AIA Group Limited (1299) Earnings Call Transcript & Summary

Good morning, and thank you for joining AIA's 2026 interim results presentation. We have delivered a strong set of results with double-digit growth across our key financial metrics. Value of new business increased by 10% to a record high of $3.2 billion. We saw growth across all distribution channels and reportable segments, excluding Thailand, which had an exceptionally high comparative as previously disclosed. Underlying VONB growth was 14% adjusting for Thailand. AIA's consistent delivery of high-quality new business has accelerated growth in earnings. Operating profit after tax of $4.2 billion was up 13% per share, driving a record operating ROE of 17.5%. And we now expect to exceed our 9% to 11% OPAT per share CAGR target over 2023 through 2026. Operating cash generation grew strongly with underlying free surplus generation up 10% per share and net free surplus generation up 12% per share. The Board has declared a 10% increase in the interim dividend per share. These results demonstrate that our strategy is working as intended. We are growing fast, returning substantial cash to shareholders, generating higher returns on equity and maintaining a resilient balance sheet with low leverage. Sustained over time, that combination is the key driver of long-term value creation. Our strong results are underpinned by our position as the leading pan-Asian life and health insurer. But what sets us apart is not just that we operate in the most attractive markets in the world. It is that we combine a long runway for growth with a unique business model and tangible competitive advantages that allow us to capture this significant opportunity consistently and profitably. Our proven track record of execution is demonstrated by VONB compounding at 17% per annum over the last 3 years while maintaining strong margins. AIA's world-leading Premier Agency is at the core of our growth strategy, contributing 72% of group VONB. We train and develop the highest quality agents, equipping them with the best possible tools to meet customer needs. This is why our tied agency has been the #1 in MDRT globally for the last 12 years with more than double the members of our nearest competitor. The success of our strategy is evident in our agency's excellent track record of growth achieved through consistent investment in growing active agent numbers and productivity. Continued disciplined execution of this strategy drove first half VONB growth of 11%, excluding Thailand at a very strong VONB margin of 68%. The significant investments we have already made in technology and AI across recruitment, training, sales and service are delivering strong results. New agency leaders grew by 19% and new recruits by 24%. We are giving them the best possible opportunities to succeed through structured career development and targeted schemes that identify and nurture our most promising talent. And as we bring more AI-powered capabilities into this platform, the opportunity multiplies. AI helps our agents work more effectively, identify customer needs more precisely and deliver more timely personalized advice. That means the potential of Premier Agency can be unlocked faster than before, supporting continued value creation and sustainable performance over the long-term. Partnerships complement our Premier Agency by expanding our reach to millions of potential new customers. Our approach is selective, and we focus on a small number of high-quality partnerships that share our ambitions to drive customer value and long-term growth. Partnership VONB increased by 18% in the first half, supported by double-digit growth in both bancassurance and IFA and broker channels. Bancassurance VONB grew by 15% as we focus on driving higher share of wallet in the affluent and high net worth customer segments. This approach is translating into higher productivity for bank staff with VONB margin remaining healthy at over 45%. We maintain a disciplined approach to distribution through IFAs and brokers. VONB from this channel grew by 21%, supported by excellent performances in Hong Kong and Singapore. AIA creates financial value by compounding layers of new business, which generate earnings and cash well into the future. Our first half results show that strong new business flows in recent years have driven a step-up in operating profit growth. As a result of this, we achieved OPAT growth of 13% per share in the first half. Combined with consistent improvements in the efficiency of our balance sheet, the rise in profits led to a record operating ROE of 17.5%. The strength of the momentum in our earnings gives us confidence in our outlook, and we now expect to exceed our OPAT per share target. Strong new business flows are also driving growing cash generation, as you can see from our surplus generation numbers. Garth will address this in more detail later. Moving now to the business highlights from our 4 growth engines. AIA China delivered an excellent performance in the first half with VONB growth of 20%. The result was driven by our market-leading Premier Agency, which is our key competitive advantage in the Chinese Mainland. AIA's agents are 3x more productive than the market average, reflecting the depth of customer relationships built on the provision of personalized advice. Premier Agency achieved a 24% increase in VONB and accounted for nearly 90% of new business. We continue to build capacity for future growth with active agents up 14% and active new agents up 25%. This