Hong Kong-listed AIA Group, the parent company of AIA Australia, has the capital strengths and resilient operating performance to help the business absorb continued progressive dividends, S&P Global Ratings said today in a bulletin note.

The ratings agency says the insurance group’s key markets are likely to see a rebound in new business activity as governments in the Asia Pacific get a better grip on controlling the pandemic.

It says the insurer’s value of new business improved in the first two months of the year, a sign of the region’s progress in taming the spread of the coronavirus amid a ramp-up in vaccination efforts.

Efforts by the Chinese subsidiary, AIA Life Insurance, to grow its business is paying off as the world’s second biggest economy continues its sharp recovery from the pandemic-induced slump.

The Chinese market is now the group’s largest contributor on a value of new business basis, at 32%, overtaking Hong Kong.

S&P says AIA’s digitalisation efforts are likely to pay off as consumers draw comfort from acquiring life and health insurance cover online.

“Furthermore, the insurer's digital initiatives support its efforts around improving operation efficiency and training new agents,” the ratings agency said.

“AIA's recruitment of new agents grew rapidly in 2020, resulting in higher expenses and tighter profit margin.

“We believe the multichannel distribution approach, with digital technology as an enabler, will continue to anchor AIA's strategy to be the leading insurance group in Asia-Pacific.”

Last week AIA Group released its earnings results, with value of new business down 33% to $US2.77 billion ($3.58 billion) last year from 2019. Value of new business is a key earnings indicator as it measures expected profits from new premiums.

Operating profit after-tax in other markets declined by 11% with Australia’s earnings US$68 million ($87.75 million) below the level in 2019 primarily due to lower profitability from disability insurance policies. AIA groups Australia in the “other markets” category.