New AIA boss doesn’t need to overhaul Tucker’s policies after CEO’s departure
AIA does not need a policy overhaul. With heavyweight Chief Executive Mark Tucker off to chair HSBC, the $ 78 billion Hong Kong- listed Asian insurer has chosen continuity in promoting regional chief and industry veteran Ng Keng Hooi as his successor. The new CEO will find growth is set to slow but that the business is in good shape.
This is sensible succession- planning, insurance industry- style. While Ng does not have a high profile, he is well- prepared for the role, having spent decades in Asian life insurance and having worked for Tucker at both AIA and before that Prudential. Ng most recently ran the Chinese mainland and several other markets and oversaw the army of sales agents who generate most of AIA’s business. He also gets a reasonable handover period before taking over officially in September.
That said, these are big shoes to fill. Since floating under Tucker in late 2010, AIA has produced a 166 percent return for shareholders, including reinvested dividends, Eikon data shows. That beats a 28 percent total return for the local Hang Seng index, and 140 percent in dollar terms, for Britain’s Prudential.
Some of that was just about being in the right place at the right time. Asia is rising, and when people get richer and social safety nets remain threadbare, demand for insurance rockets. But AIA was also smart, focusing on policies to cushion the effect of illness or death, rather than the more controversial investment products that Chinese insurers prefer to flog.
Ng is unlikely to oversee growth at AIA that matches the recent past: in the last three years, earnings per share grew 19 percent annually and the so- called “value of new business” rose 28 percent a year, Eikon shows. Analysts forecast these rates will slow to 12 percent and 20 percent, respectively, from now till November 2019.
Still, radical change is not necessary. There could be bolt- on acquisitions in markets such as Thailand and Australia, and perhaps an expansion into more provinces in the Chinese mainland. And if AIA can accept a lower- growth future, it could easily switch to paying out a bigger chunk of earnings as dividends. Overall, however, continuity looks like a low- risk policy.