stands out in an industry where agent numbers remain significantly below pre-COVID levels. We also delivered excellent growth in capital-efficient participating products and protection while maintaining an industry-leading VONB margin of around 60%. We have built excellent momentum in our new geographies, contributing 11% of AIA China's VONB, and we remain on track to deliver our VONB target of 40% compound annual growth to 2030. Together, these results demonstrate the strength of our differentiated model and AIA remains well positioned to capture the long-term growth opportunities in the Chinese Mainland. Turning now to Hong Kong, where we achieved another record first half result. VONB of $1.2 billion increased by 10% with margin remaining strong at 72%, reflecting our financial discipline. Our Premier Agency accounts for the majority of our business and sets the standard for quality and professionalism. AIA Hong Kong was once again ranked the #1 MDRT company globally. 30% of agents are MDRT members, following an 18% increase compared with the previous year. First half agency VONB remained stable at a high level, while we continue to invest in recruitment, development and leadership to drive future growth. Active new agents grew by 7% and active new leaders by 22%. Partnership distribution delivered excellent VONB growth. We saw strong performances in our IFA and broker channel as well as our strategic partnerships with Citibank and the Bank of East Asia. Closer engagement and tailored propositions for affluent and high net worth customers are driving significantly higher sales productivity. More broadly, AIA Hong Kong's performance reflects the quality of our distribution and the attractiveness of our products across key customer segments. Let me turn to this now. Our domestic business performed very strongly with VONB up 23%. This was supported by deeper engagement with our more than 3 million existing customers, a large contribution from new Hong Kong residents and average policy sizes increasing by 10%. VONB from Chinese Mainland visitors was stable against a comparative, which benefited from a surge in demand ahead of product changes in the middle of 2025. Underlying demand remains strong. Second quarter VONB was higher than the first quarter with June the strongest month. Customer flows also remained strong with more than 25,000 new customers in the first half. Our customer base is diversified with around 2/3 coming from outside the Greater Bay Area. AIA's products offer broad appeal to people seeking attractive long-term returns, protection and diversification. Many customers have multiple policies with us and the persistency remained high at 99%, while premium finance business accounted for less than 1% of VONB. Yet with only 550,000 customers in total, the potential runway for future growth remains substantial. AIA Hong Kong's strong track record of growth across distribution channels and customer segments reflects the strength of our business and the depth of demand. Since these attractive fundamentals remain fully intact, I have every confidence that we can continue to deliver attractive long-term growth in this market. AIA is the leading life insurer across ASEAN, which contributed almost 1/3 of group VONB of more than $1 billion. Our Premier Agency ranks #1 for MDRT and combined with high-quality partnerships, we have a very strong platform for sustained growth across the region. In Thailand, our largest ASEAN market, VONB grew by 13% in the second quarter. Premier Agency remains the core strength of the business, complemented by very strong growth from our partnership with Bangkok Bank. Singapore delivered 10% VONB growth, including a 19% increase in the second quarter with growth from both agency and partnership distribution. Malaysia VONB was up by 10% in the first half with growth accelerating in the second quarter on the back of strong contributions from partnerships and continued improvement in agency momentum. The strong performance across our major ASEAN markets reinforces our belief in the long-term growth potential of the region. Moving now to India. Tata AIA Life delivered another excellent set of results with VONB growth of 31% in the first half as we continue to capture the huge potential in the market. Agency represents 55% of our business in India and delivered excellent VONB growth of 38%. We continue to build scale and invest in future growth as evidenced by the strong increases in active agents, new recruits and new leaders. We expanded our customer reach with bank and broker distribution and continue to see sales growth with VONB up 23% across these channels. Tata AIA ranks #1 in retail protection and persistency in India, reflecting our focus on delivering high-quality advice and products to our customers. In summary, today's strong results are a continuation of AIA's exceptional track record of delivering growth across our key financial metrics. Our ability to deliver sustained strong performance reflects our unique position as the leading pan-Asian life and health insurer, delivering growth by capitalizing on the huge opportunity set in the region. We are focused on driving high-quality profitable new business growth with attractive reinvestment economics that adds further layers of recurring earnings and cash generation. I am confident in our ability to continue to drive future growth and attractive shareholder value creation. I will now hand over to our CFO, Garth Jones, who will take you through the details of our financial results.

