I analyze monetary policy and economic trends, focusing on real-world impacts.

AIA Group’s Buybacks Signal Value: A Compelling Case for Long-Term Growth

Samuel ReedSaturday, May 17, 2025 7:50 pm ET

9min read

In the volatile landscape of global markets, few signals speak louder than a company repurchasing its own shares at scale. AIA Group (1299:HK), Asia’s leading life insurer, has sent a resounding message of confidence through its aggressive share buybacks in May 2025—amid a maintained "Buy" rating from Jefferies despite a price target cut. This article dissects why these buybacks, paired with robust first-quarter performance, position AIA as a compelling buy at HK$66, well below its 12-month high of HK$74.60.

The Buyback Blitz: Management’s Vote of Confidence

Between May 8–16 alone, AIA spent HK$662.6 million repurchasing 10.7 million shares, underscoring its commitment to returning capital to shareholders. This activity is part of a US$1.6 billion buyback program launched in April 2025, which will run through June. The intensity of these repurchases—occurring during a period of global macroeconomic uncertainty—sends a clear signal: management believes AIA’s intrinsic value far exceeds its current market price.

The buybacks are not arbitrary. AIA’s shareholder capital ratio remains comfortably above 200%, ensuring ample liquidity to fund repurchases without compromising growth. With outstanding shares reduced by 5% year-on-year, the buybacks also boost metrics like earnings per share (EPS), amplifying the impact of AIA’s already robust financial performance.

Q1 VONB Growth: AIA’s Engine of Value Creation

AIA’s buybacks are underpinned by strong fundamentals. In Q1 2025, its Value of New Business (VONB) surged 13% year-on-year to US$1.497 billion, driven by:
- Premier Agency dominance: Contributing over 75% of VONB, with agent productivity and recruitment rising 8% and 9%, respectively.
- Geographic expansion: New markets in China (Anhui, Shandong, etc.) added over 20% VONB growth, while Hong Kong and Thailand delivered standout performances.

The VONB margin expanded to 57.5%—a 3-percentage-point jump—reflecting disciplined pricing and product mix shifts toward higher-margin protection and savings products. This profitability bodes well for free surplus generation, a key driver of future buybacks and dividends.

Jefferies’ Contradiction: A Buying Opportunity in Disguise

While Jefferies cut AIA’s price target to HK$88 (from HK$96), it maintained a Buy rating, citing a 45% upside. This apparent contradiction masks a deeper truth:
- Near-term headwinds: Jefferies flagged concerns over economic assumptions in Mainland China and global tax reforms (BEPS 2.0), which could dampen short-term results.
- Long-term conviction: The firm acknowledged AIA’s structural advantages, including its Premier Agency model, Asia’s rising insurance penetration, and financial resilience (e.g., liquid assets exceeding short-term liabilities).

The key takeaway? Jefferies’ price target cut reflects cautious near-term modeling, not a loss of faith in AIA’s fundamentals. The maintained Buy rating and upside target align with AIA’s long-term trajectory—a trajectory supported by buybacks and VONB growth.

Why Act Now? The Case for Immediate Investment

Undervaluation Signal: At HK$66, AIA trades at a 27% discount to its 52-week high, despite strong buybacks and VONB growth. Management’s aggressive repurchases validate this undervaluation.
Hong Kong and Asia’s Growth Engine: AIA’s core markets—Hong Kong, China, and Southeast Asia—are primed for growth. Rising affluence, aging populations, and low insurance penetration (e.g., only 3.5% of Mainland households own life insurance) create a multi-decade tailwind.
Dividend Discipline: AIA has raised dividends for 13 consecutive years, with a final 2024 dividend hike of 10%. The buyback program adds to this shareholder-friendly stance.

Conclusion: AIA’s Buybacks Offer a Margin of Safety

AIA’s recent buybacks—occurring at prices below its historical highs—act as a built-in margin of safety for investors. Pairing Jefferies’ maintained Buy rating with AIA’s robust VONB growth and financial strength, the stock presents a rare opportunity to invest in a quality insurer trading at a discount.

Action to Take: With shares at HK$66, now is the time to establish a position in AIA Group. The buyback program and long-term growth drivers suggest this dip is temporary—and the rewards for patient investors could be substantial.

Jeanna Smialek is a pseudonym for an analyst specializing in Asian financial markets and corporate strategy.

Disclaimer: The news articles available on this platform are generated in whole or in part by artificial intelligence and may not have been reviewed or fact checked by human editors. While we make reasonable efforts to ensure the quality and accuracy of the content, we make no representations or warranties, express or implied, as to the truthfulness, reliability, completeness, or timeliness of any information provided. It is your sole responsibility to independently verify any facts, statements, or claims prior to acting upon them. Ainvest Fintech Inc expressly disclaims all liability for any loss, damage, or harm arising from the use of or reliance on AI-generated content, including but not limited to direct, indirect, incidental, or consequential damages.