AIA is a major life insurance group in the Asia-Pacific region, the group is rooted more than 90 years, providing insurance protection, savings, investment and retirement and other financial services, providing services throughout 15 countries and cities.

2011 Annual Result Review

AIA recorded a sharp growth in 2011, also good in the financial indicators. The key indicators in creating value– Value of new business ,there is a strong growth, a substantial rise from $ 667 million to $ 932 million in 2011, with an increase nearly 40% yoy, bright performance. New business profit margin rose to 37.2%, up 4.6 % yoy, the Group's new business increased substantially, mainly due to three measures as below:

1) introduction of new protection and wealth management products to meet customer needs.

2) re-pricing, adjustment pricing of the low profit margins` product, increasing the average profit margin of the overall product portfolio.

3) enhance the productivity and professionalism of the agency force to ensure the continued growth in profit.

The growth of the Group's core business is bright, but the return on investment fell sharply by 73% yoy, mainly due to the equity securities marked to market losses, fell to (2.181 billion U.S. dollars) from last year's 3.138 billion. Stock market volatility last year, mainly due to the debt crisis continued to spread in Europe, we expect the debt crisis will be released, the Group's 2012 net income of equity securities will rebound. Addition, the Group's business focus on emerging markets in Asia, on one hand the market far away from the debt crisis in Europe, on the other hand, the vast potential of finance and insurance business in Asia, we estimate that the Group will enjoy a high growth in the next 7 years, especially the core insurance and wealth management business. Therefore, given the "Accumulate" investment rating, twelve months target price $ 32 HKD.

Distribution of the Group's business

There is an average distribution of the Group's business in profit before tax, Hong Kong and Thailand, the proportion is slightly heavy, the rest of the market accounted for a share, effective dispersion of regional risk. Apart from that, the Group's business focus on China and the emerging Southeast Asian countries, Vietnam, Indonesia and the Philippines (VIP), good economic fundamentals in these countries, we expect the countries` earnings contribution will continue to expand in the group.

Return on investment

From the figure above, the Group's fixed income assets to total assets is more than 80%, the investment income increased by about 16% yoy. However, the equity securities carried at fair value, and thus recorded a substantial loss, which dragged down the overall return on investment. We expect to the European debt crisis will be released, the securities gains will steadily recover, favor 2012 results.

Annualized new premiums

Annual premiums continue to rise

Annualized new premiums of the Group's various districts and the value of new business steadily increased, including in particular the emerging markets such as Vietnam, Indonesia and Philippines,), annualized new premiums in the second half of 2011 reached $ 391 million, an increase of more than doubled. We estimate that with the sustained economic growth in the emerging East Asian of the three countries (Vietnam, Indonesia, Philippines), the area of new business value and annual premium growth is expected to surpass the group average, as the growth engine of the Group.

The total weighted premium income

Total weighted premium income including renewal premium of 100%, 100% of first year premium and 10% of written premiums.

Group's annualized new premiums rose nearly 22 % yoy, mainly due to the Group launched a new protection and wealth management products, enhanced the productivity and professionalism of the agency, ensuring the continued growth in profit.

However, the total weighted premium income increased 11 % to $ 14.442 billion in FY11, the growth is less than the growth of annual new business premiums, mainly due to regular premium business size is large and a large number of renewal premium included, the total weighted large part to the low base effect.

Value of new business

Agency distribution channels accounted for approximately 78% of the value of new business, new business worth $ 811 million in 2011, up 40 % yoy, which includes the annualized new premium growth of 11% and profit margin improved by 15% and 8% product mix improvement.

We expect the Group's products re-pricing and product mix improvement will be continued this year. In addition, the number of active agents in Group rose % yoy, which will direct increase in new customers and new business value. Group's expansion strategy is on a right track the new business value and new business profit margins are expected to further enhance in 2012.

Embedded Value

The embedded value is the estimated economic value to the actuarial method to determine the life insurance business based on a series of specific assumptions on future experience, but does not include the economic value of any future new business.

The Group's embedded value rose % yoy to $ 27.239 billion, embedded value per share in FY11 is HK $ 17.64, Group embedded value increases is less than we expected, mainly due to the devaluation of Asia currencies and stock return dropped in Asian region. However, since December 2011, the Asian currencies against the U.S. dollar to resume its rally, coupled with the region's stock markets stabilized and the market expected the United States will launch QE3, weak dollars will help to improve the group 's embedded value of 2012.

From the figure above, the EV in Singapore and Hong Kong were dropped in 2011, recorded negative growth mainly due to the capital requirements of the Hong Kong business rose. We believe that the move is a one-time case, EV of the Group will resume growth in 2012.

Valuation

AIA based in Asia, we expect the Group will be continued growth in seven years with 9% short-term annual growth, after that the long-term growth will be about 6.3%, the corresponding discount rate is 7.5 % 2011 dividend per share is HK $ 0.33, as we expect that the insurance industry had a high growth period, the growth rate with linear decline, thus we use two-stage dividend discount H model, derived a value of HK $ 32 per share.

Corresponding to P/B rate about 2.133 times the P/E ratio 17.7 times new business embedded value multiples about 16.9 times.

The major risks

European sovereign debt crisis continues to worsen,

Group's growth rate is slower than our expectation

China's economy deteriorate

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