AIA GROUP LIMITED
友邦保險控股有限公司
STOCK CODE 1299
LIVING OUR
PURPOSE
ANNUAL
REPORT
2021
ABOUT AIA
AIA Group Limited and its subsidiaries
(collectively “AIA” or the “Group”) comprise
the largest independent publicly listed
pan-Asian life insurance group. It has a
presence in 18 markets – wholly-owned
branches and subsidiaries in Mainland
China, Hong Kong SAR(1), Thailand,
Singapore, Malaysia, Australia, Cambodia,
Indonesia, Myanmar, New Zealand, the
Philippines, South Korea, Sri Lanka, Taiwan
(China), Vietnam, Brunei and Macau SAR(2),
and a 49 per cent joint venture in India.
AIA meets the long-term savings and
protection needs of individuals by offering a
range of products and services including life
insurance, accident and health insurance
and savings plans. The Group also provides
employee benefits, credit life and pension
services to corporate clients. Through an
extensive network of agents, partners and
employees across Asia, AIA serves the
holders of more than 39 million individual
policies and over 16 million participating
members of group insurance schemes.
The business that is now AIA was first
established in Shanghai more than a century
ago in 1919. It is a market leader in Asia
(ex-Japan) based on life insurance premiums
and holds leading positions across the
majority of its markets. It had total assets of
US$340 billion as of 31 December 2021.
AIA Group Limited is listed on the Main
Board of The Stock Exchange of Hong Kong
Limited under the stock code “1299” with
American Depositary Receipts (Level 1)
traded on the over-the-counter market
(ticker symbol: “AAGIY”).
Notes:
(1) Hong Kong SAR refers to the Hong Kong Special Administrative Region.
(2) Macau SAR refers to the Macau Special Administrative Region.
(3) Explanations of certain terms and abbreviations used in this report are set forth in the Glossary.
OUR PURPOSE
IS TO HELP
PEOPLE LIVE
HEALTHIER,
LONGER,
BETTER
LIVES.
CONTENTSOVERVIEW010 Financial Highlights012 Chairman’s Statement015 Group Chief Executive and President’s ReportFINANCIAL AND OPERATING REVIEW022 Group Chief Financial Officer’s Review046 Business Review061 Risk Management067 Regulatory and International Developments068 Our PeopleCORPORATE GOVERNANCE073 Statement of Directors’ Responsibilities074 Board of Directors082 Executive Committee087 Report of the Directors098 Corporate Governance Report114 Remuneration ReportFINANCIAL STATEMENTS133 Independent Auditor’s Report140 Consolidated Income Statement141 Consolidated Statement of Comprehensive Income142 Consolidated Statement of Financial Position144 Consolidated Statement of Changes in Equity146 Consolidated Statement of Cash Flows148 Notes to the Consolidated Financial Statements and Material Accounting Policy Information257 Independent Auditor’s Report on the Supplementary Embedded Value Information261 Supplementary Embedded Value InformationADDITIONAL INFORMATION287 Information for Shareholders290 Corporate Information291 Glossary This past year saw AIA deepen our commitment
to the regional community while accelerating the
expansion of our businesses in key growth markets,
notably Mainland China.
We clearly and demonstrably articulated our
long-term Environmental, Social and Governance
(ESG) strategy, which is integral to our Purpose of
helping people live Healthier, Longer, Better Lives.
We also addressed the immediate challenge of
the COVID-19 pandemic in all 18 markets
where we operate.
2021
HIGHLIGHTS
002
AIA GROUP LIMITED AIA forms exclusive
15-year bancassurance
partnership with The
Bank of East Asia
Under this strategic
bancassurance partnership,
The Bank of East Asia distributes
AIA’s life and long-term savings
products on an exclusive basis to
its affluent customer base via
more than 140 outlets in Hong
Kong and Mainland China.
THE GREATER BAY AREA OFFERS IMMENSE
POTENTIAL FOR AIA WITH A COMBINED
POPULATION OF
86 MILLION
1.7 TRILLION(1)
AND GDP OF CLOSE TO US$
AIA captures further
growth in Mainland China
through our investment
in China Post Life
AIA has invested in China Post Life for a 24.99 per
cent equity stake. This investment increases AIA’s
engagement with the growth opportunities in
the China life insurance market and complements
our existing strategy in Mainland China.
AIA named #1 MDRT company
for the seventh year running
AIA is the only multinational firm in
history to have the largest number
of Million Dollar Round Table (MDRT) members
for seven consecutive years. This is a testament
to AIA’s investments in building our Premier
Agency workforce and our agents’ uninterrupted
professional services to their communities
amidst the pandemic.
Note:
(1) The Guangdong Province, Hong Kong SAR Government
and Macau SAR Government figures, 2020.
AIA China launches
operations in Hubei
and Sichuan
The launches of the new Sichuan and
Hubei branches accelerate AIA’s
geographical expansion in Mainland
China and enable replications of our
differentiated Premier Agency in
new locations.
003
ANNUAL REPORT 2021 2021 HIGHLIGHTS
AIA commits to achieving
net-zero greenhouse
gas emissions by 2050
AIA is the largest pan-Asian life and health
insurer to commit to net-zero emissions.
This builds on AIA’s long-term commitment to
sustainability and supports the delivery of
sustainable value for our customers, shareholders
and communities across Asia.
AIA releases new ESG strategy
AIA’s ESG strategy empowers the
Group to deliver long-term value for
stakeholders and deliver our Purpose, by
addressing material ESG topics through
clear goals and tangible actions. This
strategy is built around five pillars: Health
and Wellness; Sustainable Operations;
Sustainable Investment; People and
Culture; and Effective Governance.
“Driven by our
Purpose of helping people live
Healthier, Longer, Better Lives,
we have a responsibility
to help address climate change
and contribute to
sustainable and healthier
development for Asia.”
LEE YUAN SIONG
GROUP CHIEF EXECUTIVE AND PRESIDENT
AIA completes divestment
from coal mining and coal-fired power
seven years ahead of schedule
AIA divested entirely from our directly-managed
listed equity and fixed income exposure to coal
mining and coal-fired power businesses in
October 2021, seven years ahead of our original
schedule. AIA will make no new investments in
businesses directly involved in coal mining or
generating electricity from coal.
AIA commits to the Science
Based Targets initiative
Science Based Targets initiative (SBTi)
is a global body that enables businesses
to set ambitious emissions reduction
targets, in line with the latest climate
science. AIA will integrate the SBTi
commitment into our investment
portfolio engagement processes, with
the goal that 100 per cent of in-scope
investee companies will establish their
own targets by 2040.
004
AIA GROUP LIMITED AIA grants first
100 scholarship
awards to
university students
in Hong Kong
AIA has granted our first 100
scholarship awards to university
students in Hong Kong as part of our
pledge of US$100 million to support
100 undergraduates every year over
the next several decades.
AIA supports
communities to combat
the COVID-19 pandemic
AIA has made meaningful and significant
contributions in all 18 of our markets to help
front-line medical staff and the wider
communities battle the ongoing pandemic.
These include expanding COVID-19 coverage
and insurance plans for customers; incentivising
employees, agents, and customers to get
vaccinated; distributing protective equipment and
supplies to medical personnel; and purchasing
vaccinations for communities. In particular,
the Group has made a US$2.5 million contribution
to support relief efforts in India.
AIA launches inaugural
Regional Ambassador
Programme to help
communities live
Healthier, Longer, Better
Lives
This regional programme
provides AIA’s ambassadors,
some of the most influential
health and well-being
advocates across Asia, a
platform to co-create new
ideas and inspirational content
to promote health and
wellness, as well as cultural
diversity.
005
ANNUAL REPORT 2021 TRANSFORMING
THROUGH
TECHNOLOGY,
DIGITAL AND
ANALYTICS
75%
73%
AIA has a rich history of helping
millions of people in Asia live Healthier,
Longer, Better Lives. Over the past
two years, health and wellness have
become increasingly important for our
communities, driving greater demand
for our compelling propositions and
leading customer experience.
OF CLAIMS SUBMISSIONS
AND
PROCESSED
OF SERVICE REQUESTS VIA DIGITAL
CHANNELS IN 2021
ACHIEVED AN OVER
70%
CLOUD TECHNOLOGY
ADOPTION RATE,
AHEAD OF THE GLOBAL
FINANCIAL SERVICES
AND INSURANCE
INDUSTRY AVERAGES
AIA’s accelerated use of technology,
digital and analytics (TDA) across our
business has been crucial in better
supporting our customers, employees,
agents, distributors, partners, and
communities, whilst continuing
our strong track record of growing
shareholder value. By leveraging the
power of TDA in our businesses, we
are transforming into a simpler, faster,
and more connected organisation.
Our journey to becoming a customer-
centric, digitally-enabled insurer allows
us to better engage our stakeholders,
drive greater business efficiencies, and
capture sustainable and significant
growth opportunities across Asia.
006
AIA GROUP LIMITED Bronze
Silver
Gold
Platinum
integrated with
our digital health
and wellness
ecosystem to
motivate people
to lead
healthier lives
CLOSE TO
2 MILLION
MEMBERS OF AIA VITALITY IN 10 MARKETS
AND AIA CHINA’S WELLNESS PROGRAMME
MORE THAN
1 MILLION
FOOD LOGS UPLOADED ON OUR EXCLUSIVE
AI FOOD SCORING TOOL IN 5 MARKETS
RECRUITED
DIGITALLY
OVER 98%
OF NEW FINANCIAL
ADVISERS IN
3 KEY MARKETS
Empowered our agents with
enhanced digital tools to drive
business productivity and
engage customers better
GENERATED
MORE THAN
2 MILLION
LEADS THROUGH SOCIAL MEDIA
PLATFORMS
Telemedicine saw a
year-on-year growth of
73 per cent in online consultations
across 10 markets in 2021
Awarded “2021 Insurtech
Initiative of the Year
in Mainland China” by
Insurance Asia for Xiao Bang,
our AI-powered
personal assistant
007
ANNUAL REPORT 2021 AIA
AT-A-GLANCE
008
AIA GROUP LIMITED THE LARGEST
LISTED COMPANY
ON THE HONG KONG
STOCK EXCHANGE
which is incorporated and
headquartered in Hong Kong(1)
THE LARGEST LIFE
INSURER
in the world by market capitalisation(1)
Present in
18 MARKETS
and 100% FOCUSED
ON ASIA
NO.1 WORLDWIDE FOR
MDRT REGISTERED MEMBERS
The only multinational
company to top the table for
SEVEN CONSECUTIVE
YEARS
Serving the holders of
more than
39 MILLION
individual policies and
over
16 MILLION
participating members of
group insurance schemes
Provides protection
with total sum
assured of
US$2 TRILLION
to people across Asia
Benefits and claims
exceeded
US$16 BILLION
in 2021
COMMITTED
TO NET-ZERO
GREENHOUSE
GAS EMISSIONS
BY 2050
TOP RATED
PERFORMER
by Sustainalytics in
the industry and region
for ESG
“DIGITAL
INSURER OF
THE YEAR
IN 2021”
by InsuranceAsia
News
Note:
(1) As at 31 December 2021.
009
ANNUAL REPORT 2021 OVERVIEW
2021 RESULTS AT-A-GLANCE
VALUE OF NEW BUSINESS(1)(7)
ANNUALISED NEW PREMIUMS(2)(7)
US$ MILLIONS
US$ MILLIONS
6,510
6,585
5,624
5,647
5,219
4,154
3,955
3,206
3,366
2,765
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
OPERATING PROFIT AFTER TAX(3)(8)
TOTAL WEIGHTED PREMIUM INCOME(4)
US$ MILLIONS
US$ MILLIONS
6,409
5,689
5,942
5,298
4,635
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
34,002
35,408
36,859
30,543
26,393
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
EV EQUITY(5)
US$ MILLIONS
TOTAL ASSETS AND TOTAL LIABILITIES(8)
US$ BILLIONS
75,001
67,185
63,905
56,203
52,429
340
326
284
279
262
219
230
229
190
175
350
300
250
200
150
100
50
0
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
TOTAL ASSETS TOTAL LIABILITIES
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
010
AIA GROUP LIMITEDOVERVIEW OVERVIEW
2021 BREAKDOWN BY MARKET SEGMENT
VALUE OF NEW BUSINESS(1)(6)
ANNUALISED NEW PREMIUMS(2)
14%
8%
10%
17%
21%
30%
25%
25%
9%
10%
19%
12%
OPERATING PROFIT AFTER TAX(3)
TOTAL WEIGHTED PREMIUM INCOME(4)
12%
22%
6%
11%
15%
34%
21%
19%
7%
9%
12%
32%
MAINLAND CHINA HONG KONG THAILAND SINGAPORE MALAYSIA OTHER MARKETS
Notes:
(1) Value of new business (VONB) is the present value, measured at the
point of sale, of projected after-tax statutory profits emerging in the
future from new business sold in the period less the cost of holding
the required capital in excess of regulatory reserves to support this
business.
(2) Annualised new premiums (ANP) is a measure of new business
activity that is calculated as the sum of 100 per cent of annualised
first year premiums and 10 per cent of single premiums, before
reinsurance ceded.
(3) Operating profit after tax (OPAT) is shown after non-controlling
interests.
(4) Total weighted premium income (TWPI) consists of 100 per cent of
renewal premiums, 100 per cent of first year premiums and 10 per
cent of single premiums, before reinsurance ceded.
(5) Embedded value (EV) is an actuarially determined estimate of the
economic value of a life insurance business based on a particular
set of assumptions as to future experience, excluding any economic
value attributable to future new business. EV Equity is the total of
embedded value, goodwill and other intangible assets, after allowing
for taxes.
(6) Based on local statutory basis, before unallocated Group Office
expenses and deduction of the amount attributable to non-controlling
interests, VONB by segment includes pension business.
(7) From 2019 onwards, ANP and VONB for Other Markets include
the results from our 49 per cent shareholding in Tata AIA Life
Insurance Company Limited (Tata AIA Life). ANP and VONB for
2018 and before have not been restated and do not include any
contribution from Tata AIA Life. The VONB for the Group from
2019 onwards excludes the VONB attributable to non-controlling
interests. VONB for 2018 and before have not been restated
and are reported before deducting the amount attributable to
non-controlling interests, as previously disclosed. The IFRS results
of Tata AIA Life are accounted for using the equity method. The
results of Tata AIA Life are accounted for on a one quarter lag
basis in AIA’s consolidated results. For clarity, TWPI does not
include any contribution from Tata AIA Life.
(8) AIA’s IFRS accounting treatment for the recognition and
measurement of insurance contract liabilities of Hong Kong
participating business has been refined to reflect expected
changes to policyholder bonuses. Comparative information has
been adjusted for 2019. Comparative information for 2018 and
prior years has not been restated.
011
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CHAIRMAN’S STATEMENT
AIA IS DEEPLY ROOTED WITHIN ASIA AND OUR GROWTH STRATEGY
IS FULLY ALIGNED WITH ITS VAST POTENTIAL AND EVOLVING NEEDS.
DESPITE THE PROFOUND GLOBAL CHALLENGES FROM THE ONGOING
COVID-19 PANDEMIC, I AM INCREDIBLY PROUD OF HOW OUR COLLEAGUES
HAVE RESPONDED WITH DEDICATION AND CARE FOR OUR CUSTOMERS
AND DELIVERED VERY STRONG RESULTS FOR OUR SHAREHOLDERS.
Mr. Edmund Sze-Wing Tse
Independent Non-executive
Chairman
012
AIA GROUP LIMITEDOVERVIEW As the world continues to adapt to new ways of working and living, 2021 proved to be another complex year. I believe
the life and health insurance industry plays a vital role in helping people cope with the challenges and uncertainty
they encounter. I am incredibly proud of our exceptional company and AIA’s outstanding people who have continued
to provide much-needed support for our communities throughout the prolonged difficulties created by the COVID-19
pandemic. AIA is a multi-generational business, spanning more than 100 years, during which we have operated
through many market cycles. The trust that is placed in us by our customers is the foundation of our Purpose to help
people live Healthier, Longer, Better Lives.
The execution of our growth strategy in 2021 delivered a very strong financial performance with an increase in all
of our key financial metrics. Value of new business (VONB) grew by 18 per cent to US$3,366 million, reflecting our
geographical diversification and market-leading positions across Asia. Operating profit after tax (OPAT) increased by
6 per cent to US$6,409 million, while underlying free surplus generation (UFSG) grew by 8 per cent to US$6,451
million. EV Equity reached a new high of US$75.0 billion. Our financial discipline ensured our capital position
remained very strong with the Group Local Capital Summation Method (LCSM) cover ratio at 399 per cent as at 31
December 2021.
The board of Directors (Board) has recommended a final dividend of 108.00 Hong Kong cents per share, which is
an increase of 8 per cent, reflecting the strength and resilience of our financial results and the Board’s continued
confidence in the future prospects of the Group. This brings the total dividend for 2021 to 146.00 Hong Kong cents
per share. The Board continues to follow AIA’s established prudent, sustainable and progressive dividend policy,
allowing for future growth opportunities and the financial flexibility of the Group.
Since our historic initial public offering (IPO) in 2010, the Group has adhered to a strategy that is focused on delivering
superior profitable growth that in turn drives strong earnings and cash flow generation. We believe this is a key point
of differentiation for AIA. The direct outcome of the execution of our growth strategy is a substantial increase in AIA’s
free surplus since our IPO to US$24.8 billion on a pro forma basis(1) at 31 December 2021.
As a result of our very strong financial position and free surplus accumulated over time, the Board has approved a
return of capital to shareholders of up to US$10.0 billion through a share buy-back programme. The share buy-back
represents capital that is surplus to our needs, allowing for capital market stress conditions and retention of capital
for strategic and financial flexibility. It is our intention to undertake the share buy-back over a three-year period with
the quantum and pace of implementation subject to market and geopolitical conditions. Profitable new business
growth will continue to be AIA’s primary focus given the attractive returns on capital we can generate and we believe
that this return of capital will further enhance returns to shareholders.
It is a tremendous honour and privilege to serve this outstanding company alongside Board members who are
dedicated to maintaining the highest standards of corporate governance. All of our non-executive directors are
independent and contribute extensive leadership experience from the public and private sectors. We work together
to provide oversight of the Group’s governance framework and risk management activities by holding regular external
reviews of our relevant principles and practices. In this way, we embed a robust risk culture across the organisation
that is fundamental for successfully managing through an increasingly complex operating environment.
AIA is the largest pan-Asian life and health insurer with a long-established legacy of trust, scale and influence in
the region. We have a responsibility to help our communities by addressing material Environmental, Social and
Governance (ESG) issues and play a leading role in the transition to a more sustainable future. As a major owner of
investment assets, we recognise the influence our investment decisions and proactive engagement efforts can have
on the region. We believe that the integration of ESG considerations throughout our investment process is essential
for driving this transition while effectively managing risk and generating sustained returns for our customers and
shareholders.
013
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CHAIRMAN’S STATEMENT
We are well positioned to encourage positive change and I am pleased that our efforts in 2021 have been recognised.
Sustainalytics, a global leader in ESG and Corporate Governance research and ratings, ranked AIA in the second
percentile and a top performer for the insurance industry. Our “Prime” ESG Corporate Rating score from Institutional
Shareholder Services Inc. (ISS) reaffirms our position among the best in our industry for our sustainability
performance. MSCI upgraded AIA’s rating from A to AA, supported by the Group’s performance on human capital
development and we have been included in the FTSE4Good Index Series for the fifth consecutive year.
Although the unpredictable nature of the COVID-19 pandemic and increasing global geopolitical tensions have
created near-term uncertainty, the major demographic trends and strong domestic drivers of demand in Asia
underpin the powerful long-term prospects for AIA’s business. The combination of rising wealth, ageing populations,
low levels of private insurance penetration and limited social welfare coverage, create a compelling need for AIA’s
insurance products. Asian consumers are acutely aware of the importance of financial security and protecting the
well-being of their families, making our Purpose and propositions even more relevant. The long-term opportunities
available to AIA are truly exceptional.
I would like to thank Yuan Siong and his senior management team for their exemplary leadership during these
extraordinary times. Across the organisation and through our culture of empowerment, our people demonstrate the
highest professional standards set out in our Operating Philosophy of “Doing the Right Thing, in the Right Way, with
the Right People and the Right Results will come”.
AIA’s proven growth strategy, as demonstrated by our financial results in 2021, and our consistent execution since
our IPO give us great confidence in our ability to achieve sustainable long-term value for all of our stakeholders.
Finally, our performance would not have been possible without the enduring trust of our customers and shareholders.
On behalf of the Board, I remain very grateful for your ongoing support.
Edmund Sze-Wing Tse
Independent Non-executive Chairman
11 March 2022
Notes:
(1) Pro forma free surplus as at 31 December 2021 assumes immediate adoption of the new Hong Kong Risk-based Capital regime and the release of
existing additional resilience margins held by the Group.
Growth rates are shown on constant exchange rates as management believes this provides a clearer picture of the year-on-year performance of the
underlying business.
014
AIA GROUP LIMITED
OVERVIEW OVERVIEW
GROUP CHIEF EXECUTIVE AND
PRESIDENT’S REPORT
AIA HAS ACHIEVED A VERY STRONG SET OF RESULTS IN 2021 WITH
GROWTH IN ALL OF OUR KEY FINANCIAL METRICS. I AM CONFIDENT
THAT THE FOCUSED EXECUTION OF OUR CLEAR AND AMBITIOUS
STRATEGY BY OUR EXTRAORDINARY PEOPLE WILL CONTINUE
TO CAPTURE THE SIGNIFICANT GROWTH OPPORTUNITIES IN ASIA
AND EXTEND AIA’S TRACK RECORD OF VALUE CREATION FOR ALL
OUR STAKEHOLDERS.
Mr. Lee Yuan Siong
Group Chief Executive
and President
ANNUAL REPORT 2021
015
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GROUP CHIEF EXECUTIVE AND PRESIDENT’S REPORT
AIA is an exceptional company with outstanding employees and distributors who embody our Purpose of helping
people live Healthier, Longer, Better Lives, each and every day. I am enormously grateful for the professionalism
and dedication they have shown in serving our communities while delivering financial security to millions of
people.
As the largest pan-Asian life and health insurer, we are uniquely placed to use our scale and influence to
meaningfully contribute to the economic and social development of the region. The long-term nature of our
products places sustainability at the forefront of how we operate and means we have a vital role to play in
addressing material Environmental, Social and Governance (ESG) issues to safeguard a better future for society. In
2021, we committed to achieving net-zero greenhouse gas emissions by 2050 using the latest climate science to
set ambitious emissions reduction targets in conjunction with the Science Based Targets initiative (SBTi). Critical
to this ambition is the sustainable deployment of our investment portfolio and I am proud that we have completed
the divestment of our directly-managed listed equity and fixed income exposure to coal mining and coal-fired
power businesses, seven years ahead of schedule.
Since the onset of the pandemic, our local businesses have been proactively helping to alleviate the impact on
our communities. Our primary focus is to ensure uninterrupted service to our customers through our enhanced
digital capabilities, easy access to health services and expedited claim payments across our businesses. In 2021,
benefits and claims exceeded US$16 billion, assuring our customers and their families that we are always there
for them, particularly in these most uncertain times.
2021 FINANCIAL PERFORMANCE HIGHLIGHTS
Our very strong financial results demonstrate the strength of our profitable growth model, built on high-quality and
differentiated distribution, personalised and valuable propositions for our customers, and all backed by exceptional
technology and digital platforms to deliver outstanding service. Value of new business (VONB) grew by 18 per
cent to US$3,366 million and EV Equity reached a new high of US$75.0 billion. On a like-for-like basis(1), VONB for
the Group outside Hong Kong exceeded the pre-pandemic level of 2019 and all of our reportable segments grew
year-on-year.
Our large and growing in-force portfolio with high-quality, recurring sources of earnings supported an increase of
6 per cent in operating profit after tax (OPAT) to US$6,409 million and underlying free surplus generation (UFSG)
grew by 8 per cent to US$6,451 million.
The Board has recommended an 8 per cent increase in final dividend to 108.00 Hong Kong cents per share which
brings the total dividend for 2021 to 146.00 Hong Kong cents per share. This follows AIA’s established prudent,
sustainable and progressive dividend policy, allowing for future growth opportunities and the financial flexibility
of the Group.
AIA has significant opportunities to invest capital in superior profitable growth that generates increased
shareholder value. With such attractive reinvestment economics, our ability to invest in new business growth
remains an important priority and differentiator for AIA. As we have consistently demonstrated over time, our
financial discipline and strategic focus on profitable new business growth support substantial free surplus
generation that, in turn, funds further capital investment in organic new business and inorganic opportunities
while optimising cash returns to shareholders.
016
AIA GROUP LIMITEDOVERVIEW The direct outcome of our profitable growth strategy is the substantial increase in free surplus since our IPO to
US$24.8 billion on a pro forma basis(2) at 31 December 2021. As a result of our very strong financial position, the
Board has approved a return of capital to shareholders of up to US$10.0 billion to be conducted through a share
buy-back programme over the next three years. The quantum and pace of implementation will be subject to market
and geopolitical conditions. The share buy-back represents capital accumulated over time that is surplus to our
needs, allowing for capital market stress conditions and retention of capital for strategic and financial flexibility. This
capital return programme enhances shareholder returns while retaining the financial strength that allows AIA to
continue investing capital in the significant growth opportunities available to us with confidence.
TRANSFORMING OUR COMPETITIVE ADVANTAGES
Asia plays a pivotal role in driving global economic progress. Around 40 per cent of all global goods flow through
the region and, by 2040, Asia is expected to generate 50 per cent of global GDP and account for 40 per cent
of global consumption. It is the most dynamic region for life and health insurance, underpinned by strong
fundamental drivers of growth. Compounding wealth creation and the expanding need for protection generate
growing demand for our products. Wellness, healthcare and higher expectations of quality of life into old age are
increasingly front of mind. Understanding rapidly shifting consumer behaviour is critical in turning this potential
for increased life and health insurance coverage into a reality for millions of customers. I am confident that the
focused execution of our strategic priorities will build on AIA’s substantial competitive advantages and generate
profitable growth for the future.
Our industry leadership in the use of Technology, Digital and Analytics to enhance our business is a core strategic
priority. More than 70 per cent of our infrastructure was hosted in the cloud at the end of December 2021, well
ahead of the global financial services and insurance industry averages and a significant increase from 39 per cent
a year ago. In addition to reducing operating expenses, our transformation is supporting a substantial improvement
in straight-through-processing rates with close to 60 per cent of all customer transactions processed without any
human intervention and more than 95 per cent of all new policies issued electronically. We have an increasing
ability to deploy analytics platforms and drive automation, supporting our large-scale business growth including
our geographical expansion in Mainland China. Over the year, we delivered more than 100 major projects that
employ artificial intelligence and analytics, enhancing every aspect of our business, including recruitment,
training, underwriting and claims handling.
Our Unrivalled Distribution benefits from cutting-edge digital tools that support the provision of high-quality
advice, driving customer engagement and sales, even during periods of movement restrictions. Our proprietary
Premier Agency delivered excellent VONB growth of 20 per cent and the persistent execution of our strategy
achieved an increase in both productivity and the number of active agents. In 2021, we were the number one
Million Dollar Round Table (MDRT) company globally, extending our record of leadership to seven consecutive
years and demonstrating the success of the Group’s Premier Agency strategy.
The adoption of remote sales processes has strengthened the resilience of our bancassurance distribution in
response to disruptions from intermittent branch closures to control the spread of COVID-19 throughout 2021.
Our initiatives supported double-digit VONB growth in aggregate from our strategic bancassurance partnerships
across our ASEAN markets. We also expanded our network of leading digital platform partnerships with companies
that have significant active user bases, including with Tiki Corporation in Vietnam and TNG Digital Sdn. Bhd.
(TNGD) in Malaysia. Our focus in this channel is to capture new customer segments at scale through innovative
lifestyle benefits and scenario-based propositions, using new models to drive growth.
017
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP CHIEF EXECUTIVE AND PRESIDENT’S REPORT
At the heart of our Compelling Propositions is our Health and Wellness Ecosystem combining AIA Vitality,
customised incentive-based rewards and leading services that help keep our customers healthier for longer. We
reward customers for taking actions that positively impact their health and help them to access the best treatment,
accumulate funds to pay for services and save more effectively. Demand continued to grow for our protection
propositions and the combined membership of AIA Vitality and our wellness programme in Mainland China
increased to close to 2 million members at 31 December 2021. Our telemedicine services are now available through
our network in 10 markets and demand continued to grow with a 73 per cent increase in online consultations
compared to 2020. We offer Personal Case Management services in 12 markets and the AIA Regional Health
Passport is supported by our new regional service centre.
In 2021, we made great progress in delivering a Leading Customer Experience that is based on the core
principles of simplicity, timeliness and reliability. We are transforming our interactions with customers through
digital applications, greater automation and increased use of analytics while delivering enhanced operational
efficiencies. Customer engagement through digital channels continued to grow with 75 per cent of claims and
73 per cent of all service requests submitted digitally. Our investments in technology, digital and analytics are
driving significant turnaround time improvements with close to 60 per cent of all customer transactions across the
Group completed on the same day. We are also demonstrating that increased automation and the use of artificial
intelligence achieve more personalised and consistent service, with higher customer engagement and retention.
I am extremely proud of our achievements despite the extraordinary operating environment since early 2020.
Our very strong results demonstrate the execution of our clear and ambitious strategy to further develop AIA’s
significant competitive advantages.
OUR PEOPLE
AIA’s strong track record of performance has been achieved through a culture of local empowerment with
accountability. Our strategy leverages our unique culture with simpler structures, agile ways of working and
enhanced people capabilities. In the past twelve months, we have focused on designing new working models across
our businesses with processes that support a human-centric workplace, new centres of excellence to advance
critical capabilities and the sharing of best practices. Our technology, digital and analytics talent has increased by
29 per cent since we began our transformation to become a simpler, faster, more connected organisation in July
2020.
Despite 2021 posing a challenging operating environment, our employee engagement levels have reached new
highs. 97 per cent of our staff responded to the annual Gallup Q12 employee engagement survey and our results
place us in the 90th percentile of the global finance and insurance industry benchmark. We were also once again
recognised in the Forbes “World’s Best Employers” list. We have exceptional people and these achievements
reflect their successes and combined efforts across our markets.
INVESTING IN ADDITIONAL GROWTH OPPORTUNITIES
Mainland China is AIA’s largest market by VONB and offers tremendous growth potential both within our existing
geographies and by increasing our reach into new cities as we enlarge our addressable target market. Following the
successful launch of our new operation in Chengdu, Sichuan in March 2021, we received approval from the China
Banking and Insurance Regulatory Commission (CBIRC) and began operations in Wuhan, Hubei. This approval
marks another milestone as we progressively replicate our Premier Agency in new geographies and capture AIA’s
unique opportunity to access a base of potential customers five times the reach of our existing geographical
footprint. I am also very pleased that the CBIRC has recently granted us approval to upgrade our operations in
Tianjin and Shijiazhuang, enabling us to expand our presence through additional sales offices.
018
AIA GROUP LIMITEDOVERVIEW Also in Mainland China, we completed the investment of a 24.99 per cent equity stake in China Post Life Insurance
Co., Ltd. (China Post Life), a leading bank-affiliated life insurer that is focused on bringing financial protection to
the mass and emerging mass-affluent segments in Mainland China. This investment is highly complementary to
our strategy for AIA China and further increases the Group’s exposure to the significant growth prospects in this
market. In February 2022, we agreed a new distribution partnership between AIA China and Postal Savings Bank
of China Co., Ltd.
In July 2021, we launched our exclusive 15-year bancassurance partnership with The Bank of East Asia, Limited
(BEA) covering Hong Kong and Mainland China. Our partnership provides access to more than 1.2 million domestic
customers in Hong Kong, a top-three foreign bank franchise in Mainland China and additional capabilities to
harness the immense potential for AIA across the Greater Bay Area.
In March 2022, we announced the acquisition of 100 per cent of Blue Cross (Asia-Pacific) Insurance Limited (Blue
Cross) and 80 per cent of Blue Care JV (BVI) Holdings Limited (Blue Care) from BEA. Blue Cross is a well-established
insurer in Hong Kong providing leading health insurance products and Blue Care operates medical centres with
a large medical network in Hong Kong. We have also agreed to extend the scope of our existing bancassurance
partnership through the addition of personal lines general insurance products to BEA’s personal banking
customers in Hong Kong. This transaction accelerates AIA’s health and wellness strategy, deepens the distribution
partnership with BEA and brings new product expertise to support all of AIA’s distribution channels in Hong Kong.
Amplify Health is our new pan-Asian Health InsurTech business in partnership with Discovery Limited (Discovery).
This is an opportune time to play a leading role in transforming healthcare delivery across the region with total
healthcare expenditure in our markets expected to exceed US$4 trillion in 2030. The unprecedented combination
of ageing demographics, accelerated digital adoption, new advancements in HealthTech and significant unmet
consumer demand underpin the tremendous strategic potential for this new venture.
Our shared vision is that Amplify Health will transform how individuals, corporates, payors and providers experience
and manage health insurance and healthcare delivery, improving the health and wellness outcomes of patients and
communities across Asia. Amplify Health brings together the best of both partners: AIA’s strong brand, unrivalled
distribution platform and execution capabilities, together with Discovery’s proven technology, intellectual property
and health expertise. I am confident that Amplify Health will provide yet another key competitive advantage for
AIA, attracting new customers and helping grow new business value and deliver increased financial benefits.
OUTLOOK
The global economy continued to recover in 2021 on the back of accommodative monetary and fiscal policies
alongside gradual economic reopening. Short-term supply-chain disruptions, labour shortages, high energy prices
and greater demand for consumer goods are fuelling rising consumer inflation expectations, particularly in the
United States. As a result, a growing number of central banks have started normalising their monetary policies
with the Federal Reserve deciding to terminate its asset purchase programme and raise interest rates. The current
geopolitical tensions are also creating uncertainty in global capital markets.
Inflationary pressures in Asia are relatively more stable and current account surpluses are supported by an
economic recovery led by export growth and investment. Fiscal easing policies have been more restrained than in
other parts of the world and Mainland China stands out in this context as its monetary and fiscal policies are likely
to be eased rather than tightened.
019
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP CHIEF EXECUTIVE AND PRESIDENT’S REPORT
New COVID-19 variants such as Omicron are causing short-term volatility in new business sales as sharp rises in
infections and containment measures disrupt activity and distribution productivity, particularly in the first quarter
of 2022. We are cautiously optimistic that with a wider roll-out of vaccines and new therapeutics, severity of
illness will reduce further, and the ability of health and social systems to cope will continue to improve over time.
As the worst effects of the pandemic subside, we expect to see a strong recovery in activity levels and consumer
demand. I am confident that the long-term prospects for AIA’s businesses remain exceptional.
The strong domestic drivers of demand and major demographic trends in Asia will continue to generate an
increasing need for our products. As we focus on delivering our strategic priorities, we will build on AIA’s substantial
competitive advantages to generate profitable growth and increasing returns for our shareholders while achieving
our Purpose of helping people live Healthier, Longer, Better Lives.
Lee Yuan Siong
Group Chief Executive and President
11 March 2022
Notes:
(1) Growth on a like-for-like basis refers to the exclusion of the 5 per cent withholding tax applied since July 2020 for AIA China following subsidiarisation
and the exclusion of the one-off contribution from Commonwealth Bank of Australia (CBA) in the first quarter of 2020 for Other Markets.
(2) Pro forma free surplus as at 31 December 2021 assumes immediate adoption of the new Hong Kong Risk-based Capital regime and the release of
existing additional resilience margins held by the Group.
Growth rates are shown on constant exchange rates as management believes this provides a clearer picture of the year-on-year performance of the
underlying business.
020
AIA GROUP LIMITEDOVERVIEW FINANCIAL AND OPERATING REVIEW
022 Group Chief Financial Officer’s Review
046 Business Review
061 Risk Management
067 Regulatory and International Developments
068 Our People
021
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP CHIEF FINANCIAL OFFICER’S REVIEW
AIA HAS DELIVERED A VERY STRONG AND BROAD-BASED
FINANCIAL PERFORMANCE. OUR RESULTS DEMONSTRATE
THE POWER OF AIA’S UNIQUE BUSINESS MODEL THAT
ENABLES US TO CAPTURE THE IMMENSE GROWTH
OPPORTUNITIES ACROSS ASIA AND DELIVER SUPERIOR
SHAREHOLDER VALUE.
Growth rates and commentaries are provided on a constant exchange rate (CER) basis.
Mr. Garth Jones
Group Chief Financial Officer
022
AIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW SUMMARY AND KEY FINANCIAL HIGHLIGHTS
AIA is exceptionally positioned to leverage the immense opportunities for life and health insurance across Asia
and drive growth in our key financial metrics of value of new business (VONB), operating profit after tax (OPAT),
embedded value (EV) and underlying free surplus generation (UFSG). AIA’s very strong performance in 2021
demonstrate these growth opportunities, our differentiated business model and our financial discipline in action
delivering a broad-based performance with increases in all of our key financial metrics. VONB growth of 18 per
cent was very strong, EV Equity was up by 16 per cent before the payment of shareholder dividends, and the Board
has declared a final dividend of 108.00 Hong Kong cents per share which increases the total dividend by 8 per cent.
The Board has also approved a return of capital to shareholders of up to US$10.0 billion to be conducted through
a share buy-back programme over the next three years. AIA’s business is unique, enabling sustained maintenance
of a very strong financial position, investment of increasing amounts of capital in the huge growth opportunities
available to us, while also delivering progressive cash returns to shareholders.
We delivered very strong VONB growth of 18 per cent to US$3,366 million, powered by our unrivalled, multi-
channel distribution and reflecting our geographical diversification and market-leading positions across Asia. On
a like-for-like basis(1), all of our reportable segments grew VONB year-on-year and VONB for the Group outside
Hong Kong exceeded the pre-pandemic level of 2019. While ongoing travel restrictions continued to affect sales
to Mainland Chinese visitors, AIA Hong Kong returned to growth with a 37 per cent increase in VONB, driven by the
excellent performance of our domestic customer segment.
VONB margin increased by 6.3 pps to 59.3 per cent alongside 6 per cent growth in ANP to US$5,647 million. The
increase in VONB margin was driven by a significant positive shift in product mix, particularly in Hong Kong and
Thailand, higher government bond yields, and a reduction in acquisition expense overruns.
EV Equity grew by 16 per cent before payment of shareholder dividends of US$2,147 million and reached a new
record high of US$75,001 million at 31 December 2021. EV operating profit increased by 7 per cent to US$7,896
million and included US$437 million from positive operating variances, as our overall experience has continued
to outperform our EV assumptions. Investment return variances were also positive at US$1,293 million and more
than offset negative exchange rate movements of US$810 million.
Our high-quality, recurring sources of earnings and the proactive management of our growing in-force portfolio
underpinned a 6 per cent increase in OPAT to US$6,409 million and a 0.6 pps increase in operating margin to 17.5
per cent. Successive cohorts of new business are the primary driver of our OPAT growth as VONB translates into
earnings over time. OPAT growth was 9 per cent after normalising for the exceptional claims experience during the
COVID-19 pandemic and excluding the impact of withholding tax for AIA China post subsidiarisation.
The Group’s financial position remained very strong at 31 December 2021 with a Group LCSM cover ratio of 399
per cent and a very strong increase in free surplus of US$8,129 million, before the BEA agreement and China
Post Life Insurance Co., Ltd. (China Post Life) investments of US$2,430 million in aggregate and the payment of
US$2,147 million of shareholder dividends. Free surplus was US$17,025 million at 31 December 2021.
023
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION AIA has proactively engaged with the Hong Kong Insurance Authority (HKIA) to early adopt the new Hong Kong
Risk-based Capital (HKRBC) regime. As at 11 March 2022, we have submitted an application for early adoption
and expect to receive approval before the end of the first half of 2022, subject to meeting all of the necessary
conditions. Further details of the adoption of the HKRBC regime and its impact are included later in this review.