Good morning. I'm delighted to take you through another strong set of results for AIA, demonstrating the quality of the business we have built over many years. Let me start by highlighting 3 things that I see as key in these results. First, we achieved double-digit growth across new business earnings and cash generation. Second, the profitable new business written over many years is now compounding visibly, driving higher operating profit and free surplus generation. Third, disciplined capital deployment is lifting returns to record levels, and we have continued to both grow strongly and return capital to shareholders. In combination, these results provide clear evidence that AIA's growth model is creating sustained shareholder value. Let me now take you through the results in more detail. VONB increased to a record $3.2 billion, up by 10%, with growth across all distribution channels and reportable segments other than Thailand. OPAT increased to $4.2 billion, up 13% per share and operating ROE reached a record 17.5%. This strong result gives us confidence in the outlook, and we now expect to exceed our OPAT per share growth target. UFSG, our key operating measure of cash generation, increased to $3.9 billion, up 10% per share. During the first half, we returned $3.6 billion to shareholders through dividend and share buyback. Based on this strong performance, the Board has declared a 10% increase in the interim dividend per share, reflecting both our sustained strong performance and our confidence in the future. Turning to new business. AIA is focused on writing large-scale, high-quality and profitable new business that creates value for both our customers and shareholders. Our proprietary Premier Agency accounted for 72% of group VONB with partnership distribution contributing the remaining 28%. VONB margin stood at 57.1%, broadly stable compared with prior year. The financial profile of our product mix is highly attractive. Traditional protection products generate underwriting profits while participating in unit-linked products generate recurring fee-based earnings. Together, these products accounted for 96% of group VONB in the first half. This high-quality product mix generates strong and predictable cash flows with highly attractive returns on the capital we invest. Every dollar of capital invested in new business is expected to generate $4 of distributable earnings within 10 years and with a rapid payback period of just 3 years. The internal rate of return on our new business investment remains above 20%. Our ability to write profitable new business at scale while maintaining these attractive economics is a key differentiator for AIA, and underpins our confidence in our ability to compound value over time. Our embedded value clearly demonstrates the financial dynamics of AIA's growth model. Each cohort of profitable new business adds another layer of future earnings and cash generation, supported by prudent assumptions and disciplined management of the in-force portfolio. EV operating profit increased to $6.6 billion in the first half, up 12% per share. Growth was driven by the higher VONB, increased expected return from our in-force and positive operating variances, reflecting the overall quality of our business and our focused operational management. As a result, operating ROEV increased by 220 basis points to a record 18%. Investment return variances added $1 billion to EV equity, mainly from positive equity market performance in the period, while exchange rates and other nonoperating items were small. Overall, EV equity increased by 9% to $87.1 billion before returns to shareholders. After the $3.6 billion of dividend and share buyback, EV equity reached $83.4 billion, up by 6% per share over the first half. AIA's embedded value reflects the high quality of our in-force portfolio built for many years of profitable new business. Similar to our new business, future earnings from our in-force book are predominantly sourced from protection and long-term savings products, which provide recurring and resilient cash flows. Our prudent assumptions and active management of the in-force portfolio have consistently resulted in positive operating variances. In the first half, these added $742 million to EV operating profit. This included positive medical claims experience, reflecting claim savings of around $200 million for the half. At the same time, due to disciplined expense management and continued business growth, our expense ratio has improved by 130 basis points over 2 years to 6.9% this half. Since our IPO, operating variances have been positive every year and have now added over $5 billion to EV equity. The strong track record and the limited sensitivity to capital market movements demonstrates the prudence of our assumptions and the quality of the in-force portfolio. Overall, our EV provides a prudent and reliable measure of the economic value created for shareholders. Now moving to the IFRS results. First, on the left-hand side of the slide. The contractual service margin, or CSM, represents the accumulated stock of expected future IFRS earnings from our in-force portfolio. Each new cohort of profitable new business adds a further layer to the stock, which is then released into earnings over time. During the first half, new business added $4.9 billion, while the expected return contributed a further $1.7 billion. After a release of $3.4 billion of CSM into earnings, together with small other items, including variances and exchange rate movements, the CSM balance increased to $67.8 billion. Underlying CSM growth was 10%, driven by our strong organic growth. Turning to the right-hand side. Since the adoption of IFRS 17, new business and the expected return on the in-force portfolio have added $38.1 billion to the CSM. After releases of $20.5 billion into earnings, the CSM has increased by a net $17.5 billion, thereby expanding our stock of future earnings, while the release rate has remained broadly stable. This demonstrates how successive cohorts of profitable new business compound over time to support sustained growth in recurring earnings. The CSM release is the principal contributor to OPAT, our core measure of operating earnings. The greater release into profit due to a higher CSM is the main driver of the 11% increase in insurance service results seen in the first half. Positive variances also flow into this, reflecting continued disciplined management of expenses and claims, including progress in executing our integrated health strategy. The net investment results after expenses also increased compared with last year. Overall, OPAT increased to $4.2 billion in the first half, up by 13% per share. Strong earnings growth, together with disciplined capital management, drove operating ROE up by 200 basis points to a record 17.5%. The growth in CSM and the quality and resilience of our in-force portfolio give us confidence in the earnings outlook, and we now expect to exceed our 9% to 11% OPAT per share CAGR target for 2023 to 2026. The same compounding dynamic that drives earnings also underpins cash generation. Each new policy that we write adds a future stream of cash flows to our growing in-force portfolio, which emerges progressively over future years. At the end of the first half, we expect our in-force portfolio to generate $57 billion of distributable earnings over the next 10 years. This is 15% higher than at the end of the first half of 2025, reflecting the addition of profitable new business, together with an uplift from positive variances. As these distributable earnings emerge, they drive higher operating cash generation. In the first half, UFSG increased to $3.9 billion, up 10% per share. After investment in new business and central costs, net free surplus generation increased to $2.8 billion, up 12% per share. The stronger growth in net free surplus generation than UFSG reflects the increased capital efficiency of new business written, in particular, the shift in product mix towards participating business in the Chinese Mainland. These results demonstrate the direct progression from profitable new business, to growth in the in-force portfolio, and then into higher earnings and ultimately cash generation. We follow a clear and shareholder value-focused capital management framework. Our capital management policy targets the return of 75% of annual net free surplus generation through dividends and share buyback. We also regularly review our capital position and return capital in excess of our needs. Since 2022, we have returned $26.6 billion to shareholders through dividends and share buyback, while continuing to invest in profitable growth. The shareholder capital ratio stood at 210% at 30th of June 2026, following the $3.6 billion returned to shareholders during the first half, in line with our expectations. Our capital position remains very strong, and we retain substantial financial flexibility given our low leverage and high financial strength ratings. Consistent with our long-established prudent, sustainable and progressive dividend policy, the Board has declared an interim dividend per share of HKD 0.539, which represents an increase of 10% over last year. AIA has increased its dividend every year after IPO, ever since our first dividend in 2011 and including during the COVID period. Our ability to sustain this track record reflects the resilience of our earnings and cash generation from the growing in-force portfolio. As a reminder, the final dividend and the balance of shareholder returns under our capital management policy will be determined and announced with the 2026 annual results in March 2027. To conclude, AIA has delivered another strong financial performance in the first half of 2026 with double-digit growth across new business, earnings and cash generation and record operating returns. These results reflect the strength of AIA's platform, the depth of our distribution, the quality of our product mix and the disciplined way in which we manage capital. AIA is exceptionally well positioned in Asia, the most attractive region in the world for life and health insurance. I'm confident in AIA's outlook with a clear strategy, a proven model and a demonstrable ability to execute effectively. We continue to drive profitable growth, and we are converting this into earnings, cash and shareholder returns with discipline and consistency. Thank you.

