In Asia, insurance is obviously big business given how under-insured the region is. According to Swiss Re, Asia’s mortality protection gap in 2019 stood at a whopping US$83 trillion.
Closing this gap means individuals in Asia buying more insurance, either life or health. For insurers, it’s also a massive opportunity as the estimated additional annual premium potential is close to US$300 billion per year.
So, the tailwinds for growth are there. It’s no surprise, then, that there are established insurance firms looking to tap into this demand.
Two of the biggest listed insurance companies in Asia are AIA Group Ltd (SEHK: 1299) and Ping An Insurance Group Co of China Ltd (SEHK: 2318).
While AIA is more of a broader Asian growth story, Ping An Insurance is a pure-China play. However, for long-term investors, which is the better buy?
While AIA and Ping An are both insurance companies, they’re also very different in the way they operate.
AIA is more focused on life and health insurance across Asia whereas Ping An operates more as a conglomerate with divisions such as its flagship life and health insurance arm but also has interests in P&C, banking, securities, asset management and technology.
As a result, Ping An’s reach within China is much wider given it has a financial retail base of 218 million customers in China.
However, Ping An is focused purely on China. Meanwhile, for AIA its geographical mix when looking at value of new business (VNB) saw China and Hong Kong make up 50% of the total in 2020.
Thailand, Singapore, Malaysia and “Other Markets” made up the other 50% of VNB, indicating that it has scope to grow in markets outside China.
Ironically, though, even though China makes up a big portion of AIA’s VNB, the company is just getting started in the country – given it only operates in eight select cities/regions within the country.
Over the coming years, that means its growth within China is likely to be superior to that of Ping An, which is already a ubiquitous brand for Chinese individuals.
Winner: AIA Group
Insurance companies in Asia are able to pay out decent dividends given the amount of cash they rake in on a regular basis.
Given the health operating profit figures for both AIA and Ping An, both have also been growing their dividends at a solid pace.
First off, AIA in 2020 paid a dividend per share (DPS) of HK$1.353, which was up 7.5% year-on-year. Since 2011 – which was its first full year as a listed company – AIA has grown its dividend over the past nine years at a CAGR of 17%.
Meanwhile, Ping An Insurance paid out a DPS of RMB 2.20 (HK$2.63) in 2020. Versus its DPS of RMB 0.40 in 2011, that equates to a CAGR in its dividend over the past nine years of 20.9%.
Winner: Ping An Insurance
Share price return
For long-term investors, it’s also worth taking a look at the share price return of companies over longer stretches of time.
Since AIA went public in October 2010 at HK$19.68 per share, AIA’s share price has risen by just over 385% over the past decade or so.
As for Ping An Insurance, its share price has risen by around 97% during that same period – underperforming AIA.
Winner: AIA Group
Premium insurance player
For long-term investors who see the potential of insurance in Asia, AIA seems like the better choice.
Although both AIA and Ping An Insurance are great companies, the former appears to have brighter prospects for its business.
Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of AIA Group Ltd and Ping An Insurance Group Co of China Ltd.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.