July 27, 2012 / 2:27 AM / 7 years ago

UPDATE 3-AIA first-half value of new business better than expected

By Clare Baldwin

HONG KONG, July 27 (Reuters) - AIA Group Ltd, Asia’s No.3 insurer, reported a bigger-than-expected increase in the value of new business in the first half as the company expanded sales in the region’s fast-growing developing economies.

Value of new business (VONB), a key metric in the insurance sector that measures the future profitability of new policies, rose 28 percent to $512 million in the first half, while margins climbed 6.6 percentage points to 42.6 percent. AIA’s net profit gained 10 percent to $1.44 billion.

Three analysts on average had estimated AIA’s VONB at $491.3 million and its net profit at $1.29 billion.

AIA, which is among the final round bidders for parts of ING’s Asian insurance business, has benefited from the region’s relatively high savings rate and growing middle class.

“They are delivering on everything they said they would: margin expansion, volumes picking up in the second quarter with Thailand clearly showing improvement,” said Barclays’ Hong Kong-based insurance analyst Mark Kellock.

Chief Executive Mark Tucker said in a conference call that while he expects continued volatility in the world economy, Asia will continue to grow and he remains positive on China.

“The Asian economies will continue to move ahead with more than sufficient force to overcome the strong headwinds from the challenges facing the developed economies,” Tucker said.

AIA would consider acquisitions if they make financial sense, he said, declining to comment on ING.

As an insurer whose operations span Asia but do not extend into the troubled economies of Europe or the United States, AIA is in a strong position to buy ING’s insurance assets.

AIA had $3.11 billion in cash and cash equivalents as of May 31 and has secured between $6 billion and $8 billion in financing for a planned ING bid.

Shares in AIA have risen nearly 9 percent so far this year, outpacing a 2 percent gain in the Hong Kong benchmark. AIA shares climbed as much as 3.5 percent on Friday before closing 0.2 percent lower at HK$26.75.

AIA declared an interim dividend of 12.33 Hong Kong cents, an increase of 12 percent.

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