HONG KONG • Hong Kong-listed insurer AIA Group said yesterday that the value of new business (VONB), a key measure of growth, topped US$1 billion (S$1.3 billion) in the first quarter of the year. That represents a 20 per cent increase compared with the first three months of 2017 at constant exchange rates.
AIA said China remained its fastest-growing market, while growth in Singapore was "very strong". It described VONB as "positive" in Hong Kong and Thailand, two other important markets.
But investors are getting mixed signals from AIA.
The first-quarter figures hinted at the challenges of maintaining rapid growth at scale - yet also point to a future where it depends less extensively on China.
There were a handful of important data points.
Firstly, AIA chief executive Ng Keng Hooi hailed a record quarter by VONB, noting that this key measure topped US$1 billion for the first time.
Yet the annual VONB increase of 20 per cent undershoots the blistering 55 per cent in the first quarter of 2017, although AIA has since moved its fiscal year-end, meaning the two periods differ by a month. It also lags behind the 28 per cent rate of the last two full years.
It is unwise to read too much into a single short quarterly update.
But AIA could be starting to run up against what is sometimes known in finance as the law of large numbers, or the simple idea that rapid growth gets harder to maintain as a company grows larger.
However, there was good news from Thailand and Singapore.
The Republic saw continued growth in regular premium protection business. "Strong agency results benefited from both an increased number of active agents and productivity improvements," said AIA.
That is encouraging, because at present the company is largely a bet on China: Hong Kong and the mainland made up 64 per cent of VONB last year, and 51 per cent of operating profit after tax.
This focus has served AIA extremely well in recent years.
Moves by Beijing to further open up the insurance market to foreigners could favour AIA too, by making it easier to expand from its bases in the cities of Shanghai, Beijing and Shenzhen, and the provinces of Guangdong and Jiangsu.
But if China's economy slows, or regulations change again, AIA would suffer disproportionately.
Being more diversified would insulate against that outcome, and mean the company was seen more as a proxy for increasing financial sophistication across the wider region. It might delay the reckoning with the law of large numbers, too.
Shares in AIA have risen about 24 per cent in the last 12 months, giving the group a market capitalisation of about US$105 billion. The stock ended 1.95 per cent lower at HK$68 yesterday.