AIA, Prudential grapple with China sales issue: UOBKayHian

However, both companies' exposure to the involved brokers is limited.

A joint investigation by regulators has shaken market sentiment, causing AIA and Prudential shares to drop 7% and 5% respectively, said UOBKayHian in a market report.

The probe targeted unlicensed insurance sales to mainland China visitors through brokers. 

However, both companies' exposure to the involved brokers is limited, with only a small portion of their new business affected.

Despite the setback, AIA and Prudential are expected to maintain strong new business growth in 1Q24, with at least a 20% year-on-year increase projected. 

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Recovery in mainland China visitor arrivals and robust ASEAN market performance contribute to this optimism.

Rising 10-year treasury yields, currently at 4.66%, have contributed to the insurers' depressed valuations. 

A 50 basis point increase in bond yields could reduce their embedded value by 1.5% (AIA) and 2.6% (Prudential), affecting investor sentiment and further weighing on valuation.