Goldman Sachs Maintains Buy Rating on AIA Group, Target Price HK$97

Overview

Goldman Sachs released a research report assessing AIA Group's valuation amid weak stock performance. The report suggests that although the stock has been pressured by recent regulatory controls on online brokers and State Council outbound investment decrees, the current price already reflects most expectations of new business losses. Institutional investors maintain a Buy rating, believing that continued growth drivers will drive a valuation re-rating, with a 12-month target price of HK$97.

Core views

Stock Price Pricing Analysis: Institutions believe the recent decline in stock price has begun to reflect expectations for significant reductions in new business for the MCV segment and disruptions in HK domestic sales, including potential impacts from inward migration technology trends in recent years from mainland China. However, analysis indicates that the current stock price has not yet reflected potential disruption to the back book of policies, as some investors worry stricter regulations could lead to increased early terminations of existing policies. Historical Comparison Perspective: The decline in stock price since May 22 roughly aligns with market reactions when UnionPay tightened rules in 2016, when AIA's stock price fell 12%-15% over 1-2 months. Referencing 2023/24 experience, if growth concerns persist, investor focus may shift from growth to near-term shareholder returns (dividends and buybacks) as downside protection. Given that AIA's current yield premium relative to the 10-year US Treasury is modest compared to the 2023-24 period, stock prices may face further pressure until regulatory clarity emerges. Growth Drivers and Performance: The key to stock price recovery lies in demonstrating sustained growth momentum in HK, mainland, and other markets. 1Q26 performance was strong, with mainland new business value growing 26% year-over-year (unaffected by outbound investment regulation) and HK growing 21% year-over-year (driven jointly by domestic and MCV segments). Excluding HK, projected VONB growth CAGR for 2026-2029 is 12%, or 13% including HK, with mainland being the largest growth driver. The 1H26 earnings release in August will be a critical point for the company to update its outlook on HK sales momentum and growth prospects. Valuation and Target Price: Based on a 1.4x FY27E P/EV multiple, the 12-month target price is set at HK$97. The target multiple formula is ROEV-g/COE-g, assuming a long-term growth rate of 2%. Current stock prices are close to historical lows seen in 2016/2022, making risk/reward attractive. Expected ROE is projected to expand from 14% in 2023 to 19% in 2027E, with distributable profit growth potentially recovering to an 8% CAGR during 2024-27E, matching pre-pandemic levels.

Analysis framework

Institutions adopted a historical event comparison method, contrasting current regulatory impacts with the 2016 UnionPay tightening and mainland margin uncertainty in 2023/24 to evaluate the rationality of stock price reactions. Additionally, P/EV valuation methods were used, calculating target prices based on FY27E forecasts and long-term growth assumptions. Furthermore, scenario analysis was conducted to assess the impact of damage to new business and the back book on valuation, helping investors understand which risk factors are currently priced in versus those that are not.

Methodology notes

• Industry-Specific TerminologyP/EV insurance valuation

  P/EV Valuation Method

  A common valuation method for insurance companies, where stock price is divided by Embedded Value. The research report calculates the target price based on a 1.4x FY27E P/EV multiple, reflecting market pricing of the company's future value creation capability.

• Event Gamification and Behavioral FinanceEvent-driven analysis

  Historical Event Comparison Analysis

  Comparing current regulatory events with similar historical events (e.g., 2016 UnionPay tightening) to evaluate the rationality of stock price reactions and potential bottoms, helping determine whether current valuations have sufficiently priced in negative factors.

• Company Fundamentals and Financial Framework

  VONB Growth CAGR Analysis

  Value of New Business (VONB) compound annual growth rate is a core indicator for measuring the growth potential of insurance companies. The report analyzes contributions from different regions to overall growth by breaking down VONB growth expectations for HK and non-HK markets.

• Valuation methods

  ROEV-g/COE-g Target Multiple Calculation

  Calculating target P/EV multiples based on Return on Equity Value (ROEV), long-term growth rate (g), and cost of equity (COE), a common theoretical pricing model in insurance stock valuation.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• AIA Group (1299.HK)

  Beneficiary

  Strengths

  Leading pan-Asian life insurer operating in 18 markets; ranked top 3 in multiple major markets; strong shareholder returns and long-term profit growth capabilities; 1Q26 results beat expectations

  Weaknesses

  Stock price under pressure due to regulatory controls; sustainability of MCV segment growth is under scrutiny

  Risks

  Slowing mainland growth, especially in high-margin protection products; tightening of mainland capital controls affecting HK sales and policy renewals; sluggish overall economic growth in Asia

Key data

• 12-Month Target PriceHK$97.00Based on 1.4x FY27E P/EV multiple
• Current Stock PriceHK$71.00Closing price as of June 9, 2026
• Implied Upside36.6%Potential gain from current price to target price
• 1Q26 Mainland VONB Growth+26% yoyUnaffected by outbound investment regulation
• 1Q26 HK VONB Growth+21% yoyDriven jointly by domestic and MCV segments
• 2026-2029 VONB CAGR13% (including HK)Excluding HK is 12%; mainland is the largest growth driver
• FY27E P/EV Multiple1.4xCore valuation multiple used to calculate target price
• Expected ROE14% (2023) → 19% (2027E)Expected ROE to continue expanding

Impact & implications

For investors, current valuations are at historical lows with attractive risk/reward profiles. Institutions believe that continued strong performance in new policy sales and improved capital generation should drive valuation re-rating. If growth concerns persist, investor focus may shift to shareholder returns (dividends and buybacks) as downside protection. The August 1H26 earnings release will be a critical catalyst for verifying HK sales momentum and growth outlook.

Risks

• Significant slowdown in mainland growth, especially in high-margin protection products
• Delays in regulatory approval for new mainland provinces
• Significant tightening of mainland capital controls, negatively impacting HK sales and policy renewals
• Sluggish overall economic growth in Asia

What to watch

• August 1H26 earnings release, focusing on updates to HK sales momentum and growth outlook
• Clarity on regulatory direction
• Whether the back book of policies will be affected by disruption