the first quarter of 2022 as we previously highlighted, our businesses are regaining momentum where infections have passed their peak and disruptions have begun to subside.
“Our significant investments in technology, digital and analytics are enabling our businesses to successfully adapt to the complex and fluid operating environment, helping to progressively reduce the impact on our sales from successive waves of the pandemic. Supported by our digital tools and remote capabilities, our businesses outside Mainland China and Hong Kong delivered VONB in the first quarter of 2022 that was 50 per cent above the level achieved in the first wave of the pandemic during the second quarter of 2020.
“I am confident that our consistent focus on the execution of our strategy will deliver long-term growth and sustainable value for all of our stakeholders as we help millions more people live Healthier, Longer, Better Lives.”
SUMMARY FOR THE FIRST QUARTER
In the first quarter of 2022, the Omicron variant drove unprecedented levels of COVID-19 infections and a temporary disruption to new business sales across many of our markets. While the timing has varied by market, in most cases daily infections increased exponentially and subsequently fell rapidly, limiting the duration of the most significant sales disruption. In markets where infections have fallen substantially from their peak, we have seen sales activity rebound.
AIA China remained the largest contributor to the Group in the first quarter of 2022. As previously reported, a regulatory change in February 2021 accelerated demand for traditional protection and drove an exceptional first quarter. While VONB margin declined as strong sales of long-term savings maintained the more balanced product mix of the second half of last year, we delivered an increase in ANP compared to the first quarter of 2021.
Our new initiatives supported a double-digit increase in new recruits for AIA China compared with the first quarter of 2021, building on the strong recruitment momentum we achieved in the second half of last year. We have also continued to make strong progress in our geographical expansion with our new branch in Wuhan, Hubei, commencing sales in the first quarter of 2022 and contributing to excellent VONB growth across our new geographies.
While the high volume of COVID-19 infections drove widespread social distancing and economic disruption during the first quarter of 2022, our reportable segments outside Mainland China delivered a resilient performance in aggregate with an 8 per cent decline in VONB compared with the excellent result achieved in the first quarter of 2021.
AIA Hong Kong reported an increase in VONB compared to the first quarter of 2021, supported by growth from both our Premier Agency and partnership channels. While travel across the Hong Kong border remains subject to restrictions, we achieved a substantial increase in VONB from sales to Mainland Chinese visitors through our Macau branch.
Overall, VONB margin decreased by 7.6 pps to 54.4 per cent, driven mainly by a shift in Mainland China to a more balanced product mix as well as increased acquisition expense overruns resulting from the Group’s reduced sales volumes. The long-term investment return assumptions used to calculate VONB remain unchanged from those shown in our Annual Report 2021. Margin reported on a present value of new business premium (PVNBP) basis remained at 10 per cent. ANP of US$1,567 million declined by 7 per cent while TWPI increased by 5 per cent to US$9,948 million over the same period.
On 8 April 2022, the Hong Kong Insurance Authority granted approval for AIA to early adopt the Hong Kong Risk-based Capital (HKRBC) regime from 1 January 2022. While we have calculated VONB for the first quarter of 2022 under both the HKRBC basis and the new China Risk-Oriented Solvency System phase 2 (C-ROSS II) basis, the impacts were immaterial.
The long-term prospects for AIA’s businesses are exceptional given our substantial competitive advantages, geographical diversification and the powerful structural growth drivers for life and health insurance in Asia. Rising incomes, low levels of private insurance penetration and limited social welfare coverage continue to drive demand for AIA’s insurance products across our markets.
Global economic growth continued in the first quarter of 2022 although supply-side disruptions, labour shortages and high energy prices are fuelling rising consumer inflation and interest rates. The current geopolitical tensions are also creating volatility in global capital markets.
While we expect new COVID-19 variants to continue to emerge, we are cautiously optimistic that the success of vaccination programmes and new therapeutics will further reduce the severity of illness.
We are confident that the continued execution of our strategic priorities will build on our strong track record of growth and generate long-term sustainable value for shareholders.
FOREIGN EXCHANGE VOLATILITY
AIA receives the vast majority of its premiums in local currencies and we closely match our local assets and liabilities to minimise the economic effects of foreign exchange movements. When reporting the Group’s consolidated figures, there is a currency translation effect as we report in US dollars. We have provided growth rates and commentaries on CER unless otherwise stated, since this provides a clearer picture of the underlying performance of the businesses.