Hong Kong-headquartered insurer AIA Group Chief Executive and President Mark Tucker has expressed his confidence and optimism over AIA's future in the Chinese mainland market, vowing to invest more despite an unusual net profit decline in the mainland in 2010.
According to an annual result released on Friday, AIA's after-tax net profit soared 54 percent year on year to 2.7 billion U.S. dollars in the fiscal year ended on Nov. 30, 2010, beating market expectations.
But its net profit from the Chinese mainland tumbled 32 percent year on year to 61 million U.S. dollars last year from 90 million U.S. dollars in 2009.
Its before-tax operating profit in the mainland edged up 3 percent to 92 million U.S. dollars from a year ago, the company said in its maiden annual result since the largest initial public offering in Hong Kong's equity market history in October 2010, in which AIA raised 20.5 billion U.S. dollars for former U.S. parent company AIG.
"It's just a matter of time. Eighteen years of life insurance business (in the Chinese mainland) make you very young. If you look at our business in Hong Kong, it's 80 years old," Tucker told Xinhua in an interview hours after AIA released the annual result, referring to the time period of AIA's presence in the mainland.
AIA started operations in the mainland 18 years ago. And according to Tucker, AIA is the only overseas company in the banking and insurance sector which makes a profit in China's mainland.
"China is our fourth large businesses in terms of new business profitability. If you think on VONB (value of new business), that's probably our most significant major what we focus on as a team. It is a single major that we focus most significantly...The potential is immense," he said.
AIA's annual result indicated that its value of new business in the Chinese mainland market soared 43 percent year on year in 2010, to 68 million U.S. dollars, after Hong Kong's 210 million U.S. dollars, Thailand's 174 million U.S. dollars and Singapore's 104 million U.S. dollars. The profitability rate for the Chinese mainland stood at 33.2 percent.
It is also a matter of investing, and the way AIA looked at the Chinese mainland market was to invest, Tucker said, adding: "the simple matter is investing...You have to invest. Life insurance business is very different from other businesses. We think it in medium to long term. One or two or three or four years is not significant. We are trying to build a business for a generation ahead."
Then will AIA's net profit in the mainland market continue to fall?
"It depends on how much we'll continue to invest in the business. For traditional life insurance contract, you don't expect to realize the contacts in 7 to 10 years. That's just the nature of life insurance contract," he said.
Tucker, 53, who started doing business in Hong Kong in the 1980s and in the mainland around 1990, said the opportunities in the mainland market were significant.
"I have always been a great believer in China. (And) I think that it is always a great time to be in China. We are specially lucky at this point," he said.
Commenting on AIA's cooperation with Chinese banks, namely ICBC and China Construction Bank, Tucker said it was normal for insurance companies to have relations with banks.
"Ultimately, to cooperate with the largest bank in China (ICBC), it is a great honor for us. So it is a natural alliance of one of the biggest insurance companies in Asia with the biggest bank in China. That is a great combination," he said.
Talking about AIA's vision, Tucker said AIA's ambition aimed to become and grow into one of the most successful companies and insurers, in Asia and the world.
And in China's mainland, AIA would continue to build up its businesses, and grow with AIA's competitors such as China Life and Ping'An, he said.
AIA said it was the largest and independent listed pan-Asian life insurance group, with extensive operations in 15 markets in Asia Pacific. It is a market leader in the Asia Pacific region and holds number one positions in 6 of its 15 geographical markets based on life insurance premiums.
AIA has operations in the Chinese mainland, Hong Kong, Taiwan and Macao, Thailand, Singapore, Malaysia, the Republic of Korea, the Philippines, Australia, Indonesia, Vietnam, New Zealand, Brunei and India. Hong Kong is the largest contributor to AIA's premium income and operating profit.