Good morning, everyone, from AIA Central in Hong Kong, and welcome to AIA's 2026 Interim Analyst Briefing. I'm Sami Taipalus, the Chief Investor Relations Officer of AIA. With me on the stage, I have Lee Yuan Siong, Group CEO and President; Garth Jones, Group CFO; and Regional Chief Executives, Jacky Chan, Fisher Zhang, Hak-Leh Tan and Leo Grepin. We also have other members of the Executive Committee in the room with us. We will now begin the Q&A session. [Operator Instructions] Operator, over to you.

[Operator Instructions] And our first question comes from Thomas Wang of Goldman Sachs.

Maybe a couple of ones. I think Hong Kong, obviously, is the focus for this result. Number came, I think, a little bit below consensus. And also, you have -- there's a lot of news flow. So just whether you can give us some update on what's happening on the ground in Hong Kong. And I understand kind of on the MCV segment, I understand the basic, but I'm just wondering whether you have sort of medium-term growth target in mind for the Hong Kong market so we can better track because it's kind of been volatile over the last couple of years. And then the second point, maybe on the capital planning part. Just wondering, we've kind of been quiet on the M&A front. What kind of target could be attractive for AIA? How are you evaluating the potential M&A opportunities?

Yes. Thank you for your question, Thomas. Now we are confident of our outlook for 2026 overall and for our major markets. I think the demand drivers for our products remain intact, including for CMV business in Hong Kong. We have very strong competitive advantages in the Hong Kong market, including our leading Premier Agency channel, our partnership distribution, our strategic bank partners in Citibank and Bank of East Asia. So we remain very confident of our outlook for Hong Kong. I will hand over to Jacky to elaborate.

