February 25, 2011 / 12:26 AM / 7 years ago

UPDATE 3-Former AIG unit AIA profit beats, shares rise 5 pct

   * H2 net profit $1.6 bln vs $1.04 bln consensus	
 * 2010 new biz value up 22 pct, slowing from 35 pct in H1	
 * 2010 investment income up 14 pct amid stock market rebound	
 * 2010 embedded value up 18 pct to $24.7 bln	
 * Shares up 5.2 pct vs broader market's 1.2 pct
 (Adds CEO quotes, share movement)	
 By Kelvin Soh and Lee Chyen Yee	
 HONG KONG, Feb 25 (Reuters) - AIA , Asia's No. 3
insurer, beat forecasts with a 54 percent jump in 2010 net
profit as a recovery in stock markets  boosted
investment income , pushing its shares up 5 percent.	
 The results mark a strong turnaround from the days of the
global financial crisis, when terrified customers turned up in
droves at the company's offices to surrender their policies
fearing that AIA's parent AIG may go under. AIG spun off
AIA last year, but still holds a 33 percent stake in the
 "It was a very good set of results, especially looking at
AIA's investment income for the period," said Kenneth Yue, an
analyst at CCB International in Hong Kong who has an
"outperform" rating on the stock.	
 "However, looking at the stock market's performance these
two months, it might be challenging for the company to maintain
that kind of performance on investments."	
 AIA is facing stiff competition from rivals such as
Prudential and China's Ping An looking to
expand in Asia's fast-growing insurance market and the company
sees 2011 as "demanding operationally."	
 The insurer, which reported its results before the market
open on Friday, did so for the first time as a listed company.
AIA listed last October in the world's third biggest IPO.	
 Chief Executive Mark Tucker said the macro economy and
political uncertainty remain the company's biggest challenges
for 2011.	
 "I think that shouldn't take away from the fact that over
the medium- and long-term opportunities in Asia are immense,"	
Tucker said in a post-earnings call.	
 Asia is shaping up to be the new battleground for many
insurance companies facing saturated and aging economies in
their home markets, with companies such as Dutch financial group
ING and Sun Life also pushing into the region.	
 AIA's net profit was $1.6 billion in the second half, up
from the previously stated $788 million last year and better
than the consensus estimate of $1.04 billion according to a poll
of 14 analysts by Thomson Reuters I/B/E/S.	
 The company said 2010 operating profit before tax clocked in
at $2.1 billion, up from $1.8 billion in 2009.	
 Weighing on the performance was a fall in operating margin
to 13.8 percent in the second half from 18.8 percent in the
first half of 2010, hit by a rise in the sale of more
investment-linked products in Hong Kong that typically command
lower margins.	
 "I think our aim is to look across all our products and
ensure there's a greater protection margin there which will help
move margins up," CEO Tucker said.	
 Investment income rose 14 percent in 2010 to $3.5 billion,
helped by rebounding equities markets and appreciating Asian
currencies. AIA reports in U.S. dollars, but receives much of
its premiums in Asian currencies, which broadly appreciated last
 Value of new business (VONB), a key indicator that measures
the profitability of new business, rose 22 percent to $667
million in 2010, but slowed from the 35 percent in the first
 AIA's finance chief Marc de Cure said during the call that
the company's VONB growth in the second half fell on a
sequential basis because of a smaller base in 2009, which
exaggerated the growth seen in the first half of 2010.	
 Solvency ratio, which measures an insurer's ability to meet
its payment obligations, rose to 337 percent from 312 percent in
the fiscal first half. Solvency requirements differ depending on
the market it operates in, but regulators typically require
insurers to maintain an excess of assets over liabilities.	
 (Editing by Charlie Zhu and Vinu Pilakkot)	
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