Tucker: What we’ll do with AIA’s cash reserves
AIA CEO Mark Tucker talks about spending AIA’s $5 billion cash pile, the potential for acquisitions and the key business drivers in the toughest Asian markets.
Q: AIA’s solvency ratio has gone up to 356%, something most banks we speak to could never dream of. That amounts to some $5 billion in cash reserves. What are you going to do with it?
A: We think of it as being in four blocks, of which the first is the most important. That’s investing in new business profitability. We have significant cash to invest in growing new business we can grow at 20% IRRs plus. Secondly, there’s a capital buffer that from a statutory and regulatory point of view we need to have in place. We’ve got to be able to withstand a one-in-ten or one-in-twenty-year event. Thirdly, we want some flexibility to do small-scale bolt on M&A if that’s available. And last but not least you pay a dividend. [AIA announced to day an interim dividend of 11 Hong Kong cents per share, the first dividend since listing].
Q: Under what circumstances would it ever make sense for you to acquire outside of the region?
A: We have an incredible opportunity in Asia, and for the time being that’s where we need to grow organically and to focus.