Yes, Thomas. I'm very pleased AIA Hong Kong and Macau delivered a set of very strong results in first half, VONB up 10% to record USD 1.2 billion. This was really supported by our strong underlying distribution channel, especially the Premier Agency as we keep emphasizing the key differentiation channel for AIA Hong Kong is our Premier Agents, and it achieved MDRT #1 globally as a company for 24 years and almost 30% of our agents are MDRT. And as you see in our slide, in fact, after COVID in the last 3 years, we have double-digit growth in our agency VONB and double-digit growth in our agency productivity. And that said, we also have a diversified channel. We have a strong balance sheet distribution channel. We have a strong bancassurance result in this first half this year, and our IFA broker also grew strongly. I want to emphasize that the 10% growth is against last year first half, a very strong high growth due to product changes in the middle of the year. And our domestic customer segment in first half this year actually grew strongly by 23%. And our Chinese Mainland visitor channel VONB was broadly stable against a very high base in last year. And in our CMV Chinese Mainland visitor segment, our VONB growth actually is growing quarter-to-quarter from first Q to second Q and June was the highest CMV VONB for the whole first half in Hong Kong and Macau. As you talk about the recent news flow, actually, since those recent news flow in May, we continue to see good demand from Chinese Mainland visitor business in our Hong Kong result, as you can see that. And also all those kind of news regarding cross-border fund flow or taxation, those are always there. There is no change in those regulatory requirements. And as I said before, I think many times, the Chinese Mainland visitor business segment has been a major business segment in the Hong Kong life insurance industry for more than 2 decades. And the key reason for it because of the strong underlying structural drivers, including the assess of a diversified global investment opportunity, which supports our long-term life insurance product, and also the access to high-quality advice and more flexible quality decided product and proposition. Those structural drivers remain unchanged. And as you can see that in the first half of this year, there are more than 25,000 new Chinese Mainland register customer segment customer added to our portfolio, which now have roughly 550,000 customers in our in-force book. This is still -- there is still a big opportunity going forward to grow the CMV customer segment. And in terms of the medium growth opportunity, I think you also know that we don't provide forecast. And as Yuan Siong pointed out, we see continued strong opportunity in Hong Kong and AIA Hong Kong is well positioned to capture those opportunities.

Thomas, on your question on capital management. As I said, we are very focused on driving strong new business growth that can translate to high-quality earnings and cash returns to shareholders. We have communicated our capital management policy, and we remain focused on implementing this capital management policy as we have communicated. And the first half results and the past year's results have demonstrated that our strategy is actually working. We have seen a strong VONB growth. We've seen this translate into strong OPAT per share growth. As we have said this time, we expect to exceed our OPAT per share CAGR target that we communicated to the market. And we have also seen record levels of our ROE of more than 17% ROEV, very record levels as well. I hand over to Garth to elaborate further.

Yes. I mean, we've seen the way in which we've executed the capital management policy has been exactly as we intended. The shareholder capital ratio has reduced as we've increased the buyback, but remains strong. We've seen how we've returned $3.6 billion to shareholders in the first half. And I think importantly, you see that not only have we seen strong operational execution in the first half on an ongoing basis, but also the way that our disciplined capital management has now also increased the ROE up to 17.5%, a record and up 200 basis points over the same half last year. So the capital management policy is working, and we see that in the numbers we're showing today. I think in these uncertain times, retaining financial strength is important. But as ever, we look at all ways to create value for our shareholders on an ongoing basis.

Thank you, Thomas. Next question, please.

The next question comes from MW Kim of JPMorgan.

I have 2 questions. So firstly, the long-term bond yields have continued to rise across a number of the markets, including the U.S., while the broad macro environment remains volatile. This may create some noneconomic volatility in the company's reported financial figures. Could you remind us of the key actions company has taken in recent years to reduce that accounting and also the solvency volatility, and how effective these measures have been in recent market environment? And secondly, on the holding company cash base, the core earning growth was very strong in first half, but capital flow from the subsidiaries appears to have a much smaller than first half '25. Could you help us understand whether this mainly reflect the timing of the remittance, capital management choices at subsidiary level or any other drivers?

Okay. These are 2 financial questions, which I'll hand over to Garth to...

Yes. Thanks, MW.

Thanks, MW.

