US$1.7bn buyback a +VE surprise; lift TP to HK$112

AIA Group Ltd. (1299 HK) US$1.7bn buyback a+VE surprise;lift TP toHK$112 AIAdeliveredbroadly in-line FY25results withVONBgrowing 15% CER (or 17% AER)to US$5,516mn, while the new US$1.7bn share buybackfor FY26was a positivesurprisein addition to US$2.6bn total dividends (+10% YoY). 4Q VONB moderated toUS$1.2bn, up 9.7% YoY, slower than a 27% rise in 3Q25 (US$1.48bn). Margin sawabroad-based expansion except in SG (-3.4pct), at 58.5% in the Group level, up 3.6pctYoY, a slight beatvsour estimate (Table), thanks to a favourable product mix in HK(+3.0pct) and TH (+11.4pct) alongside the repricing benefit from mainland Chinamarket in 3Q25 (+1.4pct). Group OPAT grew 8% CER (or 7% AER) to US$7.14bn,translating to +12% per-share growth, tracking the 9%-11% OPAT per-share CAGRtarget in 2023-2026. Operating RoEV and ROE reached 15.8%/15.5% by year-end, up0.9pct/ 0.7pct YoY, both at annual highs. USFG remained strong at US$6.8bn, up 11%YoYonper share basis, and net FSG, the key metric for shareholder returns, stoodabove US$4.4bn, up 9%/14% per shareYoY. Driven by resilient organic growth andprudent capital management, the insurer deliveredUS$4.7bn total shareholder returnin FY25 throughUS$2.4bn dividends and US$2.3bn buyback.AIA China’s VONBgrowth edged up above 20% YoY in Jan-Feb 2026, while we believe momentum in AIAThailand could moderate in 1Q26E given a high base from the front-loaded salesdistortion upontheintroduction of medical insurance repricing in 1Q25.We liftour TPto HK$112 (prev. HK$89) based onappraisalvalue by 1) rolling forward our estimatesto FY26-28E, and 2) fine-tuning key metrics OPAT and VONB growth by 3%/3% inFY26-27E (Table). Our new TP implies 1.7x FY26E P/EV. Reiterate BUY. Target PriceHK$112.00(Previous TPHK$89.00)Up/Downside30.2%Current PriceHK$86.05 Insurance Nika MA(852) 3900 0805nikama@cmbi.com.hk Stock Data Shareholding Structure VONB remained broadly on track.InFY25, Group VONBrose15% (CER) YoYto US$5.52bn, tracking Bloomberg consensus of US$5.54bn. 4Q VONB moderatedto US$1.2bn (+9.7%), slower than a 27% rise in 3Q, while margin peaked at 60.7%,up2.5pct/1.8pct QoQ/YoY.The4Qslowdown could be attributable to TH andmainland China, given 1) substantial medical insurance sales in 4Q24 prior to theco-payment rules implementation and 2)early preparation for 1Q26 jumpstart salesfor AIA China.Agency(73% mix) and partnership (27% mix)VONBrose 13%/22%YoY toUS$4.3bn/1.6bn.Marginticked up3.6pct YoY to 58.5% in FY25,thanks toa combined benefit of shift to favourable product mix and repricing actions, for whichHK and TH could be main contributors with their margin at 68.5%/110.9%. Geographic dynamics:HKremained thestar VONB contributor; AIA Chinaeased pressure of economic assumption change; THreleasednew GrowthStrategy.HK VONB grew 28%YoY to US$2.26bn (39% mix) in FY25,reflectingsustained momentum into 2H with VONB up 32% YoY (1H25: +24%). Marginexpanded 3pct YoY to 68.5% in FY25, thanks to the new flagship product launch.AIA TH saw 13% YoY VONB growth to US$993mn(17% mix),with margin up11.4pct YoY to 110.9%.AIA ChinaVONBrose 2%YoY toUS$1.24bnin FY25(21%mix),primarilydue to the economic assumption change in 1H25(-4% YoY),butrebounded in 2H with VONB up by 14% YoY. Thisstrongmomentum sustained inJan-Feb 2026 with VONB up >20% YoY as reported. China Growth Strategyprogressed on track with the nine new regions’ VONBaccelerating in 2H (+56%,vs. 1H: +36%) toUS$118mn (+45%) in FY25, above the 40% VONB CAGR target.Additionally, AIA THGrowth Strategyboostedprospects ofgrowthin theregion,where the insurer ledwith24% market share by total ANP and 44% share in agencyby FY25. Albeit with a positive outlook, a more specific numeric target on mid-termgrowth isanticipatedfrom mgmt. guidance. Auditor: PwC Related reports: 1.1H25 review: Resilient VONB uptrendwith optimistic outlook on China GrowthStrategy, Aug 22, 2025 2.Decent VONB growth across ex-Chinamarkets;buybacks to complete fasterthan expected, May 2, 2025 3.新业务价值增长具备韧性，新一轮回购计划提升股东回报至6%,Mar 18, 2025 4.Robust VONB growth in-line;newbuyback of US$1.6bn implying 6% totalS/H returns,Mar 18, 2025 OPAT per share +12%modestly above Group’s three-year CAGR target.OPATwasatUS$7.1bn in FY25, up 7%/12% per share YoY, broadly alignedto the 9%-11% Group’s CAGR target from 2023-2025. Insurance service results comprised80% of operating profit before tax atUS$6.8bn in FY25, up 18% YoY, driven byrobust CSM release ofUS$6.2bn, up 10% YoY. Net investment results fell 5% YoYtoUS$3.1bndue to a reduction in investment return on surplus assets for furthershare buybacks and lower interest rates in China and the US. On the CSM front,new business CSM increased 17%YoYtoUS$9.1bn with the expected return on 5.FY24 preview: OPAT back to growthtrajectory; resilient VNB despite modestslowdown in 2H, Feb 24, 2025 6.1H24 VNB beat with margin recovery;expecttotal>US$7bn cash returns toshareholders in FY24, Aug 26, 2024 in-force book adding upto US$3bn. CSM balance climbed