AIA Group's 1st-qtr new business jumps 20 pct on China demand

* Q1 value of new business at $1.02 bln vs $811 mln a year ago

* Foreign insurers gaining market share in China (Recasts; adds details on key markets, CEO comment)

May 4 (Reuters) - Insurer AIA Group Ltd on Friday reported a 20 percent rise in new business in the fiscal first quarter, as demand for insurance products remained strong in its key markets of China and Hong Kong.

Foreign insurers including AIA are gaining market share in China, the world's second-largest economy, aided by a regulatory crackdown on short-term investments packaged as insurance that has hurt many of their local rivals.

Many foreign insurance companies are strengthening their presence in smaller cities, where insurance penetration - measured in terms of the value of premiums underwritten as a percentage of gross domestic product - is low.

Current rules limit foreign holdings in Chinese insurance joint ventures to 50 percent. AIA, however, is the only wholly owned foreign insurance firm in China as its operations were set up before the restrictions were introduced.

In the fiscal first quarter ended March 31, AIA's value of new business (VONB), which measures expected profit from new premiums and is a key gauge for growth, rose to $1.02 billion from $811 million a year earlier, the company said in a statement.

"AIA has made a strong start to the year with 20 percent growth in VONB to US$1,021 million, which is the first time that quarterly VONB for the Group has exceeded US$1 billion," said Chief Executive Ng Keng Hooi.

China and Hong Kong together account for about half of new business growth globally at AIA, which was founded in Shanghai nearly 100 years ago and was the first foreign insurer to be granted a license in China.

Besides China and Hong Kong, the insurer does business in Asia in Thailand, Singapore, Malaysia and South Korea. (Reporting by Sumeet Chatterjee in Hong Kong and Chris Thomas in Bengaluru Editing by James Dalgleish and Matthew Lewis)