Hong Kong Insurer Growth to Slow Before Q4 Rebound, Morgan Stanley Says

Hong Kong's life insurance sector is poised for a near-term slowdown in growth before normalizing in the fourth quarter, according to a new report from Morgan Stanley. The bank noted that while insurers posted solid growth in the first half of the year, performance has diverged significantly based on customer mix, product strategy, and distribution channels.

Divergent H1 Performance

In a research note, Morgan Stanley said that Hong Kong life insurers' Value of New Business (VNB) generally rose in the first half of 2026, but the underlying drivers varied widely. The report highlighted a growing gap between overall sales growth and value creation among companies.

• FWD Group (1828.HK) recorded the strongest VNB growth at 25%, with an estimated acceleration to over 50% in the second quarter.
• AIA (1299.HK), Prudential (2378.HK), and Manulife (0945.HK) saw VNB growth of 8% to 11% in their Hong Kong operations.
• Sun Life (SLF.TO) reported a 4% year-over-year increase in its new business Contractual Service Margin (CSM).

The bank explained that while some insurers like Manulife and Sun Life saw volume-driven growth, others like AIA, Prudential, and FWD benefited from margin expansion of 6 to 7 percentage points due to a more favorable product mix and repricing.

Local Demand Outpaces Mainland Visitor Business

Ad

The growth in the first half was predominantly driven by the local, or onshore, market, while momentum from Mainland Chinese Visitors (MCV) was sluggish, the report stated. This trend underscores a clear divergence in demand from different customer segments.

AIA and Prudential both saw local business grow by 23% and 22% respectively, while their MCV business declined by 2% in the first half. Manulife's management also indicated that its growth came primarily from the onshore market. The exposure to the MCV segment, which accounted for 24% to 30% of business for some firms in the first half, varies significantly across the sector.

Outlook and Forecast

Looking ahead, Morgan Stanley anticipates that onshore demand will remain the primary engine for new business, supported by stable needs from core local customers and strong contributions from new Hong Kong residents.

The bank expects MCV business to remain weak in the early third quarter due to high comparison bases and tax-related news flow. However, analysts believe the structural demand for savings, protection, and asset diversification from this segment remains intact and forecast a normalization in year-over-year growth from the fourth quarter as base effects subside. The bank maintains a constructive medium-term outlook despite the expected near-term weakness.