Morgan Stanley has released a research report indicating that Hong Kong life insurers' growth in the first half of 2026 remains solid, though divergence among players is widening. New business value (VNB) generally rose across Hong Kong life insurance companies in the first half, but the underlying growth drivers have shown clear differentiation. Differences in customer, product, and channel mix have widened the gap between overall sales growth and value creation.

The firm notes that Hong Kong life insurers are posting steady value growth, but the drivers are becoming increasingly distinct. FWD Group (01828) delivered the strongest VNB growth in the first half of 2026 at 25%, with Morgan Stanley estimating its second-quarter growth accelerated to over 50%, supported by a lower comparison base and further margin expansion. AIA (01299), PRU (02378), and MANULIFE-S (00945) recorded VNB growth of 8% to 11% in the Hong Kong market, while Sun Life saw its contractual service margin (CSM) rise 4% year-on-year. Most companies experienced slower VNB growth in the second quarter, whereas FWD accelerated and Manulife remained broadly stable.

However, growth drivers may continue to diverge. Manulife and Sun Life are more volume-driven, benefiting from attractive promotional campaigns and distribution expansion, though intensifying competition is putting pressure on margins. In contrast, AIA, Prudential, and FWD saw margins expand by 6 to 7 percentage points year-on-year, supported by favorable product mix, repricing initiatives, or longer premium payment terms.

Morgan Stanley highlights that Hong Kong life insurers' growth in the first half was led by the local market, while momentum in the Mainland Chinese Visitor (MCV) segment remained sluggish. Despite solid VNB growth in the first half, onshore business in Hong Kong clearly outperformed the MCV segment, underscoring the divergence in customer group momentum. AIA and Prudential recorded similar local growth of 23% and 22% respectively in the first half, while both saw MCV decline by 2%. Manulife's management also indicated that its Hong Kong growth was primarily driven by onshore business, with MCV contracting. Major players have varying exposures across onshore, offshore, and MCV: AIA and Prudential are more balanced between onshore and MCV, while Sun Life, Manulife, and FWD have less exposure, with MCV accounting for 24% to 30% of new business in the second quarter or the first half of 2026.

The report also notes that channel dynamics are amplifying divergence at the company level. Bancassurance tends to be weighted toward the first quarter, agency channels are relatively more stable and gain momentum gradually through the year, while brokerage sales are most sensitive to regulatory timing. These dynamics, combined with base effects — such as FWD's particularly high comparison base in the first quarter of 2025 and Sun Life's relatively low base in the same period — along with differing competitive strategies, explain much of the wide dispersion in reported growth across insurers.

Looking ahead, Morgan Stanley expects short-term growth to moderate, with normalization returning by the fourth quarter. The firm anticipates that onshore demand will continue to be the primary growth driver for Hong Kong's new business, supported by steady demand from core local customers, deeper penetration among existing clients, and strong contributions from new Hong Kong residents. Due to higher comparison bases and tax-related news, MCV momentum may remain weak into early third quarter of 2026, particularly for smaller-ticket policies. However, structural demand for long-term savings, protection, and asset diversification remains intact, and comparison bases should become easier from the fourth quarter of 2026 onward, supporting year-on-year growth normalization. Morgan Stanley expects softer data in the third quarter of 2026, largely reflecting base effects and the early release of prior regulatory factors rather than weakening underlying demand, but the firm remains constructive on the medium-term outlook despite ongoing divergence among insurers.