2nd UPDATE: AIA Last Fiscal Year Net Up 54%; Sees Growth Momentum Continuing

Asian insurance giant AIA Group Ltd. (1299.HK) said Friday its net profit for its last fiscal year jumped 54% as a weaker U.S. dollar boosted its investment gains and new business surged.

AIA Chief Executive Mark Tucker said in a news conference he expects the robust growth momentum to extend into the company's first quarter ending Feb. 28, and added the insurer will report its first-quarter results in the coming weeks.

The company, which was spun off by American International Group Inc. (AIG) in a Hong Kong listing in October, reported that its net profit for the 12 months ended Nov. 30 surged to US$2.7 billion from US$1.75 billion a year earlier, surpassing the average US$2.1 billion net profit forecast of 10 analysts polled earlier by Thomson Reuters. The result was also above the US$1.4 billion-US$2.3 billion the company had forecast before its listing.

"Recovery (in the region) is under way, and we expect much more to come" in 2011, Tucker told reporters in a conference call.

The insurer said its net premiums and fee income in its last fiscal year rose 10% to US$11.08 billion from US$10.10 billion, while the value of new business, a key indicator of future profitability, rose 22% to US$667 million from US$545 million, driven by growth in markets such as China and Thailand.

Tucker said in the conference call the company recorded strong growth in profitability in the fourth quarter, and added AIA's results were boosted by gains in several Asian currencies, especially the Chinese yuan, against the U.S. dollar.

Investment income for the period rose 14% to US$3.48 billion from US$3.06 billion, boosted by gains in equity markets and debt securities, particularly in the second half of last year. Excluding the effect of forex gains, investment income would have risen just 8%, the company said.

AIA's total weighted premium income rose 12% to US$13.01 billion in its last fiscal year from US$11.63 billion a year earlier, though the growth rate would be just 5% if foreign exchange effects were excluded.

"Rising interest rates in the region and appreciation of Asian currencies are all positive to the group's earnings," said Marc de Cure, AIA's chief financial officer.

The U.S. dollar weakened against major currencies last year amid worries about the U.S. economic recovery. The U.S. currency dropped 9% against the Japanese yen and 3.7% against the British pound, while the Chinese yuan gained 2% against the U.S. dollar.

However, analysts said they were concerned about the sustainability of AIA's earnings growth momentum given the downturn in Asian equity markets since the end of last year, which likely affected AIA's investment income.

CCB International Securities analyst Kenneth Yue said the insurer may have suffered losses on its equity investments as a result of the recent downturn. The MSCI Asia Ex Japan is down 1.5% so far this year, while the Taiwan Weighted Index has fallen 4.2%, and the Hang Seng Index is flat.

Tucker reiterated that he sees immense growth opportunities in China, the insurer's fourth-biggest market by premium income, and said the company will continue to invest in the country, with a focus on Guangdong and Jiangsu provinces.

He also said that while AIA has a strong capital position, it will nonetheless focus mainly on organic opportunities to drive its growth this fiscal year, and only consider acquisitions that would make business sense for the company.

The company's better-than-expected results for its last fiscal year boosted its Hong Kong-listed shares Friday. AIA's shares ended up 5.7% at HK$22.30 after rising as much as 7% earlier in the session. Its shares are up 2% since the start of the year.

AIA, which has life-insurance operations in 15 Asian markets, raised more than US$20 billion in its IPO, a record for Hong Kong, backed by strong investor interest in the company's pan-Asian exposure and strong brand recognition. The share sale also contributed to the single-largest repayment of U.S. taxpayer funds used in AIG's rescue, which amounted to more than US$120 billion.

AIA didn't propose a dividend for fiscal 2010, as stated earlier in its listing prospectus. The company said it will consider paying a semiannual dividend from the first half "if conditions remain as at present."

-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com

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