In September 2021, AIA completed the acquisition of 100 per cent of BEA Life Limited, a wholly-owned subsidiary
of The Bank of East Asia, Limited (BEA). The completion of the acquisition signifies another key achievement in the
long-term relationship with BEA, following the successful commencement of the 15-year strategic bancassurance
partnership in July 2021. BEA Life Limited was subsequently renamed AIA Everest Life Company Limited (AIA
Everest).
Following regulatory approval from the China Banking and Insurance Regulatory Commission, the Group completed
its investment of RMB12,033 million (approximately US$1,860 million) through AIA Company Limited (AIA Co.) for
a 24.99 per cent equity stake (post investment) in China Post Life, increasing the Group’s exposure to the growth
opportunities in Mainland China.
The board of Directors (Board) has recommended a final dividend of 108.00 Hong Kong cents per share, subject
to shareholders’ approval at the Company’s forthcoming AGM. This brings the total dividend for 2021 to 146.00
Hong Kong cents per share, an increase of 8 per cent compared with the total dividend for 2020. This follows AIA’s
established prudent, sustainable and progressive dividend policy, allowing for future growth opportunities and the
financial flexibility of the Group.
We have an established capital management framework that delivers sustainable value for our shareholders. Our
first priority is to ensure a strong and resilient balance sheet to cover regulatory requirements, absorb capital
market stress and meet all of our liabilities as they fall due. We invest capital in high-quality profitable new business
as demonstrated by a cumulative investment of US$16.2 billion that has generated an increase in value of future
distributable earnings of US$44.5 billion from VONB since our IPO. In turn, VONB growth drives increasing UFSG
and cash generation, enabling us to invest further capital in organic new business and inorganic opportunities and
pay a prudent, sustainable and progressive dividend.
AIA’s unique business model and financial discipline have supported a substantial increase in free surplus since
our IPO to a pro forma(2) US$24.8 billion at 31 December 2021. Our capital management framework is fundamental
to our consistent financial discipline and we will periodically assess the Group’s ongoing capital needs to deliver
sustainable and optimal shareholder returns.
With clarity on the Group’s regulatory capital requirements and our very strong free surplus position, the Board
has approved a return of capital to shareholders of up to US$10.0 billion to be conducted through a share buy-
back programme over the next three years. The quantum and pace of implementation will be subject to market
and geopolitical conditions. The share buy-back represents capital accumulated over time that is surplus to our
needs, allowing for capital market stress conditions and retention of capital for strategic and financial flexibility.
This capital return programme enhances shareholder returns while retaining the financial strength that allows AIA
to continue investing capital in the significant growth opportunities available to us with confidence. We expect to
commence the programme as soon as practical following the publication of this announcement.
AIA’s unique business and enormous growth opportunities, combined with continued financial discipline enable
us to maintain a very strong financial position, while continuing to leverage our competitive advantages, invest in
growing profitable new business and deliver cash returns to shareholders.
Notes:
(1) Growth on a like-for-like basis refers to the exclusion of the 5 per cent withholding tax applied since July 2020 for AIA China following subsidiarisation
and the exclusion of the one-off contribution from Commonwealth Bank of Australia (CBA) in the first quarter of 2020 for Other Markets.
(2) Pro forma free surplus as at 31 December 2021 assumes the immediate adoption of the new HKRBC regime and the release of existing additional
resilience margins held by the Group.
024
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW NEW BUSINESS PERFORMANCE
VONB, ANP and Margin by Segment
US$ millions, unless otherwise stated
VONB
2021
VONB
Margin
ANP
VONB
Mainland China
1,108
78.9%
2020
VONB
Margin
80.9%
44.7%
71.0%
63.4%
59.9%
38.4%
968
550
469
330
222
514
3,053
57.7%
VONB Change
YoY
CER
YoY
AER
7%
37%
34%
6%
26%
(4)%
15%
14%
37%
30%
8%
27%
(1)%
19%
ANP
1,197
1,138
661
520
369
1,334
5,219
756
609
356
283
511
64.0%
90.0%
64.7%
57.3%
35.9%
3,623
63.2%
1,404
1,106
677
549
491
1,420
5,647
(57)
n/m
n/m
(103)
n/m
n/m
n/m
n/m
(167)
n/m
n/m
(161)
n/m
n/m
n/m
n/m
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Subtotal
Adjustment to reflect
consolidated reserving and
capital requirements
After-tax value of unallocated
Group Office expenses
Total before
non-controlling interests
Non-controlling interests
(33)
n/m
n/m
(24)
n/m
n/m
Total
3,366
59.3%
5,647
2,765
52.6%
5,219
3,399
59.3%
5,647
2,789
52.6%
5,219
18%
n/m
18%
22%
n/m
22%
We delivered very strong VONB growth of 18 per cent to US$3,366 million, powered by our unrivalled, multi-
channel distribution and reflecting our geographical diversification and market-leading positions across Asia. On
a like-for-like basis(1), all of our reportable segments grew VONB year-on-year and VONB for the Group outside
Hong Kong exceeded the pre-pandemic level of 2019. While ongoing travel restrictions continued to affect sales
to Mainland Chinese visitors, AIA Hong Kong returned to growth with a 37 per cent increase in VONB, driven by the
excellent performance of our domestic customer segment.
VONB margin increased by 6.3 pps to 59.3 per cent alongside 6 per cent growth in ANP to US$5,647 million. The
increase in VONB margin was driven by a significant positive shift in product mix, particularly in Hong Kong and
Thailand, higher government bond yields and a reduction in acquisition expense overruns.
AIA China delivered VONB growth of 10 per cent after excluding the impact of withholding tax that has applied
following the subsidiarisation of our business. Our differentiated Premier Agency strategy, coupled with the
increased level of digital tool adoption, supported an improvement in agency activity and productivity. Following
the successful launch of our new operation in Chengdu, Sichuan, in March, we received approval from the China
Banking and Insurance Regulatory Commission to begin operations in Wuhan, Hubei, with sales commencing from
January 2022.
025
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION AIA Hong Kong achieved excellent VONB growth of 37 per cent in 2021. Both our agency and bancassurance
channels delivered very strong performances, underpinned by an improvement in both agency activity and
productivity and supported by the launch of our new partnership with BEA in July. The resumption of Macau’s
Individual Visit Scheme with Mainland China drove excellent growth in sales to Mainland Chinese visitors through
our Macau branch during the year.
AIA Thailand achieved VONB growth of 34 per cent in 2021 with a 19.4 pps increase in VONB margin, driven by a
proactive shift towards the sale of regular premium unit-linked and protection products. Both our market-leading
agency business and our strategic bancassurance partner, Bangkok Bank Public Company Limited (Bangkok
Bank), delivered strong VONB growth for the year as we continued to improve the productivity of our agency new
recruits and bank insurance specialists.
AIA Singapore achieved 6 per cent VONB growth in 2021, as double-digit growth in our agency channel was partly
offset by a reduction in new business from our partnership distribution channel. We continued to support our
Premier Agency by enhancing our digital tools and platforms, leading to an increase in the number of active agents
and improvements in agent productivity.
AIA Malaysia reported VONB growth of 26 per cent, supported by strong performances in both our agency and
partnership distribution channels. Our Takaful business also delivered excellent growth in 2021.
Our Other Markets segment delivered growth on a like-for-like basis(1) in 2021. A strong performance in the first
half was offset by reduced sales volumes in the second half as stricter containment measures were imposed in a
number of markets due to a resurgence of COVID-19.
Note:
(1) Growth on a like-for-like basis refers to the exclusion of the 5 per cent withholding tax applied since July 2020 for AIA China following subsidiarisation
and the exclusion of the one-off contribution from CBA in the first quarter of 2020 for Other Markets.
026
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW EV EQUITY
EV OPERATING PROFIT
EV operating profit was US$7,896 million in 2021, an increase of 7 per cent compared with 2020, mainly driven
by growth in VONB and an increase in expected return on EV. Operating return on EV (operating ROEV) was 12.1
per cent, compared with 11.7 per cent in 2020. Basic EV operating earnings per share grew by 7 per cent to 65.44
US cents.
Operating variances contributed US$437 million to EV operating profit as our overall experience has continued
to be favourable compared with our EV assumptions. Since our initial public offering (IPO) in 2010, operating
variances have cumulatively added more than US$3.6 billion to EV Equity.
EV Operating Earnings Per Share – Basic
EV operating profit (US$ millions)
Weighted average number of
ordinary shares (millions)
Basic EV operating earnings per share (US cents)
EV Operating Earnings Per Share – Diluted
EV operating profit (US$ millions)
Weighted average number of
ordinary shares(1) (millions)
Diluted EV operating earnings per share(1) (US cents)
2021
7,896
12,066
65.44
2021
7,896
12,087
65.33
2020
7,243
12,060
60.06
2020
7,243
12,080
59.96
YoY
CER
7%
n/a
7%
YoY
CER
7%
n/a
7%
YoY
AER
9%
n/a
9%
YoY
AER
9%
n/a
9%
Note:
(1) Diluted EV operating earnings per share including the dilutive effects, if any, of the awards of share options, restricted share units, restricted stock
purchase units (RSPUs) and restricted stock subscription units (RSSUs) granted to eligible directors, officers, employees and agents under the share-
based compensation plans as described in note 40 to the consolidated financial statements.
EV MOVEMENT
EV Equity grew by 16 per cent before payment of shareholder dividends of US$2,147 million and reached a new
high of US$75,001 million at 31 December 2021. EV grew by US$7,740 million, after the payment of shareholder
dividends of US$2,147 million, to US$72,987 million at 31 December 2021. The increase in EV was mainly driven
by EV operating profit of US$7,896 million and positive investment return variances of US$1,293 million, which
more than offset negative exchange rate movement of US$810 million. The effect of acquisition of US$123 million
relates to the acquisition of AIA Everest and the BEA upfront payment of US$258 million refers to the strategic
bancassurance partnership. The investment of US$1,860 million in China Post Life is included at cost with no
resulting impact to adjusted net worth (ANW) and EV.
027
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION An analysis of the movement in EV is shown as follows:
US$ millions, unless otherwise stated
Opening EV
Purchase price(1)
Acquired EV(2)
Effect of acquisition
BEA Upfront Payment(3)
Value of new business
Expected return on EV
Operating experience variances
Operating assumption changes
Finance costs
EV operating profit
Investment return variances
Effect of changes in economic assumptions
Other non-operating variances
Total EV profit
Dividends
Other capital movements
Effect of changes in exchange rates
Closing EV
US$ millions, unless otherwise stated
Opening EV
Purchase price(1)
Acquired EV
Effect of acquisition
BEA Upfront Payment
Value of new business
Expected return on EV
Operating experience variances
Operating assumption changes
Finance costs
EV operating profit
Investment return variances
Effect of changes in economic assumptions
Other non-operating variances
Total EV profit
Dividends
Other capital movements
Effect of changes in exchange rates
Closing EV
028
2021
ANW
28,503
VIF
EV
36,744
65,247
(397)
266
(131)
(258)
(810)
5,156
626
64
(309)
4,727
1,636
(26)
1,163
7,500
(2,147)
9
(174)
33,302
ANW
28,241
(18)
–
(18)
–
(726)
5,591
538
(31)
(247)
5,125
(3,446)
35
160
1,874
(1,997)
81
322
28,503
–
254
254
–
4,176
(754)
(175)
(78)
–
3,169
(343)
460
37
3,323
–
–
(636)
39,685
(397)
520
123
(258)
3,366
4,402
451
(14)
(309)
7,896
1,293
434
1,200
10,823
(2,147)
9
(810)
72,987
2020
VIF
EV
33,744
61,985
–
–
–
–
3,491
(1,415)
(5)
47
–
2,118
1,578
(1,048)
(490)
2,158
–
–
842
36,744
(18)
–
(18)
–
2,765
4,176
533
16
(247)
7,243
(1,868)
(1,013)
(330)
4,032
(1,997)
81
1,164
65,247
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW EV Equity
US$ millions, unless otherwise stated
EV
Goodwill and other intangible assets(4)
EV Equity
Number of ordinary shares (millions)
EV Equity per share (US cents)
As at
31 December
2021
As at
31 December
2020
72,987
2,014
75,001
12,097
620.00
65,247
1,938
67,185
12,095
555.48
Notes:
(1) The purchase price in 2021 refers to the cost of acquiring AIA Everest as per note 5 to the consolidated financial statements, and the purchase price in
2020 refers to the purchase price adjustments for the alternative arrangements with CBA in relation to The Colonial Mutual Life Assurance Society Limited
(CMLA) as per note 5 to the consolidated financial statements in the Company’s Annual Report 2020.
(2) As at 31 August 2021.
(3) Refers to the consideration for the strategic bancassurance partnership.
(4) Consistent with the consolidated financial statements. Net of tax, amounts attributable to participating funds and non-controlling interests.
EV AND VONB SENSITIVITIES
Sensitivities to EV and VONB arising from changes to central assumptions from equity price and interest rate
movements, and including the impacts of management actions inclusive of strategic hedging programmes,
are shown below. The interest rate sensitivities apply a 50 basis points movement in current government bond
yields, our long-term investment return assumptions and risk discount rates. Interest rate sensitivities to both
increasing and reducing interest rates overall are small, and primarily driven by the market interest rate level and
the characteristics of the underlying assets and liabilities by business unit.
US$ millions, unless otherwise stated
Central value
Impact of equity price changes
10 per cent increase in equity prices
10 per cent decrease in equity prices
Impact of interest rate changes
50 basis points increase in interest rates
50 basis points decrease in interest rates
US$ millions, unless otherwise stated
Central value
Impact of interest rate changes
50 basis points increase in interest rates
50 basis points decrease in interest rates
As at 31 December 2021
As at 31 December 2020
EV
% Change
EV
% Change
72,987
1,878
(1,871)
(330)
279
2.6%
(2.6)%
(0.5)%
0.4%
65,247
1,099
(1,095)
652
(1,294)
1.7%
(1.7)%
1.0%
(2.0)%
2021
2020
VONB
% Change
VONB
% Change
3,366
74
(108)
2.2%
(3.2)%
2,765
193
(298)
7.0%
(10.8)%
Please refer to Section 3 of the Supplementary Embedded Value Information for additional information.
029
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION IFRS PROFIT
OPAT(1) by Segment
US$ millions, unless otherwise stated
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Group Corporate Centre
Total
2021
1,371
2,143
960
723
392
784
36
2020
1,220
2,059
987
621
326
687
42
6,409
5,942
YoY
CER
4%
4%
(1)%
13%
17%
10%
n/m
6%
YoY
AER
12%
4%
(3)%
16%
20%
14%
n/m
8%
Note:
(1) Attributable to shareholders of the Company only, excluding non-controlling interests.
Our high-quality, recurring sources of earnings and the proactive management of our growing in-force portfolio
underpinned a 6 per cent increase in OPAT to US$6,409 million and a 0.6 pps increase in operating margin to 17.5
per cent. Successive cohorts of new business are the primary driver of our OPAT growth as VONB translates into
earnings over time. OPAT growth was 9 per cent after normalising for the exceptional claims experience during the
COVID-19 pandemic and excluding the impact of withholding tax for AlA China post subsidiarisation.
Mainland China reported 4 per cent growth in OPAT as strong underlying business growth was partly offset by the
impact of withholding tax following subsidiarisation and the normalisation of medical claims relative to the low
levels experienced in 2020. Underlying OPAT growth was 10 per cent excluding these items.
Hong Kong’s OPAT increased by 4 per cent, as underlying business growth and higher investment returns that
resulted from an increase in equity asset balances were partly offset by a normalisation of medical claims
experience relative to the low levels of 2020 and a small number of unusually large death claims. Underlying OPAT
growth was 8 per cent excluding the low levels of medical claims in 2020. Underlying business growth continues
to be affected by the lower absolute levels of total new business from all segments in aggregate in 2020 and 2021
relative to 2019 levels.
Thailand’s OPAT remained broadly stable as adverse lapse experience from our in-force portfolio and lower
investment returns offset underlying business growth.
OPAT in Singapore increased by 13 per cent, driven by growth in our in-force portfolio and increased investment
returns.
Malaysia’s OPAT grew by 17 per cent in 2021. As previously highlighted, a one-off provision for an industry-wide
initiative to identify and pay accumulated unreported death claims was made in the first half of 2020. Excluding
this provision, OPAT increased by 11 per cent.
OPAT in Other Markets increased by 10 per cent, as strong underlying business growth across a number of markets
was partially offset by increased mortality claims from markets affected by the resurgence of COVID-19.
Average shareholders’ allocated equity grew by 10 per cent to US$50 billion, while operating return on shareholders’
allocated equity (operating ROE) was 12.8 per cent, compared with 13.0 per cent in 2020.
030
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW TWPI by Segment
US$ millions, unless otherwise stated
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
2021
6,999
11,904
4,428
3,433
2,479
7,616
2020
5,622
13,042
4,462
3,088
2,216
6,978
36,859
35,408
YoY
CER
16%
(9)%
2%
8%
10%
4%
2%
YoY
AER
24%
(9)%
(1)%
11%
12%
9%
4%
TWPI increased by 2 per cent to US$36,859 million compared with 2020. In Hong Kong, TWPI reduced as significant
cohorts of long-term participating policies started to reach the end of their premium payment terms and became
fully paid up; these in-force policies have continued to generate OPAT though they no longer contribute to TWPI.
Total recurring premiums accounted for over 90 per cent of premiums received in 2021.
IFRS Operating Profit Investment Return
US$ millions, unless otherwise stated
Interest income
Expected long-term investment return for
equities and real estate
Total
2021
7,536
3,095
10,631
2020
7,051
2,347
9,398
YoY
CER
5%
30%
12%
YoY
AER
7%
32%
13%
International Financial Reporting Standards (IFRS) operating profit investment return increased by 12 per cent
to US$10,631 million compared with 2020. The growth was primarily driven by the increase in the size of our
investment portfolio, with higher equities and real estate balances.
Operating Expenses
US$ millions, unless otherwise stated
Operating expenses
2021
3,031
2020
2,695
YoY
CER
10%
YoY
AER
12%
Operating expenses grew by 10 per cent to US$3,031 million, driven by growth in our headcount and increased
technology, digital and analytics related spending. The expense ratio was 8.2 per cent compared with 7.6 per cent
in 2020.
031
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Net Profit(1)
US$ millions, unless otherwise stated
OPAT
Short-term fluctuations in investment return related
to equities and real estate, net of tax(2)
Reclassification of revaluation (gains)/losses for
property held for own use, net of tax(2)
Corporate transaction related costs, net of tax
Implementation costs of new accounting standards,
net of tax
Other non-operating investment return and
other items, net of tax
Total
2021
6,409
2020
5,942
(276)
(406)
(66)
(49)
(43)
1,452
7,427
52
(56)
(30)
277
5,779
YoY
CER
6%
n/m
n/m
n/m
n/m
n/m
28%
YoY
AER
8%
n/m
n/m
n/m
n/m
n/m
29%
Notes:
(1) Attributable to shareholders of the Company only, excluding non-controlling interests.
(2) Short-term fluctuations in investment return include the revaluation gains and losses for property held for own use. This amount is then reclassified out
of net profit to conform to IFRS measurement and presentation.
IFRS NON-OPERATING MOVEMENT
IFRS net profit was US$7,427 million in 2021, compared with US$5,779 million in 2020, an increase of 28 per cent.
AIA’s net profit includes mark-to-market movements from our equity and investment property portfolios. Other
non-operating items in 2021 included corporate transaction related costs of US$49 million, implementation costs
of new accounting standards of US$43 million and other non-operating items of US$1,452 million, mainly driven
by realised gains from our available for sale debt securities.
032
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW
Movement in Shareholders’ Allocated Equity
US$ millions, unless otherwise stated
Opening shareholders’ allocated equity
Net profit
Purchase of shares held by employee share-based trusts
Dividends
Revaluation gains/(losses) on property held for own use
Foreign currency translation adjustments
Other capital movements
Total movement in shareholders’ allocated equity
Closing shareholders’ allocated equity
Average shareholders’ allocated equity
2021
48,030
7,427
(106)
(2,147)
42
(1,301)
115
4,030
52,060
50,045
2020
43,278
5,779
(16)
(1,997)
(46)
931
101
4,752
48,030
45,654
The movement in shareholders’ allocated equity is shown before fair value reserve movements. We believe this
provides a clearer reflection of the underlying movement in shareholders’ equity over the year, before the IFRS
accounting treatment of market value movements in available for sale debt securities.
Shareholders’ allocated equity increased by 11 per cent to US$52,060 million as a result of net profit of US$7,427
million, partly offset by the payment of shareholder dividends of US$2,147 million and the impact of depreciation
of local currencies against our US dollar reporting currency of US$1,301 million.
Average shareholders’ allocated equity grew by 10 per cent compared with last year.
Sensitivities to foreign exchange rate, interest rate and equity price movements are included in note 38 to the
consolidated financial statements.
033
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION IFRS EARNINGS PER SHARE (EPS)
Basic EPS based on OPAT attributable to shareholders increased by 6 per cent to 53.12 US cents in 2021.
Basic EPS based on IFRS net profit attributable to shareholders, including mark-to-market movements from our
equity and investment property portfolios, increased by 27 per cent to 61.55 US cents in 2021.
IFRS EPS – Basic
Profit (US$ millions)
Weighted average number of ordinary shares
(millions)
Basic earnings per share (US cents)
IFRS EPS – Diluted
Profit (US$ millions)
Weighted average number of ordinary shares(2)
(millions)
Diluted earnings per share(2) (US cents)
Net Profit(1)
OPAT(1)
2021
7,427
12,066
61.55
2020
5,779
12,060
47.92
2021
6,409
12,066
53.12
Net Profit(1)
OPAT(1)
2021
7,427
12,087
61.45
2020
5,779
12,080
47.84
2021
6,409
12,087
53.02
2020
5,942
12,060
49.27
2020
5,942
12,080
49.19
Notes:
(1) Attributable to shareholders of the Company only, excluding non-controlling interests.
(2) Diluted earnings per share including the dilutive effects, if any, of the awards of share options, restricted share units, RSPUs and RSSUs granted to eligible
directors, officers, employees and agents under the share-based compensation plans as described in note 40 to the consolidated financial statements.
034
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW
IFRS BALANCE SHEET
Consolidated Statement of Financial Position
US$ millions, unless otherwise stated
Assets
Financial investments
Investment property
Cash and cash equivalents
Deferred acquisition and origination costs
Other assets
Total assets
Liabilities
Insurance and investment contract liabilities
Borrowings
Other liabilities
Less total liabilities
Equity
Total equity
Less non-controlling interests
Total equity attributable to shareholders of AIA Group Limited
Shareholders’ allocated equity
Movement in Shareholders’ Equity
US$ millions, unless otherwise stated
Opening shareholders’ equity
Net profit
Fair value (losses)/gains on assets
Purchase of shares held by employee share-based trusts
Dividends
Revaluation gains/(losses) on property held for own use
Foreign currency translation adjustments
Other capital movements
Total movement in shareholders’ equity
Closing shareholders’ equity
Number of ordinary shares (millions)
Shareholders’ equity per share (US cents)
As at
31 December
2021
As at
31 December
2020
Change
AER
281,876
271,467
4,716
4,989
28,708
19,585
4,639
5,619
27,915
16,481
339,874
326,121
251,283
235,952
9,588
18,069
8,559
17,942
278,940
262,453
60,934
467
60,467
52,060
63,668
468
63,200
48,030
2021
63,200
7,427
(6,763)
(106)
(2,147)
42
(1,301)
115
(2,733)
60,467
12,097
499.85
4%
2%
(11)%
3%
19%
4%
6%
12%
1%
6%
(4)%
–
(4)%
8%
2020
54,947
5,779
3,501
(16)
(1,997)
(46)
931
101
8,253
63,200
12,095
522.53
035
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Total Investments
US$ millions, unless otherwise stated
As at
31 December
2021
Percentage
of total
As at
31 December
2020
Percentage
of total
Total policyholder and shareholder
253,585
86%
247,408
87%
Total unit-linked contracts and consolidated
investment funds
Total investments
40,059
293,644
14%
100%
36,302
283,710
13%
100%
The investment mix remained stable during the year as set out below:
Unit-Linked Contracts and Consolidated Investment Funds
US$ millions, unless otherwise stated
Unit-linked contracts and consolidated
investment funds
Debt securities
Loans and deposits
Equity shares and interests in investment funds
Cash and cash equivalents
Derivatives
Total unit-linked contracts and consolidated
investment funds
As at
31 December
2021
Percentage
of total
As at
31 December
2020
Percentage
of total
6,660
365
31,909
1,076
49
17%
1%
80%
2%
–
6,403
395
28,232
1,219
53
18%
1%
78%
3%
–
40,059
100%
36,302
100%
036
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW
Policyholder and Shareholder Investments
US$ millions, unless otherwise stated
Participating funds and Other participating
business with distinct portfolios(1)
Government bonds
Other government and government agency bonds
Corporate bonds and structured securities
Loans and deposits
Subtotal – Fixed income investments
Equity shares and interests in investment funds
Investment property and property held for own use
Cash and cash equivalents
Derivatives
Subtotal Participating funds and Other
participating business with distinct portfolios
Other policyholder and shareholder
Government bonds
Other government and government agency bonds
Corporate bonds and structured securities
Loans and deposits
Subtotal – Fixed income investments
Equity shares and interests in investment funds
Investment property and property held for own use
Cash and cash equivalents
Derivatives
Subtotal other policyholder and shareholder
Total policyholder and shareholder
As at
31 December
2021
Percentage
of total
As at
31 December
2020
Percentage
of total
11,092
11,372
55,697
2,699
80,860
29,185
1,081
1,317
1,190
4%
5%
22%
1%
32%
12%
–
1%
–
9,324
11,701
54,947
2,519
78,491
23,892
1,054
565
335
4%
5%
22%
1%
32%
10%
–
–
–
113,633
45%
104,337
42%
44,901
19,345
51,013
6,247
121,506
9,923
5,698
2,596
229
139,952
253,585
18%
8%
20%
2%
48%
4%
2%
1%
–
55%
100%
46,939
18,918
53,649
6,421
125,927
7,058
5,570
3,835
681
143,071
247,408
19%
7%
22%
3%
51%
3%
2%
2%
–
58%
100%
Note:
(1) Participating business is written in a segregated statutory fund, with regulations governing the division of surplus between policyholders and shareholders.
“Other participating business with distinct portfolios”, which represents the Hong Kong participating business, is supported by segregated investment
assets and explicit provisions for future surplus distribution, though the division of surplus between policyholders and shareholders is not defined in
regulations.
ASSETS
Total assets increased by US$13,753 million to US$339,874 million at 31 December 2021, compared with
US$326,121 million at 31 December 2020 due to positive net revenues and mark-to-market gains on equities,
partly offset by negative fair value movements from our debt securities.
Fixed income investments, including debt securities, loans and term deposits held in respect of policyholders
and shareholders, totalled US$202,366 million at 31 December 2021 compared with US$204,418 million at 31
December 2020 as the inflow of new money was more than offset by changes in market values.
037
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Government bonds and other government and government agency bonds represented 43 per cent of fixed income
investments at 31 December 2021 and 31 December 2020. Corporate bonds and structured securities accounted
for 53 per cent of fixed income investments at 31 December 2021 and 31 December 2020. The average credit
rating of our fixed income portfolio, excluding government bonds, remained stable at A- compared to the position
at 31 December 2020. Our corporate bond portfolio is well diversified with over 2,000 issuers and an average
holding size of US$47 million. At 31 December 2021, we held US$4.0 billion of bonds rated below investment
grade or not rated, representing 2 per cent of our total bond portfolio. We had under US$140 million of our bonds,
representing 0.1 per cent of our total bond portfolio, downgraded to below investment grade during the year and
there were no impairments in 2021, reflecting the quality of our investment portfolio.
Equity shares and interests in investment funds held in respect of policyholders and shareholders totalled
US$39,108 million at 31 December 2021, compared with US$30,950 million at 31 December 2020. The US$8,158
million increase in carrying value was mainly attributable to new purchases driven by underlying business growth,
market movements and greater asset allocation. Within this figure, equity shares and interests in investment funds
of US$29,185 million were held in participating funds and other participating business with distinct portfolios.
Cash and cash equivalents decreased by US$630 million to US$4,989 million at 31 December 2021 compared to
US$5,619 million at 31 December 2020. The reduction largely reflected the payments for acquisitions.
Other assets increased to US$19,585 million at 31 December 2021 compared with US$16,481 million at 31
December 2020, reflecting an increase in prepaid expenses, reinsurance recoveries and intangible assets.
LIABILITIES
Total liabilities increased to US$278,940 million at 31 December 2021 from US$262,453 million at 31 December
2020.
Insurance and investment contract liabilities grew to US$251,283 million at 31 December 2021 compared with
US$235,952 million at 31 December 2020, reflecting the underlying growth of the in-force portfolio.
Borrowings increased to US$9,588 million at 31 December 2021, of which US$3,768 million are subordinated,
due to the net proceeds from the issuances of medium-term notes and securities totalling US$2,079 million less
the redemption of medium-term notes of US$1,002 million upon maturity. The leverage ratio, which is defined as
borrowings expressed as a percentage of total borrowings and equity, was at 13.6 per cent, compared with 11.9
per cent at 31 December 2020.
Details of commitments and contingencies are included in note 43 to the consolidated financial statements.
EQUITY
Total equity attributable to shareholders was US$60,467 million at 31 December 2021, compared with US$63,200
million at 31 December 2020, as earnings for 2021 were offset by the decrease in fair value reserve driven by
the increase in some key government bond yields in 2021. The fair value reserve reflects unrealised gains on our
available for sale debt securities and is excluded from shareholders’ allocated equity to represent the underlying
position more clearly.
038
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW CAPITAL
FREE SURPLUS
The Group’s free surplus is the excess of adjusted net worth over required capital, including consolidated reserving
and capital requirements, adjusted for certain assets not eligible for regulatory capital purposes. The Group holds
free surplus to enable it to invest in organic new business growth, take advantage of inorganic opportunities and
absorb the effects of capital market stress conditions.
UFSG is an operating metric that measures the expected amount of free surplus generated from in-force business
over the period before investment in new business, unallocated Group Office expenses, finance costs, investment
return variances and other non-operating items.
UFSG of US$6,451 million increased by 8 per cent, driven by continued growth and active management of our in-
force portfolio. Free surplus invested in writing new business was US$1,712 million, 18 per cent higher than 2020
and in line with VONB growth. Basic UFSG per share grew by 8 per cent to 53.46 US cents.
Underlying Free Surplus Generation Per Share – Basic
UFSG (US$ millions)
Weighted average number of ordinary shares (millions)
Basic UFSG per share (US cents)
Underlying Free Surplus Generation Per Share - Diluted
UFSG (US$ millions)
Weighted average number of ordinary shares (millions)
Diluted UFSG per share (US cents)
2021
6,451
12,066
53.46
2021
6,451
12,087
53.37
2020
5,843
12,060
48.45
2020
5,843
12,080
48.37
YoY
CER
8%
n/a
8%
YoY
CER
8%
n/a
8%
YoY
AER
10%
n/a
10%
YoY
AER
10%
n/a
10%
The Group remained financially very strong at 31 December 2021 with free surplus of US$17,025 million, after
the payment of US$2,147 million of shareholder dividends. The BEA arrangement and our shareholding in China
Post Life together accounted for an investment of US$2,430 million of free surplus. While the investment in China
Post Life is an asset within the IFRS consolidated financial statements, it does not contribute to the eligible asset
value for regulatory capital purposes under both the Group LCSM and the Hong Kong Insurance Ordinance (HKIO)
bases, and is therefore excluded from free surplus. Free surplus per share grew by 19 per cent to 140.74 US cents.
039
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION The following table summarises the change in free surplus:
US$ millions, unless otherwise stated
Opening free surplus
Effect of acquisition(1)
BEA Upfront Payment(2)
Investment in China Post Life
UFSG
Free surplus used to fund new business
Unallocated Group Office expenses
Finance costs and other capital movements
Free surplus before investment return variances and dividends
Investment return variances and other items
Free surplus before dividends
Dividends
Closing free surplus
2021
13,473
(312)
(258)
(1,860)
6,451
(1,712)
(273)
(300)
15,209
3,963
19,172
(2,147)
17,025
2020
14,917
(18)
–
–
5,843
(1,428)
(173)
(166)
18,975
(3,505)
15,470
(1,997)
13,473
Notes:
(1) The effect of acquisition in 2021 refers to the cost of acquiring AIA Everest of US$397 million as per note 5 to the consolidated financial statements, less
the acquired free surplus of US$85 million. The effect of acquisition in 2020 refers to the purchase price adjustments for the alternative arrangements
with CBA in relation to CMLA as per note 5 to the consolidated financial statements in the Company’s Annual Report 2020.
(2) Refers to the consideration for the strategic bancassurance partnership.
Free Surplus Per Share
Free surplus (US$ millions)
Number of ordinary shares (millions)
Free surplus per share (US cents)
2021
17,025
12,097
140.74
2020
13,473
12,095
111.39
YoY
CER
19%
n/a
19%
YoY
AER
26%
n/a
26%
GROUP LCSM SOLVENCY POSITION
Our Group supervisor is the HKIA and the Group is in compliance with its group capital adequacy requirements. In
2021, the HKIA implemented the new group-wide supervision (GWS) framework, under which the HKIA has direct
regulatory powers over Hong Kong incorporated holding companies of designated insurance groups. On 14 May
2021, AIA Group Limited became a designated insurance holding company and is therefore subject to the GWS
framework in Hong Kong, including the GWS Capital Rules. The GWS Capital Rules set out the capital requirements
of the Group under the GWS framework that define the Group’s overall solvency position. These requirements are
based on a “summation approach” and are referred to as the Local Capital Summation Method (LCSM).
Under the LCSM, AIA’s published group-level total available capital and minimum capital requirement are
calculated as the sum of the available and applicable minimum required capital according to the respective
regulatory requirements for each entity within the Group, subject to any variation considered necessary by the
HKIA. The Group LCSM surplus is the difference between the Group available capital and the Group minimum
capital requirement. The Group LCSM cover ratio is the ratio of the Group available capital to the Group minimum
capital requirement.
040
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW At 31 December 2021, the Group LCSM surplus was US$50,663 million, with a very strong Group LCSM cover ratio
of 399 per cent. Group available capital within these figures includes:
(i) US$3,768 million(1) of subordinated securities. Subordinated securities with a fixed maturity receive full capital
credit up to the date that is 5 years prior to the date of maturity, with the capital credit then reducing at the rate
of 20 per cent per annum until maturity. Perpetual subordinated securities receive full capital credit unless
they are redeemed; and
(ii) US$5,820 million(1) of senior notes issued before designation that have been approved by the HKIA. Prior to
maturity, the approved senior notes receive full capital credit until 14 May 2031, after which the capital credit
reduces at the rate of 20 per cent per annum until 14 May 2036.
The comparative figures as at 31 December 2020 were based on the Group’s understanding of the likely application
of the GWS framework to the Group at the time and included US$1,735 million of subordinated securities, while
excluding US$5,822 million carrying amount of senior notes not then approved as contributing to Group available
capital. This is largely consistent with the basis of calculation of the Group LCSM solvency position as at 31
December 2021 with the key difference being the treatment of senior notes.
A summary of the Group LCSM solvency position is as follows:
US$ millions, unless otherwise stated
Group available capital
Group minimum capital requirement
Group LCSM surplus
Group LCSM cover ratio
Senior notes approved as contributing to Group available capital(1)
As at
31 December
2021
As at
31 December
2020
67,611
16,948
50,663
399%
5,820
59,830
16,013
43,817
374%
–
Note:
(1) The amounts represented the carrying value of medium-term notes and securities contributing to Group available capital. These are counted as tier 2
group capital under the GWS Capital Rules.
041
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP LCSM COVER RATIO SENSITIVITIES
Group LCSM cover ratio sensitivities arising from changes to the central assumptions from equity price and interest
rate movements and applied consistently with those in EV, are shown below. The interest rate sensitivities apply
a 50 basis points movement in current bond yields and the corresponding movement on discount rates applied to
the calculation of liabilities. The amount of eligible debt capital is equal to the carrying value and is unchanged in
the sensitivity calculations.
US$ millions, unless otherwise stated
Central value
Impact of equity price changes
10 per cent increase in equity prices
10 per cent decrease in equity prices
Impact of interest rate changes
50 basis points increase in interest rates
50 basis points decrease in interest rates
As at
31 December
2021
As at
31 December
2020
399%
374%
4 pps
(4) pps
12 pps
(6) pps
1 pps
(2) pps
13 pps
(18) pps
RECONCILIATION BETWEEN GROUP LCSM SURPLUS AND FREE SURPLUS
AIA considers free surplus on a consolidated basis a more representative view of the capital position of the Group
from a shareholder perspective than the LCSM. The table below shows a reconciliation between the Group LCSM
surplus and free surplus.
US$ millions, unless otherwise stated
Group LCSM surplus
Adjustments for:
Eligible debt capital
Different capital requirements under EV for AIA China(1)
Reflecting shareholders’ view of capital(2)
Free surplus on business unit basis
Adjustment to reflect consolidated reserving and capital requirements
Free surplus on consolidated basis
As at
31 December
2021
As at
31 December
2020
50,663
43,817
(9,588)
(7,733)
(9,902)
23,440
(6,415)
17,025
(1,735)
(7,675)
(10,314)
24,093
(10,620)
13,473
Notes:
(1) Adjustment from C-ROSS solvency basis to China Association of Actuaries (CAA) EV basis in line with local requirements.
(2) Reflects change from Group minimum capital requirement to EV required capital and the removal of participating fund surplus.
042
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW LOCAL SOLVENCY REQUIREMENTS
The Group’s individual branches and subsidiaries are also subject to supervision, including relevant capital
requirements, in the jurisdictions in which they and their parent entity operate. The local operating units were in
compliance with the capital requirements of their respective entity and local regulators in each of our geographical
markets at 31 December 2021.
The HKIA is in the process of developing amendments to the HKIO to cater for the new HKRBC regime with an
effective date of 1 January 2024. On 28 December 2021 the HKIA released a circular setting out requirements
for insurers that are “sufficiently advanced” in their preparations to adopt the HKRBC regime at an early date and
the Group has submitted an application for early adoption of the HKRBC regime for AIA International Limited, our
principal operating entity in Hong Kong. Our application is currently under review by the HKIA and we expect to
receive approval before the end of the first half of 2022, subject to meeting all of the necessary conditions.
The current HKIO basis uses assumptions including an implicit margin for risk above the best estimate basis in
the calculation of liabilities plus a non-economic capital requirement. The HKRBC basis prescribes an economic
approach that uses best estimate assumptions for the calculation of liabilities plus an explicit capital requirement
to allow for various risks. While the required capital for our business increases under the HKRBC basis, the
corresponding reduction in liabilities results in an increase in both EV and free surplus.
The HKIO calculation basis does not adequately reflect the benefit of our long-standing approach of matching our
assets and liabilities, particularly under volatile capital market conditions. We therefore hold additional resilience
margins to smooth non-economic movements between assets and liabilities which will no longer be required on
the adoption of the HKRBC regime.
The table below shows the pro forma impact on the Group’s EV and free surplus of the adoption of the HKRBC
basis and release of these additional resilience margins no longer required relating to the current HKIO basis as at
31 December 2021, subject to the outcome of the early adoption application currently under review by the HKIA:
US$ millions, unless otherwise stated
Closing Balance as at 31 December 2021
Release of resilience margins
Impact of HKRBC
Pro forma Closing Balance as at 31 December 2021
Embedded
Value
Free
Surplus
72,987
885
2,379
76,251
17,025
3,400
4,403
24,828
043
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION HOLDING COMPANY FINANCIAL RESOURCES
At 31 December 2021, holding company financial resources were US$13,136 million compared with US$12,388
million at 31 December 2020. The increase of US$748 million was mainly driven by capital flows to the holding
company from subsidiaries of US$3,976 million and net proceeds of the issuances and redemption of medium-
term notes and securities totalling US$1,077 million during the year, offset by the investment in China Post Life
of US$1,860 million and the payment of shareholder dividends of US$2,147 million. Issuances of medium-term
notes and securities totalled US$2,079 million while US$1,002 million were redeemed upon maturity.