I mean the actions we're taking are not actions that are new. They are actions we've taken over many years. I think the first thing I'd point you to is our EV sensitivities to interest rates. You see that's very low. And clearly, that reflects the strong ALM management that we have and the prudence in our assumptions also. I think also if you look at the earnings, again, I think strong earnings growth, we saw 13% per share earnings growth this year in our operating profit after tax. We always say look through to that rather than the net profit because of the volatility. But the change in product mix that we've had towards Par products in China will help more generally because the business will go into VFA rather than GMM. And as you look at our business, some of the things that we've done, even reducing the shareholder funds over time will also reduce some of the noise between net profit and OPAT. The move to IFRS 17 actually, MW, has helped a lot with that noise as IFRS 17 is more market-based. So the actions we've taken, you see it in the product portfolio of the new business, and you see it in the product portfolio of the in-force actually because it's been there for many years, and you see it in our sensitivities. On the holdco cash, I think you have to go back to the first half of '25. We had some capital flows, and it's really about strong liquidity management at the holdco. If you look at the rate for the first half, it's broadly in line with where it normally is. And I would remind you that the second half is normally higher than the first half and also look at it over the full year. But you can see that the flows from the businesses continue to be strong and meet our needs.

Thank you, MW. Next question, please.

The next question comes from Michelle Ma of Citi.

This is Michelle Ma from Citi Research. First of all, congrats on this set of results despite a very high base for comparison. I have 2 questions. The first is to Jacky. So could you help us to understand how MCV customers' mentality has changed after Decree 837. Do they feel more urgent to buy Hong Kong insurance products or more hesitant? And how do you assess the impact from the recent rumor on the additional 20% tax to be imposed on the Hong Kong insurance or overseas insurance participating for dividends? And also, there is a kind of regulatory changes in the coming September 1. The Federation of Insurers in Hong Kong, they will unified definition of critical illness. And there may be a stricter standards applied to those kind of minor critical illness diseases. How do you see it change our competitive edge or product competitiveness over our major competitors? So sorry, a bit long, but that's my first question to Jacky. Second question to Fisher, it's about the Document 65. We know that at the beginning of July, there was a lot of product redesign and new launch of products in the bancassurance channel. There is a lot of business disruptions for our peers in Mainland. Even though bancassurance is not a major distribution channel of AIA in China, how do you see it will impact our business going forward?

Okay. Thank you, Michelle. You have a question for Jacky on competition and demand in Hong Kong. As I said earlier, I think the demand drivers for CMV business remain intact. I think CMV customers purchase -- come to Hong Kong to purchase insurance for access to international investments, diversification for access to better healthcare, better advice. So we continue to see good demand from CMV customers. Now so I hand over to Jacky to elaborate on the product competitiveness.

Yes. Thank you, Michelle. So let me address the product competitive question. Yes, Hong Kong FI is launching a kind of unified definition on CI. And please note that this is a voluntary adoption for the insurance company. This is something to provide the advice guidance for the insurance company. So it is voluntary. And for AIA, we look at it and we find that, in fact, majority, most of our CI definition are broadly in line with those guidance. And we will continue to consider the innovative design in the proposition, including CI going forward, as we have been doing more innovative product proposition in the past so many years. May I just also add to the point about the CMV Chinese Mainland visitor business. We continue to see good demand since all those news flow, whether it is Decree number 837 or cross-border, et cetera, et cetera. And tax is never a key driver for the demand of long-term life insurance product in Hong Kong. As Yuan Siong already pointed out, those drivers are really about the access to international diversified investment, which add up our long-term life insurance product and also more diversified or tailored design in proposition and quality advice. And we continue to see a strong good demand of CMV business.

Yes. On China, on Mainland China, we are very pleased with the first half results. VONB growth of 20%, especially pleased with the performance from the agency channel, 24% VONB growth and this is supported by very strong foundation, growth in active agents of 14%, growth in productivity, growth in active new agents. You can see that we are investing into our -- building up our branding Premier Agency in Mainland China. So I'm very confident of the outlook for China in 2026. Now I caution you to not focus too much on quarterly growth numbers because the quarterly numbers, as you know, is affected by one-off factors and one-off events. So overall, for the year, we are confident of our performance -- of the outlook for China. Now I hand over to Fisher to talk a bit more in detail about China's performance in the first half year.

