J.P. Morgan: FWD (01828) Q3 New Business Value Beats Expectations; Target Price HK$48

J.P. Morgan released a research report stating that FWD's (01828) third-quarter operating data slightly beat the firm's expectations, confirming that its growth pace remains on track, supported by a diversified regional portfolio. The firm maintains an "Overweight" rating with a target price of HK$48. The company's new business value (NBV) during the period reached US$276 million, up 14% year-on-year at actual exchange rates, above the firm's expectation of 11% growth. Given that Hong Kong and mainland Chinese insurers recorded weak or negative sales growth in the third quarter, the firm believes FWD's performance was strong. The report noted that growth was mainly driven by Japan and ASEAN markets, while resilient sales momentum in Hong Kong also surprised the firm, with third-quarter new business value growth remaining strong at 13%. The firm believes the strongest investment case lies in the group's cash generation remaining on track to exceed new business investment and financing costs, while its capital base remains adequate. As of June this year, the group's solvency ratio was 203%, with no bonds maturing until 2030. Therefore, the firm expects the share price to increasingly reflect its life insurance sales scale expansion and cash generation. The firm forecasts fourth-quarter new business value growth of 15% year-on-year and 11% year-on-year growth in fiscal 2027. It is estimated that for every 50 basis point increase in interest rates, FWD's new business value grows by 6.6%, compared with only 0.8% for peer AIA (01299). The firm believes FWD's current valuation is not expensive, and its share price has underperformed the Hang Seng Index by 14 percentage points year-to-date.