Trojan Global Income Fund

We started a new investment in AIA, a leading life and health insurance company in Asia. Its core business is straightforward: helping families protect themselves financially if someone dies too early, becomes seriously ill, or needs support in later life. We are attracted to AIA because its most important products are protection and health insurance, rather than lower-margin savings products. These policies are valuable for customers, but also attractive for AIA because they tend to be profitable, capital-light and long-lasting.

What makes AIA distinctive is the strength of its proprietary agency network. Unlike insurers that depend heavily on banks or third-party distributors, AIA has built its own highly trained salesforce across Asia. This matters because protection products are not always easy to sell. Customers need advice, trust and education, rather than simply choosing the highest savings rate. AIA’s agents are therefore a key competitive advantage, helping the company reach customers directly, explain more complex products and build long-term relationships.

The growth opportunity is potentially significant. Across many Asian markets, people are becoming wealthier, but remain underinsured. As incomes rise, more families want to protect their savings, healthcare needs and dependants. Hong Kong and Thailand are already highly profitable markets, while China offers a strong future opportunity because AIA’s target customer base remains very underpenetrated.

We also believe the share price does not fully reflect the quality of the business. The pandemic disrupted sales and cash generation, and investors have remained cautious about China. However, the underlying business has been recovering and operating metrics are healthy. Despite this, AIA still trades below its long-term valuation range, even as returns have moved back to strong levels.

A further positive is the return of Sir Mark Tucker as Chairman. He previously led AIA through its IPO and a period of strong value creation, and his return should give investors greater confidence in the company’s strategy and governance.

In short, we are buying a high-quality Asian insurance franchise with a differentiated distribution model, strong long-term growth prospects, improving investor confidence and a dividend yield of 2.5%.