Thanks for the question. Firstly, I want to emphasize the overall performance. As Yuan Siong said, we are very pleased about the excellent performance, particularly it's driven by the structural growth driver and AIA China's unique differentiated strategy, particularly in the Premier Agency and also our new BUs great performance. The unique geography expansion opportunity actually also give us full confidence to deliver sustainable growth going forward. Your question actually about in the second half, we need to refine a lot of products, actually it is mainly about the bancassurance. Maybe let me elaborate the bancassurance a little bit more. So firstly, how we look at the bancassurance Actually, as we said several times, we think bancassurance with various new regulation in place, especially like the PIR adjustment mechanism, like the shifting to the Par, like Bao Xing He Yi, actually, the bancassurance is getting more healthy. So we think there is a huge opportunity in the future. So secondly, our strategy is to build a differentiated profitable bancassurance. That's why we say we collaborate with a selected bank partner who have the same vision, same operating philosophy with us. We focus on those affluent and high net worth customers, do more POS management, stringent active management and very importantly, customer relationship management. That's our target differential model. So since you mentioned since July, actually, the regulator strengthened the Bao Xing He Yi, which means the whole marquee, the bancassurance will shift from the previous more fee driven to the future. It's kind of a comprehensive capability driven. The insurance company need to do more on the POS management, on the customer management. That is exactly -- you can find the direction of us. So we have refined all the product to complying all the regular requirements. And this direction, although the whole marquee will have a transition period, but as I said, we are very well positioned to capture this long-term opportunity in future. So overall speaking, not just the Premier Agency, we also have full confidence in the overall business performance. Thank you.

Thank you, Michelle. Next question, please.

The next question comes from Charles Zhou of UBS Securities.

This is Charles from UBS. I also have a few questions. The first question on the second page of the interim report, I know that Yuan Siong said the group has achieved 17% compound annual growth rate since the first half of 2023, which I believe this also exceeds the investor expectations about mid-teens value of the business growth for the AIA Group. So may I know so how do you see this expectation about the mid-teens growth, including for this year and also in the medium term? As we know, you only achieved 10% in the first half. That means the growth probably have to accelerate in the second half to achieve this mid-teens expectations. So can you maybe just help us to understand how -- in which market we'll see better growth? And also in the medium term, as you know, right, Hong Kong, China is getting bigger and bigger. So in the medium term, if we are going to achieve, say, mid-teens growth, do you expect the growth will come from Hong Kong, China or maybe more from the Southeast Asia? So that's my first question. Second question is for Hong Kong. I think the competition in Hong Kong has intensified over the past few years, especially in bancassurance and broker channel, both are gaining shares in Hong Kong compared with agency based on the industry data. So how does AIA plan to sustain its competitive position given AIA's agency dominant model? And how does AIA view the Hong Kong competitive landscape and rapid growth of the bank-backed insurers? Last, maybe very quickly on AIA China. Just regarding the margin, we saw the margin decline a little bit in China. Can you maybe just elaborate and talk about the margin?

Thank you, Charles. And thank you for bringing us to this slide, which I think is a very important slide because it exactly tells us that we are operating in the best region for life and health and long-term savings insurance business. This is our core business, and we are in the best region. We have very significant competitive advantages that -- and these competitive advantages, we continue to invest into strengthening these competitive advantages, including building up our Premier Agency, building up our strategic bank partnerships and our partnerships with selective brokers and IFAs. And we have delivered -- if you go to Slide 15, we have shown that over the long-term, we are able to deliver a very strong record of consistent performance. Yes, in terms of VONB, there was a blip during the years of COVID, but COVID affected the whole world. And you can see that post-COVID, we bounced back very quickly and continue that trajectory of strong growth that's translating to earnings, that's translating to cash returns to our shareholders. So the thesis for -- the investment thesis for AIA, I think, remains very, very strong. So this is the first thing I'd like to say. Now in terms of the growth engines. We have -- we operate in 18 markets, but we have identified our 4 key growth engines, mainly Mainland -- Chinese Mainland, Hong Kong and ASEAN and India. So these are our 4 growth engines. And these 4 growth engines continue to deliver good growth. The power of our diversified pan-Asian platform, all of these 4 growth engines means that we can consistently deliver the kind of growth trajectory that you see in Slide 15. right? So now on our competitive advantages, clearly, the key competitive advantage for us is Premier Agency. We have the best in the market. I think Jacky and the team have talked about our -- the quality of our Premier Agency, the fact that we have the most number of MDRT globally for 12 consecutive years. We are #1 in MDRT in 11 of our 18 markets. And all these have been very strong, consistent. It's not just 1 year or temporary performances, but consistent performances over the years, right? Going forward, I think we can further accelerate growth through the use of technology and AI. We believe that technology and AI can be a growth accelerator for our key distribution channels. And this is what we are investing into and we are devoting a lot of time and energy on leveraging AI to improve productivity, to increase access to more customer segments, and to be able to reach customers at the right time in the right locations. So we remain confident in our outlook for 2026 and beyond. Yes, so that's my answer to your first question. On the second question about market competition. Again, I go back to the point that we are focused on delivering high-quality growth, right? That translates to earnings, and cash, right? So -- and we believe that if we consistently focus on this high-quality growth that in all our markets, we will become the leading life and health insurer in the market. We are already the leading life and health insurer in many of our markets that we operate in, but we believe that this focus on delivering high-quality growth will anchor our ability to become the leading insurer in all the markets that we operate in, right? So this is -- now we know that in Hong Kong, our strength is our Premier Agency and our bank partners in Citibank and Bank of East Asia, they delivered very, very strong performances in the first half of 2026. And we are aware that, as I said, we continue to be very focused on high-quality business. We are aware that in certain markets, there will be companies that will adopt a very aggressive pricing strategies. There will be companies that will adopt some short-term incentives to drive market share growth. But as I emphasize again and again, we focus on high-quality growth. Specifically about Hong Kong, I will hand over to Jacky to talk about it.