The movements in holding company financial resources are summarised as follows:
US$ millions, unless otherwise stated
Opening holding company financial resources
Capital flows from subsidiaries
Corporate activity including acquisitions
Net capital flows to holding company
Increase in borrowings(1)
Interest payments on borrowings(1)
Investment income, mark-to-market movements in debt securities and others
Closing holding company financial resources before dividends
Dividends paid
Closing holding company financial resources
Assets recoverable and liabilities repayable within 12 months as follows:
US$ millions, unless otherwise stated
Loans to/amounts due from subsidiaries(2)
Medium-term notes and securities(3)
Net other assets and other liabilities
2021
12,388
3,976
(1,860)
2,116
1,077
(322)
24
15,283
(2,147)
13,136
2020
8,630
2,354
–
2,354
2,792
(245)
854
14,385
(1,997)
12,388
As at
31 December
2021
As at
31 December
2020
103
(167)
(46)
90
(1,002)
(14)
Notes:
(1) Borrowings principally include medium-term notes and securities, other intercompany loans; and amounts outstanding, if any, from the Company’s
US$2,290 million unsecured committed credit facilities.
(2) As at 31 December 2021, loans to/amounts due from subsidiaries was US$1,917 million (2020: US$1,904 million). US$103 million was recoverable
within the 12 months after the year ended 31 December 2021 (2020: US$90 million).
(3) As at 31 December 2021, medium-term notes and securities placed to the market was US$9,588 million (2020: US$8,559 million). US$167 million was
repayable within the 12 months after the year ended 31 December 2021 (2020: US$1,002 million). Details of the medium-term notes and securities
placed to the market are included in note 30 to the consolidated financial statements.
044
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW GLOBAL MEDIUM-TERM NOTE AND SECURITIES PROGRAMME
In March 2021, we increased our Global Medium-term Note (GMTN) and Securities Programme from US$10 billion
to US$12 billion.
During the year, the Company issued two fixed rate resettable subordinated perpetual securities and two fixed
rate resettable subordinated dated securities. On 7 April 2021, the Company issued US$750 million of resettable
subordinated perpetual securities at an annual rate of 2.7 per cent. On 11 June 2021, the Company issued
Singapore dollar (SGD) 500 million of resettable subordinated perpetual securities at an annual rate of 2.9 per
cent. On 9 September 2021, the Company issued Euro (EUR) 750 million of 12-year resettable subordinated dated
securities at an annual rate of 0.88 per cent. On 19 October 2021, the Company issued Singapore dollar (SGD) 105
million of 30-year resettable subordinated dated securities at an annual rate of 3.0 per cent. These securities are
all listed on The Stock Exchange of Hong Kong Limited.
At 31 December 2021, the aggregate carrying amount of the debt issued to the market under the GMTN and
Securities Programme was US$9,588 million.
CREDIT RATINGS
At 31 December 2021, AIA Co. had financial strength ratings of Aa2 (Very Low Credit Risk) with a stable outlook
from Moody’s; AA (Very Strong) with a stable outlook from Fitch; and AA- (Very Strong) with a stable outlook from
S&P Global Ratings.
At 31 December 2021, the Company had issuer credit ratings of A1 (Low Credit Risk) with a stable outlook from
Moody’s; AA- (Very High Credit Quality) with a stable outlook from Fitch; and A+ (Strong) with a stable outlook
from S&P Global Ratings.
DIVIDENDS
The Board has recommended a final dividend of 108.00 Hong Kong cents per share, subject to shareholders’
approval at the Company’s forthcoming AGM. This brings the total dividend for 2021 to 146.00 Hong Kong cents
per share, an increase of 8 per cent compared with the total dividend for 2020. This follows AIA’s established
prudent, sustainable and progressive dividend policy, allowing for future growth opportunities and the financial
flexibility of the Group.
045
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION BUSINESS REVIEW
SUMMARY AND KEY BUSINESS HIGHLIGHTS
In 2021, AIA delivered a strong performance with an 18 per cent increase in VONB and growth in all of our key
financial metrics. Our diversification is a key competitive advantage for AIA, and the execution of our strategic
priorities has driven broad-based growth across our geographical markets and distribution channels as all our
reportable segments delivered VONB growth on a like-for-like basis. VONB for the Group outside Hong Kong
exceeded pre-pandemic levels after excluding the impact of withholding tax following our subsidiarisation in China.
We have continued to accelerate the use of technology, digital and analytics (TDA) throughout our business to
provide uninterrupted service to our customers, agents and partners even as the COVID-19 pandemic continued to
impact the region throughout the year.
DISTRIBUTION
Our agency channel delivered 20 per cent VONB growth in 2021, demonstrating our ongoing commitment to
enhancing the quality of our agency distribution through our highly differentiated Premier Agency strategy. As a
result of the successful execution of our strategy and our rapid digitalisation of the entire agency value chain, we
grew the number of active agents and raised their productivity levels, demonstrating our commitment to quality
recruitment. AIA was once again the number one Million Dollar Round Table (MDRT) company globally in 2021,
extending our track record to seven years in the top ranked position globally and affirming the effectiveness of our
Premier Agency strategy.
VONB for our partnership channels grew by 4 per cent after excluding the impact of the one-off contribution from
Commonwealth Bank of Australia (CBA) in the first quarter of 2020, as previously reported. Our focus on increasing
referral leads from our bank partners through customer analytics, digital marketing platforms and social media
enabled us to reach previously untapped customer segments and address their needs through our seamless
omnichannel experience.
GEOGRAPHICAL MARKETS
AIA China delivered VONB growth of 10 per cent after excluding the impact of withholding tax that has applied
following the subsidiarisation of our business. Our differentiated Premier Agency strategy, coupled with the increased
level of digital tool adoption, supported an improvement in agency activity and productivity. Following the successful
launch of our new operation in Chengdu, Sichuan, in March, we received approval from the China Banking and
Insurance Regulatory Commission to begin operations in Wuhan, Hubei, with sales commencing from January 2022.
AIA Hong Kong achieved excellent VONB growth of 37 per cent in 2021. Both our agency and bancassurance channels
delivered very strong performances, underpinned by an improvement in both agency activity and productivity and
supported by the launch of our new partnership with BEA in July. The resumption of Macau’s Individual Visit Scheme
with Mainland China drove excellent growth in sales to Mainland Chinese visitors through our Macau branch during
the year.
AIA Thailand achieved VONB growth of 34 per cent in 2021 with a 19.4 pps increase in VONB margin, driven by a
proactive shift towards the sale of regular premium unit-linked and protection products. Both our market-leading
agency business and our strategic bancassurance partner, Bangkok Bank Public Company Limited (Bangkok Bank),
delivered strong VONB growth for the year as we continued to improve the productivity of our agency new recruits
and bank insurance specialists.
AIA Singapore achieved 6 per cent VONB growth in 2021, as double-digit growth in our agency channel was partly
offset by a reduction in new business from our partnership distribution channel. We continued to support our Premier
Agency by enhancing our digital tools and platforms, leading to an increase in the number of active agents and
improvements in agent productivity.
AIA Malaysia reported VONB growth of 26 per cent, supported by strong performances in both our agency and
partnership distribution channels. Our Takaful business also delivered excellent growth in 2021.
Our Other Markets segment delivered growth on a like-for-like basis in 2021. A strong performance in the first half
was partly offset by reduced sales volumes in the second half as stricter containment measures were imposed in a
number of markets due to a resurgence of COVID-19.
046
AIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW UNRIVALLED DISTRIBUTION
AGENCY
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
2021
2,877
74.3%
3,872
2020
2,333
67.5%
3,455
YoY CER
YoY AER
20%
6.5 pps
10%
23%
6.8 pps
12%
Our proprietary Premier Agency is a core competitive advantage that distinguishes AIA as the pre-eminent life and
health insurance company in Asia. Our strategy is to attract and select high-quality new recruits and help them build
sustainable and successful full-time careers by supporting their sales and recruitment activities with best-in-class
training, award-winning digital tools and clear career paths. This differentiated long-term strategy is the foundation
of our professional, resilient and productive agency force that holds market-leading positions across the region. Our
unparalleled Premier Agency platform enables us to reach millions of customers across Asia and meet their diverse
and evolving needs with personalised advice and our comprehensive suite of propositions.
The consistent execution of our Premier Agency strategy in 2021 delivered excellent VONB growth of 20 per cent
to US$2,877 million. ANP grew by 10 per cent to US$3,872 million and VONB margin increased to 74.3 per cent,
primarily driven by favourable shifts in product mix in Hong Kong and Thailand and a reduction in acquisition expense
overruns.
AIA’s commitment to providing customers with high-quality advice through our professional agency force and
continued deployment of new technology supported growth in the number of active agents across the Group as well
as an increase in the productivity of these agents. Quality recruitment remains a key strategic priority for our Premier
Agency platform as demonstrated by a strong increase in the productivity of new agents. For example, new agents
from our quality recruitment programmes in Malaysia and Thailand were four times more active than standard agent
recruits during the year.
Our investments in TDA capabilities for our agency force are proving invaluable in a challenging operating
environment. New functionality enables our agents to leverage their social media networks systematically and with
curated content, helping to reach new customer segments even during strict lockdowns. Our expanded social media
integrated leads management platform helped to generate over 2 million new customer leads and close to US$280
million of ANP for the Group in 2021. The remote sales functionality integrated into our digital tools makes it easier
for agents to switch from in-person to digital remote sales models when needed. For example, in Singapore, the
proportion of cases closed through remote sales exceeded 75 per cent during the period when stringent pandemic
restrictions were in-force.
In 2021, AIA once again achieved excellent growth in MDRT membership with over 16,000 registered members
across the Group, representing an increase of 25 per cent compared with 2020. AIA is now the number one MDRT
company globally for the last seven years with the largest number of MDRT-registered members, demonstrating the
effectiveness of our Premier Agency strategy.
047
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION PARTNERSHIPS
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
2021
695
39.1%
1,775
2020
676
38.4%
1,764
YoY CER
YoY AER
0%
0.6 pps
(2)%
3%
0.7 pps
1%
AIA’s extensive network of market-leading strategic distribution partners provides us with a unique opportunity
to engage and meet the protection, health, wellness and long-term savings needs of hundreds of millions of
potential customers across Asia. Our key priorities for this channel are to strengthen collaboration with our strategic
bancassurance and other partners to deliver digital-led personalised propositions and insurance advice for their
customers, as well as continue to expand our network of digital platform partnerships.
Our partnership distribution business delivered stable VONB of US$695 million in 2021, as ANP declined by 2 per
cent and VONB margin increased slightly to 39.1 per cent. After excluding the impact of the one-off purchase by CBA
in the first quarter of 2020, as previously reported, VONB increased by 4 per cent.
BANCASSURANCE, INTERMEDIATED CHANNELS AND DIRECT MARKETING
Activity management was an important focus in 2021 as we continued to develop our bancassurance business.
Bank insurance specialists benefitted from greater adoption of digital tools, enhanced customer segmentation
with analytics and new propositions to meet evolving customer needs. The adoption of remote sales processes has
strengthened the resilience of our bancassurance sales model as branches were intermittently closed by government
mandates to control the spread of COVID-19. Our initiatives supported double-digit VONB growth in aggregate across
our strategic bancassurance partnerships in the ASEAN markets. We also launched our strategic bancassurance
partnership with BEA in Hong Kong and Mainland China, and the regional partnership has already become a material
contributor to our overall bancassurance results in the second half of 2021.
Our focus on increasing referral leads from our bank partners through customer analytics, digital marketing platforms
and social media delivered over 2.8 million leads in 2021. This enabled us to reach previously untapped customer
segments and address their needs through our seamless omnichannel experience.
In April 2021, Citibank, N.A. (Citibank) announced that it intends to exit its consumer banking business in Asia
except for Hong Kong and Singapore. We have amended our bancassurance agreement with Citibank to deepen
our partnership in these two markets, which have contributed the large majority of VONB to the existing regional
partnership.
DIGITAL PLATFORMS
In 2021, we continued to expand our network of strategic partnerships with technology companies that have
significant active user bases, including with Tiki Corporation in Vietnam and TNG Digital Sdn. Bhd. (TNGD) in
Malaysia. In this channel, we are focusing on accessing new customer segments at scale through innovative lifestyle
benefits and scenario-based propositions. For example, we launched WalletSafe with TNGD in October, a first-in-
market e-wallet balance protection plan integrated with personal accident and COVID-19 coverage. Since launch,
this product attracted over 200,000 customers in less than three months. In South Korea, we brought together SK
Telecom, Samsung Card and AIA Vitality to launch a range of new joint propositions targeting a combined customer
base of 40 million people. We also continued to activate our digital platform partnerships as we set up dedicated
teams in eight markets and expanded the geographical coverage of ZA Tech Global Limited (ZA Tech)’s leading
digital insurance platform to Hong Kong, Indonesia and Vietnam.
048
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW GEOGRAPHICAL MARKET HIGHLIGHTS
MAINLAND CHINA
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2021
1,108
78.9%
1,404
6,999
1,371
2020
968
80.9%
1,197
5,622
1,220
YoY CER
YoY AER
7%
14%
(1.9) pps
(2.0) pps
9%
16%
4%
17%
24%
12%
AIA China delivered VONB growth of 7 per cent and a 9 per cent increase in ANP in 2021. Excluding the impact
of 5 per cent withholding tax following the subsidiarisation of our business, VONB increased by 10 per cent. Very
strong double-digit growth in agency productivity more than offset a slight reduction in active agent numbers for
the full year. Our successful recruitment initiatives supported a return to growth in active agent numbers in the
second half. VONB margin remained stable for the year, even as strong demand for our new suite of long-term
savings propositions drove an increased proportion of savings business and a lower VONB margin in the second half.
Traditional protection products accounted for the majority of VONB in 2021 as a regulatory change that took effect in
February 2021 accelerated demand and nearly half of the year’s total VONB was recorded in the first quarter.
AIA’s commitment to our long-established and differentiated Premier Agency strategy provides a significant
competitive advantage for AIA China and positions us for long-term sustainable growth as shifting consumer
preferences and regulations drive increased demand for high-quality propositions backed by professional advice.
Through our new initiatives and an enhanced recruitment platform, we achieved a very strong double-digit increase
in new recruits in the second half compared to the first half, while maintaining our stringent quality requirements.
Powerful new digital tools supported higher agency activity and productivity as well as very strong double-digit
growth in agent incomes in 2021 compared to 2020.
The Chinese life insurance market remains significantly underpenetrated, offering tremendous growth potential for
AIA. In July 2021, we launched our Family Insurance Consulting service application which analyses a customer’s
existing insurance coverage in real time and generates a personal needs analysis, supporting our agents to provide
tailored product recommendations to customers. Over 350,000 clients have benefitted from this tool.
We continue to strengthen our compelling customer propositions with new integrated value-added services tailored
to the evolving needs and increasing demands of consumers. Our new long-term savings products have helped
attract new customers and deepen our share of wallet with our existing customers. For example, You Zi Zai, our new
retirement proposition, provides customers with medical coverage and concierge services, through which we connect
customers to a large number of high-quality partner institutions offering a variety of retirement and rehabilitation
services across our geographical footprint.
AIA China reported OPAT growth of 4 per cent as strong underlying business growth was partly offset by the impact
of withholding tax following subsidiarisation and the normalisation of medical claims relative to the low levels
experienced in 2020. Excluding these items, OPAT grew by 10 per cent.
Following the successful launch of our new operation in Chengdu, Sichuan, in March, we received approval from the
China Banking and Insurance Regulatory Commission to begin operations in Wuhan, Hubei, with sales commencing
from January 2022. Hubei province has a population of nearly 60 million and is a centre of excellence for higher
education in Mainland China. This approval marks another milestone as we replicate our Premier Agency in new
geographies and capture AIA’s unique opportunity to access a base of potential customers five times the reach of our
existing footprint.
049
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION HONG KONG
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2021
756
64.0%
1,106
11,904
2,143
2020
550
44.7%
1,138
13,042
2,059
YoY CER
YoY AER
37%
37%
19.3 pps
19.3 pps
(3)%
(9)%
4%
(3)%
(9)%
4%
AIA Hong Kong delivered an excellent result in 2021 with VONB growth of 37 per cent. ANP returned to positive
growth in the second half of the year after a reduction in the first half. A favourable product mix shift combined with
higher government bond yields and reduced acquisition expense overruns led to an increase of 19.3 pps in VONB
margin. While the Individual Visit Scheme with Mainland China remained suspended for Hong Kong throughout
2021, the scheme has resumed for Mainland Chinese visitors to Macau. This has supported excellent growth in sales
to Mainland Chinese visitors for our Macau branch compared to 2020.
AIA’s Premier Agency remained the clear market leader in agency distribution in Hong Kong and achieved strong
double-digit VONB growth, underpinned by an improvement in both activity and productivity. Our bancassurance
channel also achieved excellent VONB growth in 2021, supported by the launch of our new partnership with BEA
in July. We launched a flagship innovative long-term savings product in June, which provides customers with the
flexibility to switch between multiple currencies as their needs evolve.
OPAT grew by 4 per cent, as underlying business growth and higher investment returns that resulted from an increase
in equity asset balances were partly offset by a normalisation of medical claims experience relative to the low levels
of 2020 and a small number of unusually large death claims. TWPI reduced as significant cohorts of long-term
participating policies started to reach the end of their premium payment terms and became fully paid; these in-force
policies have continued to generate OPAT.
THAILAND
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2021
609
90.0%
677
4,428
960
2020
469
71.0%
661
4,462
987
YoY CER
YoY AER
34%
30%
19.4 pps
19.0 pps
5%
2%
(1)%
2%
(1)%
(3)%
AIA Thailand achieved 34 per cent VONB growth in 2021. ANP increased by 5 per cent and VONB margin improved
by 19.4 pps due to a proactive shift in product mix to regular premium unit-linked and protection products.
Our market-leading agency business delivered excellent VONB growth, as we continued to focus on quality
recruitment and achieved double-digit growth in the productivity of agents from our differentiated Financial Adviser
programme. Our strategic bancassurance partner, Bangkok Bank, delivered double-digit VONB growth for the year,
driven by higher productivity of bank insurance specialists as well as increased sales of unit-linked products.
OPAT remained broadly stable as adverse lapse experience from our in-force portfolio and lower investment returns
offset underlying business growth.
050
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW SINGAPORE
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2021
356
64.7%
549
3,433
723
2020
330
63.4%
520
3,088
621
YoY CER
YoY AER
6%
1.4 pps
3%
8%
13%
8%
1.3 pps
6%
11%
16%
AIA Singapore delivered 6 per cent VONB growth in 2021. ANP grew by 3 per cent, as double-digit growth in our
agency channel was partly offset by a reduction in new business from our partnership distribution channel. VONB
margin improved by 1.4 pps as a result of reduced acquisition expense overruns compared to last year.
Leveraging our powerful digital tools, our differentiated Premier Agency strategy delivered an increase in the number
of active agents and improvements in agent productivity. The increased adoption of iSMART, our mobile application
supporting agents to leverage social media for leads generation, has helped generate over US$70 million of ANP
since launch. Our digital sales platform enables agents to convert leads seamlessly and has supported higher agent
productivity with a double-digit increase in average case size in 2021.
OPAT increased by 13 per cent, driven by growth in our in-force portfolio and increased investment returns.
MALAYSIA
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2021
283
57.3%
491
2,479
392
2020
222
59.9%
369
2,216
326
YoY CER
YoY AER
26%
27%
(2.5) pps
(2.6) pps
32%
10%
17%
33%
12%
20%
AIA Malaysia achieved very strong VONB growth of 26 per cent, supported by double-digit growth in both our agency
and partnership distribution channels. ANP grew by 32 per cent, driven by excellent growth in our Takaful business,
and VONB margin remained strong at 57.3 per cent.
In agency, we continued to focus on quality recruitment and achieved excellent double-digit growth in new recruits
in 2021. We have improved both the activity and productivity of our agents, with over 85 per cent of active agents
utilising our digital tools to manage their day-to-day activities. Our partnership channel delivered strong double-digit
VONB growth, driven by our exclusive bancassurance partnership with Public Bank Berhad.
OPAT grew by 17 per cent in 2021. As previously highlighted, a one-off provision for an industry-wide initiative to
identify and pay accumulated unreported death claims was made in the first half of 2020. Excluding this provision,
OPAT increased by 11 per cent.
051
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION OTHER MARKETS
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2021
511
35.9%
1,420
7,616
784
2020
514
38.4%
1,334
6,978
687
YoY CER
YoY AER
(4)%
(1)%
(2.9) pps
(2.5) pps
4%
4%
10%
6%
9%
14%
Overview
Our Other Markets segment recorded a 4 per cent reduction in VONB. After excluding the large one-off contribution
from CBA in Australia in the first quarter of 2020, VONB growth was positive in 2021, with growth in the first half
partly offset by a weaker performance in the second half, as stricter containment measures were imposed in a number
of markets due to a resurgence of COVID-19. OPAT increased by 10 per cent, as strong underlying business growth
across a number of markets was partially offset by increased mortality claims in Indonesia and the Philippines.
Geographical Market Highlights
Australia and New Zealand: In 2021, AIA Australia delivered double-digit VONB growth on a like-for-like basis
excluding the one-off contribution from CBA in the first quarter of 2020. Our group insurance business delivered
strong ANP growth as we renewed several large group insurance schemes.
AIA New Zealand reported excellent VONB growth, driven by a very strong performance from our IFA channel and a
reduction in acquisition expense overruns.
Cambodia: AIA Cambodia continued to execute its multi-channel distribution strategy. Our partnership distribution
delivered double-digit ANP growth despite disruptions from COVID-19 containment measures that were in place for
most of the year. In 2021, we entered into a new partnership with Prince Bank Plc and extended our partnership with
Cambodian Public Bank.
India: Tata AIA Life maintained our industry leading position in the pure retail protection market and achieved strong
VONB growth in 2021. We continued to grow our high quality differentiated Premier Agency as we expanded our
agency’s geographical footprint by opening 100 new digitally-enabled branches that operate completely without
paper. Our bancassurance channel delivered excellent growth as we enhanced our digital and remote-selling tools.
Our digital capabilities enabled us to engage and service the customers of our partners with seamless end-to-end
experiences. For example, our partnership with PolicyBazaar increased sales by 40 per cent in 2021 with over 50,000
cases sold by way of an end-to-end digital journey with tele-assistance.
Indonesia: AIA Indonesia’s VONB remained stable in 2021 compared to last year as the pandemic continued to cause
disruption to new business sales. As restrictions eased in the fourth quarter, we saw business momentum return
with positive month-on-month growth in VONB for both agency and our strategic bancassurance partnership with
Bank Central Asia. Our agency channel delivered very strong double-digit growth for the year, driven by a significant
increase in new recruits and higher utilisation of digital tools.
052
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW Myanmar: AIA Myanmar continued to build strong foundations for the long-term expansion of our business in this
market. Momentum began to return in the second half of the year as we focused on growing our distribution. In 2021,
we became the market leader by MDRT membership.
Philippines: AIA Philippines’ VONB reduced slightly compared with last year as a decline in the first half was partly
offset by year-on-year growth in both our agency and bancassurance channels in the second half of the year. In
agency, high adoption of iRecruit, our digital end-to-end recruitment platform, supported strong double-digit growth
in new recruits and we drove increased utilisation of digital tools amongst our agents. The increased adoption of
remote selling tools in our bancassurance channel also supported an improvement in productivity of our bank
insurance specialists.
South Korea: AIA Korea achieved double-digit VONB growth in 2021. Our direct marketing channel delivered strong
growth, underpinned by an increase in sales representatives compared to last year. We continued to enhance our
omnichannel distribution with SK Telecom, SK Inc. C&C and Samsung Card, resulting in an excellent increase in sales
in the second half compared to the first half.
Sri Lanka: AIA Sri Lanka delivered excellent VONB growth, driven by very strong performances across both our
agency and bancassurance channels. Our continued focus on supporting our agency force with enhanced digital
tools drove a strong growth in the number of active agents.
Taiwan (China): AIA Taiwan recorded a double-digit decline in VONB in 2021, as stringent containment measures
were implemented for the first time since the start of the pandemic and remained in place for the majority of the year
affecting sales across all channels.
Vietnam: AIA Vietnam’s VONB declined in 2021 as the implementation of strict mobility restrictions for the first time
since the beginning of the pandemic affected sales in the second half of the year, which more than offset growth
in the first half. We continued to enhance and drive adoption of our digital tools among our agents, resulting in
a double-digit increase in remote sales adoption. Our strategic bancassurance partnership with VPBank achieved
excellent VONB growth for the year and we launched our partnership with Tiki Corporation, a leading comprehensive
e-commerce platform in Vietnam, in December.
053
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION TECHNOLOGY, DIGITAL AND ANALYTICS
Our goal is to position AIA as the industry leader in the use of technology, digital and analytics (TDA), enabling us
to capture new growth opportunities, increase productivity, better connect with our customers and drive greater
efficiencies across the business. Rapid adoption and scaling of TDA throughout the organisation has been critical
in AIA’s successful navigation of the pandemic, helping us to continuously support our employees, customers,
distributors and partners.
AIA’s comprehensive investment programme in TDA is upgrading the capabilities of our business units to achieve
our vision as a simpler, faster and more connected organisation. Our progress accelerated in 2021, continuing
our shift to a world-class technology infrastructure that is efficient, scalable and agile. We are investing in digital
enablement tools and embedding data analytics throughout our business. Our TDA transformation is significantly
enhancing the experience of our stakeholders as they interact with AIA.
WORLD-CLASS TECHNOLOGY
AIA is adopting cloud technology at pace and by the end of 2021 over 70 per cent of our information technology
infrastructure was hosted in the public cloud, compared with 39 per cent a year ago. As we progress towards
our ambitious goal of 90 per cent cloud adoption, we are already well ahead of the global financial services and
insurance industry averages.
Our businesses in Mainland China, Hong Kong, Thailand and Singapore have all exceeded 70 per cent cloud
adoption, while our relatively young operation in Vietnam has reached 99 per cent, up from 54 per cent in January
2021. Across our markets we are achieving our key objectives of stability, efficiency and security as well as seeing
cost benefits emerge. Our ability to deploy big data and analytics platforms and drive automation at scale is
increasing, supporting our business growth in general and our geographical expansion in Mainland China in
particular.
We continue to focus on increasing the straight-through processing (STP) of buy, service and claim customer
journeys as we improve digitalisation and automation of operational processes. In December 2021, we processed
58 per cent of transactions automatically for the Group. Artificial intelligence (AI), robotic process automation
solutions and digitalisation of processes have supported impressive STP results in some of our markets. For
example, in December 2021, STP levels for customer service requests reached 91 per cent in Mainland China; full
end-to-end STP of new business processing in the Philippines was close to 70 per cent; and our Australia business
processed 75 per cent of minor health claims automatically.
DIGITAL ENABLEMENT
We have made significant enhancements to our agency digital platforms, driving increased adoption by agency
leaders and agents, supporting agency recruitment and raising agent productivity. We have deployed iRecruit,
our digital recruitment application, in all of our agency markets, and in 2021, rolled out significant enhancements
in Thailand, Indonesia, the Philippines and Vietnam. Overall adoption of iRecruit increased to 63 per cent among
agents and leaders. The upgraded functionality and content of our eLearning platforms have helped us deliver
innovative, engaging and tailored learning experiences for our agents with an adoption rate of 96 per cent.
054
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW We launched our integrated social media prospecting and content sharing capabilities in four markets in 2021,
embedded into our digital platforms to streamline the use of online channels for new customer lead generation.
Through this new platform, our agents delivered strong results with close to US$280 million of ANP generated
from more than two million sales leads for the Group. We plan to build on this success with further enhancements
and deployment across our other markets in 2022.
We continue to build digital and data-driven solutions to deliver a seamless end-to-end sales experience for our
bancassurance partners. We are enhancing their ability to generate leads digitally, contact customers online and
complete the sales journey either digitally or face-to-face with in-branch specialists. In 2021, over 2.8 million
leads were digitally generated through our strategic bank partners, enabling us to reach previously untapped
customers.
We are improving our self-service and digital claims capabilities for customers. In 2021, we launched nine new
customer-facing apps across our markets as we increased the number of services and features available online
to over 9.2 million registered customers across the Group. Customer engagement through digital channels has
continued to grow with 75 per cent of claims and 73 per cent of service requests submitted digitally in 2021. Our
focus on improving the customer service and digital experience has seen our apps achieve an app store rating of
4 or higher across all of our key markets.
In December, we launched One Experience in Mainland China, our integrated digital platform that combines policy
servicing with AIA’s Health and Wellness Ecosystem of services and curated content. The platform will transform
our customers’ experience through more personalised and targeted engagement as we build a lifetime affinity
with them. One Experience is also integrated into our agency digital platforms, providing enhanced leads and sales
opportunities for agents and more relevant and personalised recommendations for customers.
Our progress in digital enablement is delivering strong results for our customers, agents, partners and employees
and our achievements have helped AIA to be named Digital Insurer of the Year in 2021 by InsuranceAsia News.
ANALYTICS POWERING EVERYTHING WE DO
In 2021, we implemented over 100 individual use cases of analytics across our businesses as we develop and
industrialise the Group’s capabilities.
Our high-quality Premier Agency force is a key competitive advantage for AIA and we are enhancing its capabilities
with analytics embedded into the end-to-end agency management lifecycle. Our AI-driven career aptitude test
generates a comprehensive assessment and enables systematic identification of high-potential agents early in
their careers. This allows us to provide targeted and personalised career development programmes and support
the development of more high-performing agents more quickly. The increasing power of our analytics will help to
extend our agency differentiation, driving higher productivity and improved agent retention. We have seen strong
success in Mainland China, Hong Kong and Thailand and plan to extend these capabilities to other markets in
2022.
In Mainland China, Xiao Bang, our AI-powered personal assistant, handles outbound calls and more complex
two-way conversations with a growing portfolio of applications. Xiao Bang allows us to systematically engage
customers on a personal level at scale, delivering direct financial benefits such as supporting the collection of
nearly RMB2 billion in overdue premiums in the last two years. Xiao Bang won the 2021 Insurtech Initiative of the
Year in Mainland China awarded by Insurance Asia.
055
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION In Singapore we launched Claims EZ, a claims platform allowing customers to submit medical claims digitally. Using
AI and machine learning for automatic claims assessment, the engine auto-assessed almost all of AIA HealthShield
electronically-submitted claims, processed 60 per cent with no human intervention and paid over 55 per
cent of minor claims within 24 hours. Claims EZ has won several industry awards and has helped deliver a 20 per
cent improvement in Customer Effort Score for claims within one year.
CYBERSECURITY AND RESPONSIBLE USE OF ARTIFICIAL INTELLIGENCE
As we continue to leverage cloud technology and AI, and increase our use of digital and analytics across the Group,
we also continue to focus on the governance of their use, data protection and cybersecurity.
In 2021, AIA promulgated a Responsible Use of Artificial Intelligence Standard which details our principles on
the use and application of AI in both internally-developed or externally-sourced solutions. The standard has also
prescribed clear roles and responsibilities to effectively cascade requirements throughout the Group.
We maintained ISO 27001 certification in 2021 for our identity access management and cybersecurity operations
services on our security controls, including our data security and encryption standards. The scope of our
certification was also extended to cover cloud security operations.
056
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW COMPELLING PROPOSITIONS
AIA’s Purpose to help people live Healthier, Longer, Better Lives underpins everything that we do. Through
our compelling propositions we aim to create shared economic value, tying our financial success to community
success. We look to reward customers for taking actions that positively impact their health, help them seek the
best treatment and save more effectively to meet their financial needs through different life stages.
HIGH-QUALITY ADVICE IS CORE TO OUR PROPOSITIONS
The foundation of AIA’s compelling propositions is the high-quality advice that helps our customers select the
right products and services. Customers form a trusted advisory relationship with our Premier Agents and the
professional sales teams of our distribution partners, and this is a critical success factor underpinning our long-
term track record of delivery. We train and equip our advisers to provide ongoing and personalised advice as they
help our customers and their dependants with their evolving needs.
BEST-IN-CLASS HEALTH AND WELLNESS SERVICES INTEGRATED IN OUR PROPOSITIONS
Our customers also have access to services across the four components of AIA’s Health and Wellness Ecosystem,
covering all stages of their health journeys from prediction, through prevention and diagnosis, to treatment and
recovery.
AIA Vitality is fundamental to our shared-value insurance model, rewarding customers for living more healthily
and transforming the way they perceive life and health insurance. AIA Vitality is now active in 10 of our markets
following its launch in Indonesia in 2021. The relevance of AIA Vitality to our customers is reflected in the 45 per
cent growth in VONB from protection products integrated with AIA Vitality to US$633 million in 2021. The
combined membership of AIA Vitality and our wellness programme in Mainland China increased further to almost
2 million members at 31 December 2021.
We also continue to expand the personalised services integrated within the programme. For example, we
introduced an exclusive AI-powered food scoring and logging tool in five markets in partnership with Holmusk, a
global data science and healthcare technology provider. This tool helps us deepen our regular engagement with
and further improves our understanding of AIA Vitality members as they upload their daily nutrition. Since launch,
AIA Vitality members have uploaded more than a million food logs.
Rapid advances in healthcare technology and the increasing consumer desire to use digital health services driven
by the pandemic are combining to transform remote healthcare services. We are responding by making it easier for
our customers to access quality services. AIA Telemedicine, our primary digital healthcare support tool, enables
our customers to receive medical consultations by video on their mobile devices as well as prescription services,
medication delivery and referral to healthcare provider networks. AIA Telemedicine services are available in 10 of
our markets. In 2021, we continued to see a significant surge in the use of our services, with the overall number of
initial online telemedicine consultations up by 73 per cent.
Following launches in Cambodia, Myanmar and New Zealand during 2021, AIA now offers its Personal Case
Management in 12 markets, helping to manage serious medical conditions and support customers through
difficult times. The service provides our customers with access to leading global specialists for medical advice and
local medical teams for support. In 2021, 21 per cent of customers using this service in nine markets received a
refined diagnosis, 56 per cent had their initial treatment plan amended, and 71 per cent of unnecessary treatment
such as surgery was avoided, leading to an overall customer satisfaction rate of 94 per cent.
057
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION The AIA Regional Health Passport builds on our pan-Asian presence to provide customers with access to a wide
network of leading international hospitals across multiple healthcare hubs. Our customers enjoy the convenience
of a region-wide referral and appointment service and cross-border cashless payments. In 2021, we established
a regional service centre to enhance customer support across the seven markets where the AIA Regional Health
Passport services are available, following launches in Indonesia and Sri Lanka.
INTEGRATED SOLUTIONS TO MEET CUSTOMER NEEDS
We believe a key component of success in delivering our compelling propositions is making it easier for customers
to access our solutions and services. In December 2021, we launched the first release of One Experience, the
Mainland China version of our lifestyle super app. Since launch, One Experience has received a very high app store
rating of 4.8 and over 1.4 million users have registered on the platform.
Across Asia, we design our propositions based on our deep understanding of the evolving needs of our existing and
potential customers. For example, we have developed a wide range of solutions to meet the increasing needs for
retirement savings driven by ageing societies. A key element of these retirement propositions is the integration of
health and wellness services to address their pre- and post-retirement needs.
In July 2021, AIA China launched its new total retirement solution, You Zi Zai, that combines insurance solutions,
support services and planning tools to deliver a unique and compelling proposition. With a design driven by our
in-depth customer research, You Zi Zai aims to change how Chinese families plan for their retirement. Prior to
launch, we equipped our Premier Agents with new digital planning tools that identify retirement risk exposures,
compile personalised gap analysis and deliver tailored recommendations for our customers. This total retirement
solution has been well received by our customers and it has generated a strong uplift to our VONB in Mainland
China since launch.
Our new retirement income proposition in Singapore provides peace of mind to customers looking to protect their
savings. This new unit-linked product leverages our top-performing funds on the AIA Regional Funds Platform,
powered by leading global fund managers and oversight from AIA’s experienced investment team. We have
enhanced our digital planning tools to support our Premier Agents as they tailor these solutions to each customer.
ONGOING TRANSFORMATION FROM PAYOR TO PARTNER
As a pan-Asian life and health insurer, AIA is uniquely positioned to deploy our technology, digital and analytics
capabilities to deliver healthcare solutions with greater convenience, expanded access and lower costs to
customers while easing pressure on traditional healthcare delivery models.
In February 2022, we announced the establishment of new business, Amplify Health, in partnership with Discovery
Limited (Discovery), our long-standing partner in AIA Vitality. Our vision is for Amplify Health to be a leading
digital health technology and integrated solutions business, transforming how individuals, corporates, payors and
providers experience and manage health insurance and healthcare delivery, improving the health and wellness
outcomes of patients and communities across Asia. Amplify Health will accelerate AIA’s health and wellness
strategy, leveraging an array of health technology assets, proprietary data analytics and extensive health expertise
transferred from Discovery, a global leader in value-based healthcare.
058
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW LEADING CUSTOMER EXPERIENCE
A key strategic priority for AIA is to deliver a seamless omnichannel customer experience with best-in-class
engagement. We believe that distinctive, personalised and meaningful experiences for our customers will generate
a range of business benefits, including significant improvements in customer retention, increased sales leads,
cross-sales and conversion, and productivity gains for our distribution channels. To deliver a leading customer
experience we are reorienting our business around customer journeys and leveraging the power of TDA.
A critical driver in our transformation is the feedback from our customers through a comprehensive Group-wide
measurement framework, ensuring that we prioritise the changes that make the most difference.
DRIVING SATISFACTION WITH CUSTOMER INSIGHTS AND RAPID TURNAROUND
In Mainland China, insights from survey with around 300,000 customers over the past four years covering our
buy, service and claim journeys have driven the transformation of our customer experience. Increasingly we
are applying data analytics and AI in our key insurance processes, helping to simplify the underwriting process,
automate the claims process and embed voicebots into both our inbound chat and outbound call services. These
enhancements have supported AIA China to remain the insurance market leader for overall Net Promoter Score
and Customer Effort Score for the last four years.
Customer research across the Group is clear that faster transaction turnaround times and claims experience are
key drivers of customer satisfaction. Our TDA programme is driving significant improvements and, in December
2021, close to 60 per cent of all customer transactions across the Group were completed on the same day. Some
of our markets have delivered outstanding performance. In December, AIA Korea completed 98 per cent of service
requests and AIA Thailand resolved 76 per cent of minor health claims within the same day.
LEVERAGING OUR TRUSTED RELATIONSHIP WITH CUSTOMERS
Understanding our customers better allows us to deliver more targeted and personalised services and product
propositions. AIA Hong Kong’s AI-powered 3D Protection Index shows a holistic and engaging view of an individual’s
financial protection coverage and offers personalised recommendations through AIA Connect, our customer app.
In April 2021, AIA Thailand helped address vaccination concerns with a free health insurance product for existing
customers that covered side effects of COVID-19 vaccines and provided cover for loss of income and mortality.
More than 17,000 customers signed up for this cover on the day of launch and, using this as a trigger to review
protection coverage, we generated more than US$20 million of new premiums from cross-sales within three
months.
Across the Group, our focus on offering additional solutions to new and recently-acquired customers generated
more than US$250 million of incremental VONB in 2021, an increase of 10 per cent on the previous year.
The long-term relationships that our agents form with customers are an important source of new business for
AIA as they help to address evolving protection needs. Our enhanced data-driven existing customer marketing
helps us to connect with customers at the right time with personalised propositions. In 2021, data-driven leads
accounted for 80 per cent of our total new business from cross-selling additional products to existing customers,
up from 61 per cent in 2020. We also increased usage of social media and messaging by a factor of 10 in 2021,
helping to generate more than three million leads digitally and more than 20 per cent growth in new business from
cross-sales.
