Dahua Jixian: Maintain "Buy" rating on AIA (01299) with a target price of 109 Hong Kong dollars.

Dahua Jixian released a research report stating that it maintains a "buy" rating for AIA (01299), raising its 2026 to 2027 OPAT forecast by 3.2% and 3.9% to a target price of HK$109. The report indicated that AIA's 2025 Value of New Business (VONB) increased by 17% year-on-year to US$5.5 billion, slightly below the bank's expectations, mainly due to sales growth in Mainland China and Thailand markets falling short of expectations, partially offset by a 4-percentage-point increase in the VONB profit margin to 58.5% year-on-year. Profit margin expansion was mainly driven by strategic product mix changes in Thailand and Hong Kong, as well as pricing benefits in Mainland China. The bank stated that AIA's shareholder return slightly exceeded expectations, with its announcement of a US$1.7 billion share buyback program, slightly higher than the bank's expected US$1.6 billion. Together with the full-year dividend, the total shareholder return in 2025 reached 4.1%. The embedded value increased by 10% year-on-year to US$76.8 billion, with an operating return on embedded value rising by 90 basis points to 15.8%, mainly benefiting from positive investment and operational differences, VONB growth, and foreign exchange gains. Furthermore, the company's operating profit (OPAT) accelerated by 8% to US$7.1 billion, mainly driven by an increase in the release of Contractual Service Margin (CSM) and positive operational differences. Management revealed that VONB growth in Mainland China in the first two months of this year exceeded 20%, and momentum in the Hong Kong business continued into the first quarter. To alleviate market concerns about private credit risks, the group disclosed a risk exposure of US$3.3 billion as of the end of last year, accounting for about 2% of non-dividend and surplus assets, with no investments in high-risk AI, software, or technology sector-specific funds.