UBS has released a research report stating that the market appears to have largely priced in the worst-case scenario regarding the impact of Decree 837 on the Mainland China Visitor (MCV) insurance business, which assumes a future new business value (VNB) of zero from these customers.
The bank believes that as long as regulatory outcomes do not result in a complete ban on new MCV business, AIA (01299) shares possess upside potential, and current concerns appear excessive. The firm reiterated its "Buy" rating on AIA, maintaining its target price at HK$104.
Key Supporting Factors
UBS outlined three primary supporting factors. Firstly, discussions with intermediaries such as agents indicate that current operations, including sales and premium payments, remain stable. The recent restrictions by the Hong Kong Monetary Authority on bank investment accounts are specifically for securities trading and are unrelated to insurance purchases or payments.
Secondly, the MCV insurance business remains viable under the regulatory frameworks of both Mainland China and Hong Kong.
Thirdly, Hong Kong's Financial Secretary, Paul Chan Mo-po, made constructive remarks during an event on June 10, 2026. Additionally, benefiting from intensive promotional activities since mid-May, the bank anticipates AIA Hong Kong's second-quarter new business value performance may exceed market expectations.
Broader Business Strength
UBS added that aside from the regulatory uncertainty surrounding the Hong Kong MCV business, the fundamental strength of AIA's other operations remains intact, and the company has a strong track record of navigating crises.
The firm expects AIA to be attractive in the Mainland China market, projecting a new business value compound annual growth rate (CAGR) of 18% for the fiscal years 2025 to 2030. Concurrently, for new regions entered after 2019, the target is to achieve a 40% new business value CAGR from fiscal 2025 to 2030.
Currently, the stock's valuation is approximately 1.04 times the forecast 12-month forward price-to-embedded value (P/EV), with a return on embedded value (RoEV) of 16%, presenting an attractive risk-reward profile.