Yes. Thank you, Yuan Siong. Charles, as you point out, Hong Kong competition is intense, but it's always been there because Hong Kong is an international finance center, financial center. And you see that there are almost all those major global financial institutions, they have business in Hong Kong. So no wonder, there is keen competition here. And as Yuan Siong pointed out, AIA in Hong Kong and Macau, we focus on delivering sustainable quality growth in our business in the long-term. And we do see that our differentiated Premier Agency is a key differentiator, and we sell long-term life insurance and long-term saving product through our Premier Agency channel. And we also have partnership with our exclusive bank partner, Citi and BEA, and they both also focusing on selling long-term life insurance and long-term saving product. And in the broker channel, we are also there. Hong Kong, AIA Hong Kong is also having a multi-distribution channel because this is a very diversified financial center. And we selectively partner with roughly 10% of the brokers in Hong Kong who are also aligned with us in the value proposition of long-term life insurance product for our customers. As you see in the so-called recent -- I believe you see in the recent statistics in the Hong Kong life insurance market, there is a big growth in terms of ANP and mostly driven by single premium and short pay. Short pay, meaning that premium paying period less than 5 years. And I'm sure you see that many of our competitors, they may really do go into that path and the margin will experience a drop. But in the case of AIA Hong Kong, we delivered a set of strong real ANP growth of 10% amid a very strong margin of 72%. So this shows that our financial discipline and focusing on delivering long-term sustainable quality growth.

On the China margin question, I think you need to look at it in terms of the bancassurance channel and the agency channel. We are very happy with the level of the VONB margin of our agency and bancassurance channel. Now bancassurance channel, our VNB margin was 35%. Now this compared to years ago where it was like low single digits in the industry. I think this is a very healthy level of VONB margin for bancassurance channel in the Chinese Mainland. Now with the increased focus on Bao Xing He Yi and other regulations and the moves by the regulator, we believe that the profitability of the bancassurance channel will continue to be at a healthy level. And as Fisher described it just now. Now with the agency channel, our VONB margin stands at 60%. This is a very attractive VONB margin and very -- and we believe it is a market-leading VONB margin for the agency channel in this low interest environment. If you look at the product mix of our Mainland China -- Chinese Mainland business, it is a very attractive product mix. 35% of the new business is in protection business, 57% in participating savings and 8% in the tax incentivized retirement products. These are products that we like in this low interest rate environment. And I hand over to Fisher to further elaborate.

Basically, that's all I think firstly, Charles, as you know, we manage the business by focusing on growing the absolute amount of the ANP. So as you can see in the first half, we are very pleased to deliver excellent performance in the ANP, which is 20%. Secondly, you notice that there is a slight drop in the margin, which is mainly because we further shifted more to the Par. As you know, it's more healthy. You must know, I give you a typical example. Last year, the first half, our CI product was still non-Par CI. But in the second half, we launched the Par CI, which is very well received by the market. So we continue to shift more healthy product mix. That's the main reason for the margin drop. Last but not least, as Yuan Siong said, we actually maintained a very decent margin. No matter agency around 60%, bancassurance at 75% are all very well above the market. And very importantly, the product mix is healthy. We are very unique in the protection. It's still a 15% growth. So consider all of this, I have full confidence that we can continue to deliver a decent margin in the future.