059
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION ORGANISATION OF THE FUTURE
AIA’s strong track record of performance has been achieved through our unique culture of empowerment and
focus on developing employee capabilities. To support our strategic ambitions, we are transforming AIA into a
simpler, faster, more connected organisation to support the delivery of our future growth ambitions.
Our organisation and people strategy enables us to attract, retain and develop outstanding people, making AIA an
employer-of-choice across our markets. Our annual employee engagement survey demonstrates our continued
positive employee sentiment. In 2021, 97 per cent of our employees responded to the survey and the Group’s
employee engagement scores improved to place AIA in the 90th percentile of Gallup’s global finance and insurance
industry benchmark.
SHAPING A SIMPLER, FASTER, MORE CONNECTED AIA
To reinforce our empowerment culture and support the delivery of our strategic priorities, we are strengthening
our operating models and evolving the way that we work. In the past twelve months we have focused on designing
structures and working models across eight of our businesses to enable our employees to deliver on our strategic
priorities. To enable faster execution and innovation, we are redesigning business processes to support a human-
centric workplace, setting up new Centres of Excellence to advance critical capabilities and best practices, and
adopting agile ways of working.
Agile working drives real impact in the way we deliver our most critical strategic priorities through empowered
teams that are digitally-led, customer experience-driven and growth-oriented. These new ways of working are
already helping us to realise value more rapidly, focus on customer needs and innovate at pace. In time, we expect
hundreds of people across the Group will be part of these teams, spearheading a new way of working at AIA.
BUILDING A FUTURE READY WORKFORCE
The skills required in the life insurance industry and for the future of work are evolving quickly. We are focused on
attracting talent with the critical skills we require, incubating capabilities in core business lines, strengthening our
approach to capability building and designing new academies to reskill employees. In particular, between 1 July
2020 and 31 December 2021, we invested in technology, digital and analytics capability, resulting in an increase
of 29 per cent in our overall number of employees in this area.
Additional details about our people-related strategies and initiatives supporting our Organisation of the Future are
covered in the Our People section on page 68.
Notes:
(1) Throughout all sections of the Business Review, growth on a “like-for-like basis” refers to the exclusion of the 5 per cent withholding tax applied since July
2020 for AIA China and the exclusion of the one-off contribution from CBA in the first quarter of 2020 for Other Markets.
(2) Throughout the Distribution section, VONB and VONB margin by distribution channel are based on local statutory reserving and capital requirements and
exclude pension business.
(3) AIA’s Other Markets VONB and ANP results include the results from our 49 per cent shareholding of Tata AIA Life Insurance Company Limited (Tata AIA
Life). The IFRS results for Tata AIA Life are accounted for using the equity method. For clarity, TWPI does not include any contribution from Tata AIA Life.
The results of Tata AIA Life are accounted for the twelve-month period ended 30 September 2021 and the twelve-month period ended 30 September
2020 in AIA’s consolidated results for the full year of 2021 and the full year of 2020, respectively.
(4) Growth rates and commentaries are provided on a constant exchange rate (CER) basis.
(5) Overall number of employees includes full-time and part-time as well as employees on contract, and excludes interns, agents of the Group and employees
of our joint venture, Tata AIA Life.
060
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW FINANCIAL AND OPERATING REVIEW
RISK MANAGEMENT
OVERVIEW
The Group recognises the importance of sound risk management in every aspect of our business and for all
stakeholders. For our policyholders, it provides the security of knowing that we will always be there for them. For
investors, it is key to protecting and enhancing the long-term value of their investment. Finally, for regulators, sound
risk management supports industry growth and enhances the public’s trust in the industry.
While effective risk management is vital to any organisation, it goes to the core of a life insurance business where
it is a fundamental driver of value. The Group’s Risk Management Framework (RMF) does not seek to eliminate all
risks but rather to identify, understand and manage them within acceptable limits in order to support the creation of
long-term value.
The Group’s RMF is built around developing an appropriate and mindful risk culture at every level of the organisation
in support of our strategic objectives. The RMF provides business units with appropriate tools, processes and
capabilities for the identification, assessment and, where required, upward referral of identified material risks for
further evaluation.
The Group’s RMF consists of the following key components:
• Risk Governance;
• Risk Culture;
• Risk Strategy;
• Risk Underwriting;
• Risk Control; and
• Risk Disclosure.
RISK GOVERNANCE
THREE LINES OF DEFENCE
The Group’s Risk Governance framework is built on the “Three Lines of Defence” model. With regard to risk
management, the objective is to ensure that an appropriate framework is in place, including an independent system
of checks and balances, to provide assurance that risks are identified, assessed, managed and governed properly.
The framework clearly defines roles and responsibilities for the management of risk between Executive Management
(First Line), Risk & Compliance (Second Line) and Internal Audit (Third Line) functions. While each line of defence is
independent from the others, they work closely to ensure effective oversight.
The First Line is made up of the business decision-takers who are the Risk Owners and are responsible for ensuring
that effective and appropriate processes are in place at all times to effectively identify, assess and manage risk in
a manner consistent with the RMF. In particular, the amount of risk taken at each level of the organisation must be
consistent with both the Risk Appetite of the Group and the relevant business unit. The First Line is also responsible
for operating an effective control environment, including mitigation of risks through implementation of controls.
Initial identification, assessment and management of risk is the responsibility of executives operating in the First
Line. Decisions regarding activities deemed to have significant risks attached or that are outside the limits delegated
to a given level of management are referred to a senior Group executive or, where appropriate, through the Group
Chief Executive and President to the Risk Committee of the Board and, where appropriate, to the full Board.
061
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION The Second Line consists of the Group Chief Risk Officer (CRO), business unit CROs, and the Risk & Compliance
function. This group ensures that the RMF remains appropriate and effective with respect to the risk profile and
operations of the Group. This group is independent of, but works closely with, the First Line to ensure that risks are
being managed appropriately within the Risk Appetite of the Group and the relevant business unit. Whilst the First
Line is empowered with decision-making authority, the Second Line is responsible for overseeing First Line activities
and ensuring that decisions are subject to an appropriate level of governance, as well as ensuring that the Group
adheres to its own high standards.
The Third Line of Defence (Third Line) is the Group Internal Audit (GIA) function, which reports to the Audit Committee
of the Board. GIA is responsible for providing independent assurance over the effectiveness of the RMF, including key
internal controls, and makes recommendations based on the audit findings.
The Three Lines of Defence converge at the Board, which retains overall responsibility for the Group’s RMF.
RISK COMMITTEE STRUCTURE
The Group’s Risk Committee structure is designed to:
• ensure consistent application of the RMF across the Group;
• provide streamlined processes for the timely identification, assessment and escalation of risk issues;
• provide objective analysis of risk issues enabling informed decision-making; and
• ensure discussion and challenge in relation to risk issues in suitable forums leading to optimal outcomes.
AIA Group Limited Board
Audit
Committee
Risk
Committee
Remuneration
Committee
Nomination
Committee
Operational Risk
Committee
Financial Risk
Committee
The Board
The Board retains overall responsibility for oversight of the Group’s risk management activities. In this regard the
Board sets the Group’s Risk Appetite, approves the RMF (including amendments or refinements from time to time)
and monitors material Group-wide risks. In fulfilling these responsibilities, the Board is supported and advised by the
Risk Committee.
Risk Committee
The Risk Committee oversees risk management across the Group and advises the Board on all risk-related issues
requiring Board attention. The members of the Risk Committee are all Board directors, with the majority of members,
including the Committee Chairman, being Independent Non-executive Directors. The Risk Committee meets at least
four times a year.
062
RISK MANAGEMENTAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW Operational Risk (ORC) And Financial Risk (FRC) Committees
The Risk Committee is supported by two Executive Risk Committees which, between them, oversee the management
of all risks. The ORC is chaired by the Group Chief Risk Officer and oversees risks associated with failure in internal
processes, personnel and systems or from external events. The FRC is chaired by the Group Chief Executive and
President and oversees risks associated with Financial, Insurance and Investment activities. The FRC and ORC each
meet at least four times a year.
The above committee structures are replicated at the business unit level where applicable.
RISK CULTURE
The RMF recognises the importance of risk culture in the effective management of risks. Risk Culture defines the
Group’s attitude to risks and ensures its remuneration structure promotes the right behaviour.
ACCOUNTABILITY
A key component of the Group’s risk culture is accountability. The First Line of Defence (First Line) generally consists
of business unit management and is responsible for managing risks associated with their businesses. The Risk &
Compliance function makes up our Second Line of Defence (Second Line) and is headed by the Group CRO who
has overall accountability for the Risk & Compliance function across the Group. Within each business unit, the
business unit CRO is a senior position with a primary reporting line into the Group CRO or Regional CROs, and a
secondary reporting line to the business unit Chief Executive Officer (CEO). This structure ensures independence
of the Second Line while ensuring that business unit CROs have full access to local business discussions so as to
provide risk management perspectives and insights. The Group CRO is a member of the Group Executive Committee
while business unit CROs are, in most cases, also members of their respective business unit Executive Committees.
REMUNERATION
The Company’s executive remuneration structure ensures appropriate consideration of the RMF within a strong
performance-oriented culture. This is supported by a performance management system where all staff are measured
on ‘how’ as well as ‘what’ they deliver. This structure places significant emphasis on conduct as well as achievement,
and is consistent with our fundamental Operating Philosophy of “Doing the Right Thing, in the Right Way, with the
Right People... the Right Results will come”.
RISK STRATEGY
Risk Strategy describes the types of risks, and how and to what extent they are taken in order to pursue the Group’s
strategic objectives. The Group Risk Appetite Framework (RAF) establishes the quantum and nature of risks the
Group is prepared to take to achieve its strategic objectives.
• The Risk Appetite Statement (RAS) is an overarching statement on the enterprise’s attitude to risk;
• Risk Principles and Risk Tolerances are qualitative statements and quantitative metrics that expand and validate
the RAS; and
• Risk Controls and Risk Limits are used to manage specific risks.
RISK APPETITE STATEMENT
The Group has adopted the following RAS:
“The amount of risk taken by AIA in the ordinary course of its business will be sufficient to meet its customers’
reasonable requirements for protection and benefits while ensuring that the level and volatility of shareholder returns
are in line with a broadly-based risk profile appropriate to an Asia-Pacific ex-Japan-focused life insurance company.“
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ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION RISK PRINCIPLES AND RISK TOLERANCES
The RAS is supported by five Risk Principles:
Risk Principles
Regulatory Capital
Financial Strength
“AIA has no appetite for regulatory non-compliance and as such will ensure that we hold
sufficient capital to meet our current statutory minimum solvency in all but the most
extreme market conditions.”
“AIA will ensure the Group’s ability to meet all future commitments to our customers, both
financial obligations and in terms of the promises we make to them. We will maintain
sufficient capital to support a Financial Strength Rating that meets our business needs.”
Liquidity
“AIA will maintain sufficient liquidity to meet our expected financial commitments as they
fall due.”
Earnings Volatility
Business Practice
“AIA will seek to deliver reported operating earnings consistent with expectations and will
implement policies, limits and controls to contain operational risks, risk concentrations and
insurance risks within reasonable tolerances.”
“AIA will uphold high ethical standards and will implement sound internal controls to
minimise the downside risk from the impact of any operational failures within reasonable
tolerances.”
Further granular risk limits, measures, indicators and tolerances are used to monitor and control specific risk types.
RISK LANDSCAPE
The Group maintains a detailed risk taxonomy to ensure all risks are identified and systematically managed. These
risks are categorised in accordance with the risk landscape shown below.
Operating Risks
Financial Risks
Liability Risks
Operational Risk
Business Risk
Structural Risk
Investment Risk
Insurance Risk
Conduct Risk
Strategic Risk
Property Risk*
Mortality Risk
Execution, Delivery &
Process Management Risk
Business Environment
Equity Risk*
External Event Risk
Lapse Risk
Credit Default Risk*
Financial Crime Risk
Expense Risk
Credit Spread Risk*
Disability / Morbidity
Risk
Pandemic &
Catastrophe Risk
Reinsurance
Counterparty Risk
Fraud Risk
People Risk
Information Risk
Technology Risk
Legal &
Compliance Risk
FX Risk
Investment
Counterparty Risk
Interest Rate Risk
Liquidity Risk
* Risks may be structural, if the assets are used
to back policyholder liabilities, or investment, if
related to shareholder positions.
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064
RISK MANAGEMENTAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW
Principal Risk
Definition
Operational Risk
Business Risk
Structural Risk
Investment Risk
Insurance Risk
The risk arising from internal processes, personnel and systems or from external events
which may result in a direct or indirect business impact. This includes potential legal or
regulatory sanctions, financial loss, or loss of reputation the Group may suffer as a
result of a failure (or perceived failure) to comply with applicable laws, regulations or
industry standards.
The risk of loss, lower than anticipated or forgone business profits arising from greater-
than-expected business expenses or a reduced revenue base. This may arise due to
internal factors such as the business strategy, or from implications of the wider business
environment over the planning horizon.
The risk arising from changes in price, or volatility, of assets relative to the value of the
liabilities. This includes the sensitivity of the balance sheet to market movements, such as
foreign exchange and interest rates, as well as the ability to meet financial obligations, such
as claims, debt servicing and dividends, when due.
The risk of adverse market movements in assets, as well as indirect exposure through
default of a counterparty, leading to a reduction in surplus.
The risk of adverse movements in the value or trend of insurance liabilities arising from the
biometric risks underwritten by the Group. The risk may manifest gradually over time or
more suddenly from shocks or extreme events. Insurance risk includes changes to actuarial
assumptions regarding future experience for these risks.
RISK UNDERWRITING
The Group has a robust process that provides sufficient information, capability and tools to manage its key risks.
Risks which the Group proactively accepts are identified, quantified and managed to support the creation of long-
term value.
IDENTIFICATION
Timely and complete identification of risks is an essential first step to the risk management process. The Risk &
Compliance function has developed a systematic process to identify existing and emerging risks in the business
units. The risk landscape enables a consistent identification and classification of existing and emerging risks inherent
in business activities.
QUANTIFICATION
Quantification of risk is important in establishing the level of exposure and in determining the appropriate management
actions within the Group’s Risk Appetite. Specific approaches to quantifying risk are applied depending upon the
nature of the risk, including regular capital assessments, and stress and scenario testing.
UNDERWRITING DECISIONS
Risks are evaluated against approved risk tolerances to ensure implications on risk profile are understood and
appropriately considered in decision-making.
REVIEW AND MANAGEMENT
Executives working in the First Line are responsible for the execution of appropriate actions and other risk mitigation
strategies to transfer, mitigate or eliminate risks considered outside of risk tolerance. They are also responsible for
the timely escalation of material risk developments.
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ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION RISK CONTROL
Risks which the Group seeks to mitigate are managed through an effective internal controls system to maintain
exposures within an acceptable residual level. The Operational Risk and Control Framework (ORCF) has been
designed to ensure that the Group operates in accordance with the expectations of stakeholders. A primary
component of the ORCF is the Risk and Control Assessment (RCA), which is a regular evaluation of the business’
operational risks and control effectiveness to ensure that information and perspectives on the internal control
environment are appropriately considered.
RISK DISCLOSURE
The Second Line is responsible for monitoring First Line activities and reporting to the appropriate Risk Committees
the performance of the First Line against risk metrics and limits defined in the Risk Appetite. Information is gathered
from underlying systems and provided to the Board, respective Risk Committees and other executive management
to inform key decision-making.
Ongoing monitoring of the RMF is undertaken to support an ongoing evaluation of the Group’s risk profile, compliance
status and overall effectiveness of the RMF. The overall RMF is reviewed by the Board on an annual basis to confirm
its continued appropriateness. In addition, to ensure the effectiveness of the Risk Management Process, an Own Risk
and Solvency Assessment (ORSA) is reported to the Risk Committees for annual review.
EXECUTION OF THE RMF
The Group has embedded its RMF into key business processes and decision-making, with the following
priority areas:
• Product lifecycle and approval: in evaluating the launch, revision and ongoing management of insurance
products, the Group considers the potential financial and operational risks involved;
• Strategic planning: the Group undertakes an annual planning process to develop and set its strategy and
corporate objectives. The Risk & Compliance function assesses the impact of potential strategies on the Group’s
risk profile and ensures that the strategies selected are in line with its Risk Appetite;
Investment management: whilst the Group seeks to realise positive returns, we carefully manage risks arising
from our asset portfolio to ensure AIA maintains the financial flexibility needed to fund new business growth
opportunities, support its planned dividend policy, pay claims and withstand capital market (or other) stress
conditions;
•
• Structural management: the timing and value of assets are matched with corresponding liabilities to ensure
sufficient resources are available to meet liabilities as they fall due. Our asset allocation strategy is driven by the
liability matching approach, which seeks to ensure that structural risks are managed carefully; and
Internal Control: to ensure potential operational and compliance risk exposures arising from day-to-day business
activities are subject to appropriate control and management within our Risk Appetite, the Group has embedded
a robust approach to internal control as part of its ORCF.
•
066
RISK MANAGEMENTAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW FINANCIAL AND OPERATING REVIEW
REGULATORY AND INTERNATIONAL
DEVELOPMENTS
COMFRAME AND INSURANCE CAPITAL STANDARD (ICS)
Since 2019, the International Association of Insurance Supervisors (IAIS) has applied ComFrame, the Common
Framework for the Supervision of Internationally Active Insurance Groups (IAIGs). Pursuant to ComFrame, IAIGs are
identified as insurance groups that meet minimum requirements with regard to the size and geographical footprint
of their operations. The Group has accordingly been designated an IAIG.
In 2020 the IAIS began the first of two phases in the development and implementation of the ICS. Under the first
phase, a “Reference ICS” is being assessed during a five-year Monitoring Period for reporting privately to group-wide
supervisors. It is proposed that the second phase, beginning in 2025, will include implementation of the ICS as part
of prescribed group capital requirements. The IAIS is also collecting data on the “aggregation method” (AM), an
alternative proposed by US regulators, that would define group solvency by referencing the local regimes to which
a group is subject. The IAIS will make a determination by the end of the Monitoring Period whether the AM can be
considered to produce “comparable outcomes” to the Reference ICS and therefore be used in its place.
GROUP-WIDE SUPERVISION (GWS)
The Company was designated a “designated insurance holding company” under the GWS framework on 14 May
2021. The GWS framework was developed to align with international standards and practices to supervise Hong
Kong-domiciled IAIGs and is reflective of the requirements of ComFrame. Under the GWS framework, the Hong
Kong Insurance Authority (HKIA) has direct regulatory powers over the Company including powers to approve a
shareholder controller, a chief executive, a director and a key person in control function to hold a specified position,
and powers to intervene, inspect and investigate.
HONG KONG RISK-BASED CAPITAL (HKRBC) REGIME
The HKIA is in the process of developing amendments to the Hong Kong Insurance Ordinance (HKIO) to cater for the
new HKRBC regime with an effective date of 1 January 2024. On 28 December 2021, the HKIA released a circular
setting out requirements for insurers that are “sufficiently advanced” in their preparations to adopt the HKRBC regime
at an early date and the Group submitted an application for early adoption of the HKRBC regime for AIA International
Limited, our principal operating entity in Hong Kong. The application is currently under review by the HKIA.
BEPS 2.0
AIA continues to closely monitor developments in respect of the tax policy work led by the Organisation for Economic
Co-operation and Development (OECD) on the “Two-Pillar Solution to Address the Tax Challenges Arising from the
Digitalisation of the Economy”, a phase of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project that is
commonly referred to as “BEPS 2.0”, and constructively engages with governments and the OECD.
On 20 December 2021, the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) published draft model
rules to give effect to Pillar Two, which are intended to serve as a template that participating jurisdictions can
translate into domestic law. The Inclusive Framework has agreed that participating jurisdictions should enact these
rules into law in 2022, with the majority of the rules to be effective from 2023.
BEPS 2.0 is likely to adversely impact AIA’s effective tax rate, however a number of material areas remain unclear.
067
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION OUR PEOPLE
At AIA, we firmly believe our greatest asset is our people (1). They span multiple geographies and communities,
and make up the culture of our business, delivering on our Purpose to help millions of people across Asia to live
Healthier, Longer, Better Lives. Our organisation and people strategy enables us to attract, retain and develop
outstanding people, making AIA an employer-of-choice across our markets.
Nurturing and growing our culture, building leaders and workforce capability, and supporting and developing our
people so that they can achieve their potential are key organisation and people priorities for AIA.
NURTURING OUR CULTURE
AIA has an unparalleled history of operation in Asia. As we embark on our second century as an organisation, and
in the context of the current global pandemic, we are mindful that our culture brings us together and sets us apart.
AIA is focused on nurturing a culture of empowerment balanced with accountability. Leaders are given the tools and
autonomy to make decisions within the guidelines set and monitored by our Group Office.
In the first half of 2021, we evolved our Leadership Essentials framework to reflect the behaviours and mindsets
required by AIA today and in the future. Our three deep-rooted Leadership Essentials of Clarity, Courage and
Humanity provide a compass that guides each of us, regardless of where we are and what we do. Our Leadership
Essentials remain at the core of how we work with each other and will continue to shape employee development.
Trust is the foundation of all interactions with our people, customers, and external stakeholders. We hold ourselves
to the highest professional standards as defined in AIA’s Code of Conduct, which outlines how we maintain this trust
and reflects our Operating Philosophy. Our belief is that “Doing the Right Thing, in the Right Way, with the Right
People... the Right Results will come”. The Code of Conduct provides clear guidance on how to conduct business at
all times, by embedding ethics and strong risk management in all the decisions made by AIA employees.
EMPLOYEE ENGAGEMENT
Ensuring that we offer a collaborative and inclusive workplace that prioritises employee engagement is a top priority
for AIA. To help us monitor levels of engagement across our business units and functions, each year we conduct the
Gallup Q12 employee engagement survey. It provides meaningful input to allow for the development of strategies to
address areas requiring improvement, with the goal of building on our strong levels of engagement.
In 2021, 97 per cent of our people responded to the survey and the Group’s employee engagement scores improved
to place AIA at the 90th percentile of Gallup’s global finance and insurance industry benchmark. We are proud that
our employee engagement levels are in the top quartile of this benchmark for the fifth consecutive year.
BUILDING FUTURE LEADERS
AIA is committed to developing strong internal leadership capability, with a succession pipeline that drives sustainable
business growth and shapes our organisation for our people and customers.
LEADERSHIP DEVELOPMENT
We continue to provide leading talent development programmes through the AIA Leadership Centre (ALC), our
world-class learning facility in Bangkok, Thailand. The ALC collaborates with world renowned business schools
and consulting firms to deliver customised programmes to our senior leaders, top agency leaders and key partner
executives, with a clear focus on AIA’s strategic and governance priorities. We are proud of the progress made in
2021 in delivering many of our leadership programmes virtually, enabling our development strategies to continue to
build momentum.
068
AIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW During the last three years, we have taken significant steps in strengthening our approach to leadership development
by rolling out “SPARK”, a bespoke and in-depth leadership programme for our most senior leaders. In addition, we
have recently rolled out two further signature leadership programmes targeted at additional leadership segments:
“Leading Across Boundaries” and “Voyage”.
SUCCESSION AND ORGANISATION PLANNING
Our annual Group Organisation and People Review process identifies different talent segments to enable leaders to
plan for the succession of all key leadership roles. The success of our targeted approach to talent development and
succession planning continues to be evidenced by the many examples of internal promotions into key leadership
roles across the Group.
At the same time, we continue to enrich our leadership pipeline by attracting top leadership talent from different
backgrounds, with the skills needed to shape and drive our future organisation.
BULDING A FUTURE READY WORKFORCE
Building workforce capability and developing our people so they can achieve their potential is a key priority for AIA
and is critical for us to fulfil our strategic ambitions.
We continue to invest in attracting talent and incubating capabilities in core business lines, strengthening our
approach to capability building and designing new academies to reskill employees.
Between 1 July 2020 and 31 December 2021, we invested in technology, digital and analytics capabilities, resulting
in an increase of 29 per cent (2) in our overall number of employees in this area. This material and ongoing investment
supports our strategy in these areas and the delivery of compelling propositions and leading experiences for
our customers.
LEARNING AND DEVELOPMENT
Our learning culture actively supports people in their current roles, while providing a platform for growth and
development within AIA. Our focus on learning is a key part of our ambition to make sure our people can reskill,
upskill, work more flexibly, and adapt to the changing world of work. We take a holistic approach to learning and
development that includes knowledge and skills accumulated from on-the-job experiences, mobility, collaborative
projects, structured virtual lessons, and digital self-learning.
To ensure that we continue to develop talent for the future, we continually research the skills and knowledge needs
of our industry, review feedback from our employees, and design programmes to address these needs. In addition,
our people are required to regularly complete mandatory training on critical topics.
We have launched, and are in the process of designing, new programmes to incubate new talent capabilities in core
lines of business across the Group and to reskill employees for new roles to support our organisation, including:
• A Group-wide digital learning journey, with over 20 modules focused on technology, digital and analytics, to
accelerate capability and drive a digital culture across the business.
• New academies to develop capabilities needed for our Organisation of the Future, such as “Agile”, “Analytics” and
“Design” programmes to help re-skill for critical roles and upskill existing talent.
Notes:
(1) As at 31 December 2021, AIA had a total of 23,981 employees, which includes full-time and part-time as well as employees on contract, and excludes
interns, agents of the Group and employees of our joint venture, Tata AIA Life.
(2) Includes full-time and part-time employees as well as employees on contract, and excludes interns, agents of the Group and employees of our joint
venture, Tata AIA Life.
069
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Digital content and delivery methods play an important role in shaping a culture of continuous learning at AIA. All
of our business units provide their employees with access to our Learning Hub, an online platform which provides
access to thousands of digital learning courses.
EMPLOYEE MOBILITY
We strongly believe that career mobility and assignments in different business units or functions provide our
employees with new opportunities. These assignments serve as platforms to learn new skills, and help develop the
individual’s AIA network.
EMPLOYEE COACHING AND INTERNSHIPS
We encourage our employees to expand their networks, seek guidance and foster communications across different
departments and seniorities.
Across our business units, we also offer development opportunities for hundreds of interns. Our programmes provide
interns with first-hand experience of what a career at AIA is like and an opportunity to learn critical skills in a fast
moving and customer focused environment. They also provide us with a great opportunity to identify future talent for
our business.
RECOGNISING AND REWARDING OUR PEOPLE
Robust dialogues on individual, and team progress are part of the ongoing performance development process at
AIA. Our Performance Development Dialogue programme is designed to enable managers to continually assess the
performance, impact and behaviours of their team and recommend development activities to help meet defined
career objectives. The Performance Development Dialogue focuses on What employees and / or their teams have
accomplished and, just as importantly, How they achieve their goals.
We provide competitive, fair and equitable total rewards programmes that use a combination of market competitive
financial and non-financial rewards to attract, engage and retain diverse talent while motivating them to help
execute our business goals. We believe that our existing reward programmes are well received by employees for
their simplicity, transparency, and market alignment.
In addition, our Employee Share Purchase Plan provides our employees the opportunity to purchase AIA shares and
receive ‘matching shares’ over time during their employment with us.
EMBEDDING OUR PURPOSE
The health and well-being of our people and their families is a key priority for the Group. Our Group-wide benefits and
workforce well-being programmes help our employees and their families live Healthier, Longer, Better Lives through
a range of flexible benefits tailored to local circumstances and employee needs. We encourage employees to stay
active, understand their health profile and take steps to safeguard their well-being. Our business units offer a range
of benefits suited to local needs, which may include flexible working, discounted gym memberships, other sporting
and recreational facilities, and mothers’ rooms.
In 2021, we continued to strive to provide a safe and secure environment for our employees during the pandemic.
Many of our business units operated remote working or flexible working arrangements to protect our employees,
families, and communities. We also continued to provide virtual learning, resources and programmes to help support
our employees.
070
AIA GROUP LIMITEDOUR PEOPLEFINANCIAL AND OPERATING REVIEW SUPPORTING A DIVERSE AND INCLUSIVE CULTURE
AIA’s diversity, comprising talent from a wide range of backgrounds, is one of our key strengths. We foster an inclusive
workplace and encourage open, constructive dialogue. We believe in actively embracing and celebrating differences.
Diversity can be as much of a strength as the characteristics that unite us. Across our markets, we actively encourage
and seek out diverse perspectives because we believe that this results in greater innovation, better decision-making,
increased adaptability, and improved problem-solving.
As part of their orientation, all employees joining AIA are required to complete training on the Code of Conduct,
which includes our approach to inclusion and non-discrimination. In addition, we have an anti-harassment policy and
e-learning module for all employees, outlining expected workplace conduct and professionalism, including channels
for escalation. In line with our Code of Conduct, AIA has zero tolerance for discrimination or harassment in any form,
including on the basis of race, colour, religion, sex, nationality, age, disability, military service, marital status and
sexual orientation.
We strive to provide an inclusive workplace and are proud to be an employer of choice for women across the region.
Women represent 58 per cent of our employee population (3) and 42 per cent of our senior leaders across the Group
as at 31 December 2021.
We recognise the importance of understanding different generational needs when shaping our policies and practices,
and we aim to ensure that we create an inclusive workplace for all age groups. As at 31 December 2021, 65 per cent
of our employees are Gen Y and Gen Z (4).
We also believe that different cultural and national backgrounds enrich AIA’s social fabric. As at 31 December 2021,
over 70 nationalities are represented across AIA. AIA also values diverse perspectives for effective governance and
decision making, with our Board representing different nationalities and ethnicities, as well as a range of educational
backgrounds and experience.
RECOGNISED AS AN EMPLOYER OF CHOICE
In 2021, our continued focus on our people has received several local and global accolades, including:
• AIA Group was named in the Forbes “World’s Best Employers” list.
• AIA China was awarded the “Top Employer China” by Top Employers Institute.
• AIA China was awarded “Best Employers” by Kincentric.
• AIA China was awarded the “Employer Excellence of China” by 51job.com.
• AIA Thailand was awarded the “Top Employer Thailand” by Top Employers Institute.
• AIA Malaysia was voted as “Graduates’ Top 25 Preferred Employer in 2022” by Graduates Choice Award.
• AIA Malaysia was the insurance sector winner of “Graduate Employer Of The Year”, and AIA Shared Services,
Malaysia, was the BPO and shared services sector winner of “Graduate Employer Of The Year”, by GTI Media.
• AIA Singapore was the insurance and risk management sector winner in “Singapore’s 100 Leading Graduate
Employers” by GTI Media.
• AIA Vietnam and AIA Sri Lanka were certified as a “Great Place To Work” by Great Place to Work.
• AIA Thailand, AIA Vietnam, AIA Cambodia were named “Best Companies to Work for in Asia” by HR Asia.
• AIA New Zealand was named “Top Insurance Employers 2021” by Insurance Business New Zealand.
Additional details about our People and Culture initiatives are contained in our 2021 Environment, Social and
Governance report which can be found on www.aia.com.
Notes:
(3) Refers to employees on permanent and fixed-term contracts. This excludes interns, agents of the Group and employees of our joint venture, Tata AIA Life.
(4) Gen Y is defined as the generation born between 1981 and 1996 and Gen Z is defined as the generation born from 1997 onwards.
071
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE
073 Statement of Directors’ Responsibilities
074 Board of Directors
082 Executive Committee
087 Report of the Directors
098 Corporate Governance Report
114 Remuneration Report
072
AIA GROUP LIMITED CORPORATE GOVERNANCE
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Company’s consolidated financial statements in accordance with
applicable laws and regulations.
In preparing the consolidated financial statements of the Company, the Directors are required to:
• select suitable accounting policies and apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether the consolidated financial statements have been prepared in accordance with Hong Kong Financial
Reporting Standards (HKFRS) and IFRS; and
• prepare the consolidated financial statements on a going concern basis, unless it is inappropriate to presume that
the Group will continue in business.
The Directors are responsible for keeping proper accounting records that give a true and fair view of the state of the
Company’s affairs and explain its transactions.
The Directors are responsible for taking reasonable steps to safeguard the assets of the Group and to prevent and
detect fraud and other irregularities. The Directors are also responsible for preparing a Report of the Directors and
the Corporate Governance Report as set out on pages 87 to 113 of this Annual Report.
The Directors confirm that to the best of their knowledge:
1. the consolidated financial statements of the Company, prepared in accordance with HKFRS and IFRS, give
a true and fair view of the assets, liabilities, financial position, cash flows and results of the Company and its
undertakings included in the consolidated financial statements taken as a whole; and
2. the section headed “Financial and Operating Review” included in this Annual Report presents a fair review of the
development and performance of the business and the position of the Company and its undertakings included
in the consolidated financial statements taken as a whole, together with a description of the principal risks and
uncertainties that the Group faces.
Under the group-wide supervision (GWS) framework by the Hong Kong Insurance Authority, AIA is expected to
have in place a corporate governance framework which provides for the sound and prudent management and
oversight of the Group’s businesses including in regards to the protection of the interests of policyholders of the
insurers within the Group. As such, the Board strives to oversee the implementation of the corporate culture,
business objectives and strategies for achieving those objectives, in line with the long-term interests and viability of
the Group.
The Board is required, among other requirements, to ensure there is an appropriate number and mix of individuals
with sufficient knowledge and experience commensurate with its governance structure. Under the GWS framework,
the Board provides oversight in respect of the design and implementation of risk management and internal controls
across the Group. This includes having a framework to take effective measures to deter, prevent, detect, report and
remedy non-compliance with relevant legal and regulatory requirements and fraud in insurance. The Group has also
adopted a remuneration policy which does not induce excessive or inappropriate risk taking.
In summary, the Board exercises independent judgement and objectivity in its decision making, taking due account
of the interests of the Group and its policyholders.
073
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION BOARD OF DIRECTORS
MR. JOHN BARRIE
HARRISON
DR. NARONGCHAI
AKRASANEE
MS. JIE SUN
(JANE)
MR. JACK
CHAK-KWONG SO
MR. EDMUND
SZE-WING TSE
MR. LEE YUAN
SIONG
074
AIA GROUP LIMITED
CORPORATE GOVERNANCE W
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PROFESSOR LAWRENCE
JUEN-YEE LAU
MR. CESAR VELASQUEZ
PURISIMA
MR. GEORGE
YONG-BOON YEO
ANNUAL REPORT 2021
075
INDEPENDENT NON-EXECUTIVE CHAIRMAN AND INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. Edmund Sze-Wing TSE
Aged 84, is the Independent Non-executive Chairman and an Independent Non-executive Director of the Company. He
was appointed Non-executive Director of the Company on 27 September 2010 and elected Non-executive Chairman
on 1 January 2011. He was re-designated as the Independent Non-executive Chairman and an Independent Non-
executive Director of the Company on 23 March 2017. Mr. Tse is also the Chairman of the Nomination Committee
and a member of the Remuneration Committee and the Risk Committee of the Company. He is a director of AIA
Foundation. Mr. Tse’s appointments during these 60 years with the Group and its predecessor, AIG Group, include
serving as Honorary Chairman of AIA Co. from July 2009 to December 2010, Chairman and Chief Executive Officer
from 2000 to June 2009 and President and Chief Executive Officer from 1983 to 2000. He also served as Chairman
of AIA Philippines Life and General Insurance Company Inc. (formerly known as The Philippine American Life and
General Insurance (PHILAM LIFE) Company) from 2005 to 2015. Mr. Tse is a non-executive director of PCCW Limited
(listed on the Hong Kong Stock Exchange), a director of Bridge Holdings Company Limited (formerly known as
PineBridge Investments Limited) and the non-executive Chairman of PineBridge Investments Asia Limited. Mr. Tse
is also a member of the membership committee and a fellow of the Hong Kong Academy of Finance. He served as a
non-executive director of PICC Property and Casualty Company Limited (listed on the Hong Kong Stock Exchange)
from 2004 to July 2014. In recognition of his outstanding contributions to the development of Hong Kong’s insurance
industry, Mr. Tse was awarded the Gold Bauhinia Star by the HKSAR Government in 2001. Mr. Tse received an honorary
fellowship and an honorary degree of Doctor of Social Sciences from The University of Hong Kong in 1998 and 2002,
respectively. He also received an honorary degree of Doctor of Business Administration from Lingnan University in
2018. In 2003, he was elected to the prestigious Insurance Hall of Fame and in 2017, Mr. Tse was awarded the first
ever Lifetime Achievement Award at the Pacific Insurance Conference in recognition of his outstanding contribution
to the insurance industry.
EXECUTIVE DIRECTOR AND GROUP CHIEF EXECUTIVE AND PRESIDENT
Mr. LEE Yuan Siong
Aged 56, is an Executive Director and the Group Chief Executive and President of the Company, having been appointed
on 1 June 2020. Mr. Lee is also a member of the Risk Committee of the Company. He joined the Group in March 2020
and has more than 30 years experience in the insurance sector. He is a director of various companies within the
Group including acting as Chairman and Chief Executive Officer of AIA Co. Prior to his current role, Mr. Lee was an
executive director of Ping An Insurance (Group) Company of China, Ltd. from June 2013 and served as the company’s
co-CEO and Chief Insurance Business Officer. Before joining Ping An, Mr. Lee held a number of senior leadership
positions with Prudential plc of the United Kingdom, including President of CITIC-Prudential Life Insurance Company
Limited, a life insurance joint venture in Mainland China. He also has significant experience across a number of Asian
markets including Hong Kong SAR, India, Indonesia, Taiwan (China), Thailand and Vietnam. Mr. Lee began his career
at the Monetary Authority of Singapore. He has been a Director and appointed as Vice Chairman of The Geneva
Association since November 2021. He has also been a member of the Hong Kong Academy of Finance since 2020.
He holds a Master of Philosophy (Finance) degree from the University of Cambridge and is a Fellow of the Society of
Actuaries (US).
076
AIA GROUP LIMITEDCORPORATE GOVERNANCEBOARD OF DIRECTORS INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. Jack Chak-Kwong SO
Aged 76, is an Independent Non-executive Director of the Company. He was appointed a Non-executive Director of the
Company on 28 September 2010 and re-designated as an Independent Non-executive Director of the Company on
26 September 2012. He is also a member of the Audit Committee, the Nomination Committee and the Remuneration
Committee of the Company. From August 2007 to September 2010, Mr. So served as an independent non-executive
director of AIA Co. He is currently an independent non-executive director of China Resources Power Holdings Co. Ltd.
(listed on the Hong Kong Stock Exchange) and the Chairman of Airport Authority Hong Kong. He is also an
independent senior advisor to Credit Suisse, Greater China and a non-official member of the Chief Executive’s
Council of Advisers on Innovation and Strategic Development. Mr. So was Chairman of the Consultative Committee on
Economic and Trade Co-operation between Hong Kong and Mainland China from October 2013 to December 2015.
Mr. So was awarded the Gold Bauhinia Star and the Grand Bauhinia Medal by the HKSAR Government in 2011 and
2017, respectively. Mr. So served as an executive director of the Hong Kong Trade Development Council from 1985
to 1992 and served as its Chairman from 2007 to 2015. He was an independent non-executive director of Cathay
Pacific Airways Limited (listed on the Hong Kong Stock Exchange) from 2002 to 2015, a non-executive director of
The Hongkong and Shanghai Banking Corporation Limited from 2000 to 2007, the Chairman of the Hong Kong Film
Development Council from 2007 to 2013 and a member of the Chinese People’s Political Consultative Conference
from 2008 to 2018.
Mr. Chung-Kong CHOW
Aged 71, is an Independent Non-executive Director of the Company, having been appointed on 28 September 2010.
