AIA succeeds where many others struggle to prosper

Mark Tucker

The performance demonstrates  the continued strong growth of a financial institution with more than 90 years experience in Asia, AIA’s group chief executive and president Mark Tucker tells VIR.

AIA Group’s business report for the first six months beat analysts’ expectations. This overwhelming success is a surprise to many people, who noted  the group’s difficulties before its initial public offering (IPO). Do you agree?

The value of new business (VONB) should be used as the yardstick to evaluate the group’s post-IPO record performance, reaching $399 million, with the most optimistic estimates at $375 million by Morgan Stanley. It represents an increase of 32 per cent compared with the same period of last year.

AIA Group has actually overcome heaps of difficulties prior to the IPO last October. Hiring the right people for the right positions contributed to our success. We aim to build a business that is profitable and sustainable. We are a blue chip and we are a growth stock, and there isn’t too many of those in the world.

The AIA Group’s VONB growth rate reached 32 per cent, of which more than three-quarters was contributed by its agency distribution channel. In the long-term, do agencies remain the key channel?

The multi-distribution approach serves as our fundamental tactic. That facilitates different needs of our customers. For instance, some customers would prefer to go through a bank, some through agents, some through independent financial advisers (IFAs) and others to purchase directly from the insurers. We must provide access to our customers on a profitable basis. Our primary distribution channel is the agency network across Asia and it will remain so in the near future.

In the first half of 2011, the AIA Group’s core tied agency force contributed 78 per cent of the group’s total VONB and 72 per cent of the group’s total annualised new premiums. With the bancassurance channel, our business grew by 18 per cent in the first half of 2011. We have decided to give more focus on this channel going forward. In addition to international banks, we aim to establish and strengthen cooperation with local banks.  These relationships bring benefits to all the clients, the banks and ourselves.

Recent developments in the US and European debt crisis do not show a very bright picture. There is a fear that it will impact on the portfolio of international financial institutions. How will AIA act?

The debt crisis in the US and Europe will not have a major impact on our operations across Asia-Pacific. We have negligible holdings of US treasuries on our balance sheet and we only have a small holdings of European sovereign debt. Our operations are wholly in Asia. While Asia is not immune to economic volatility, its growth story is very much intact. AIA Group’s capital strength is very strong and we have no debt leverage on the balance sheet. Our subsidiary, American International Assurance Company, was rated AA- by S&P.

However, obviously every market has its own obstacles. In Vietnam, inflation and the exchange rate are big concerns for investors. Is it true in AIA’s case, too?

Every market has its own challenges. However, you should put things into context. I have been in Asia for 25 years now. If you look at Vietnam 20 years ago, the transformation is unparalleled compared to today.

I am positive and have believed in the fundamental drivers in Asia these 30 years. Asia’s encouraging gross domestic product (GDP) growth, demographics, fiscal and foreign exchange surpluses, low leverage compared to the US or Europe, emerging middle classes and its move from public to the private sectors are all going in the right direction.

Does the Vietnamese economy’s internal difficulties and fierce competition in the insurance field hamper AIA Vietnam’s growth?

Over the past 11 years, AIA Vietnam has been focusing on laying a strong foundation for its sustainable growth through continuous training and development of its human resources. We have  more than 400 staff and 14,000 agents.