JP Morgan: Lowers AIA (01299) target price to 112 Hong Kong dollars, maintains "overweight" rating.

JPMorgan released a research report stating that AIA (01299) had a solid performance last year. With the repurchase scale exceeding expectations and management's confidence in the quality of growth, the bank made minor adjustments to several financial forecasts, including raising the cash generation forecast for existing life insurance policies from 2026 to 2028 to USD 7.7 billion to USD 9.6 billion, reflecting improved capital efficiency prospects. The bank also slightly raised the forecast for core earnings and contract service margin (CSM) balances to reflect a continuing trend of profit growth. JPMorgan lowered AIA's target price from HKD 115 to HKD 112, and included a USD 1.7 billion large-scale repurchase plan in the forecast, while reiterating a "hold" rating. The report pointed out that the economic benefits of new business of AIA have improved, with the new business value-to-new business investment ratio increasing from 3 times in 2023/2024 to 3.1 times last year, reflecting future cash generation capabilities. The bank forecasted that the new business value in 2026 and 2027 would be USD 6.2 billion and USD 7.4 billion respectively, higher than market expectations of USD 6.3 billion and USD 7.2 billion, as the product portfolio continues to improve. It is expected that the CSM balance will increase from USD 72 billion at the end of this year to USD 92 billion at the end of 2028, supporting a strong compound effect on the balance sheet. Although the bank lowered its forecast for new business value for AIA in 2026 and 2027, to reflect macroeconomic fluctuations, relative weakness in other markets (except India), and the impact of sales volume in China, it still expects double-digit growth in new business value over the next three years. The Group announced a repurchase budget of USD 1.7 billion this year, with JPMorgan estimating a total shareholder return rate of approximately 4% over the next 12 months, providing downside protection, but not expecting any additional repurchases after 2026.