He is also a member of the Nomination Committee and the Risk Committee of the Company. Mr. Chow was appointed
a non-official member of the Executive Council of the HKSAR on 1 July 2012 and was further appointed for a new term
of office from 1 July 2017. Mr. Chow was also appointed as the Chairman of the Advisory Committee on Admission of
Quality Migrants and Professionals of the HKSAR from 1 July 2016, a director of the Community Chest of Hong Kong
from 19 June 2017, a member of the Financial Leaders Forum set up by the HKSAR Government from 18 August
2017, a non-official member of the Human Resources Planning Commission of the HKSAR Government from 1 April
2018, a member of the InnoHK Steering Committee from 4 February 2019 and the Chairman of the Urban Renewal
Authority Board from 1 May 2019. Mr. Chow was knighted in the United Kingdom for his contribution to industry in
2000 and was awarded the Gold Bauhinia Star and the Grand Bauhinia Medal by the HKSAR Government in 2015
and 2021, respectively. Mr. Chow was a Steward of The Hong Kong Jockey Club from 2011 to 2020, the Chairman
of the Advisory Committee on Corruption of the Independent Commission Against Corruption from 2013 to 2018,
the Chairman of Hong Kong Exchanges and Clearing Limited (listed on the Hong Kong Stock Exchange) from 2012
to 2018, Chief Executive Officer of MTR Corporation Limited (listed on the Hong Kong Stock Exchange) from 2003
to 2011, Chief Executive Officer of Brambles Industries plc, a global support services company, from 2001 to 2003,
and Chief Executive of GKN plc, a leading industrial company based in the United Kingdom, from 1997 to 2001. He
was an independent non-executive director of Anglo American plc from 2008 to 2014, independent non-executive
director of Standard Chartered plc from 1997 to 2008 and the Chairman of the Hong Kong General Chamber of
Commerce from 2012 to June 2014.
077
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Mr. John Barrie HARRISON
Aged 65, is an Independent Non-executive Director of the Company, having been appointed on 1 July 2011. He is
also a member of the Audit Committee, the Nomination Committee and the Risk Committee of the Company. He
also acts as a Board Representative at the ESG Committee, a management committee of the Company. Mr. Harrison
is an independent non-executive director of Cathay Pacific Airways Limited (listed on the Hong Kong Stock
Exchange). He is also an independent non-executive director of Grosvenor Asia Pacific Limited since 1 December
2017. He was appointed an Honorary Court Member of The Hong Kong University of Science and Technology with
effect from 20 September 2016. Mr. Harrison was an independent non-executive director of BW Group Limited from
2010 to 2020 and the Vice Chairman of BW LPG Limited from 2013 to 2020. He was an independent non-executive
director of Hong Kong Exchanges and Clearing Limited (listed on the Hong Kong Stock Exchange) from 20 April
2011 to 26 April 2017, The London Metal Exchange Limited from 6 December 2012 to 26 April 2017 and LME Clear
Limited from 16 December 2013 to 26 April 2017. From 2012 to May 2015, he was also a member of the Asian
Advisory Committee of AustralianSuper Pty Ltd. From 2008 to 2010, Mr. Harrison was Deputy Chairman of KPMG
International. In 2003, he was elected Chairman and Chief Executive Officer of KPMG, China and Hong Kong and
Chairman of KPMG Asia Pacific. Mr. Harrison began his career with KPMG in London in 1977, becoming a partner of
KPMG Hong Kong in 1987. Mr. Harrison received an honorary fellowship from The Hong Kong University of Science
and Technology in 2017. Mr. Harrison is a Fellow of the Institute of Chartered Accountants in England and Wales and
a member of the Hong Kong Institute of Certified Public Accountants.
Mr. George Yong-Boon YEO
Aged 67, is an Independent Non-executive Director of the Company, having been appointed on 2 November 2012.
He is also the Chairman of the Remuneration Committee and a member of the Audit Committee and the Nomination
Committee of the Company. Mr. Yeo is an independent director of Pinduoduo Inc. (listed on the Nasdaq Global Select
Market) and an independent non-executive director of Creative Technology Ltd (listed on the Singapore Exchange).
He has been a member of the International Advisory Committee of Mitsubishi Corporation since June 2014 and a
member of Global Advisory Board of Mitsubishi UFJ Financial Group, Inc. since July 2019. He is a member of the
International Advisory Board of the Berggruen Institute on Governance. In March 2018, he became a senior advisor
to Brunswick Group LLP for its Geopolitical Initiative. In 2012, Mr. Yeo was presented with the Order of Sikatuna by
the Philippines Government and the Padma Bhushan by the Indian Government, and became an Honorary Officer
of the Order of Australia. He was a member of the Vatican Council for the Economy from 2014 to 2020. Mr. Yeo was
previously the Chairman, an executive director and a senior advisor of Kerry Logistics Network Limited (listed on
the Hong Kong Stock Exchange) from 2012 to 2019, from 2013 to 2019, and from 2019 to 2021 respectively. He
was also a director of Kerry Holdings Limited from 2016 to 2019; a senior advisor of Kerry Group Limited from 2019
to 2021; as well as a director of New Yangon Development Company Limited from 2017 to 2021. During 2013 to
2014, Mr. Yeo was a member of the Pontifical Commission for Reference on the Economic-Administrative Structure
of the Holy See. During 1988 to 2011, Mr. Yeo was a member of the Singapore Parliament and held various Cabinet
positions, including Minister for Foreign Affairs, Minister for Trade and Industry, Minister for Health, Minister for
Information and the Arts and Minister of State for Finance. During 1972 to 1988, Mr. Yeo served in the Singapore
Armed Forces and attained the rank of Brigadier-General in 1988 when he was Director of Joint Operations and
Planning in the Ministry of Defence.
078
AIA GROUP LIMITEDCORPORATE GOVERNANCEBOARD OF DIRECTORS Professor Lawrence Juen-Yee LAU
Aged 77, is an Independent Non-executive Director of the Company, having been appointed on 18 September 2014.
He is also a member of the Nomination Committee and the Risk Committee of the Company. Professor Lau currently
serves as an independent non-executive director of CNOOC Limited (listed on the Hong Kong Stock Exchange and
previously listed on the New York Stock Exchange) and Semiconductor Manufacturing International Corporation
(listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange). He is also an independent non-executive
director of Far EasTone Telecommunications Company Limited (listed on the Taiwan Stock Exchange). He has been
serving as the Ralph and Claire Landau Professor of Economics at The Chinese University of Hong Kong (CUHK) since
2007 and the Chairman of the Council of Shenzhen Finance Institute of CUHK, Shenzhen since 12 January 2017. He
currently serves as a member of the Currency Board Sub-committee of the Exchange Fund Advisory Committee of
the HKSAR and a non-official member of Candidate Eligibility Review Committee of the HKSAR. In addition, he serves
as the Vice Chairman of the Our Hong Kong Foundation; a Fellow of the Hong Kong Academy of Finance; a Director
of the Chiang Ching-Kuo Foundation for International Scholarly Exchange, Taipei; and the C.V. Starr Distinguished
Fellow of China Development Research Foundation, Beijing since 2019. He was formerly a member of the Exchange
Fund Advisory Committee of the HKSAR, Chairman of its Governance Sub-committee and a member of its Investment
Sub-committee until 2019; Vice Chairman of China Center for International Economic Exchanges, Beijing until 2021;
a member and Chairman of the Prize Recommendation Committee of the LUI Che Woo Prize Limited, from 2015
to 2021; as well as a member of the Hong Kong Trade Development Council Belt and Road & Greater Bay Area
Committee, from 2019 to 2021. He was appointed a Justice of the Peace by the HKSAR Government in 2007 and
awarded the Gold Bauhinia Star by the HKSAR Government in 2011. From 2004 to 2010, Professor Lau served as
Vice-Chancellor (President) of CUHK. From 2009 to 2012, he served as a Non-official Member of the Executive
Council of the HKSAR. He was appointed Chairman of CIC International (Hong Kong) Co., Limited, a wholly-owned
subsidiary of China Investment Corporation, in November 2010 and retired from the position in September 2014. He
was a member of the 11th and 12th National Committees of the Chinese People’s Political Consultative Conference
from 2008 to 2012 and from 2013 to 2018 respectively, a Vice-Chairman of the Sub-committee of Population,
Resources and Environment, from 2010 to 2013, and a Vice-Chairman of the Sub-committee of Economics from
2013 to 2018. From 2014 to 2020, he was an independent non-executive director of Hysan Development Company
Limited (listed on the Hong Kong Stock Exchange). He received his B.S. degree (with Great Distinction) in Physics
from Stanford University in 1964 and his M.A. and Ph.D. degrees in Economics from the University of California at
Berkeley in 1966 and 1969, respectively. He joined the faculty of the Department of Economics at Stanford University
in 1966, becoming its Professor of Economics in 1976 and the first Kwoh-Ting Li Professor in Economic Development
in 1992. From 1992 to 1996, he served as a Co-Director of the Asia-Pacific Research Center at Stanford University,
and from 1997 to 1999 as the Director of the Stanford Institute for Economic Policy Research. He became its
Kwoh-Ting Li Professor in Economic Development, Emeritus, upon his retirement from Stanford University in 2006.
079
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Ms. Swee-Lian TEO
Aged 62, is an Independent Non-executive Director of the Company, having been appointed on 14 August 2015.
She is also the Chairman of the Risk Committee and a member of the Nomination Committee of the Company.
She also acts as a Board Representative at the ESG Committee, a management committee of the Company.
Ms. Teo currently serves as a non-executive and independent director and a member of the corporate governance
and nominations committee and executive resource and compensation committee and chairs the risk committee
of Singapore Telecommunications Limited (listed on the Singapore Exchange). She is also the Chairman of the
board, non-executive independent director and the Chairman of the Nominating and Remuneration Committee
of CapitaLand Integrated Commercial Trust Management Limited (listed on the Singapore Exchange) and a non-
executive director of Avanda Investment Management Pte Ltd., a Singapore-based fund management company.
Ms. Teo is a member of the board of directors of the Dubai Financial Services Authority and a director of Clifford
Capital Pte. Ltd. and Clifford Capital Holdings Pte. Ltd. Ms. Teo has over 27 years of experience with the Monetary
Authority of Singapore (MAS). During her time at the MAS, she worked in foreign reserves management, financial
sector development, strategic planning and financial supervision. She was the Deputy Managing Director in charge
of Financial Supervision, overseeing the regulation and supervision of the banking, insurance and capital markets
industries and macroeconomic surveillance, and also represented the MAS on various international fora, including the
Basel Committee on Banking Supervision, and on various committees and working groups of the Financial Stability
Board. She retired from the MAS as Special Advisor in the Managing Director’s office in June 2015. In addition to
the MAS, Ms. Teo also served on the board of the Civil Aviation Authority of Singapore from 2002 to 2010. Ms. Teo
received her B.Sc. (First) in Mathematics from the Imperial College of Science and Technology, University of London
in 1981 and her M.Sc. in Applied Statistics from the University of Oxford in 1982. She was also awarded the Public
Administration Medal (Gold) (Bar) at the Singapore National Day Awards in 2012.
Dr. Narongchai AKRASANEE
Aged 76, is an Independent Non-executive Director of the Company, having been appointed on 15 January 2016.
He is also a member of the Audit Committee and the Nomination Committee of the Company and the Chairman
of advisory board of AIA Thailand. Dr. Narongchai was previously an Independent Non-executive Director of the
Company from 21 November 2012 to 31 August 2014. He is the former Minister of Energy and Minister of Commerce
for the Kingdom of Thailand, and served as a Senator. Dr. Narongchai served as Chairman of the Export-Import Bank
of Thailand from December 2005 to June 2010, a Director of the Office of the Insurance Commission of Thailand
from October 2007 to August 2012, a Director of the National Economic and Social Development Board from July
2009 to July 2013 and a member of the Monetary Policy Committee of the Bank of Thailand from November 2011
to September 2014. He is currently the Chairman of the Steering Committee and Vice-Chairman of the Council of
Mekong Institute, the Chairman of the Thailand National Committee for the Pacific Economic Cooperation Council
and the Chairman of the Khon Kaen University Council in Thailand. Dr. Narongchai also acts as the Chairman and
an independent director of three entities listed on the Stock Exchange of Thailand, namely MFC Asset Management
Public Company Limited, Ananda Development Public Company Limited and Thai-German Products Public Company
Limited. He is the Chairman and an independent director of The Brooker Group Public Company Limited, which is
listed on the Stock Exchange of Thailand’s Market for Alternative Investment. Dr. Narongchai is also the Chairman of
the Seranee Group of companies. He previously served as an independent director of each of Malee Sampran Public
Company Limited and ABICO Holdings Public Company Limited and as the Vice-Chairman and an independent
director of Thai-German Products Public Company Limited, all of which are listed on the Stock Exchange of Thailand.
Dr. Narongchai received his Bachelor’s degree in Economics with Honours from the University of Western Australia
and a M.A. and Ph.D. in Economics from Johns Hopkins University.
080
AIA GROUP LIMITEDCORPORATE GOVERNANCEBOARD OF DIRECTORS Mr. Cesar Velasquez PURISIMA
Aged 61, is an Independent Non-executive Director of the Company, having been appointed on 1 September 2017.
He is also the Chairman of the Audit Committee and a member of the Nomination Committee and the Risk Committee
of the Company. Mr. Purisima currently serves as an independent director of Bank of the Philippine Islands (BPI),
Ayala Land, Inc., Universal Robina Corporation and Jollibee Foods Corporation, all of which are listed on The Philippine
Stock Exchange. He is also an independent director of BPI Capital Corporation, a wholly owned subsidiary of BPI, a
founding partner of Ikhlas Capital Singapore Pte. Ltd., a member of the Global Advisory Council of Sumitomo Mitsui
Banking Corporation, and a member of Singapore Management University’s International Advisory Council in the
Republic of the Philippines (the Philippines). He also serves on the board of trustees of the World Wildlife Fund –
Philippines, De La Salle University, and the International School of Manila. He is an Asia Fellow at the Milken Institute,
a global, non-profit, non-partisan think tank. Mr. Purisima served in the government of the Philippines as Secretary
of Finance from July 2010 to June 2016 and as Secretary of Trade and Industry from January 2004 to February
2005. He also previously served on the boards of a number of government institutions, including as a member of the
Monetary Board of the Bangko Sentral ng Pilipinas (Central Bank of the Philippines), Governor of the World Bank
Group for the Philippines, Governor of the Asian Development Bank for the Philippines, Alternate Governor of the
International Monetary Fund for the Philippines and Chairman of Land Bank of the Philippines. He was conferred the
Chevalier dans l’Ordre national de la Légion d’Honneur (Knight of the National Order of the Legion of Honour) by the
President of the French Republic in 2017, the Order of Lakandula, Rank of Grand Cross (Bayani) by the President of
the Philippines in 2016 and the Chevalier de l’Ordre national du Mérite (Knight of the National Order of Merit) by the
President of the French Republic in 2001. Mr. Purisima is a certified public accountant. He has extensive experience
in public accounting both in the Philippines and abroad. He was Chairman and Managing Partner of SyCip, Gorres,
Velayo & Co. (a member firm of Andersen Worldwide until 2002 when it became a member firm of Ernst & Young
Global Limited) from 1999 until 2004. During the period, Mr. Purisima was also the Asia-Pacific Area Managing
Partner for Assurance and Business Advisory Services of Andersen Worldwide from 2001 to 2002 and Regional
Managing Partner for the ASEAN Practice of Andersen Worldwide from 2000 to 2001. Mr. Purisima obtained his
Bachelor of Science in Commerce (Majors in Accounting & Management of Financial Institutions) degree from De La
Salle University (Manila) in 1979, Master of Management degree from J. L. Kellogg Graduate School of Management,
Northwestern University in 1983 and Doctor of Humanities honoris causa degree from Angeles University Foundation
(the Philippines) in 2012.
Ms. SUN Jie (Jane)
Aged 53, is an Independent Non-executive Director of the Company, having been appointed on 1 June 2021. She is
also a member of the Nomination Committee of the Company. Ms. Sun is the chief executive officer and a member of
the board of directors of Trip.com (listed on the Hong Kong Stock Exchange and the Nasdaq Global Select Market),
one of the leading global travel services company that operates the sub-brands Trip.com, Ctrip, Skyscanner and
Qunar. Ms. Sun is a director of Tripadvisor, Inc. and MakeMyTrip, both listed on the Nasdaq Global Select Market.
She is also an independent director of iQIYI, Inc. (listed on the Nasdaq Global Select Market) and TAL Education
Group (listed on the New York Stock Exchange). Ms. Sun has extensive experience in operating and managing online
businesses, mergers and acquisitions, and financial reporting and operations. Ms. Sun was named one of Fortune’s
Top 50 Most Powerful Women in Business for four consecutive years from 2017 to 2020. In 2019, she was named
in the Forbes World’s Most Powerful Women List and awarded the Asia Game Changer Award by Asia Society. She
was also named one of Emergent 25 Asia’s Latest Star Businesswomen in 2018, and one of the Most Influential and
Outstanding Businesswomen in China in 2017 by Forbes. Ms. Sun received her Bachelor’s degree from the business
school of the University of Florida with high honors. She also obtained a LLM degree from Peking University Law
School. She is a member of the American Institute of Certified Public Accountants.
081
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION EXECUTIVE COMMITTEE
MS. CARA ANG
DR. MARK KONYN
MR. MITCHELL NEW
MR. LEO GREPIN
MR. JACKY CHAN
MR. WILLIAM LISLE
082
AIA GROUP LIMITED
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MR. GARTH JONES
MR. TAN HAK LEH
MR. STUART A. SPENCER
MS. JAYNE PLUNKETT
MR. BISWA MISRA
ANNUAL REPORT 2021
083
Mr. LEE Yuan Siong
Mr. Lee’s biography is set out above.
Mr. Garth Brian JONES
Aged 59, is the Group Chief Financial Officer responsible for leading the Group in all aspects of capital and financial
management, as well as managing relationships with key external stakeholders, including independent auditors and
actuaries, rating agencies and international accounting and regulatory bodies. He is a director of various companies
within the Group, including AIA Co. and AIA International. He joined the Group in April 2011. Prior to joining the
Group, Mr. Jones was the Executive Vice President of China Pacific Life Insurance Co., Ltd., the life insurance arm of
China Pacific Insurance (Group) Co., Ltd. He also held a number of senior management positions during 12 years with
Prudential Corporation Asia Limited, including Chief Financial Officer of the Asian life insurance operations. Prior to
joining Prudential, Mr. Jones led the development of Swiss Re’s Asia life business. Mr. Jones is a Fellow of the Institute
and Faculty of Actuaries. On 1 June 2016, he was appointed a member of the industry advisory committee on long
term business, which advises the HKIA. Mr. Jones is also a member of the IFRS Advisory Council of the IASB.
Mr. William LISLE
Aged 56, is the Regional Chief Executive and Group Chief Distribution Officer responsible for the Group’s
businesses operating in Thailand, Vietnam, India and Sri Lanka as well as the Group’s agency distribution, partnership
distribution, digital platform partnership channel and corporate solutions. Mr. Lisle was Chief Executive Officer of
AIA’s operation in Malaysia from December 2012 to May 2015, including leading the large-scale and successful
integration of ING Malaysia after its acquisition by the Group in 2012. He is a director of various companies within
the Group, including AIA Co., AIA Australia Limited and AIA New Zealand Limited. He is also a director of Tata AIA Life
Insurance Company Limited, a joint venture between the Group and Tata Sons Limited in India. Mr. Lisle joined the
Group in January 2011 as Group Chief Distribution Officer.
Mr. Wing-Shing CHAN (Jacky)
Aged 58, is the Regional Chief Executive responsible for the Group’s businesses operating in Hong Kong SAR,
Mainland China, the Philippines, South Korea, Taiwan (China) and Macau SAR. He is a director of various companies
within the Group, including AIA Co. and AIA International. Mr. Chan has extensive experience having worked at AIA
for the past 34 years. Prior to becoming a Regional Chief Executive, Mr. Chan was Chief Executive Officer of AIA Hong
Kong and Macau since 2009. Previously, he held several senior positions including the Country Head of AIA China,
Executive Vice President – Distribution & Marketing of Nan Shan Life Insurance of Taiwan and Senior Vice President
& Head of Life Profit Centre of AIA - Asia (ex-Japan & Korea). Mr. Chan holds a Bachelor of Science Degree from
The University of Hong Kong. He is a Fellow of the Society of Actuaries (FSA), a member of American Academy of
Actuaries (MAAA) and a Fellow of the Canadian Institute of Actuaries (CIA).
084
AIA GROUP LIMITEDCORPORATE GOVERNANCEEXECUTIVE COMMITTEE Mr. TAN Hak Leh
Aged 56, is the Regional Chief Executive and Group Chief Life Operations Officer responsible for the Group’s businesses
operating in Singapore and Brunei, Malaysia, Cambodia and Myanmar as well as Group Operations and Operations
Shared Services in Malaysia. He is a director of various companies within the Group. Mr. Tan was Chief Executive
Officer of AIA’s operation in Thailand from 2016 to 2019, Group Chief Risk Officer in 2015 and Chief Executive Officer
of AIA’s operation in Singapore from 2011 to 2015. Prior to joining the Group, Mr. Tan was Chief Executive Officer of
Great Eastern Life, Singapore. Prior to joining Great Eastern Life, Mr. Tan was Director of the Insurance Department
of the MAS. Mr. Tan has played an active role in the life insurance industry since 2005. His appointments include:
President of the Life Insurance Association (LIA), Singapore from 2010 to 2013, Vice Chair of Singapore College of
Insurance from 2011 to 2013 and Vice President of Thailand Life Assurance Association from 2017 to 2018. He was
also a Board member of Financial Industry Disputes Resolution Centre Ltd from 2008 to 2015.
Mr. Leo Michel GREPIN
Aged 46, is the Regional Chief Executive and Group Chief Strategy Officer responsible for the Group’s business
operating in Australia, New Zealand, and Indonesia as well as leading the Group’s Strategy and Corporate
Development functions. Mr. Grepin joined the Group in January 2022. Prior to joining the Group, Mr. Grepin was
President of Sun Life, Asia. Before joining Sun Life, he was at Bridgewater Associates, a global hedge fund, where
he led the team managing portfolio construction and trade generation. He also spent 15 years at McKinsey &
Company and led the global client service teams serving several multinational insurers and asset managers as
Senior Partner. Mr. Grepin has a Master of Science in Aeronautics and Astronautics from the Massachusetts Institute
of Technology and a Bachelor of Engineering in Mechanical Engineering (Hons) from McGill University.
Mr. Mitchell David NEW
Aged 58, is the Group General Counsel responsible for providing leadership to legal and corporate governance
functions within Group Office and the country operations. He also has executive responsibility for the Group’s
ESG Programme, including acting as Chairman of the Group’s ESG Committee. He has previously also acted as
Group Chief Risk Officer. He is a director of various companies within the Group including AIA International, AIA
Reinsurance Limited, as well as the Group’s operating subsidiaries in Singapore, Vietnam, Indonesia and the
Philippines. He joined the Group in April 2011. Prior to joining the Group, Mr. New occupied various senior roles
with Manulife Financial, including Senior Vice President and Chief Legal Officer for Asia and Japan, based in Hong
Kong and Senior Vice President and General Counsel to Manulife’s Canadian division. He also practiced law with
Fasken Martineau in Canada where he is a qualified barrister and solicitor and member of the Law Society of
Upper Canada. He holds a Bachelor of Commerce Degree and Master’s Degree in Business Administration from
McMaster University and a Bachelor of Laws Degree from the University of Western Ontario.
Dr. Mark KONYN
Aged 60, is the Group Chief Investment Officer responsible for providing oversight of the management of the
investment portfolios of the Group as well as supervising and supporting the many investment professionals
throughout the Group. He is a director of various companies within the Group including Chairman of AIA Investment
Management Private Limited and AIA Investment Management HK Limited. He joined the Group in September 2015.
Dr. Konyn joined AIA from Cathay Conning Asset Management, where he was Chief Executive Officer responsible for
the company’s investment business and strategic expansion in the region. He had held senior positions at Allianz
Global Investors (where he was Asia-Pacific CEO for RCM Global Investors), Fidelity Investments and Prudential UK.
He is a Fellow of the Royal Statistical Society, and holds a Diploma from the London Business School in Investment
Management, having previously completed his Ph.D. in Operational Research sponsored by the UK Government.
085
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Ms. Pek-San ANG (Cara)
Aged 53, is the Group Chief Human Resources Officer responsible for the development of overall human capital
strategies and their implementation across the Group, as well as leading and providing support to the human
resources functions in country market operations. She joined the Group as the Chief Human Resources Officer for AIA
Singapore in May 2016. Prior to joining AIA, Ms. Ang was the Head of Human Resources of Standard Chartered Bank
Singapore. During her time with Standard Chartered, she spent more than 10 years in a variety of country, regional
and global HR leadership roles based in Singapore and Thailand. Prior to joining Standard Chartered Bank Singapore,
Ms. Ang was the Senior Vice President and Head of Human Resources for Marsh Asia.
Mr. Biswa Prakash MISRA
Aged 44, is the Group Chief Technology Officer responsible for providing leadership to the Group’s technology, digital
and analytics areas. He is a director of various companies within the Group. He joined the Group in June 2013. Prior to
joining the Group, Mr. Misra served as the Regional Chief Technology Officer for ING Insurance Asia Pacific. Previously,
he spent six years with information technology consulting firm Capgemini, leading the company’s insurance practice
for Asia. Mr. Misra holds a degree in electrical engineering from the National Institute of Technology, Surat, India.
Mr. Stuart Anthony SPENCER
Aged 56, is the Group Chief Marketing Officer and oversees customer engagement, propositions, branding, AIA Vitality,
communications, sponsorships, events, digital platforms and healthcare. He is a director of various companies within
the Group. Mr. Spencer re-joined AIA in May 2017 from Zurich Insurance Group, where he was most recently interim
CEO, Asia Pacific and prior to that, CEO, General Insurance, Asia Pacific from 2013 to 2016. Mr. Spencer occupied
various leadership roles in the American International Group from 1996 to 2009, during which time he held a number
of senior positions including leading the Accident & Health General Insurance business in Latin America and acting
as President of Accident & Health Worldwide for the AIG Life Companies. Mr. Spencer started his career in New York
at American Express Travel Related Services in Marketing. He is an alumnus of the Harvard Business School, The
Fletcher School of Law and Diplomacy and Brandeis University.
Ms. Jayne Lynn PLUNKETT
Aged 52, is the Group Chief Risk Officer responsible for the Group’s risk and compliance functions. She is a director
of various Group companies, including AIA Singapore Private Limited and AIA Philippines Life and General Insurance
Company Inc. (formerly known as The Philippine American Life and General Insurance (PHILAM LIFE) Company).
Ms. Plunkett joined AIA in November 2019 from Swiss Re, where she was most recently Chief Executive Officer
Reinsurance Asia, Regional President Asia and member of the Group Executive Committee. During her time with
Swiss Re, she held several senior positions, including Head of Casualty Underwriting for Asia and Division Head
Casualty Reinsurance. Prior to that, she was with GE Insurance Solutions. Ms. Plunkett holds a Bachelor of Science
in Business Administration from Drake University. She is a Fellow of the Casualty Actuarial Society and a member of
the American Academy of Actuaries.
086
AIA GROUP LIMITEDCORPORATE GOVERNANCEEXECUTIVE COMMITTEE CORPORATE GOVERNANCE
REPORT OF THE DIRECTORS
The Board is pleased to present this report and the audited consolidated financial statements of the Company for the
year ended 31 December 2021.
PRINCIPAL ACTIVITIES
The Group is a life insurance based financial services provider operating in 18 markets throughout the Asia region.
The Group’s principal activity is the life insurance business. In that context, the Group, through its various operating
entities, provides individual life insurance, individual accident and health insurance and savings plans throughout
Asia. The Group also distributes related investment and other financial services products to its customers and is
active in the provision of Group insurance and pension schemes in a number of its markets.
Details of the activities and other particulars of the Company’s principal subsidiaries are set out in note 44 to the
consolidated financial statements.
RESULTS
The results of the Group for the year ended 31 December 2021 and the state of the Group’s affairs at that date are set
out in the consolidated financial statements on pages 140 to 256 of this Annual Report.
BUSINESS REVIEW
The review of the business of the Group for the year ended 31 December 2021, including a description of its principal
risks and uncertainties and an indication of likely future developments as required by Schedule 5 to the Hong Kong
Companies Ordinance, is contained in the Group Chief Executive and President’s Report (pages 15 to 20), Group
Chief Financial Officer’s Review (pages 22 to 45), Business Review (pages 46 to 60), Risk Management (pages 61 to
66) and Our People (pages 68 to 71) sections under the Financial and Operating Review, and note 43 and note 45 to
the consolidated financial statements. These discussions form part of this report.
AIA takes a proactive approach to understanding the impacts posed to our business by the environment, while also
mitigating our own environmental footprint. The Group has voiced its support for the Paris Agreement by becoming a
signatory to the Task Force on Climate-related Financial Disclosures (TCFD) in 2018. We continue to take initiatives
to understand the risks posed to our insurance and investment operations from climate change, and continue to
report against the TCFD recommendations in the Group’s Environmental, Social and Governance (ESG) Report 2021.
In 2021, the Group became a signatory to the Principles for Sustainable Insurance, a global sustainability framework
under the United Nations Environment Programme Finance Initiative. The Principles are designed to address material
ESG risks and opportunities and underpin one of the largest collaborative initiative between the United Nations and
the global insurance industry.
We monitor our operational impact. In 2021, the Group announced its commitment to achieve net-zero greenhouse
gas emissions by 2050. AIA has also committed to the Science Based Targets initiative (SBTi), a global body enabling
businesses to develop ambitious emissions reduction targets in line with the latest climate science. The Group
Environmental Procedures provide guidance and outline initiatives to reduce our environmental footprint.
AIA also continues to monitor environmental regulation and opportunities in the area of green finance, and engages
with companies in the Group’s investment portfolio on ESG issues. The Group also completed the entire divestment
of directly-managed listed equity and fixed income exposure to coal mining and coal-fired power businesses in 2021,
seven years ahead of schedule.
087
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Customer privacy and data protection are of paramount importance to the Group. In 2021, AIA continued to maintain
ISO 27001 certification for our identity access management and cybersecurity security controls, including our data
security and encryption standards. We continue to upgrade and invest in physical, administrative and technical
measures to protect personal and business data. This includes programmes to educate and raise awareness among
our people regarding sound and proper cybersecurity and data protection practices. The Company has also entered
into insurance policies which cover, among others, information security risks.
People are at the heart of our business, and this means ensuring that we adhere to the high standards of quality
and customer service expected by our customers. Helping our customers improve their health requires that we
better understand their needs. To that end, we conduct research to understand the needs of various customer
segments and forge strategic partnerships in order to customise our products and services. During the COVID-19
pandemic, we continued to respond quickly and prioritised the needs of our customers. We supported them with
extended coverage, digital health solutions, and expanded virtual healthcare access and solutions that address
mental well-being.
AIA’s Supplier Code of Conduct outlines how we consider and integrate sustainability issues within our supply chain
management process. As a Group, we work with suppliers that demonstrate best practice. Dedicated due diligence
processes form a part of our existing supply chain management and monitoring system. This includes requesting
information on employment and environmental practices from selected material suppliers through our supplier
registration process.
To understand more about our progress on ESG initiatives, please refer to our ESG Report 2021, which is published
on the websites of both the Hong Kong Exchanges and Clearing Limited and the Company.
The Group is licensed to conduct insurance business and subject to extensive local regulatory oversight in each
of the geographical markets in which its branches and subsidiaries operate. While the extent of regulation varies
from jurisdiction to jurisdiction, it typically includes laws and regulations regarding corporate governance, solvency/
capital adequacy, market conduct, investment management, financial reporting and distribution. The Group dedicates
substantial resources and appropriate personnel to support compliance with relevant laws and regulations. AIA also
monitors during the year ended 31 December 2021 the Group’s compliance with all material laws and regulations
applicable to it including the solvency and capital adequacy requirements applied by its regulators, details of which
are contained in note 37 to the consolidated financial statements.
Please see the Corporate Governance Report for a discussion on the Company’s high standards of corporate
governance and the Board’s responsibility for compliance with statutory obligations.
Details of significant events affecting the Group that have occurred since 31 December 2021 are set out in note 45
to the consolidated financial statements.
DIVIDENDS
An interim dividend of 38.00 Hong Kong cents per share for the six-month period ended 30 June 2021 (2020:
35.00 Hong Kong cents per share) was paid on 21 September 2021. The Board has recommended an increase of
8 per cent in the payment of a final dividend to 108.00 Hong Kong cents per share for the year ended 31 December
2021 (2020: 100.30 Hong Kong cents per share), consistent with AIA’s established prudent, sustainable and
progressive dividend policy.
088
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS Under the respective trust deeds of the Company’s Restricted Share Unit Scheme adopted on 28 September 2010
(2010 RSU Scheme) and Restricted Share Unit Scheme adopted on 1 August 2020 (2020 RSU Scheme), shares
of the Company are held in trust by the trustee of each of these schemes. These shares are held against the future
entitlements of scheme participants. Provided the shares of the Company are held by the trustee and no beneficial
interest in those shares has been vested in any beneficiary, the trustee shall waive any right to dividend payments or
other distributions in respect of those shares (unless the Company determines otherwise).
As of 3 September 2021 (being the record date of the 2021 interim dividend), the trustee held 20,091,027 shares
under the 2010 RSU Scheme and 6,718,903 shares under the 2020 RSU Scheme. The amount of interim dividend
payments waived was approximately US$1.3 million. Pursuant to the relevant trust deeds, the trustee will waive the
right to final dividend payment if it is declared.
Subject to shareholders’ approval at the annual general meeting (AGM) to be held by the Company, the final dividend
will be payable on Friday, 10 June 2022 to shareholders whose names appear on the register of members of the
Company at the close of business on Wednesday, 25 May 2022, being the record date for determining the entitlements
to the final dividend.
DIRECTORS
The Directors of the Company during the year under review and up to the date of this report are as follows:
Independent Non-executive Chairman and Independent Non-executive Director
Mr. Edmund Sze-Wing TSE
Executive Director
Mr. LEE Yuan Siong (Group Chief Executive and President)
Independent Non-executive Directors
Mr. Jack Chak-Kwong SO
Mr. Chung-Kong CHOW
Mr. John Barrie HARRISON
Mr. George Yong-Boon YEO
Professor Lawrence Juen-Yee LAU
Ms. Swee-Lian TEO
Dr. Narongchai AKRASANEE
Mr. Cesar Velasquez PURISIMA
Ms. SUN Jie (Jane)(Note)
Note:
Ms. Sun Jie (Jane) was appointed as Independent Non-executive Director of the Company on 1 June 2021.
Ms. Sun Jie (Jane) was appointed as Independent Non-executive Director of the Company on 1 June 2021 and will
retire from office at the forthcoming AGM pursuant to Article 104 of the Company’s Articles of Association and, being
eligible, offers herself for re-election.
In accordance with Article 100 of the Company’s Articles of Association, Mr. George Yong-Boon Yeo , Ms. Swee-Lian
Teo and Dr. Narongchai Akrasanee will retire from office by rotation and, being eligible, offer themselves for re-
election at the AGM.
089
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CHANGES IN DIRECTORS’ INFORMATION
Changes in the Directors’ information which are required to be disclosed pursuant to Rule 13.51B(1) of the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules) are set out below:
Name of Director
Mr. LEE Yuan Siong
Change
• Appointed as vice chairman of The Geneva Association on 10 November 2021
Mr. Jack Chak-Kwong SO
• Retired as chairman but remained as a member of the Remuneration
Committee of the Company with effect from 1 January 2022
Mr. Chung-Kong CHOW
• Retired as chairman but remained as a member of the Risk Committee of the
Company with effect from 1 January 2022
Mr. John Barrie HARRISON
• Retired as chairman but remained as a member of the Audit Committee of the
Company with effect from 1 January 2022
Mr. George Yong-Boon YEO
• Appointed as chairman of the Remuneration Committee of the Company with
effect from 1 January 2022
• Appointed as an independent non-executive director of Creative Technology
Ltd (listed on the Singapore Exchange) with effect from 15 November 2021
Professor Lawrence Juen-Yee LAU
• Ceased as a member of Hong Kong Trade Development Council Belt and Road
& Greater Bay Area Committee with effect from 30 September 2021
• Ceased as vice chairman of China Center for International Economic
Exchanges, Beijing in December 2021
Ms. Swee-Lian TEO
• Appointed as chairman of the Risk Committee of the Company with effect
from 1 January 2022
• Appointed as chairman of the Nominating and Remuneration Committee of
CapitaLand Integrated Commercial Trust Management Limited (listed on the
Singapore Exchange) with effect from 25 October 2021
Mr. Cesar Velasquez PURISIMA
• Appointed as chairman of the Audit Committee of the Company and a
member of the Risk Committee of the Company with effect from 1 January
2022
Ms. SUN Jie (Jane)
• Appointed as a member of the Nomination Committee of the Company with
effect from 16 September 2021
The Board Chairman and the Board membership fees (inclusive of Board committee chairman or membership fees)
have been increased with effect from 1 January 2022. For further information on the increase in fees, please refer to
the Remuneration Report contained in this Annual Report.
Save as disclosed above, there is no other information required to be disclosed pursuant to Rule 13.51B(1) of the
Listing Rules.
DIRECTORS’ SERVICE CONTRACTS
No Director proposed for re-election at the AGM has a service contract with the Company which is not determinable
by the Company within one year without payment of compensation (other than statutory compensation).
DIRECTORS OF SUBSIDIARIES
The names of all directors who have served on the boards of the subsidiaries of the Company during the year under
review and up to the date of this report are kept at the Company’s registered office and available for inspection by the
shareholders of the Company during business hours.
090
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS PERMITTED INDEMNITY PROVISION
Pursuant to the Company’s Articles of Association, subject to the relevant statutes, every Director shall be indemnified
out of the assets of the Company against all costs, charges, expenses, losses and liabilities which he/she may sustain
or incur in or about the execution of his/her office or which may attach thereto. The Company has taken out insurance
against the liabilities and costs associated with proceedings which may be brought against directors of the Group.
DIRECTORS’ AND THE CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES AND
UNDERLYING SHARES
As at 31 December 2021, the Directors’ and the Chief Executive’s interests and short positions in the shares,
underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV
of the Securities and Futures Ordinance (SFO)) as recorded in the register required to be kept under Section 352 of
the SFO, or as otherwise notified to the Company and the Stock Exchange of Hong Kong Limited (Hong Kong Stock
Exchange) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (Model Code) set out
in Appendix 10 to the Listing Rules, are as follows:
Interests and short positions in the shares and underlying shares of the Company:
Number of
shares or
underlying
shares
Long Position (L)
Percentage
of the total
number of
Class
shares in issue (1)
Capacity
Name of Directors
Mr. LEE Yuan Siong
Mr. Edmund Sze-Wing TSE
633,948(L)
2,318,686(L)
1,661,659(L)
1,395(L)
(2)
(3)
(4)
(5)
3,330,400(L)
230,000(L)
(2)
(2)
Ordinary
Ordinary
Mr. Chung-Kong CHOW
Mr. Jack Chak-Kwong SO
126,000(L)(2)
Ordinary
130,000(L)(2)
Ordinary
Mr. John Barrie HARRISON
80,000(L)(2)
Ordinary
Mr. George Yong-Boon YEO
50,000(L)(2)
Ordinary
Professor Lawrence Juen-Yee LAU
250,000(L)(2)
Ordinary
Notes:
(1) Based on 12,097,003,390 ordinary shares in issue as at 31 December 2021.
(2) The interests were in the shares of the Company.
<0.01
0.02
0.01
<0.01
0.02
<0.01
< 0.01
< 0.01
< 0.01
< 0.01
< 0.01
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Interest of controlled
corporation(6)
Beneficial owner
Interest of controlled
corporation(7)
Interests held jointly
with another person(8)
Beneficial owner
Interest of spouse(9)
(3) The interests were in restricted share units (RSUs) granted to Mr. Lee Yuan Siong under the restricted share unit schemes adopted by the Company
from time to time, of which 1,468,714 RSUs were awarded compensation for unvested long-term incentives and deferred payments that Mr. Lee Yuan
Siong forfeited on leaving his prior employment as also disclosed in the Company announcement dated 22 November 2019.
