(Reuters) - Asia-focussed insurer AIA Group Ltd (1299.HK) reported a 27% drop in quarterly new business value on Friday for the first time since listing in Hong Kong in 2010, hit by disruptions caused by the COVID-19 pandemic in its main markets.
While the lockdowns have hurt AIA and a host of other global life insurance companies, their investment income came under further strain due to lower interest rates and a market rout.
The insurer’s new business value, which measures expected profits from new premiums and is a key gauge for future growth, fell to $841 million in the first quarter, from $1.17 billion a year earlier.
“The indirect impacts of the COVID-19 pandemic drove an overall 27 per cent decline in AIA’s VONB (value of new business) in the first quarter,” Chief Executive Officer Ng Keng Hooi said, referring to the drop in currency exchange rates.
“Measures to contain the pandemic had the most significant impact on our businesses in Hong Kong and Mainland China during the quarter,” he said.
New business value in Hong Kong saw a “substantial” decline, while in China, AIA reported a low double-digit decline due to the health crisis.
China and Hong Kong together account for about half of new business growth globally at AIA, which was founded in Shanghai 100 years ago and was the first foreign insurer to be granted a license in China.
AIA has long benefited from demand for insurance products in its two biggest markets of Hong Kong and China, but has faced sharply slowing growth in recent quarters due to anti-government protests and an economic downturn in Hong Kong.
In a pre-earnings note, Citi Research said AIA’s new business value growth might stay muted in second quarter as well, given stricter social distancing norms in Southeast Asian countries since late March, and then “bottom out gradually”.
The company said the gradual reopening of China’s economy has resulted in improving economic activity, but it remains below levels last year.
Reporting by Nikhil Kurian Nainan in Bengaluru and Sumeet Chatterjee in Hong Kong; Editing by Shailesh Kuber and Arun Koyyur