(4) The interests were in share options (SOs) granted to Mr. Lee Yuan Siong under the share option schemes adopted by the Company from time to time.
(5) The interests were in matching restricted stock purchase units (RSPUs) granted under the employee share purchase plans adopted by the Company
from time to time.
(6) The 230,000 shares were held by Edmund & Peggy Tse Foundation Limited, one-third interest of which is beneficially held by Mr. Edmund Sze-Wing
Tse.
(7) The 130,000 shares were held by Cyber Project Developments Limited, a company beneficially wholly owned by Mr. Jack Chak-Kwong So.
(8) The 80,000 shares were jointly held by Mr. John Barrie Harrison and his spouse, Ms. Rona Irene Harrison, as beneficial owners.
(9) The 250,000 shares were held by Ms. Ayesha Abbas Macpherson, the spouse of Professor Lawrence Juen-Yee Lau, as beneficial owner.
091
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Save as disclosed above, as at 31 December 2021, neither the Directors nor the Chief Executive of the Company
had any interest or short position in the shares, underlying shares or debentures of the Company or its associated
corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under
Section 352 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the
Model Code.
INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF PERSONS OTHER
THAN THE DIRECTORS OR THE CHIEF EXECUTIVE
As at 31 December 2021, the following persons, other than the Directors or the Chief Executive of the Company, had
interests and short positions in the shares and underlying shares of the Company as recorded in the register required
to be kept under Section 336 of the SFO:
Name of Shareholder
The Bank of New York Mellon Corporation
Number of shares
or underlying shares
(Note 1)
Long Position(L)
Short Position(S)
Lending Pool(P)
1,179,096,696(L)
363,336,256(S)
790,686,680(P)
Class
Ordinary
The Capital Group Companies, Inc.
967,301,479(L)
Ordinary
JPMorgan Chase & Co.
BlackRock, Inc.
Brown Brothers Harriman & Co.
781,024,739(L)
17,756,786(S)
408,114,862(P)
719,298,556(L)
100,800(S)
Ordinary
Ordinary
605,177,810(L)
597,387,808(P)
Ordinary
Notes:
(1) The interests or short positions include underlying shares as follows:
Percentage of
the total number
of shares in issue
(Note 2)
9.75
3.00
6.54
8.00
6.45
0.14
3.37
5.95
<0.01
5.00
4.93
Capacity
Note 3
Interest of
controlled
corporations
Note 4
Interest of
controlled
corporations
Note 5
Long Position
Short Position
Physically
settled
listed
derivatives
Cash
settled
listed
derivatives
Physically
settled
unlisted
derivatives
Cash
settled
unlisted
derivatives
Physically
settled
listed
derivatives
Cash
settled
listed
derivatives
Physically
settled
unlisted
derivatives
Cash
settled
unlisted
derivatives
Convertible
instruments –
listed
derivatives
–
–
–
–
–
23,277,176
–
–
–
–
–
363,336,256
–
–
–
–
Name of
Shareholder
The Bank of New
York Mellon
Corporation
The Capital Group
Companies, Inc.
JPMorgan Chase
2,078,000
63,800
916,865
3,438,400
2,858,000 2,320,920
8,296,511 2,567,177
& Co.
BlackRock, Inc.
Brown Brothers
Harriman & Co.
–
–
–
–
–
–
1,391,000
–
–
–
–
–
–
–
100,800
–
(2) Based on 12,097,003,390 shares in issue as at 31 December 2021.
092
–
–
1
–
–
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS (3) The Bank of New York Mellon Corporation held the interests and short positions in the following capacities:
Capacity
Number of shares or
underlying shares
(Long Position)
Number of shares or
underlying shares
(Short Position)
Interest of controlled corporations
1,179,096,696
363,336,256
(4) JPMorgan Chase & Co. held the interests and short positions in the following capacities:
Capacity
Interest of controlled corporations
Investment manager
Trustee
Approved lending agent
Number of shares or
underlying shares
(Long Position)
14,957,930
356,418,304
1,533,643
408,114,862
Number of shares or
underlying shares
(Short Position)
17,756,786
–
–
–
(5) Brown Brothers Harriman & Co. held the interests and short positions in the following capacities:
Capacity
Investment manager
Approved lending agent
Number of shares or
underlying shares
(Long Position)
7,790,002
597,387,808
Number of shares or
underlying shares
(Short Position)
–
–
Save as disclosed above, as at 31 December 2021, no person, other than the Directors or the Chief Executive of the
Company, whose interests are set out in the section entitled “Directors’ and the Chief Executive’s Interests and Short
Positions in Shares and Underlying Shares”, had any interest or short position in the shares or underlying shares of
the Company as recorded in the register required to be kept under Section 336 of the SFO.
DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES
Under his service contract in the role of Executive Director and Group Chief Executive and President with the
Company, Mr. Lee Yuan Siong was entitled to an annual discretionary earned incentive award, which includes
payment in the form of shares of the Company. Details of the incentive awards of Mr. Lee Yuan Siong are set out in
the Remuneration Report.
DIRECTORS’ INTERESTS IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS
No transactions, arrangements or contracts of significance to which the Company or any of its subsidiaries was
a party, and in which any Director of the Company or his/her connected entity has a material interest, directly or
indirectly, subsisted as at 31 December 2021 or at any time during the year under review.
093
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION RESERVES
As at 31 December 2021, the aggregate amount of reserves available for distribution to shareholders of the
Company, as calculated under the provisions of Part 6 of the Hong Kong Companies Ordinance, was US$9,519 million
(31 December 2020: US$7,360 million).
CHARITABLE DONATIONS
Charitable donations made by the Group during the year ended 31 December 2021 amounted to approximately
US$9.4 million (2020: US$2 million).
MAJOR CUSTOMERS AND SUPPLIERS
During the year ended 31 December 2021, the percentage of the aggregate purchases attributable to the Group’s
five largest suppliers was less than 30 per cent of the Group’s total value of purchases and the percentage of the
aggregate sales attributable to the Group’s five largest customers was less than 30 per cent of the Group’s total value
of sales.
SHARES ISSUED
Details of the shares issued during the year ended 31 December 2021 are set out in note 35 to the consolidated
financial statements.
DEBENTURES ISSUED
Details of the debentures issued during the year ended 31 December 2021 are set out in notes 30 and 38 to the
consolidated financial statements.
EQUITY-LINKED AGREEMENTS
During the year ended 31 December 2021, the Company did not enter into any equity-linked agreements and there
did not subsist any equity-linked agreement entered into by the Company as at 31 December 2021, save for the
restricted share units, outstanding share options and restricted stock purchase units awarded to employees under
the 2010 RSU Scheme, the 2020 RSU Scheme, the 2010 SO Scheme, the 2020 SO Scheme, the 2011 ESPP and
2020 ESPP, respectively, and the restricted stock subscription units awarded to agents under the Agency Share
Purchase Plans adopted by the Company on 23 February 2012 (2012 ASPP) and 1 February 2021 (2021 ASPP),
each described below and in the Remuneration Report and note 40 to the consolidated financial statements.
094
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS RESTRICTED SHARE UNIT SCHEME
The 2010 RSU Scheme adopted by the Company on 28 September 2010 with a term of 10 years from the date of
adoption was terminated with effect from 31 July 2020. The Company adopted the 2020 RSU Scheme on 1 August
2020 (2020 RSU Adoption Date) in place of and under substantially the same terms as the 2010 RSU Scheme. The
2020 RSU Scheme is effective for a period of 10 years from the date of adoption. A summary of the principal terms
of the 2020 RSU Scheme was set out on pages 90 to 93 of the Company’s Annual Report 2020.
No RSU Award shall be granted pursuant to the 2020 RSU Scheme if as a result of such grant (assumed accepted),
the aggregate number of shares and share equivalents underlying all grants made during the 10-year period
commencing on the 2020 RSU Adoption Date pursuant to the 2020 RSU Scheme (excluding RSU Awards that have
lapsed or been cancelled) and any other restricted share unit scheme of the Company (i.e., the 2010 RSU Scheme)
will exceed in total 2.5 per cent of the number of shares of the Company in issue on the reference date (that is, 29 May
2020), being 302,264,978 shares (or such number of shares as shall result from a sub-division or a consolidation of
such 302,264,978 shares from time to time) (2020 RSU Scheme Limit).
The RSU Awards granted pursuant to the 2020 RSU Scheme may be satisfied by the Company allotting and issuing
new shares of the Company upon vesting of the RSU Awards. The Company shall rely on any general mandate or
specific mandate obtained from its shareholders at any general meetings of the Company in accordance with the
Listing Rules to issue and allot shares underlying any RSU Awards to participants as and when the RSU Awards vest.
An application will be made by the Company to the Hong Kong Stock Exchange for the listing of and permission to
deal in any new shares of the Company (not exceeding the 2020 RSU Scheme Limit) which may be issued pursuant
to the 2020 RSU Scheme from time to time.
During the year ended 31 December 2021, the Company awarded 9,484,581 restricted share units under the 2020
RSU Scheme and no restricted share units under the 2010 RSU Scheme were awarded. More details of the schemes
are set out in the Remuneration Report and note 40 to the consolidated financial statements.
SHARE OPTION SCHEME
The Company adopted the 2010 SO Scheme on 28 September 2010 for a term of 10 years from the date of adoption.
It sought and obtained the approval from its shareholders at its annual general meeting held on 29 May 2020 (2020
AGM) for the termination of the 2010 SO Scheme and the adoption of a new share option scheme (2020 SO Scheme),
effective from 29 May 2020. The 2020 SO Scheme is also effective for a period of 10 years from the date of adoption.
The maximum number of shares of the Company in respect of which share options may be granted under the 2020
SO Scheme, together with all options to be granted under any other share option scheme(s) of the Company and/or
its subsidiaries, will be such amount so that the aggregate number of shares underlying the 2020 SO Scheme and
any such other share option scheme(s) (excluding options that have lapsed in accordance with the rules of the 2020
SO Scheme and any other schemes) will not exceed 2.5 per cent of the number of shares in issue as of the adoption
date of 29 May 2020, being 302,264,978 shares.
During the year ended 31 December 2021, the Company awarded 1,849,222 share options under the 2020 SO
Scheme, while 871,896 share options were exercised and the Company issued 871,896 new shares accordingly. The
proceeds received amounted to approximately US$3.5 million.
095
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Following the termination of the 2010 SO Scheme and adoption of the 2020 SO Scheme on 29 May 2020, no
further share options can be granted under the 2010 SO Scheme. However, the 2010 SO Scheme remains in full
force and effect for all share options granted prior to its termination, and the exercise of such share options shall
be subject to and in accordance with the terms on which they were granted under the provisions of the 2010 SO
Scheme and the Listing Rules. Since adoption until 31 December 2021, 1,849,222 share options were granted under
the 2020 SO Scheme. A summary of the terms of the 2020 SO Scheme is set out in the shareholders’ circular of the
2020 AGM, and further information regarding the scheme is set out in the Remuneration Report and note 40 to the
consolidated financial statements.
EMPLOYEE SHARE PURCHASE PLAN
The Company adopted the 2020 ESPP on 1 August 2020 in place of and with substantially the same terms as the
2011 ESPP, effective for a period of 10 years from the date of adoption. The 2011 ESPP was terminated with effect
from 31 October 2020.
During the year ended 31 December 2021, no restricted stock purchase units were awarded and 1,055,698
matching restricted stock purchase units were vested under the 2011 ESPP. During the same period, 1,557,557
restricted stock purchase units were awarded and 21,919 matching restricted stock purchase units were vested
under the 2020 ESPP. No new shares have been issued pursuant to the 2011 ESPP nor the 2020 ESPP since their
respective adoption. Details of the plan are set out in the Remuneration Report and note 40 to the consolidated
financial statements.
AGENCY SHARE PURCHASE PLAN
The Company adopted the 2012 ASPP on 23 February 2012 (2012 ASPP Adoption Date). Under the 2012 ASPP,
certain agents and agency leaders of the Group are selected to participate in the plan. Those agents selected for
participation may elect to purchase the Company’s shares and, after having been in the plan for a period of three
years, receive one matching share for each two shares purchased through the award of matching restricted stock
subscription units (RSSUs). Each eligible agent’s participation level is capped at HK$9,750 (or local equivalent) per
calendar month under 2012 ASPP and capped at HK$12,500 (or local equivalent) per calendar month under 2021
ASPP. Upon vesting of the matching RSSUs, those agents who remain with the Group will receive one matching share
for each RSSU which he or she holds. The aggregate number of new shares which can be issued by the Company
under the 2012 ASPP during the 10-year period shall not exceed 2.5 per cent of the number of shares in issue on the
2012 ASPP Adoption Date. Since the 2012 ASPP Adoption Date and up to 31 December 2021, a cumulative total of
7,811,230 new shares were issued under the 2012 ASPP, representing approximately 0.065 per cent of the shares in
issue as at the 2012 ASPP Adoption Date.
The Company adopted a new agency share purchase plan (2021 ASPP) on 1 February 2021 in place of and with
substantially the same terms as the 2012 ASPP, effective for a period of 10 years from the date of adoption. The 2012
ASPP expired on 22 February 2022.
During the year ended 31 December 2021, 229,320 matching RSSUs were granted, 1,192,355 matching RSSUs
were vested, and 1,192,355 new shares (Awarded Shares) were issued for RSSUs vested pursuant to the 2012 ASPP.
During the same period, 629,599 matching RSSUs were granted, no matching RSSUs were vested, and no new shares
(Awarded Shares) were issued pursuant to the 2021 ASPP. The Awarded Shares were issued at the subscription price
of US$1.00 each to Computershare Hong Kong Trustees Limited (being the plan trustee) to hold the same on trust for
certain eligible agents upon vesting of their matching RSSUs. The closing price of the Company’s shares on 27 April
2021 was HK$99.55. The proceeds received amounted to approximately US$1.19 million which were used to fund
the administration expenses of the 2012 ASPP and as general working capital of the Company.
096
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS NON-EXEMPT CONNECTED TRANSACTIONS
During the year ended 31 December 2021, the Group had not entered into any connected transactions which are not
exempt from the annual reporting requirement under Chapter 14A of the Listing Rules.
RELATED PARTY TRANSACTIONS
Details of the related party transactions undertaken by the Group during the year ended 31 December 2021 in
the ordinary course of business are set out in note 42 to the consolidated financial statements. Such related party
transactions are all exempt connected transactions under Chapter 14A of the Listing Rules.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
Save for the purchase of 8,277,353 shares of the Company under the 2020 RSU Scheme and the 2020 ESPP at a
total consideration of approximately US$105.5 million, neither the Company nor any of its subsidiaries purchased,
sold or redeemed any of the Company’s listed securities during the year ended 31 December 2021. These purchases
were made by the trustees of the relevant plan on the Hong Kong Stock Exchange. These shares are held on trust for
participants of the relevant plan and therefore have not been cancelled. Please refer to note 40 to the consoliated
financial statements for details.
PUBLIC FLOAT
Based on information that is publicly available to the Company and within the knowledge of the Directors, the
Company has maintained the amount of public float as approved by the Hong Kong Stock Exchange and permitted
under the Listing Rules as at the date of this report.
AUDITOR
PricewaterhouseCoopers was re-appointed auditor of the Company in 2021.
PricewaterhouseCoopers will retire and, being eligible, offer itself for re-appointment at the AGM. A resolution for the
re-appointment of PricewaterhouseCoopers as auditor of the Company will be proposed at the AGM.
By Order of the Board
Edmund Sze-Wing Tse
Independent Non-executive Chairman
11 March 2022
097
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE REPORT
CORE PRINCIPLES
The Board believes that strong corporate governance is essential both to the delivery of sustainable value and to
maintaining a culture of business integrity, which in turn supports investor confidence. The Board is ultimately
responsible for the performance of the Group, including the consistent achievement of business plans and
compliance with statutory as well as corporate obligations. The Board is also responsible for the development and
implementation of the Group’s corporate governance practices. This Corporate Governance Report explains the
Company’s corporate governance principles and practices, including how the Board manages the business to deliver
long-term shareholder value and to promote the development of the Group.
As a company listed on the Main Board of the Hong Kong Stock Exchange, the Company is committed to high
standards of corporate governance and sees the maintenance of good corporate governance practices as essential
to its sustainable growth. It is vital that Board members, in aggregate, have the requisite skills and expertise and are
supported by a structure that enables appropriate delegation between the Board, its committees and management,
whilst ensuring that the Board retains overall control. To promote effective governance across all of our operations,
the Board has approved a governance framework, which maps out internal approval processes including those
matters that may be delegated.
In this Corporate Governance Report, the Board seeks to set out the Company’s corporate governance structure
and policies, inform shareholders of the corporate governance undertakings of the Company and demonstrate to
shareholders the value of such practices.
Throughout the year ended 31 December 2021, with the exception of Code Provision C.6.3, the Company had applied
the principles and complied with all applicable code provisions of the Corporate Governance Code set out in Appendix
14 to the Listing Rules (Corporate Governance Code). Code Provision C.6.3 provides that the company secretary
should report to the chairman of the board and/or the chief executive. The Company operates under a variant of this
model whereby the Group Company Secretary reports to the Group General Counsel, who is ultimately accountable
for the company secretarial function of the Company and who in turn reports directly to the Group Chief Executive.
BOARD OF DIRECTORS
ROLES AND RESPONSIBILITIES
The Board is accountable to shareholders for the affairs of the Company. It meets these obligations by ensuring
the maintenance of high standards of governance in all aspects of the Company’s business, setting the strategic
direction for the Group and maintaining appropriate levels of review, challenge and guidance in its relationship with
Group management. It is also the ultimate decision-making body for all matters considered material to the Group
and is responsible for ensuring that, as a collective body, Board members have the appropriate skills, knowledge and
experience to perform their roles effectively.
In these matters, the Board provides leadership to management in respect of operational issues through the Group
Chief Executive and President, who is authorised to act on behalf of the Board in the operational management of the
Company. Any responsibilities not so delegated by the Board to the Group Chief Executive remain the responsibility
of the Board.
098
AIA GROUP LIMITEDCORPORATE GOVERNANCE The Board discharges the following responsibilities either by itself or through delegation to the Audit Committee, the
Nomination Committee, the Remuneration Committee and the Risk Committee:
(a) the development and review of the Company’s policies and practices on corporate governance;
(b) the review and monitoring of the training and continuous professional development of Directors and senior
management;
(c) the review and monitoring of the Company’s policies and practices on compliance with legal and regulatory
requirements;
(d) the development, review and monitoring of the Code of Conduct applicable to all officers and employees of the
Group; and
(e) the review of the Company’s compliance with the Corporate Governance Code and disclosure in this Corporate
Governance Report.
During the year under review, the Board discharged its responsibilities under the Board Charter of the Company,
which is available on the Company’s website at www.aia.com, and reviewed, amongst other things, the Company’s
compliance with the Corporate Governance Code, including the necessary disclosures in its reports to shareholders,
the terms of the Board Charter and other governance documents, and a number of Group-wide policies, including
the anti-fraud policy, anti-corruption policy, whistleblowing policy, IFRS Accounting Policy and Code of Conduct.
The Board also received the annual information security update and reviewed the Group’s leadership capability and
succession to align with the Group’s latest strategic ambitions.
The Company has also adopted its own Directors’ and Chief Executives’ Dealing Policy (Dealing Policy) on terms
no less exacting than those set out in the Model Code in respect of dealings by the Directors in the securities of the
Company. All of the Directors confirmed, following specific enquiry by the Company, that they have complied with the
required standards set out in the Model Code and the Dealing Policy throughout the year ended 31 December 2021.
BOARD EVALUATION
The Board undertakes regularly a formal evaluation of its own performance and that of its committees and individual
Directors to ensure the Board and its committees continue to perform effectively. The evaluation is conducted either
by way of internal assessment or with the support of independent external consultants. During the year, a tailored
board evaluation questionnaire was prepared to collect views and comments from Board members, the findings of
which were reviewed and discussed by the Board at its meeting held in March 2022. A comprehensive range of topics
was considered, including Board structure and composition, Board dynamics and interactions, Board Committees,
and Board processes, with special focus in the areas which could be strengthened to further enhance the overall
effectiveness of the Board and its committees. The Board evaluation has helped to identify a broader scope of topics
to be further covered in Board meetings and Directors’ trainings, and facilitated greater interactions among the Board
members and senior management, as well as further review in Board processes and governance practices.
099
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION BOARD COMPOSITION
As of 31 December 2021 and up to the date of this Corporate Governance Report, the Board consists of eleven
members, comprising one Executive Director and ten Independent Non-executive Directors. All Directors are
expressly identified by reference to such categories in all corporate communications that disclose their names. The
composition of the Board is well balanced with each Director having sound board level experience and expertise
relevant to the business operations and development of the Group. The Board is comprised of members with extensive
business, financial, government, regulatory and policy experience from a variety of backgrounds. There is diversity of
nationality, ethnicity, educational background, functional expertise, gender, age and experience.
Biographies of the Directors are set out on pages 76 to 81 of this Annual Report.
APPOINTMENT AND RE-ELECTION OF DIRECTORS
The Company uses a formal and transparent procedure for the appointment of new Directors. The Nomination
Committee engages in a robust search process to identify suitably qualified Director candidates with the use of
independent executive search firms and assesses candidates’ skills, experience and background and their alignment
with the Company’s business strategy. Final prospective candidates will then be shortlisted through a comprehensive
evaluation process involving reference checks and consideration is given to their ability and willingness to devote
sufficient time to the duties required of Board members. Following meetings with candidates by each of the members
of the Nomination Committee, the Nomination Committee will deliberate and recommend the selected candidate to
the Board for approval. During the year, this process was applied in the appointment by the Company of Ms. Sun Jie
(Jane) as an Independent Non-executive Director of the Company.
The focus of the Nomination Committee has always been to identify the most qualified individuals that can best serve
the interests of the Company’s shareholders with due regard for the interests of its policyholders. Within this broader
mandate, the Company seeks to be inclusive by taking into account various aspects of diversity. To promote greater
transparency in this respect, the Directors’ Nomination Policy was adopted by the Board in 2019 and revised in 2022.
A summary of the Policy is set out in the sub-section headed “Nomination Committee” under the “Committees of the
Board” section of this report.
In assessing the independence of a candidate, the Company takes into account the criteria affecting independence
as set out in Rule 3.13 of the Listing Rules. Every Independent Non-executive Director is required to confirm in
writing to the Company his/her independence upon his/her appointment as Director. He/She is also required to
declare his/her past or present financial or other interests in the Group’s business, or his/her connection with
any of the Company’s connected persons. In addition, he/she is also subject to ongoing obligations to notify the
Board Chairman as soon as practicable of any direct conflict of interest which may arise due to his/her duties as
an Independent Non-executive Director and any other duties or business interests which he/she may have and
to seek the Board’s written approval before any other duties or business can be undertaken. All Directors are
also required to consult with and obtain the written approval of the Board Chairman prior to accepting any other
directorships of listed companies.
All Directors are subject to retirement by rotation at least once every three years pursuant to the Corporate
Governance Code and are subject to re-election at the general meetings of the Company in accordance with the
Articles of Association of the Company.
100
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT BOARD INDEPENDENCE
Ten out of eleven members of the Board are Independent Non-executive Directors. Save as disclosed below in respect
of Mr. Tse, each of the Independent Non-executive Directors of the Company meets the independence guidelines set
out in Rule 3.13 of the Listing Rules and has provided to the Company the requisite annual confirmation as to his or
her independence.
Mr. Tse, save for being currently a director of AIA Foundation (a subsidiary of the Company) and previously a Non-
executive Director of the Company from 27 September 2010 to 22 March 2017 until his re-designation as an
Independent Non-executive Director, has met the independence guidelines set out in Rule 3.13 of the Listing Rules.
The Company has satisfied itself that Mr. Tse is independent pursuant to Rule 3.13 of the Listing Rules on the basis
that since his appointment as a Non-executive Director of the Company on 27 September 2010, Mr. Tse has not held
any executive or management role or function in the Company or any of its subsidiaries, and at no time during that
period has he been employed by the Company or any of its subsidiaries. He has not taken part in the day-to-day
management of the Company or its subsidiaries beyond his attendance at and participation in board and committee
meetings of the Group.
Independent Non-executive Directors are also required to inform the Company as soon as practicable if there is any
change of circumstances which may affect his or her independence. No such notification has been received during
the year ended 31 December 2021.
During the year under review, Directors have disclosed to the Company in a timely manner the changes in their other
offices held in public companies or organisations and other significant commitments.
Each of the four committees established by the Board, namely the Audit Committee, the Nomination Committee, the
Remuneration Committee and the Risk Committee, is chaired by Independent Non-executive Directors. The Audit
Committee, the Nomination Committee, and the Remuneration Committee comprise of Independent Non-executive
Directors only, while the Risk Committee comprises of a majority of Independent Non-executive Directors.
Included in the delegations to the Nomination Committee is the responsibility to assess annually the independence
of all the Independent Non-executive Directors and to affirm that each satisfies the criteria of independence as set
out in Rule 3.13 of the Listing Rules. Each Nomination Committee member abstains from assessing his/her own
independence.
The Nomination Committee assesses independence with regard to all relevant factors concerned rather than
limiting its assessment to the length of service of the individual in question. The Board considers individuals over
time gain valuable insight into the Group’s operations in various markets and therefore considers a full range
of factors, including board tenure, in determining an individual’s ongoing independence in the context of their
re-appointment. Nevertheless, the Board maintains a watching brief to search for suitably qualified individuals to
join the Board as Independent Non-Executive Directors in accordance with the Directors’ Nomination Policy and
Board Diversity Policy.
101
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Where an Independent Non-executive Director has served on the Board for over nine years, the Nomination Committee
considers and satisfies itself that the length of his/her tenure has not affected his/her independence having regard
to his/her actual contributions, impartiality and ability to continue to demonstrate effective oversight of management
of the Company. The Nomination Committee is confident that the wealth of skills, knowledge and experience of each
of the Independent Non-executive Directors enables each to continue to contribute meaningfully and objectively to
the deliberations of the Board.
Save as disclosed herein, none of the Independent Non-executive Directors has any material business with or
significant financial interests in the Company or its subsidiaries and therefore all the Independent Non-executive
Directors continue to be considered by the Company to be independent.
BOARD REFRESHMENT AND SUCCESSION
Board succession planning is an ongoing process for the Company. There are regular reviews and discussions on
succession planning, complemented by an active search when required for people presenting the right skill and
diversity mix. The Nomination Committee manages board succession in light of the Board’s overall needs, term limits
and retirements. It considers prospective Director candidates based on merit and takes a long-term, strategic view
of board succession, considering the competencies and experience necessary for effective oversight of the company
given its current operations and strategy as well as its ambitions for the future. It also reviews board composition in
light of the annual board assessment results and recommends any changes as appropriate.
The structure, size and composition of the Board is reviewed at least annually by the Nomination Committee. This
review includes consideration of the existing diversity (including skills, experience, background and gender) of the
Board as well as the Company’s business strategies to ensure that the Board is able to oversee all material matters
relating to the Group with a view to continuing to generate sustainable value for the Company and the Shareholders.
The Company does not have mandatory retirement ages or term limits for its directorship.
The Nomination Committee also periodically considers the composition of its Board Committees to ensure an
appropriate mix of skills alongside a range of perspectives to support the deliberations of such Committees. Changes
were made to the composition of the Board Committees, effective from 1 January 2022. Details are set out in the sub-
section headed “Nomination Committee” under the “Committees of the Board” section of this report.
BOARD PROCESS
Board meetings are held at least four times a year to determine overall strategies, receive management updates,
approve business plans as well as interim and annual results, and to consider other significant matters. At these
meetings, senior management also provides regular updates to the Board with respect to the Group’s business
activities and development of the Group, together with regulatory and policy updates.
Directors are empowered under the relevant terms of reference to request further information from management
whenever they think fit.
During the year under review, there were eight scheduled Board meetings, all of which were convened in accordance
with the Articles of Association of the Company.
102
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT
The attendance of individual Directors, either in person or through electronic means of communication, at the Board
meetings, committees’ meetings and the 2021 AGM held during the year under review are as follows:
Name of Director
Independent Non-executive
Chairman and Independent
Non-executive Director
Mr. Edmund Sze-Wing TSE
Executive Director,
Group Chief Executive and President
Mr. LEE Yuan Siong
Independent Non-executive
Directors
Mr. Jack Chak-Kwong SO
Mr. Chung-Kong CHOW
Mr. John Barrie HARRISON
Mr. George Yong-Boon YEO
Professor Lawrence Juen-Yee LAU
Ms. Swee-Lian TEO
Dr. Narongchai AKRASANEE
Mr. Cesar Velasquez PURISIMA
Ms. SUN Jie (Jane)(Note)
No. of Meetings Attended / No. of Meetings Held
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Risk
Committee 2021 AGM
8/8
8/8
7/8
8/8
8/8
8/8
8/8
8/8
8/8
8/8
5/5
–
–
4/4
–
4/4
4/4
–
–
4/4
3/3
–
2/2
4/4
4/4
1/1
–
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
1/1
–
4/4
1/1
4/4
–
–
4/4
–
–
–
–
–
–
4/4
4/4
–
4/4
4/4
–
–
–
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
–
Note:
Ms. Sun Jie (Jane) was appointed as Independent Non-executive Director of the Company on 1 June 2021.
Minutes of the meetings of and resolutions in writing passed by the Board and all committees are kept by the
Company Secretary. These minutes and resolutions are open for inspection on reasonable notice by the Directors.
CHAIRMAN AND GROUP CHIEF EXECUTIVE
Mr. Edmund Sze-Wing Tse, Independent Non-executive Chairman of the Company, plays the critical role of leading
the Board in fulfilling its responsibilities. With the support of the Group Chief Executive and President and senior
management, Mr. Tse seeks to ensure that all Directors are properly briefed on issues arising at Board meetings and
that they receive adequate and reliable information in a timely manner. He is also responsible for making sure that
good corporate governance practices and procedures are followed.
Mr. Lee Yuan Siong, Group Chief Executive and President of the Company, reports to the Board and is responsible
for the overall leadership, strategic and executive management and profit performance of the Group, including all
operations and administration. Mr. Lee attends Board meetings as the sole Executive Director and, in his capacity
as Group Chief Executive and President, ensures that the Board is updated at least monthly in respect of material
aspects of the Company’s performance. Mr. Lee discharges his responsibilities within the framework of the Company’s
policies, reserved powers and routine reporting requirements and is advised and assisted by the senior management
of the Group.
The segregation ensures a clear distinction between the Chairman’s responsibility to manage the Board and the
Group Chief Executive and President’s responsibility to manage the Group’s business.
The roles and responsibilities of the Board, the Chairman of the Board and the Group Chief Executive are set out in
the Board Charter of the Company, which is available on the Company’s website.
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ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
INDUCTION AND ONGOING DEVELOPMENT
The Company provides each Director with personalised induction, training and development. On appointment, each
Director receives a comprehensive and tailored induction covering, amongst other things, the role of the Board and
its key committees, group structure, governance structure and the duties and responsibilities of a director under
applicable laws and regulations.
Directors receive detailed briefings on the Group’s principal businesses, the markets in which it operates and the
overall competitive environment. Other areas addressed include legal and compliance issues affecting directors
of financial services companies, the Group’s governance arrangements, the principal basis of accounting for
the Group’s results, the internal audit and risk management functions, its investor relations programme and
remuneration policies. The Directors are continually updated on the Group’s business and the latest developments
to the Listing Rules and other applicable statutory requirements to ensure compliance and continuous good
corporate governance practice.
During the year under review, the Company organised a Board Strategy Day and provided a number of briefings to
the Directors to update them on the implementation of the Group’s strategies to capture future business
opportunities and the latest developments in the Group’s principal businesses, covering its investment strategy
and leadership development.
All Directors are encouraged to participate in continuous professional development to extend and refresh their
knowledge and skills, and are required to provide their training records to the Company. The training received by the
Directors during the year under review is summarised as follows:
Name of Director
Independent Non-executive Chairman and
Independent Non-executive Director
Mr. Edmund Sze-Wing TSE
Executive Director, Group Chief Executive
and President
Mr. LEE Yuan Siong
Independent Non-executive Directors
Mr. Jack Chak-Kwong SO
Mr. Chung-Kong CHOW
Mr. John Barrie HARRISON
Mr. George Yong-Boon YEO
Professor Lawrence Juen-Yee LAU
Ms. Swee-Lian TEO
Dr. Narongchai AKRASANEE
Mr. Cesar Velasquez PURISIMA
Ms. SUN Jie (Jane)(Note)
Types of Training
Reading or attending briefings /
seminars / conferences
relevant to regulatory and
governance updates
Attending corporate events /
executive briefings relevant to
the Group’s business
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Note:
Ms. Sun Jie (Jane) was appointed as Independent Non-executive Director of the Company on 1 June 2021.
104
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT COMMITTEES OF THE BOARD
The Company’s corporate governance is implemented through a structured hierarchy, which includes the Board
and four committees established by the Board, namely the Audit Committee, the Nomination Committee, the
Remuneration Committee and the Risk Committee. The memberships and terms of reference of all Board
committees are available on the websites of both the Hong Kong Exchanges and Clearing Limited and the Company.
In addition to the four Board committees, a number of management committees have been established including,
among others, an Executive Committee, the Group Operational Risk Committee, the Group Financial Risk Committee
and the ESG Committee.
AUDIT COMMITTEE
The Audit Committee consists of five members, all of whom are Independent Non-executive Directors. They are
Mr. Purisima, who serves as chairman of the Audit Committee, Mr. Harrison, Mr. So, Mr. Yeo and Dr. Narongchai.
Mr. Purisima was appointed as a member of the Audit Committee on 12 March 2021 and as chairman of the
Audit Committee, in place of Mr. Harrison, effective from 1 January 2022. Mr. Harrison remains as a member of the
Audit Committee.
The Audit Committee is delegated with the authority from the Board to oversee the Group’s financial reporting
system, the internal control systems and the relationship with the external auditor of the Company, and to review the
Group’s financial information.
The duties performed by the Audit Committee during the year under review included overseeing the Group’s financial
reporting system; reviewing risk management and internal control systems; monitoring the integrity of the preparation
of the Company’s financial information, including quarterly business highlights and interim and annual results of
the Group; reviewing the Group’s financial and accounting policies and practices as well as its whistle-blowing
programme; and monitoring the adequacy of resources for and effectiveness of the internal audit function. Details of
how the reviews of the effectiveness of the risk management and internal control systems had been undertaken are
set out in the Risk Management and Internal Control section of this report.
The Audit Committee also provided oversight for and management of the relationship with the Group’s external auditor,
including reviewing and monitoring the external auditor’s independence and objectivity, and the effectiveness of the
audit process in accordance with applicable standards.
The Audit Committee held four meetings during the year ended 31 December 2021. The attendance records of the
Audit Committee members are set out on page 103 of this Annual Report.
105
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION NOMINATION COMMITTEE
The Nomination Committee consists of ten members, including the Independent Non-executive Chairman, Mr. Tse,
who serves as chairman of the Nomination Committee, and the remaining nine Independent Non-executive Directors,
Mr. So, Mr. Chow, Mr. Harrison, Mr. Yeo, Professor Lau, Ms. Teo, Dr. Narongchai, Mr. Purisima and Ms. Sun. Ms. Sun
was appointed as a member of the Nomination Committee, effective from 16 September 2021. The Nomination
Committee is delegated with the authority from the Board to review the Board’s composition and diversity, formulate
and implement the Directors’ Nomination Policy, make recommendation to the Board on the appointment/re-
appointment of Directors and members of the Board committees, and assess the independence of the Independent
Non-executive Directors ensuring independent views and input are available to the Board.
The duties performed by the Nomination Committee during the year under review included reviewing and making
recommendations to the Board on the structure, size and composition of the Board, with due regard to the skills,
knowledge, experience and diversity of background and experience of its members; overseeing the identification and
assessment of potential candidates for directorship; providing oversight and direction in respect of the succession
planning for directors and determining the composition of the Board committees.
The Nomination Committee held two meetings during the year ended 31 December 2021. The attendance records of
the Nomination Committee members are set out on page 103 of this Annual Report. At the December 2021 meeting,
the Nomination Committee considered and recommended to the Board a rotation of the chairpersons and members
of some of the Board Committees, with effect from 1 January 2022. In arriving at such recommendation, it had
reviewed the composition of and expertise on each of the Board Committees, taking into due regard to the benefits
of maintaining continuity and experience on the Board Committees necessary for effective deliberations and
decisions and the need to bring in new perspectives and skills, as part of the Company’s ongoing effort to enhance
its Board effectiveness.
To promote greater transparency on the Nomination Committee’s processes and criteria for selecting and making
recommendations to the Board on the appointment, election or re-election of Directors, the Directors’ Nomination
Policy was adopted by the Board in 2019 and revised in 2022 upon the recommendation of the Nomination Committee.
A summary of the Directors’ Nomination Policy is set out below:
•
In assessing the suitability of a candidate proposed for appointment, election or re-election as a Director, the
Nomination Committee shall consider the candidate on the basis of the selection criteria set out in the Directors’
Nomination Policy, which includes, amongst other things, whether his/her skills, knowledge, experience and
background can complement and enhance those of the existing Board members with due regard to the benefits
of diversity perspectives set out in the Board Diversity Policy; his/her character, reputation, integrity and standard
of competence; and the ability to devote sufficient time to discharge his/her duties as a Director. For candidates
proposed for nomination as an Independent Non-executive Director, the satisfaction of the independence
requirement under Rule 3.13 of the Listing Rules is also required.
• For appointment or election of a new Director, the Nomination Committee shall take the lead in identifying
candidates suitably qualified to become a Director. It may consider referrals from existing Directors, and use
open advertising or the services of external advisers to facilitate the search based on the selection criteria set
out in the Directors’ Nomination Policy. Shareholders may also propose a person for election as a Director of the
Company at a general meeting, relevant procedures of which are set out on the website of the Company. The
Nomination Committee shall evaluate the suitability of a candidate through interviews, background checks, third
party reference checks, and/or any process as it deems necessary and appropriate.
• For re-election of a retiring Director, the Nomination Committee will review the overall past contributions of the
retiring Director to the Company, and determine whether he/she continues to meet the selection criteria set out in the
Directors’ Nomination Policy. In particular, in recommending the re-election proposals of those retiring Independent
Non-executive Directors who have been appointed to the Board for more than nine years, the Nomination Committee
should take into consideration all relevant factors when assessing their continuing independence.
106
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT These processes aim to ensure that every Director has the requisite character, experience and integrity, and that he/
she is able to demonstrate a standard of competence commensurate with his/her position as a Director.
Furthermore, the Board Diversity Policy, which was first adopted by the Board in 2013 and revised in 2021, describes
the Company’s approach to achieve appropriate diversity. A summary of the Board Diversity Policy is set out below:
• The Company understands that a Board composed of appropriately qualified members with a broad range of
relevant experience, in addition to diversity in thought and background, is essential to the effective governance of
its business and ensuring long-term sustainable growth;
• The Company remains committed to non-discrimination in all aspects of its business, including the appointment
of Board members. Consideration and selection of candidates for appointment to the Board will be based on merit
which shall include a review of the candidate’s integrity, experience, educational background, industry or related
experience and more general experience;
• Within that overriding emphasis on merit, the Nomination Committee shall seek to address Board vacancies by
actively considering candidates that bring a diversity of background and opinion from amongst those candidates
with the appropriate background and industry or related expertise and experience. The Nomination Committee’s
considerations shall include achieving an appropriate level of diversity having regard to factors such as gender,
age, ethnicity, nationality, cultural and educational background;
• The Nomination Committee will (a) in reviewing the Board composition, consider the benefits of all aspects of
diversity including, but not limited to, those described above, in order to maintain an appropriate range and
balance of skills, experience, knowledge and character on the Board; and (b) as part of the performance evaluation
of the Board, consider the balance of skills, experience, knowledge and independence of the Board;
• As part of the Nomination Committee’s annual review of the structure, size and composition of the Board, the
Nomination Committee will expressly consider and include commentary to the Board on the subject of the Board’s
diversity; and
• The measurable objectives on board diversity under the Board Diversity Policy include (a) selection of candidates
for nomination as a Director be based on the Directors’ Nomination Policy with due regard to the diversity
perspectives set out in the policy; (b) to maintain the Board with a majority of independent non-executive
directors; and (c) to ensure that the Board be made up of members with diverse backgrounds and experience,
including diversity of nationality, ethnicity and gender, with such members demonstrating appropriate knowledge,
experience and understanding of the markets in which the Company operates its business.
107
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION REMUNERATION COMMITTEE
The Remuneration Committee consists of three members, all of whom are Independent Non-executive Directors.
They are Mr. Yeo, who serves as chairman of the Remuneration Committee, Mr. So and Mr. Tse. During the year, Mr.
Yeo was appointed as chairman of the Remuneration Committee, in place of Mr. So, effective from 1 January 2022.
Mr. So remains as a member of the Remuneration Committee.
The Remuneration Committee is responsible for, amongst other things, establishing and overseeing the
implementation of the Group’s remuneration policies, overseeing and approving the Company’s equity-based
remuneration plans, and determining specific remuneration for the executive director, senior management and
other personnels of the Company.
The Remuneration Committee held four meetings during the year ended 31 December 2021. The attendance records
of the Remuneration Committee members are set out on page 103 of this Annual Report. Details of the role of the
Remuneration Committee, and the key activities performed by the Remuneration Committee during the year under
review have been set out in the Remuneration Report, which forms part of this Corporate Governance Report.
RISK COMMITTEE
The Risk Committee consists of seven members, six of whom are Independent Non-executive Directors, including
Ms. Teo, who serves as chairman of the Risk Committee, Mr. Chow, Mr. Harrison, Professor Lau, Mr. Purisima,
Mr. Tse and Mr. Lee, the sole Executive Director of the Company. During the year, Ms. Teo was appointed as chairman
of the Risk Committee, in place of Mr. Chow, effective from 1 January 2022. Mr. Chow remains as a member of the
Risk Committee. Mr. Purisima was also appointed to the Risk Committee, effective from 1 January 2022.
The Risk Committee is delegated with the authority from the Board to, amongst other things, determine the Group’s
risk appetite, including the risk appetite statement, risk principles and risk tolerances, oversee and review the
adequacy and effectiveness of the Risk Management Framework of the Group, ensure that the material risks facing
the Group have been identified and that the risk profile adequately represents any significant issues relating to the
Group’s control environment with mitigating actions put in place, and to advise the Board on risk-related issues.
The duties performed by the Risk Committee during the year under review included providing advice to the Board
on the risk profile and risk management strategy of the Group; considering and reviewing disclosures in interim
and annual reports, risk management-related policies and guidelines, statutory solvency positions, risk appetite and
metrics; overseeing the risk management and compliance framework; reviewing the risk management and internal
control systems; endorsing the Company’s risk governance structure; and reviewing major risks. Details of how the
Risk Committee reviews the effectiveness of the risk management and internal control systems of the Group are set
out in the Risk Management and Internal Control section of this report.
The Risk Committee held four meetings during the year ended 31 December 2021. The attendance records of the
Risk Committee members are set out on page 103 of this Annual Report.
108
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT EXTERNAL AUDITOR
The external auditor of the Company is PricewaterhouseCoopers. The Audit Committee is responsible for making
recommendations to the Board on the external auditor’s appointment, re-appointment and removal, which are subject
to approval by the Board and by the shareholders at a general meeting of the Company. In assessing the external
auditor, the Audit Committee will take into account relevant experience, performance, objectivity and independence
of the external auditor. The Board has adopted policies on nomination and appointment of and services performed by
the external auditor to enhance related governance practices.
The Audit Committee also reviews the non-audit services provided by the external auditor and its remuneration on
a regular basis. For the year ended 31 December 2021, the total estimated remuneration payable by the Group to
PricewaterhouseCoopers was US$27.7 million (2020: US$25.2 million), an analysis of which is set out below:
US$ millions
Audit services
Non-audit services, including:
Audit-related services(1)
Tax services
Other services
Total
2021
21.2
4.7
0.7
1.1
27.7
2020
20.0
3.9
1.2
0.1
25.2
Note:
(1) Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Group’s financial
statements. They include, among others, due diligence services pertaining to potential business acquisitions (excluding valuation services); services
related to implementation of new accounting and financial reporting guidance from regulatory authorities; and agreed-upon or expanded audit
procedures related to compliance with financial, accounting or regulatory reporting matters.
ACCOUNTABILITY AND AUDIT
FINANCIAL REPORTING
The annual results of the Company and other financial information were published in accordance with the
requirements of the Listing Rules and other applicable regulations and industry best practice. When preparing the
Company’s financial reports, the Board endeavours to present this information in a comprehensible, informative and
user-friendly manner.
The Directors acknowledge their responsibility for preparing the Company’s consolidated financial statements and
ensuring that the preparation of the Company’s consolidated financial statements is in accordance with the relevant
requirements and applicable standards.
The statement of the Company’s auditor concerning its reporting responsibilities on the Company’s consolidated
financial statements is set out in the Independent Auditor’s Report on pages 133 to 139 of this Annual Report.
109
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION RISK MANAGEMENT AND INTERNAL CONTROL
The Board, assisted by its committees, is responsible for overseeing the Group’s risk management and internal
control systems on an ongoing basis. The Board reviews the effectiveness of risk management and internal control
systems on an annual basis.
The Group’s RMF does not seek to eliminate all risks but rather to identify, understand and manage them within
acceptable limits in order to support the sustainability of the business and the creation of long-term value in alignment
with the Group’s culture and strategy, and can only provide reasonable and not absolute assurance against material
misstatement or loss. The main features and other information on the RMF and the process used to identify, evaluate
and manage significant risks are set out in the Risk Management section of this Annual Report.
The Company has an internal audit function (Internal Audit). The key features of the Company’s internal control
system include independent reviews and testing of internal controls, taking a risk-based approach and developing
an annual audit plan presented to the Audit Committee. Reports of significant audit findings are prepared and
communicated to management and the Audit Committee and where control weaknesses or defects are identified,
recommendations are provided to resolve them. This includes issues formally identified from internal audits, forensic
investigations, regulatory reports and special projects. Management is responsible for the design, implementation
and evaluation of the internal control system, including ongoing mitigation, across the business and processes.
The Board has, through the Risk Committee and Audit Committee, reviewed the adequacy and effectiveness of the
Group’s risk management and internal control systems (covering all material controls such as financial, operational
and compliance controls), including:
•
the adequacy of resources, staff qualifications and experience, training programmes and the budget of the
Group’s accounting, internal audit and financial reporting functions;
• areas of risk identified by management as well as the quality and scope of management’s ongoing monitoring of
risks and the risk management system;
•
•
•
•
•
•
the changes in the nature and extent of significant risks (including ESG risks) since the previous review and the
Group’s ability to respond to changes in the external environment and its business;
the quality and scope of the internal control system implemented by management and the work and effectiveness
of Internal Audit as well as any significant risks reported by Internal Audit;
the extent and frequency of communication of monitoring results to the Board and its committees, to enable the
assessment of the effectiveness of the Group’s risk management and internal control systems;
the incidence of any significant control failings or weaknesses that have been identified during the year and the
extent to which they have resulted in a material impact on the Group’s financial performance or condition;
the effectiveness of the Group’s processes in relation to financial reporting and regulatory compliance;
the scope of work performed by both internal and external auditors and any significant issues arising from internal
and external audit reports; and
•
the results of management’s control self-assessment exercises.
The annual review of the Group’s risk management and internal control systems was supported by an internal
certification process performed by management (at both the Company’s and subsidiaries’ levels), the Risk &
Compliance function and Internal Audit of the Company.
Management has confirmed to the Board that the Group’s risk management and internal control systems are adequate
and effective. Based on the review result and management’s confirmation, the Board considered the Group’s risk
management and internal control systems to be adequate and effective for the year ended 31 December 2021.
110
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT INSIDE INFORMATION
The Company has implemented proper procedures and internal controls for the handling and dissemination of inside
information:
• The Company has established a policy on the disclosure of inside information to ensure that all current and
prospective investors of the Company, market participants and the public are provided with appropriate
information relating to the Group in a timely and simultaneous manner. The policy has been communicated to all
relevant staff and related training has also been provided to them; and
• A written communications protocol has also been established to implement a control process within the Group
for the management of communications with various internal and external stakeholders. Such protocol identifies
a list of spokespersons who are authorised to provide information about the Group to the relevant stakeholders.
The Company’s Code of Conduct further contains a strict prohibition on the unauthorised use of confidential or
non-public information.
COMPANY SECRETARY
All the Directors have access to the advice and services of the Company Secretary at any time in respect of their
duties and the effective operation of the Board and Board committees. The Company Secretary advises the Board on
all corporate governance matters; facilitates the induction and professional development of Directors; and ensures
good information flows and communications within the Board and its committees, and between management and
the Non-executive Directors. The Company Secretary also plays an important role in ensuring that Board and Board
committee policies and procedures are followed and the Board’s obligations to shareholders pursuant to the Listing
Rules are discharged. During the year under review, Ms. Nicole Pao undertook at least 15 hours of relevant continuing
professional education.
ENGAGEMENT WITH SHAREHOLDERS
The Board recognises the importance of maintaining an ongoing dialogue with the Company’s shareholders and
does so through general meetings, press releases, announcements and corporate communications such as the
annual report, interim report and circulars. The Board is committed to the timely disclosure of information. The
latest information regarding the Group’s activities, announcements, results presentations, webcasts and corporate
communications is made available on the Company’s website at www.aia.com in a timely manner. The financial
calendar highlighting the key dates for shareholders is set out on page 287 of this Annual Report.
The Investor Relations function oversees the Company’s engagement with investors. The Company’s institutional
shareholder base is geographically diversified and the Company is also extensively covered by research analysts from
a wide range of broker houses. An active and open dialogue with institutional investors is maintained through regular
investor interactions, including meetings, investment conferences and roadshows. Investor feedback and analysts’
reports on the Company are circulated to the Board and the Executive Committee on a regular and systematic basis
to promote an understanding of external views on the Company’s performance.
The Board has adopted a Shareholders’ Communication Policy and such policy will be reviewed on an annual
basis to ensure its effectiveness. The Board welcomes views, questions and concerns from shareholders and other
stakeholders. Shareholders and other stakeholders may send their enquiries and concerns to the Board. The contact
details are set out on page 288 of this Annual Report.
111
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
2021 ANNUAL GENERAL MEETING
The 2021 annual general meeting (2021 AGM) of the Company was held at the Grand Ballroom, Lower Level 1,
Kowloon Shangri-La, 64 Mody Road, Tsim Sha Tsui East, Kowloon, Hong Kong on 20 May 2021. The Chairman and
all other members of the Board at that time, together with the Group’s senior management and external auditor,
attended the 2021 AGM, either in person or through electronic means of communication. The poll voting results are
available on the websites of both the Company and the Hong Kong Exchanges and Clearing Limited. The matters
resolved at the 2021 AGM are summarised below:
• Receipt of the audited consolidated financial statements of the Company, the Report of the Directors and the
Independent Auditor’s Report for the year ended 31 December 2020;
• Declaration of a final dividend of 100.30 Hong Kong cents per share for the year ended 31 December 2020;
• By way of separate ordinary resolutions, the re-election of Mr. Lee as Executive Director and Mr. Chow, Mr.
Harrison, Professor Lau and Mr. Purisima as Independent Non-executive Directors of the Company;
• Re-appointment of PricewaterhouseCoopers as auditor of the Company until the conclusion of the next annual
general meeting and authorising the Board to fix its remuneration;
• General mandate to Directors to cause the Company to issue additional shares of the Company, not exceeding
10 per cent of the aggregate number of shares of the Company in issue on the date of the 2021 AGM, and the
discount for any shares to be issued not exceeding 10 per cent to the benchmarked price; and
• General mandate to Directors to cause the Company to buy back shares of the Company, not exceeding 10 per
cent of the aggregate number of shares of the Company in issue on the date of the 2021 AGM.
The forthcoming annual general meeting of the Company will be held on Thursday, 19 May 2022. Further details will
be set out in the Company’s circular to be issued to the shareholders of the Company for the AGM.
SHAREHOLDERS’ RIGHTS
GENERAL MEETING
Shareholder(s) representing at least 5 per cent of the total voting rights of all the shareholders of the Company
having a right to vote at general meetings, may request to call a general meeting. If such request is made, a general
meeting must be called. Such request, either in hard copy form or in electronic form and being authenticated by the
person or persons making it, must be deposited at the registered office of the Company at 35/F, AIA Central, No.
1 Connaught Road Central, Hong Kong or sent by email to ir@aia.com for the attention of the Company Secretary.
Shareholder(s) of the Company should make reference to the provisions under Sections 566 to 568 of the Hong Kong
Companies Ordinance for calling a general meeting.
MOVING A RESOLUTION AT AN ANNUAL GENERAL MEETING
Shareholder(s) of the Company may request the Company to give notice of a resolution and move such resolution
at an annual general meeting. Such notice of resolution must be given by the Company if it has received such
request from:
(a) shareholder(s) of the Company representing at least 2.5 per cent of the total voting rights of all the shareholders
of the Company who have a right to vote on the resolution at the annual general meeting to which the request
relates; or
(b) at least 50 shareholders of the Company who have a right to vote on the resolution at the annual general meeting
to which the request relates.
112
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT Such a request must identify the resolution of which notice is to be given, be either in hard copy form or in electronic
form and be authenticated by the person or persons making it, and be received by the Company not later than six
weeks before the annual general meeting to which the request relates or, if later, the time at which notice is given
of that meeting. The request must be deposited at the registered office of the Company at 35/F, AIA Central, No. 1
Connaught Road Central, Hong Kong or sent by email to ir@aia.com for the attention of the Company Secretary.
Shareholder(s) of the Company should make reference to Sections 615 and 616 of the Hong Kong Companies
Ordinance for the relevant procedures to move a resolution at an annual general meeting.
PROPOSING A PERSON FOR ELECTION AS A DIRECTOR
Shareholders can propose a person (other than a retiring Director himself/herself) for election as a Director at a
general meeting of the Company. Relevant procedures are available on the Company’s website at www.aia.com.
CONSTITUTIONAL DOCUMENTS
The Company’s Articles of Association (in both English and Chinese) is available on the websites of both the
Company and the Hong Kong Exchanges and Clearing Limited. During the year under review, there has been no
change to the Articles of Association of the Company.
By Order of the Board
Nicole Pao
Company Secretary
11 March 2022
113
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION REMUNERATION REPORT
STATEMENT OF THE CHAIRMAN OF THE REMUNERATION COMMITTEE
ON BEHALF OF THE REMUNERATION COMMITTEE, I AM PLEASED
TO PRESENT THE REPORT ON REMUNERATION FOR DIRECTORS
AND KEY MANAGEMENT PERSONNEL FOR THE PERIOD ENDED
31 DECEMBER 2021.
In 2021, the Remuneration Committee focused on ensuring that the Group’s remuneration framework equitably
rewarded our employees for their contributions and value creation. Individual remuneration arrangements for our
senior executives are aligned to the Group’s strategy and provide rewards for the delivery of sustainable value whilst
taking into account our regulatory environment, AIA’s risk management framework, relevant market practices and
the interests of our stakeholders.
Given the challenging macroeconomic environment, the Remuneration Committee had kept itself abreast of
remuneration trends in Hong Kong, Asia Pacific and globally. As in previous years, the Remuneration Committee
worked closely with its independent advisor to ensure that AIA’s remuneration framework remains current with
relevant market practices and remuneration governance trends.
Over the course of 2021, the Remuneration Committee conducted a number of comprehensive reviews to ensure
principles of good corporate governance and market competitiveness are sustained.
• As part of the Remuneration Committee’s regular review process documenting the Remuneration Committee’s
role and the authority delegated to it by the Board, the Terms of Reference for the Remuneration Committee were
updated and approved by the full Board.
• AIA’s Remuneration Policy which governs the Group’s overall remuneration framework including for Senior
Management and Non-executive Directors was thoroughly reviewed and updated following Board approval to
ensure relevant regulatory requirements and recommended best practices were considered.
• An in-depth review of the Group’s overall incentive framework was conducted to ensure that the framework
remains compliant with relevant regulatory requirements, supports the Group’s strategy, is aligned with relevant
market practices, and that reward outcomes are closely aligned with company performance and shareholder
outcomes.
• Reviewed and proposed adjustments, subsequently approved by the Board with effect from 1 January 2022, to
the fees for the Board Chairman and Non-executive Directors.
114
AIA GROUP LIMITEDCORPORATE GOVERNANCE The overall remuneration framework for senior executives remains unchanged in 2021 and will continue to apply
in 2022. The framework focuses on encouraging behaviours, which create sustainable value for shareholders and
positive impact for other stakeholders while discouraging inappropriate risk taking.
In this report you will see that we have strengthened disclosure on AIA’s remuneration safeguards under a newly
introduced section about remuneration and risk. The Remuneration Committee continues to emphasise a balanced
approach between risk and rewards providing for competitive remuneration and incentives to attract and motivate
the talent AIA requires to deliver on the Group’s strategy.
The Remuneration Committee remains confident that the Group’s remuneration framework, including executive
remuneration arrangements are well aligned with our long-term ambitions and the Group’s strategy.
George Yong-Boon Yeo
Chairman, Remuneration Committee
11 March 2022
115
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION REMUNERATION GOVERNANCE
ROLE OF THE REMUNERATION COMMITTEE
The Remuneration Committee is responsible for establishing and overseeing the implementation of the Group’s
remuneration policies, overseeing and approving the Company’s equity-based remuneration plans, and determining
specific remuneration for all directors, the Group Chief Executive and President, Key Management Personnel (the
members of the Group Executive Committee who, by the nature and accountabilities of their respective positions,
participate directly in the development, implementation, monitoring and reporting of the overall business strategy
of the Group) and the Key Persons in Control Functions. As part of its duties, the Remuneration Committee is
responsible for establishing a formal and transparent procedure in developing and approving such remuneration.
In making its determinations and recommendations, the Remuneration Committee considers such factors as the
responsibilities of the Group Chief Executive and President and Key Management Personnel, the remuneration
paid by comparable companies, remuneration levels within the Group, relevant risk policies and the application of
performance-based incentives.
The Remuneration Committee is responsible for reviewing and assessing the remuneration framework and
relevant policies to ensure that they do not encourage excessive risk taking and do not misalign the interests of
the Company’s stakeholders. Working closely with other relevant Committees, such as, the Risk Committee, the
impact of the remuneration framework and relevant remuneration policies is assessed to ensure excessive risk taking
is not encouraged.
The Remuneration Committee also oversees the design and operation of the Company’s equity-linked and other Group
incentive schemes, recommending equity-based employee grants for approval by the Board as well as reviewing and,
where appropriate, amending the terms of the schemes.
The Remuneration Committee is authorised by the Board to discharge its duties as outlined in its Terms of Reference.
It is also authorised to seek any remuneration information it requires from the Group Chief Executive and President
and / or Key Management Personnel and may obtain external independent professional advice as it deems necessary.
The full Terms of Reference for the Remuneration Committee can be accessed at www.aia.com.
MEMBERS AND MEETINGS
As of 31 December 2021, the Remuneration Committee consisted of three Independent Non-executive Directors,
being Mr. Jack Chak-Kwong So, who was the Chairman of the Remuneration Committee until December 31, 2021,
Mr. George Yong-Boon Yeo and Mr. Edmund Sze-Wing Tse. As part of the Board’s ongoing review of its structure and
performance, the chairs of the various Board committees have been rotated. With that, Mr. Yeo has been appointed as
Chairman and Mr. So remains a member of the Remuneration Committee with effect from 1 January 2022.
The Remuneration Committee held four meetings during the year ended 31 December 2021. The attendance records
of the Remuneration Committee members are set out on page 103 of this Annual Report.
116
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE KEY ACTIVITIES OF THE REMUNERATION COMMITTEE
The Remuneration Committee performed the following key activities in 2021.
Area
Summary of activities
Remuneration decisions for
the Group Chief Executive
and President and Key
Management Personnel
• Reviewed and approved the 2021 remuneration for the Group Chief Executive and
President and the Key Management Personnel at the start of the year
• Recommended the 2021 long-term incentive grant for the Group Chief Executive and
President for approval by the Independent Non-executive Directors of the Board
• Reviewed and approved the terms and conditions including remuneration
arrangements of the incoming Regional Chief Executive and Group Chief Strategy
Officer and for the departing Group Chief Strategy and Corporate Development Officer
• Reviewed the executive benchmarking results ahead of the 2021/22 annual review
cycle
Design and operation
of the Group’s
incentive schemes
• Reviewed the achievement of relevant performance levels and approved the 2020
short-term incentive plan awards and the vesting of the 2018 long-term incentive
grants for all plan participants including the Group Chief Executive and President and
the Key Management Personnel
• Reviewed and approved grants under the long-term incentive plan, including share
option (SO) grants and performance-vesting restricted share unit (RSU) grants for the
2021 to 2023 performance period
• Approved a one-off 2021 ex-gratia award in the form of time-vesting RSUs under the
2021 long-term incentive RSU Scheme, granted to selected individuals to recognise
and reward their exceptional contributions. No 2021 ex-gratia award was made to the
Group Chief Executive and President
• Reviewed and approved the performance measures and targets for the 2022 short-
term incentive plan, and the 2022 long-term incentive plan for the 2022 to 2024
performance period
• Reviewed and approved the executive incentive framework
• Approved changes to senior control function employees’ short-term incentive awards
to align them to Group Office results from 2022 onwards
• Reviewed and approved the 2020 Remuneration Report
• Reviewed and approved the updated Terms of Reference for the Remuneration
Committee, subsequently approved by the Board
• Reviewed and approved the Remuneration Policy, subsequently approved by the
Board
• Reviewed and assessed the Group’s remuneration framework to ensure alignment
with stakeholders’ interests, including appropriate safeguards, and provided the Risk
Committee with a report of this review
• Reviewed the regulatory and corporate governance environment impacting executive
remuneration practices and governance in the Group’s key markets, including Hong
Kong, Mainland China and Australia
• Reviewed the emerging remuneration trends for AIA’s international insurance peer
companies and for the Asia Pacific and other regions, especially with respect to the
COVID-19 pandemic
• Reviewed and approved proposed adjustments to Board Chairman fee and Non-
executive director fees, subsequently approved by the Board
Remuneration governance
and disclosure
Board Chairman Fee
and Non-executive
Director Fees
In conducting its business, the Remuneration Committee is advised by an independent consultant appointed by
the Remuneration Committee, which provides independent advice for any remuneration topics requested by the
Remuneration Committee, including reviewing the remuneration framework and executive remuneration terms
and arrangements.
117
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION REMUNERATION AND RISK
The Remuneration Committee regularly reviews and as necessary amends the remuneration framework and oversees
its implementation in view of effective risk management, and regulatory requirements of relevant jurisdictions.
A report of remuneration and risk matters is to be provided annually by the Remuneration Committee and shared with
the Risk Committee. This report contains an assessment of AIA’s remuneration framework including the incentive
framework, remuneration governance practices, and the key topics discussed and approved by the Remuneration
Committee over the course of the year. This ensures a robust dialogue concerning risk issues between the two
Committees. The Group Risk Management function evaluated the 2021 remuneration framework and concluded that
it does not encourage inappropriate risk taking behaviours.
Control functions are actively involved in monitoring the operational implementation of AIA’s policies and practices
and ensuring compliance across the Group. If applicable, relevant control functions are consulted in establishing the
remuneration framework and, as required, when defining remuneration policies and rules, in order to ensure that the
remuneration framework complies with legal and regulatory requirements across the Group and does not encourage
excessive risk taking behaviours.
Group Risk Management and Group Legal are consulted to define the criteria to identify the Key Persons in Control
Functions and Material Risk Takers on a regular basis.
AIA’s remuneration framework contains multiple design and policy safeguards in place to adhere to prudent risk
taking and to not encourage excessive risk taking behaviours.
These safeguards include guidelines on employment and remuneration terms and conditions for the most senior
positions including a consistent, centrally managed framework for contractual agreements and a robust remuneration
benchmarking approach conducted by an independent advisor. Additional safeguards include clear incentive
funding and vesting frameworks aligned with Board approved performance targets, short-term incentive awards
and long-term incentive vesting levels approved by the Remuneration Committee with target and maximum pay
opportunities aligned with market practices, malus and clawback provisions as part of the incentive framework and
share ownership guidelines for the Group Chief Executive and President.
In addition, a robust Group-wide performance management framework is applied, assessing employees’ and
executives’ contributions and behaviours based on individual goals established at the beginning of the year. This
ensures that reward outcomes reflect both results achieved and behaviours demonstrated balancing the financial
and non-financial aspects.
For 2022 onwards, senior control function employees’ short-term incentive awards will be fully aligned to Group
Office results to avoid potential conflict of interests and to ensure their independence.
118
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE REMUNERATION FRAMEWORK
REMUNERATION POLICY
The Company’s remuneration policies and practices are committed to responsible remuneration practices to attract,
motivate and retain employees at all levels across the Group. AIA aims to reward all individuals competitively and
fairly, irrespective of gender, ethnicity, age, disability or other non-performance related factors, based on principles
of impact and contribution balanced against sound risk management.
AIA’s remuneration practices support the achievement of AIA’s business strategy including achievement of long-
term objectives taking into consideration the Group’s capital position and long-term performance whilst not inducing
excessive risk taking behaviours or violation of applicable laws, guidelines or regulations.
AIA’s remuneration policy serves to support the above objectives including appropriate governance, design,
implementation and monitoring of AIA’s remuneration and risk management framework. AIA’s remuneration
framework applies across the Group and is implemented consistently across business units, subject to local rules
and regulations as necessary and appropriate for the Group.
REMUNERATION ELEMENTS
The table below summarises the Company’s remuneration elements and their application to the Group Chief Executive
and President and the Key Management Personnel for the year ended 31 December 2021.
Element
Base salary
This is the fixed portion
provided as a cash
element of remuneration
Short-term incentives
These are delivered in the
form of a discretionary,
performance-based cash
award to incentivise, recognise
and reward achievement of
business objectives, individual
contribution and behaviours
Basis of determination
Notes on practices
The Remuneration Committee reviews
base salaries annually against AIA’s
international insurance peers and
wider market levels.
Base salary increases, where
applicable, typically take effect from
1 March.
Short-term incentive awards are based
on the achievement of the Group’s
pre-defined financial performance
targets as well as individual
contribution and behaviours. As such,
both financial and non-financial
performance measures are taken into
consideration.
Base salary is determined with reference
to the size and nature of the role,
geographical location, and scope and
relevant individual experience, whilst
also considering competitive market
positioning and internal equity to attract
and retain employees with required
capabilities to achieve the Group’s
business objectives.
The fixed portion of remuneration should
be set appropriately to not induce any
excessive risk taking behaviour by
leveraging the variable component.
Across the Group, short-term incentives
are discretionary and intended to
incentivise the achievement of annual
business plans.
Short-term incentive awards recognise
both business and individual
performances, taking into consideration
an individual’s contribution and
behaviours.
Short-term incentive target
opportunities are determined with
reference to the individual’s roles
and responsibilities and the market
competitiveness of variable and total
compensation.
119
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Element
Basis of determination
Notes on practices
Long-term incentives
These are delivered in the
form of RSUs and SOs to
align the long-term interests
of executives with those of
shareholders, and to reward
and motivate participants
who have made important
contributions to the Group’s
success or are expected to play
a significant role in the future
Benefits and allowances
These include benefits that
may be required by regulations
and / or in line with local market
practices, and contribute to the
value of total rewards
Employee share purchase plan
(ESPP)
This benefit provides employees
with a share investment
opportunity with matching
share grants to facilitate and
encourage long-term AIA share
ownership
Across the Group, long-term incentives
are discretionary and intended to
align key talent and senior employees
with the Group’s long-term strategic
goals and ambitions and shareholders’
interests. Long-term incentives promote
risk awareness, encourage engagement
to operate in a sustainable manner and
are designed to motivate, retain and
support wealth creation.
Long-term incentive grants are usually
made in form of RSUs and / or SOs for
senior employees and are subject to
a three-year vesting period. RSUs are
subject to pre-defined performance
vesting requirements.
Long-term incentive grant values are
determined with reference to roles
and responsibilities as well as the
individual’s performance and future
potential whilst also considering the
market competitiveness of variable and
total compensation opportunities.
The benefits programme and
allowances are designed to ensure
market competitiveness of the overall
rewards and are fully compliant with
local regulations.
Long-term incentive grants are
discretionary and participation is
determined on an annual basis.
For the Group Chief Executive and
President and Key Management
Personnel, grants are made in the form
of RSUs and SOs to deliver a balanced
mix of ownership and incentives,
as well as reward executives for
sustainable performance.
Such grants generally vest after a
three-year period and are settled
in AIA shares, with RSUs subject to
pre-defined performance vesting
requirements resulting in a significant
portion of senior executives’ variable
remuneration being deferred in the
form of long-term incentives.
The Group Chief Executive and
President and Key Management
Personnel participate in retirement
schemes and receive welfare related
benefits, for example, medical and life
insurance.
Except where prohibited by local
regulations, ESPP is open to all
employees who have completed
probation and is subject to a maximum
contribution indicated as a percentage
of base salary or the plan’s maximum
dollar limit.
Participants receive matching shares
for the Company’s shares they have
purchased and held for three years,
subject to an investment limit approved
by the Remuneration Committee.
Matching shares vest after three years.
Further details on the operation of our short-term and long-term incentives, along with the ESPP, are provided on the
following pages.
120
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE VARIABLE REMUNERATION
Variable remuneration opportunities are designed to motivate employees to deliver on key short-term and long-term
objectives and are aligned with the interests of key stakeholders of AIA, including those of long-term shareholders.
Depending on business and individual performance and behaviours, such incentives may result in award levels
above or below target, reflecting superior performance and behaviours, and performance and behaviours below
expectations, respectively.
AIA’s short-term and long-term incentive plans are described below.
SHORT-TERM INCENTIVE PLAN
Short-term incentives are discretionary and intended to incentivise participants for the achievement of annual
business plans and key objectives linked to financial, operational and individual performance over the relevant
financial year. Individual performance is measured based on the achievements of individual goals focusing on results
and behaviours, including a balance of financial and non-financial measures.
2021 short-term incentive plan performance levels, including target and maximum opportunities, were determined
by the Remuneration Committee and communicated to the Group Chief Executive and President and Key Management
Personnel at the beginning of the financial year ended 31 December 2021.
Performance Measures And Weightings
For 2021, the performance measures used in the short-term incentive plan were as follows:
VONB
UFSG
OPAT
60%
WEIGHTING
15%
WEIGHTING
25%
WEIGHTING
Value of new business (VONB) is an estimate of the economic value of one year’s
sales as published by the Company
Underlying Free Surplus Generation (UFSG) is the free surplus generated by the
business excluding the free surplus invested in new business, investment return
variances and other items
Operating Profit after Tax (OPAT) is the IFRS operating profit after tax based on the
IFRS results published by the Company
Consistent with prior years, an individual’s performance contribution was also considered when determining the amounts to
be paid to the Group Chief Executive and President and Key Management Personnel
For business units, performance measures and weightings may vary from the illustration above and include a
weighting for strategic initiatives.
The total value of short-term incentive awards that will be paid to Mr. Lee Yuan Siong (Group Chief Executive and
President) and the Key Management Personnel for the year ended 31 December 2021 is US$15,471,780.
The short-term incentive amounts for the year ended 31 December 2021 are included in note 41 to the consolidated
financial statements as “Bonuses” for Mr. Lee Yuan Siong, and as part of the “Salaries and other short-term employee
benefits” for the Key Management Personnel.
121
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION LONG-TERM INCENTIVE PLAN
The purpose of long-term incentives is intended to align senior employees with the Group’s long-term strategic goals
and ambitions and stakeholders’ interests. Long-term incentives promote risk awareness, encourage engagement to
operate in a sustainable manner and are designed to motivate, retain and support long-term wealth creation when
shareholder value is increased.
Long-term incentives are reserved for the most senior positions in the Group that have significant impact on the
sustainable financial results and the overall risk profile of the Group. Other individuals may be considered for long-
term incentives, for example on the basis of market competitiveness due to their skills and areas of expertise.
Long-term incentive grants are determined on an annual basis with reference to an individual’s overall variable
remuneration, total remuneration competitiveness, role and responsibilities, as well as performance and potential.
Long-term incentive grants are delivered in the form of performance-vesting RSUs and time-vesting SOs for a
balanced mix of incentives and ownership. The grants generally settle in shares and vest after a three-year period
and, in the case of the RSUs, performance conditions are met. As applicable to other remuneration payments,
long-term incentive vesting is subject to the Remuneration Committee’s approval and the long-term incentive
schemes are reviewed regularly to ensure their design, process, structure and governance work together to balance
risk and incentives.
The 2010 RSU Scheme and the 2010 SO Scheme adopted by the Company on 28 September 2010 were terminated
with effect from 31 July 2020 and 29 May 2020, respectively and no further grants may be made under these schemes
although outstanding awards will continue to vest based on their original terms.
The 2020 RSU Scheme and the 2020 SO Scheme, with substantially the same terms as the 2010 RSU Scheme and
the 2010 SO Scheme, respectively, were adopted by the Company on 1 August 2020 (2020 RSU Scheme Adoption
Date) and 29 May 2020 (2020 SO Scheme Adoption Date), respectively. Both the 2020 RSU Scheme and the 2020
SO Scheme are effective for a period of 10 years from the respective date of adoption.
Summaries of the 2010 RSU Scheme, 2020 RSU Scheme (together, RSU Schemes), 2010 SO Scheme and 2020
SO Scheme (together, SO Schemes) are provided later in this section and in note 40 to the consolidated financial
statements.
RESTRICTED SHARE UNIT SCHEMES
The objective of the RSU Schemes is to align the interests of scheme participants with those of the Company’s
shareholders and reward the creation of sustainable value through the grant of the Company’s shares to
participants when rigorous performance conditions have been achieved. Under the RSU Schemes, the Company
may grant RSUs to employees, directors (excluding independent non-executive directors) or officers of the Company
or any of its subsidiaries.
122
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE
Consistent with prior years, the vesting of performance-vesting RSUs is contingent on service requirements and the
extent of achievement of three-year performance targets for the following three performance measures:
VONB
EV EQUITY
TSR
1/3
WEIGHTING
1/3
WEIGHTING
1/3
WEIGHTING
VONB is an estimate of the economic value of one year’s sales as published by the
Company
Equity Attributable to Shareholders of the Company on the Embedded Value Basis
(EV Equity) is the total of embedded value, goodwill and other intangible assets
as published by the Company. Embedded value is an estimate of the economic value
of in-force life insurance business, including the net worth on the Group’s balance
sheet but excluding any economic value attributable to future new business
Relative Total Shareholder Return (TSR) is the compound annual return from the
ownership of a share over a period of time measured by calculating the change in
the share price and the gross value of dividends received (and reinvested) during
that period. AIA’s TSR is compared with the TSR of the peer companies* over the
performance period
* TSR peer companies for the performance-vesting RSUs granted include 19 life and health or multi-line insurance companies identified within the
Dow Jones Insurance Titans 30 index (DJTINN) at the start of the performance period.
The performance-vesting RSUs are tested against pre-defined performance targets at the end of a three-year
performance period. Achievement of each performance measure (with each measure having an equal weighting)
will independently determine the vesting of one-third of the target number of RSU grants.
• Threshold performance levels (for TSR, the 25th percentile of peer companies’ performance) are required for any
RSUs to vest.
• At target performance levels (for TSR, the median of peer companies’ performance), 100 per cent of the target
number of RSUs will vest.
• At maximum performance levels (for TSR, the 75th percentile or above of peer companies’ performance), 200 per
cent of the target number of RSUs will vest.
During the year ended 31 December 2021, the Company granted 9,484,581 RSUs under the 2020 RSU Scheme.
Notwithstanding the termination of the 2010 RSU Scheme, it shall remain in full force and effect for all RSUs granted
prior to its termination, and the vesting of such RSUs shall be subject to and made in accordance with the terms on
which they were granted under the 2010 RSU Scheme.
The aggregate number of shares that may underlie all RSUs granted by the Company (excluding RSUs that have
lapsed or been cancelled) pursuant to the 2020 RSU Scheme and any other restricted share unit scheme of the
Company (i.e., the 2010 RSU Scheme) shall not exceed 2.5 per cent of the number of shares in issue on 29 May 2020
(RSU Reference Date).
Since the 2020 RSU Scheme Adoption Date and up to 31 December 2021, a cumulative total of 6,042,202 RSUs
vested under the 2010 RSU Scheme and the 2020 RSU Scheme, underlying shares of which represent 0.05 per cent
of the shares in issue as at the RSU Reference Date. During the same period, no new shares have been issued under
either the 2010 RSU Scheme or the 2020 RSU Scheme.
123
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION RSUs Granted and Vested in 2021
The 2021 performance-vesting RSU grants will be assessed over a three-year period from 1 January 2021 to 31
December 2023 taking into consideration the performance measures described above.
The 2018 performance-vesting RSU grants made in 2018 were assessed over a three-year period from 1 January
2018 to 31 December 2020 taking into consideration the performance measures described above and vested on
15 March 2021. After assessing the pre-determined performance targets for the VONB, EV Equity and relative TSR
measures over the three-year period, the Remuneration Committee approved the vesting of the 2018 performance-
vesting RSU grants at 110.65 per cent of target.
RSUs to be Granted and to Vest in 2022
The 2022 performance-vesting RSU grants will be made to selected participants after the Company’s 2021 year-end
financial results announcement in early 2022. The 2022 performance-vesting RSU grants will be assessed over a
three-year period from 1 January 2022 to 31 December 2024 taking into consideration the performance measures
described above.
The 2019 performance-vesting RSU grants made in 2019 will vest in March 2022 after the Company’s year-end
financial results announcement. The final vesting results will be disclosed in the Company’s Annual Report 2022.
Further, it should be noted that the Remuneration Committee recognised the extraordinary contributions many AIA
employees exhibited during the unprecedented and challenging year, and the positive impact these efforts had on
the Company’s operations in 2020. To recognise and reward those contributions, selected individuals were granted
in March 2021 an ex-gratia award in the form of time-vesting RSUs, which will be subject to vest in March 2022. No
ex-gratia award was made to the Group Chief Executive and President. Details will be disclosed in the Company’s
Annual Report 2022.
RSU Movements During the Year Ended 31 December 2021
The table below summarises the movements in RSUs under the 2010 RSU Scheme during the year ended 31
December 2021.
Group Chief Executive
and President,
Key Management
Personnel and other
eligible employees and
participants
Group Chief Executive
and President
Mr. LEE Yuan Siong
Key Management
Personnel
(excluding the Group
Chief Executive and
President)
Other eligible
employees and
participants (1)
Date of
grant
(day /
month /
Date of
Vesting
(day /
month /
year) (2)
year) (3)
RSUs
outstanding
as at
1 January
2021
RSUs
granted
during the
year ended
31 December
2021
RSUs
vested
during the
year ended
31 December
2021
RSUs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2021
RSUs
outstanding
as at
31 December
2021 (7)
13/3/2020
See note (4)
1,784,275
25/3/2020
25/3/2023 (5)
420,426
15/3/2018
15/3/2021 (5)
27/3/2019
27/3/2022 (5)
15/5/2019
1/5/2022 (5)
30/12/2019
30/12/2022 (6)
25/3/2020
25/3/2023 (5)
980,440
832,594
27,182
445,308
963,062
15/3/2018
15/3/2021 (5)
8,443,189
29/6/2018
15/3/2021 (5)
108,956
27/3/2019
27/3/2022 (5)
8,131,419
15/5/2019
1/5/2022 (5)
16,480
25/3/2020
25/3/2023 (5)
9,602,594
10/6/2020
10/6/2023 (5)
31,142
–
–
–
–
–
–
–
–
–
–
–
–
–
(315,561)
–
–
–
1,468,714
420,426
(542,483)
(437,957)
–
–
–
–
–
–
–
–
(4,581,525)
(3,861,664)
(60,287)
(48,669)
–
832,594
27,182
445,308
963,062
–
–
(118,102)
(995,433)
7,017,884
–
–
16,480
(73,088)
(1,325,039)
8,204,467
–
–
31,142
124
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE Notes:
(1) Includes the RSUs of the retired Group Chief Executive and President, Mr. Ng Keng Hooi, that were outstanding as at 1 January 2021.
(2) The measurement dates (i.e., the dates used to determine the value of the grants for accounting purposes) for grants made during the thirteen months
ended 31 December 2018 were determined to be 15 March 2018 and 29 June 2018. The measurement dates for grants made during the financial year
ended 31 December 2019 were determined to be 27 March 2019, 15 May 2019 and 30 December 2019. The measurement dates for grants made
during the year ended 31 December 2020 were determined to be 13 March 2020, 25 March 2020 and 10 June 2020. These measurement dates were
determined in accordance with IFRS 2.
(3) The date of vesting is subject to applicable dealing restrictions.
(4) Reference is made to the Company’s announcement dated 22 November 2019. These RSUs relate to the awarded compensation for unvested long-
term incentives and deferred payments that Mr. Lee Yuan Siong forfeited on leaving his prior employment. The vesting of these RSUs is service-based
only (i.e., there are no further performance conditions attached except for continued employment). The first two tranches of 315,561 RSUs each had
vested on 13 September 2020 and 21 February 2021 respectively. Subject to continued employment, the remaining tranches of 315,561 RSUs each
are scheduled to vest on 21 February 2022, 21 February 2023 and 21 February 2024 respectively and 522,031 RSUs are scheduled to vest on
21 February 2025.
(5) The vesting of these RSUs is subject to service requirements and the achievement of performance measures shown on page 123 of this Annual Report.
(6) The vesting of these RSUs is service-based only (i.e., there are no further performance conditions attached except for continued employment). Subject
to continued employment, all RSUs will vest on 30 December 2022.
(7) Includes RSUs outstanding as at 31 December 2021 that, in accordance with the 2010 RSU Scheme rules, will lapse on or before the respective
vesting date.
The table below summarises the movements in RSUs under the 2020 RSU Scheme during the year ended 31
December 2021.
Group Chief Executive
and President,
Key Management
Personnel and other
eligible employees and
participants
Group Chief Executive
and President
Mr. LEE Yuan Siong
Key Management
Personnel
(excluding the Group
Chief Executive and
President)
Other eligible
employees and
participants
Date of
grant
(day /
month /
Date of
Vesting
(day /
month /
year) (1)
year) (2)
24/3/2021
24/3/2024 (3)
24/3/2021
24/3/2022 (4)
24/3/2021
24/3/2024 (3)
24/3/2021
24/3/2022 (4)
24/3/2021
24/3/2024 (3)
24/3/2021
24/3/2024 (5)
30/3/2021
24/3/2022 (4)
02/6/2021
02/6/2024 (3)
02/6/2021
02/6/2024 (6)
30/9/2021
30/9/2024 (3)
17/12/2021
17/12/2024 (7)
RSUs
outstanding
as at
1 January
2021
RSUs
granted
during the
year ended
31 December
2021
RSUs
vested
during the
year ended
31 December
2021
RSUs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2021
–
–
–
RSUs
outstanding
as at
31 December
2021 (8)
429,546
88,071
1,041,558
(5,245)
374,155
–
–
–
–
(4,053)
(480,084)
6,742,791
–
–
–
–
–
–
–
(3,500)
–
–
–
–
77,480
40,223
82,624
4,484
51,994
58,773
–
–
–
–
–
–
–
–
–
–
–
429,546
88,071
1,041,558
379,400
7,226,928
77,480
43,723
82,624
4,484
51,994
58,773
Notes:
(1) The measurement dates (i.e., the dates used to determine the value of the grants for accounting purposes) for grants made during the year ended 31
December 2021 were determined to be 24 March 2021, 30 March 2021, 2 June 2021, 30 September 2021 and 17 December 2021. These measurement
dates were determined in accordance with IFRS 2.
(2) The date of vesting is subject to applicable dealing restrictions.
(3) The vesting of these RSUs is subject to service requirements and the achievement of performance measures shown on page 123 of this Annual Report.
(4) The vesting of these RSUs is service-based only (i.e., there are no further performance conditions attached except for continued employment). Subject
to continued employment, all RSUs will vest on 24 March 2022.
(5) The vesting of these RSUs is service-based only (i.e., there are no further performance conditions attached except for continued employment). Subject
to continued employment, all RSUs will vest on 24 March 2024.
(6) The vesting of these RSUs is service-based only (i.e., there are no further performance conditions attached except for continued employment). Subject
to continued employment, all RSUs will vest on 2 June 2024.
(7) The vesting of these RSUs is service-based only (i.e., there are no further performance conditions attached except for continued employment). Subject
to continued employment, all RSUs will vest on 17 December 2024.
(8) Includes RSUs outstanding as at 31 December 2021 that, in accordance with the 2020 RSU Scheme rules, will lapse on or before the respective
vesting date.
125
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
SHARE OPTION SCHEMES
The objective of the SO Schemes is to align the interests of scheme participants with those of the Company’s
long-term shareholders by allowing participants to share in the long-term, sustainable value they help create for
our shareholders.
Under the SO Schemes, the Company may grant SOs to employees, directors (excluding independent non-executive
directors) or officers of the Company or any of its subsidiaries.
No amount is payable by participants on the acceptance of an SO. Each SO entitles the eligible participant to
subscribe for one ordinary share of the Company. Benefits are realised only to the extent that the share price exceeds
the exercise price when exercised. The prescribed formula for determining the exercise price of SOs is the higher
of (i) the closing price of the shares on the date of grant and (ii) the average closing price of the shares for the five
business days immediately preceding the date of grant.
According to the rules of the SO Schemes, the minimum holding period of an SO is six months from date of acceptance,
and an SO shall have a maximum life of 10 years from grant before expiry. Generally, SOs granted by the Company
become exercisable three years after the date of grant and remain exercisable for another seven years, subject to the
participants’ continued employment in good standing or retirement.
During the year ended 31 December 2021, the Company granted 1,849,222 SOs under the 2020 SO Scheme.
Notwithstanding the termination of the 2010 SO Scheme, it shall remain in full force and effect for all SOs granted
prior to its termination, and the exercise of such SOs shall be subject to and made in accordance with the terms on
which they were granted under the 2010 SO Scheme and the Listing Rules.
The aggregate number of shares that may be issued upon exercise of all SOs granted by the Company (excluding
SOs that have lapsed) pursuant to the 2020 SO Scheme and any other share option scheme of the Company (i.e., the
2010 SO Scheme) must not exceed 2.5 per cent of the number of shares in issue on 29 May 2020, being the 2020
SO Scheme Adoption Date.
Since the 2020 SO Scheme Adoption Date and up to 31 December 2021, a cumulative total of 5,211,914 new shares
were issued under the 2010 SO Scheme, representing approximately 0.043 per cent of the shares in issue as at the
2020 SO Scheme Adoption Date. During the same period, no new shares were issued under the 2020 SO Scheme.
As at the date of this report, the total number of shares which will be available for issue under the SO Schemes is
296,690,609 shares, representing approximately 2.45 per cent of the number of shares in issue of the Company.
Unless shareholders’ approval is obtained in accordance with the relevant procedural requirements under the Listing
Rules, the maximum number of shares under option that may be granted to any participant in any 12-month period
up to and including a proposed date of grant is 0.25 per cent (0.1 per cent for a substantial shareholder of the
Company) of the number of shares in issue as of the proposed date of grant. No SOs have been granted to substantial
shareholders or in excess of the individual limit pursuant to the SO Schemes since their adoption.
126
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE SOs Granted and Vested in 2021
The SOs granted in 2021 pursuant to the 2020 SO Scheme will vest in 2024, assuming all service requirements are
met. Details of the valuation of the SOs are set out in note 40 to the consolidated financial statements.
The SOs granted in 2018 in accordance with the 2010 SO Scheme rules (excluding any of such SOs that have lapsed
in the intervening period) vested on 15 March 2021 and became exercisable on15 March 2021, being the first trading
date after the Hong Kong regulatory blackout period.
SOs to be Granted and to Vest in 2022
The Remuneration Committee will grant SOs to selected participants in March 2022 after the Company’s year-end
financial results announcement. Details of these grants will be disclosed in the Company’s Annual Report 2022.
The SOs granted in 2019 will vest in March 2022 after the Company’s year-end financial results announcement.
SO Movements During the Year Ended 31 December 2021
The table below summarises the movements in SOs under the 2010 SO Scheme during the year ended 31 December
2021.
Date of
grant
(day /
month /
year) (2)
Period during
which SOs
are exercisable
(day / month / year)
SOs
outstanding
as at
1 January
2021
SOs
granted
during the
year ended
31 December
2021
SOs
vested
during the
year ended
31 December
2021
SOs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2021
SOs
exercised
during the
year ended
31 December
2021
SOs
outstanding
as at
31 December
2021 (16)
Exercise
price
(HK$)
Weighted
average
closing price
of shares
immediately
before the
dates on
which SOs
were
exercised
(HK$)
–
68.10
1,197,133
n/a
Group Chief Executive
and President,
Key Management
Personnel and other
eligible employees
and participants
Group Chief
Executive and
President
Mr. LEE Yuan Siong
Key Management
Personnel
(excluding the Group
Chief Executive and
President)
Other eligible
employees and
participants (1)
25/3/2020
25/3/2023 - 24/3/2030 (3)
1,197,133
11/3/2013
11/3/2016 - 10/3/2023 (4)
5/3/2014
5/3/2017 - 4/3/2024 (5)
12/3/2015
12/3/2018 - 11/3/2025 (6)
76,937
527,584
473,259
9/3/2016
9/3/2019 - 8/3/2026 (7)
1,413,600
10/3/2017
10/3/2020 - 9/3/2027 (8)
1,499,764
31/7/2017
1/6/2020 - 30/7/2027 (9)
353,650
15/3/2018
15/3/2021 - 14/3/2028 (10)
2,351,059
27/3/2019
27/3/2022 - 26/3/2029 (11)
2,195,342
15/5/2019
1/5/2022 - 14/5/2029 (12)
72,856
25/3/2020
25/3/2023 - 24/3/2030 (3)
2,742,235
1/6/2011
1/4/2014 - 31/5/2021 (13)
1/6/2011
1/4/2014 - 31/5/2021 (14)
15/3/2012
15/3/2015 - 14/3/2022 (15)
11/3/2013
11/3/2016 - 10/3/2023 (4)
5/3/2014
5/3/2017 - 4/3/2024 (5)
235,861
217,457
574,170
438,536
280,952
12/3/2015
12/3/2018 - 11/3/2025 (6)
1,026,353
9/3/2016
9/3/2019 - 8/3/2026 (7)
411,586
10/3/2017
10/3/2020 - 9/3/2027 (8)
2,109,430
31/7/2017
1/6/2020 - 30/7/2027 (9)
476,786
15/3/2018
15/3/2021- 14/3/2028 (10)
1,551,311
27/3/2019
27/3/2022 - 26/3/2029 (11)
1,551,283
15/5/2019
1/5/2022 - 14/5/2029 (12)
9,365
25/3/2020
25/3/2023 - 24/3/2030 (3)
1,917,300
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,351,059
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(235,861)
(217,457)
(336,312)
–
–
–
(5,005)
(5,000)
–
1,492,908
(58,403)
(72,261)
47,179
(399,188)
–
–
32,205
(854,344)
–
–
–
34.35
37.56
47.73
41.90
50.30
61.55
67.15
76.38
78.70
68.10
27.35
27.35
28.40
34.35
37.56
47.73
41.90
50.30
61.55
67.15
76.38
78.70
68.10
76,937
527,584
473,259
1,413,600
1,499,764
353,650
2,351,059
2,195,342
72,856
2,742,235
–
–
237,858
438,536
280,952
1,026,353
406,581
2,104,430
476,786
1,420,647
1,152,095
9,365
1,062,956
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
101.02
99.10
80.11
n/a
n/a
n/a
103.70
95.00
n/a
97.50
n/a
n/a
n/a
127
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Notes:
(1) Includes the SOs of the retired Group Chief Executive and Presidents, Mr. Mark Edward Tucker and Mr. Ng Keng Hooi, that were outstanding as at 1
January 2021.
(2) The measurement date (i.e., the date used to determine the value of the grants for accounting purposes) for grants made during the year ended 30
November 2011 was determined to be 15 June 2011. The measurement date for grants made during the year ended 30 November 2012 was
determined to be 15 March 2012. The measurement date for grants made during the year ended 30 November 2013 was determined to be 11 March
2013. The measurement date for grants made during the year ended 30 November 2014 was determined to be 5 March 2014. The measurement date
for grants made during the year ended 30 November 2015 was determined to be 12 March 2015. The measurement date for grants made during the
year ended 30 November 2016 was determined to be 9 March 2016. The measurement dates for grants made during the year ended 30 November
2017 were determined to be 10 March 2017 and 31 July 2017. The measurement date for grants made during the thirteen months ended 31 December
2018 was determined to be 15 March 2018. The measurement dates for grants made during the year ended 31 December 2019 were determined to
be 27 March 2019 and 15 May 2019. The measurement date for grants made during the year ended 31 December 2020 was determined to be 25
March 2020. These measurement dates were determined in accordance with IFRS 2.
(3) The vesting of SOs is service-based only. Subject to continued employment, all SOs will vest on 25 March 2023.
(4) The vesting of SOs is service-based only. All SOs vested on 11 March 2016.
(5) The vesting of SOs is service-based only. All SOs vested on 5 March 2017.
(6) The vesting of SOs is service-based only. All SOs vested on 12 March 2018.
(7) The vesting of SOs is service-based only. All SOs vested on 9 March 2019.
(8) The vesting of SOs is service-based only. All SOs vested on 10 March 2020.
(9) The vesting of SOs is service-based only. All SOs vested on 1 June 2020.
(10) The vesting of SOs is service-based only. All SOs vested on 15 March 2021.
(11) The vesting of SOs is service-based only. Subject to continued employment, all SOs will vest on 27 March 2022.
(12) The vesting of SOs is service-based only. Subject to continued employment, all SOs will vest on 1 May 2022.
(13) The vesting of SOs is service-based only. All SOs vested on 1 April 2014.
(14) The vesting of SOs is service-based only. One-third of SOs vested on 1 April 2014, one-third vested on 1 April 2015, and one third vested on 1 April 2016.
(15) The vesting of SOs is service-based only. All SOs vested on 15 March 2015.
(16) Includes SOs outstanding as at 31 December 2021 that, in accordance with the 2010 SO Scheme rules, will lapse on or before the end of the respective
periods during which the SOs are exercisable.
The table below summarises the movements in SOs under the 2020 SO Scheme during the year ended 31 December
2021.
Date of
grant
(day /
month /
year) (1)
Period during
which SOs
are exercisable
(day / month / year)
SOs
outstanding
as at
1 January
2021
SOs
granted
during the
year ended
31 December
2021
SOs
vested
during the
year ended
31 December
2021
SOs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2021
SOs
exercised
during the
year ended
31 December
2021
SOs
outstanding
as at
31 December
2021 (3)
Exercise
price
(HK$)
Weighted
average
closing price
of shares
immediately
before the
dates on
which SOs
were
exercised
(HK$)
24/3/2021
24/3/2024 - 23/3/2031(2)
–
464,526
–
–
–
97.33
464,526
n/a
24/3/2021
24/3/2024 - 23/3/2031(2)
–
1,126,373
–
–
–
97.33
1,126,373
n/a
24/3/2021
24/3/2024 - 23/3/2031(2)
–
258,323
–
(9,429)
–
97.33
248,894
n/a
Group Chief Executive
and President,
Key Management
Personnel and other
eligible employees
and participants
Group Chief
Executive and
President
Mr. LEE Yuan Siong
Key Management
Personnel
(excluding the Group
Chief Executive and
President)
Other eligible
employees and
participants
Notes:
(1) The measurement date (i.e., the date used to determine the value of the grants for accounting purposes) for grant made during the year ended 31
December 2021 was determined to be 24 March 2021. This measurement date was determined in accordance with IFRS 2.
(2) The closing price of the Company’s shares immediately before the date on which SOs were granted was HK$96.35. The vesting of SOs is service-based
only. Subject to continued employment, all SOs will vest on 24 March 2024.
(3) Includes SOs outstanding as at 31 December 2021 that, in accordance with the 2020 SO Scheme rules, will lapse on or before the end of the respective
periods during which the SOs are exercisable.
128
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE
EMPLOYEE SHARE PURCHASE PLANS
The 2011 ESPP and the 2020 ESPP (together, ESPPs) are designed to facilitate and encourage long-term AIA share
ownership by employees and to encourage employee retention.
The 2011 ESPP adopted by the Company on 25 July 2011 with a term of 10 years was terminated with effect from
31 October 2020. The Company adopted a new employee share purchase plan (2020 ESPP) on 1 August 2020 (2020
ESPP Adoption Date) in place of and with substantially the same terms as the 2011 ESPP. The 2020 ESPP is effective
for a period of 10 years from the date of adoption.
Upon the termination of the 2011 ESPP, no further RSPUs can be granted thereunder. However, the 2011 ESPP shall
remain in full force and effect for all RSPUs granted prior to its termination, and the vesting of such RSPUs shall be
subject to and made in accordance with the terms on which they were granted under the 2011 ESPP.
Under the 2020 ESPP, eligible employees of the Group may elect to purchase the Company’s shares and, through the
grant of matching RSPUs, receive one matching share for every two shares purchased and held until the end of the
vesting period. Each eligible employee’s participation level is capped at the lower of 10 per cent of his or her base
salary or HK$12,500 (or local currency equivalent) per calendar month.
Upon vesting of the matching RSPUs (i.e., three years from the first share purchase date in a plan year), those
employees who are still employed with the Group will receive one matching share for each RSPU granted to him or
her. The matching shares can either be provided to recipients through the issuance of new shares by the Company or
purchased on market by the trustee of the 2020 ESPP.
The aggregate number of shares which can be issued by the Company pursuant to the 2020 ESPP and any other
employee share purchase plan (i.e., the 2011 ESPP) during the ten-year period from the 2020 ESPP Adoption Date
shall not exceed 2.5 per cent of the number of shares in issue on 29 May 2020 (ESPP Reference Date). Since the
2020 ESPP Adoption Date and up to 31 December 2021, no new shares have been issued under the 2011 ESPP nor
the 2020 ESPP.
During the year ended 31 December 2021, no matching RSPUs were granted, 1,055,698 matching RSPUs were
vested and no new shares were issued under the 2011 ESPP. During the same period, 1,557,557 matching RSPUs
were granted, 21,919 matching RSPUs were vested and no new shares were issued under the 2020 ESPP. Since
2020 ESPP Adoption Date and up to 31 December 2021, a cumulative total of 2,140,819 matching RSPUs were
vested under ESPPs and no new shares were issued for the RSPUs.
For further information on the ESPPs, please refer to note 40 to the consolidated financial statements.
129
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION DIRECTORS AND KEY MANAGEMENT PERSONNEL EMOLUMENTS
EXECUTIVE DIRECTOR
Mr. Lee Yuan Siong received remuneration exclusively for his role as Group Chief Executive and President and received
no separate fees for his role as a Board Director or for acting as a director of any subsidiary companies.
The table below provides details of annualised target level of remuneration, excluding benefits and allowances, for
the Group Chief Executive and President.
US$ thousands
Base Salary (2)
Target short-term incentive
Target long-term incentive
Total Annualised Target Pay Opportunity
Annualised Target Pay Opportunity (1)
2021
Mr. Lee Yuan Siong
2020
Mr. Lee Yuan Siong
1,111
2,200
3,960
7,271
1,092
1,980
3,960
7,032
Notes:
(1) The target remuneration levels shown in the table above represent the annualised amount for each of them excluding benefits and allowances. Mr. Lee
Yuan Siong also received an annualised housing allowance of HK$3,000,000 for each of the years 2020 and 2021.
(2) Mr. Lee Yuan Siong’s base salary represents the annualised amount as of his date of appointment for the year 2020, and his base salary represents the
annualised amount as of 1 March (being the annual review salary effective date) for the year 2021. Base salaries are paid in Hong Kong Dollars and
converted to U.S. dollars using exchange rates as of the end of each year.
Details of the actual remuneration costs incurred by the Company during the year ended 31 December 2021 in
relation to the Group Chief Executive and President are included in note 41 to the consolidated financial statements.
NON-EXECUTIVE DIRECTORS
Remuneration for the Non-executive Directors was paid during the year ended 31 December 2021 and included fees
for their services provided to the Board Committees. All remuneration of the Non-executive Directors was on a flat
annual fee basis, with no variable component linked to either corporate or individual performance.
Details of the Non-executive Directors’ remuneration cost incurred by the Company during the year ended 31
December 2021 are included in note 41 to the consolidated financial statements.
Board Chairman
During 2021, the Remuneration Committee reviewed the fees for the Board Chairman and Non-executive Directors
and subsequently proposed adjustments to the Board for approval. The review of fees for the Board Chairman and
Non-executive Directors is typically carried out every three to four years and takes into consideration the expected
movements and requirements for the period.
To reflect the unique scope, contribution and time commitment of the Board Chairman role, and to ensure
competitiveness against our global insurance peers, Board Chairman Basic Fees, inclusive of Board Membership
fee, are increased from US$600,000 to US$750,000 per annum effective 1 January 2022. The Chairman abstained
from discussion and voting on the fee increase.
130
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE Non-executive Directors
Board Membership fees for the Non-executive Directors are increased from US$168,000 to US$220,000 per annum
effective 1 January 2022 to more closely align with the fee levels provided by our global insurance peers.
Additional annual fees for Committee Membership and Chair positions are also provided to the Non-executive
Directors and are increased effective 1 January 2022 as follows:
Audit Committee
Nomination Committee
Remuneration Committee
Risk Committee
Current Fee
Fee effective 1 January 2022
Chair
Member
Chair
Member
US$55,000
US$40,000
US$75,000
US$50,000
US$25,000
US$15,000
US$30,000
US$20,000
US$45,000
US$30,000
US$65,000
US$40,000
US$45,000
US$30,000
US$65,000
US$40,000
Non-executive Directors who have also acted as representatives of the Board to attend the ESG Committee, being
a management committee of the Company, are provided with an additional annual fee of US$15,000. Such annual fee
is increased to US$20,000 effective from 1 January 2022.
KEY MANAGEMENT PERSONNEL
The total remuneration cost charged to the consolidated income statement for the Key Management Personnel
during year ended 31 December 2021 was US$49,478,883.
Details of remuneration provided during the year ended 31 December 2021 are included in note 41 to the
consolidated financial statements.
131
ANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 25. Impairment of financial assets
26. Cash and cash equivalents
27. Insurance contract liabilities
28. Investment contract liabilities
29. Effect of changes in assumptions and estimates
30. Borrowings
31. Obligations under repurchase agreements
32. Offsetting of financial assets and
financial liabilities
33. Provisions
34. Other liabilities
35. Share capital and reserves
36. Non-controlling interests
37. Group capital structure
38. Risk management
39. Employee benefits
40. Share-based compensation
41. Remuneration of directors and
key management personnel
42. Related party transactions
43. Commitments and contingencies
44. Subsidiaries
45. Events after the reporting period
46. Statement of financial position of the Company
47. Statement of changes in equity of the Company
257 Independent Auditor’s Report on
the Supplementary Embedded
Value Information
261 Supplementary Embedded
Value Information
FINANCIAL STATEMENTS
133 Independent Auditor’s Report
140 Consolidated Income Statement
141 Consolidated Statement of
Comprehensive Income
142 Consolidated Statement of
Financial Position
144 Consolidated Statement of
Changes in Equity
146 Consolidated Statement of
Cash Flows
148 Notes to the Consolidated
Financial Statements and
Material Accounting Policy
Information
1. Corporate information
2. Material accounting policy information
3. Critical accounting estimates and judgements
4. Exchange rates
5. Change in Group composition
6. Premiums and fee income
7. Operating profit after tax
8. Total weighted premium income and
annualised new premiums
9. Segment information
10. Revenue
11. Expenses
12. Income tax
13. Earnings per share
14. Dividends
15. Intangible assets
16. Investments in associates and joint ventures
17. Property, plant and equipment
18. Investment property
19. Reinsurance assets
20. Deferred acquisition and origination costs
21. Financial investments
22. Derivative financial instruments
23. Fair value measurement
24. Other assets
132
AIA GROUP LIMITED
TO THE SHAREHOLDERS OF AIA GROUP LIMITED
(incorporated in Hong Kong with limited liability)
Opinion
What we have audited
The consolidated financial statements of AIA Group Limited (the “Company”) and its subsidiaries
(the “Group”), which are set out on pages 140 to 256, comprise:
•
•
•
•
•
•
the consolidated statement of financial position as at 31 December 2021;
the consolidated income statement for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include a summary of material
accounting policy information and other explanatory information.
Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated
financial position of the Group as at 31 December 2021, and of its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with Hong
Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”) and International Financial Reporting Standards (“IFRSs”) issued
by the International Accounting Standards Board (“IASB”) and have been properly prepared in
compliance with the Hong Kong Companies Ordinance.
Basis for Opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued
by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Consolidated Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independence
We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional
Accountants (“the Code”), and we have fulfilled our other ethical responsibilities in accordance
with the Code.
133
FINANCIAL STATEMENTSINDEPENDENT AUDITOR’S REPORTOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the consolidated financial statements of the current period. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
The key audit matters identified relate to the valuation of insurance contract liabilities and the
amortisation of deferred acquisition costs (“DAC”).
Key audit matter
How our audit addressed the key audit matter
a) Valuation of insurance contract liabilities
Refer to the following notes in the consolidated financial statements: Note 2.3 for related
accounting policies, Note 3 for critical accounting estimates and judgements, Note 27 and
Note 29.
As at 31 December 2021, the Group has
insurance contract liabilities of US$239,423
million.
We tested how management made the estimate
and performed audit procedures including the
following:
• We understood the valuation methodologies
used, identified changes in methodologies
from previous valuation and assessed the
reasonableness and
impact of material
changes identified, by applying our industry
knowledge and experience to compare
whether the methodologies and changes to
those are consistent with
recognised
actuarial practices and expectation derived
from market experience.
• We assessed the reasonableness of the key
assumptions including those for mortality,
morbidity, persistency, expense, investment
return and valuation interest rates as well as
the provision for adverse deviation. Our
assessment of the assumptions included:
• Obtaining an understanding of, and
to
the controls
in place
testing,
determine the assumptions;
• Examining
the approach used by
management to derive the assumptions
by applying our industry knowledge and
experience;
uncertain
liabilities
about
The Director’s valuation of these insurance
involves significant
contract
judgement
future
outcomes, including mortality, morbidity,
investment return,
persistency, expense,
valuation interest rates and provision for
adverse deviation, as well as complex
valuation methodologies. Therefore, these
liabilities are
significant
subject
estimation uncertainty and the associated
inherent risk is considered significant.
to
The liabilities for traditional participating
life assurance policies with discretionary
participation features and non-participating
life assurance policies, annuities and
policies related to other protection products
are substantially determined by a net level
premium valuation method using best
estimate assumptions at policy inception
adjusted
for adverse deviation. These
assumptions remain locked in thereafter,
subject to meeting a liability adequacy test
which compares the
liabilities with a
valuation on
current best estimate
assumptions.
134
FINANCIAL STATEMENTSAIA GROUP LIMITED Key Audit Matters (continued)
Key audit matter
How our audit addressed the key audit matter
a) Valuation of insurance contract liabilities (continued)
Insurance contract liabilities for universal
life and unit-linked policies are substantially
based on the value of the account balance
together with liabilities for unearned revenue
and additional insurance benefits which are
dependent upon operating assumptions
and future investment return assumptions
that are reassessed at each reporting period.
As part of our consideration of assumptions,
we have focused on those insurance contracts
where the assumptions are reassessed at
each reporting date as well as how assumptions
are set at policy inception dates.
We have, in relation to valuation methodologies
used, focused on changes in methodologies
from the previous valuation as well as
methodologies applied to material new
product types (as applicable).
• Challenging the key assumptions used
by management against past experience,
market observable data (as applicable)
and our experience of market practice.
• We checked the calculation of the liability
adequacy test and assessed the related
results in order to ascertain whether the
insurance contract liabilities used for the
inforce business are adequate in the context
of a valuation on current best estimate
assumptions.
Based upon the work performed, we found the
methodologies and assumptions used by
management to be appropriate, including those
used in the liability adequacy test.
135
INDEPENDENT AUDITOR’S REPORTOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 Key Audit Matters (continued)
Key audit matter
b) Amortisation of DAC
How our audit addressed the key audit matter
Refer to the following notes in the consolidated financial statements: Note 2.3.1 for related
accounting policies, Note 3.3 for critical accounting estimates and judgements, Note 11 and
Note 20.
As at 31 December 2021, the Group has
reported DAC of US$28,385 million.
We tested how management made the estimate
and performed audit procedures including the
following:
and
accounting policy
• Reviewed and challenged the basis of
amortisation of DAC in the context of the
the
Group’s
appropriateness of the assumptions used in
determining the estimated gross profits
used for amortisation for universal life and
unit-linked policies. This included those for
mortality, morbidity, persistency, expense
and
investment returns by comparing
against past experience, market observable
data (as applicable) and our experience of
market practice.
Based upon the work performed, we found the
assumptions used in relation to the amortisation
of DAC for universal life and unit-linked policies
to be appropriate.
DAC for traditional life insurance policies
and annuities are amortised over the
expected life of the policies as a constant
percentage of premiums and involve less
judgement by the Directors compared to
universal
life and unit-linked policies.
Expected premiums are estimated at the
date of policy issue.
The amortisation of DAC for universal life
and unit-linked policies involves greater
judgement by the Directors. For these
contracts, DAC
is amortised over the
expected life of the contracts based on a
constant percentage of the present value of
estimated gross profits expected to be
realised over the life of the contract or on a
straight-line basis. Estimated gross profits
are
regularly and significant
in making
judgement
appropriate estimates of gross profits.
Therefore, the determination of amortisation
of DAC for these contracts are subject to
significant estimation uncertainty and the
associated
is considered
significant.
inherent risk
exercised
revised
is
As part of our audit we have focused on DAC
related to universal life and unit-linked
policies where
the assumptions are
reassessed at each reporting date.
136
FINANCIAL STATEMENTSAIA GROUP LIMITED Other Information
The Directors of the Company are responsible for the other information. The other information
comprises all of the information included in the annual report other than the consolidated financial
statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we
do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read
the other information and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this regard.
Other Matter
The Group has prepared Supplementary Embedded Value Information as at and for the year
ended 31 December 2021 in accordance with the embedded value basis of preparation set out in
Sections 4 and 5 of the Supplementary Embedded Value Information, on which we issued a
separate auditor’s report to the Board of Directors of the Company dated 11 March 2022.
Responsibilities of Directors and Those Charged with Governance for the Consolidated
Financial Statements
The Directors of the Company are responsible for the preparation of the consolidated financial
statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and
IFRSs issued by the IASB and the Hong Kong Companies Ordinance, and for such internal control
as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the Directors either intend
to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting
process.
137
INDEPENDENT AUDITOR’S REPORTOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. We report our opinion solely to you, as a body,
in accordance with Section 405 of the Hong Kong Companies Ordinance and for no other purpose.
We do not assume responsibility towards or accept liability to any other person for the contents
of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with HKSAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Directors.
• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.
138
FINANCIAL STATEMENTSAIA GROUP LIMITED Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
(continued)
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those
matters that were of most significance in the audit of the consolidated financial statements of the
current period and are therefore the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Ling Tung
Man, Tom.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
11 March 2022
139
INDEPENDENT AUDITOR’S REPORTOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 US$m
REVENUE
Premiums and fee income
Premiums ceded to reinsurers
Net premiums and fee income
Investment return
Other operating revenue
Total revenue
EXPENSES
Insurance and investment contract benefits
Insurance and investment contract benefits ceded
Net insurance and investment contract benefits
Commission and other acquisition expenses
Operating expenses
Finance costs
Other expenses
Total expenses
Profit before share of losses from associates and joint ventures
Share of losses from associates and joint ventures
Profit before tax
Tax expense
Net profit
Net profit attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
EARNINGS PER SHARE (US$)
Basic
Diluted
Notes
Year ended
31 December
2021
Year ended
31 December
2020
6
10
10
37,123
(2,679)
34,444
12,748
333
47,525
32,381
(2,326)
30,055
4,597
3,031
357
1,006
35,780
(2,452)
33,328
16,707
324
50,359
36,865
(2,126)
34,739
4,402
2,695
292
944
11
39,046
43,072
8,479
(11)
8,468
(991)
7,477
7,427
50
0.62
0.61
7,287
(17)
7,270
(1,491)
5,779
5,779
–
0.48
0.48
12
13
13
140
FINANCIAL STATEMENTSCONSOLIDATED INCOME STATEMENTAIA GROUP LIMITED US$m
Net profit
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Fair value (losses)/gains on available for sale financial assets
(net of tax of: 2021: US$726m; 2020: US$(198)m)(2)
Fair value gains on available for sale financial assets transferred to income on disposal
(net of tax of: 2021: US$76m; 2020: US$98m)(2)
Foreign currency translation adjustments
Cash flow hedges
Share of other comprehensive income/(expense) from associates and joint ventures
Subtotal
Items that will not be reclassified subsequently to profit or loss:
Revaluation gains/(losses) on property held for own use
(net of tax of: 2021: US$1m; 2020: US$(1)m)
Effect of remeasurement of net liability of defined benefit schemes
(net of tax of: 2021: US$(4)m; 2020: US$1m)
Subtotal
Total other comprehensive (expense)/income
Total comprehensive (expense)/income
Total comprehensive (expense)/income attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Year ended
31 December
2021
Year ended
31 December
2020
7,477
5,779
(4,509)
4,865
(2,329)
(1,304)
(1)
43
(1,345)
951
6
(14)
(8,100)
4,463
43
25
68
(8,032)
(555)
(571)
16
(46)
(8)
(54)
4,409
10,188
10,163
25
Notes:
(1) Where applicable, amounts are presented net of tax, policyholders’ participation and other shadow accounting related movements.
(2) Gross of tax, policyholders’ participation and other shadow accounting related movements, US$7,755m relates to the fair value losses (2020:
US$8,212m relates to the fair value gains) on available for sale financial assets and US$2,405m (2020: US$1,443m) relates to the fair value gains
on available for sale financial assets transferred to income on disposal during the year.
141
FINANCIAL STATEMENTSCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
Notes
15
16
17
18
19
20
21, 23
22
12
24
26
27
28
30
31
22
33
12
34
As at
31 December
2021
As at
31 December
2020
2,914
679
2,744
4,716
4,991
2,634
606
2,722
4,639
4,560
28,708
27,915
9,311
9,335
161,087
165,106
38,993
30,822
40,195
1,468
36,775
30,156
29,026
1,069
281,876
271,467
50
120
8,087
4,989
23
103
5,833
5,619
339,874
326,121
239,423
11,860
223,071
12,881
9,588
1,588
1,392
194
5,982
389
8,524
8,559
1,664
1,003
230
6,902
346
7,797
278,940
262,453
US$m
ASSETS
Intangible assets
Investments in associates and joint ventures
Property, plant and equipment
Investment property
Reinsurance assets
Deferred acquisition and origination costs
Financial investments:
Loans and deposits
Available for sale
Debt securities
At fair value through profit or loss
Debt securities
Equity shares
Interests in investment funds
Derivative financial instruments
Deferred tax assets
Current tax recoverable
Other assets
Cash and cash equivalents
Total assets
LIABILITIES
Insurance contract liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Derivative financial instruments
Provisions
Deferred tax liabilities
Current tax liabilities
Other liabilities
Total liabilities
142
FINANCIAL STATEMENTSCONSOLIDATED STATEMENT OF FINANCIAL POSITIONAIA GROUP LIMITED
US$m
EQUITY
Share capital
Employee share-based trusts
Other reserves
Retained earnings
Fair value reserve
Foreign currency translation reserve
Property revaluation reserve
Others
Amounts reflected in other comprehensive income
Total equity attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Total equity
Total liabilities and equity
Approved and authorised for issue by the Board of Directors on 11 March 2022.
Notes
As at
31 December
2021
As at
31 December
2020
35
35
35
35
35
35
36
14,160
(225)
14,155
(155)
(11,841)
(11,891)
49,984
8,407
(1,068)
1,069
(19)
8,389
60,467
467
60,934
339,874
44,704
15,170
233
1,027
(43)
16,387
63,200
468
63,668
326,121
Lee Yuan Siong
Director
Edmund Sze-Wing Tse
Director
143
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 Note
Share
capital
Employee
share-
based
trusts
Other
reserves
Retained
earnings
Other comprehensive income
Fair
value
reserve
Foreign
currency
translation
reserve
Property
revaluation
reserve
Non-
controlling
interests
Others
Total
equity
US$m
Balance at 1 January 2021
14,155
(155)
(11,891)
44,704
15,170
233
1,027
(43)
Net profit
Fair value losses on available
for sale financial assets(2)
Fair value gains on available
for sale financial assets
transferred to income on
disposal(2)
Foreign currency translation
adjustments
Cash flow hedges
Share of other comprehensive
income/(expense) from
associates and joint
ventures
Revaluation gains on property
held for own use
Effect of remeasurement of
net liability of defined
benefit schemes
Total comprehensive income/
(expense) for the year
Dividends
14
Shares issued under share
option scheme and
agency share purchase
plan
Capital contribution from
non-controlling interests
Share-based compensation
Purchase of shares held by
employee share-based
trusts
Transfer of vested shares
from employee
share-based trusts
–
–
–
–
–
–
–
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
86
(106)
–
36
(36)
7,427
–
–
(4,490)
(2,329)
–
–
–
–
–
–
–
–
–
–
–
(1,289)
–
56
(12)
–
–
–
–
7,427
(6,763)
(1,301)
(2,147)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1)
43
–
42
–
–
–
–
–
–
–
–
–
–
(1)
–
–
25
24
–
–
–
–
–
–
468
50
63,668
7,477
(19)
(4,509)
–
(2,329)
(15)
(1,304)
–
–
–
–
(1)
43
43
25
16
(555)
(28)
(2,175)
–
11
–
–
–
5
11
86
(106)
–
Balance at 31 December 2021
14,160
(225)
(11,841)
49,984
8,407
(1,068)
1,069
(19)
467
60,934
Notes:
(1) Where applicable, amounts are presented net of tax, policyholders’ participation and other shadow accounting related movements.
(2) Gross of tax, policyholders’ participation and other shadow accounting related movements, US$7,755m relates to the fair value losses on available
for sale financial assets and US$2,405m relates to the fair value gains on available for sale financial assets transferred to income on disposal
during the year ended 31 December 2021.
144
FINANCIAL STATEMENTSCONSOLIDATED STATEMENT OF CHANGES IN EQUITYAIA GROUP LIMITED
Note
Share
capital
Employee
share-
based
trusts
Other
reserves
Retained
earnings
Other comprehensive income
Fair
value
reserve
Foreign
currency
translation
reserve
Property
revaluation
reserve
Non-
controlling
interests
Others
Total
equity
US$m
Balance at 1 January 2020
14,129
(220)
(11,887)
40,922
11,669
(698)
1,073
(41)
448
55,395
(1,345)
–
–
941
–
(4)
(10)
Net profit
Fair value gains on available
for sale financial assets(2)
Fair value gains on available
for sale financial assets
transferred to income on
disposal(2)
Foreign currency translation
adjustments
Cash flow hedges
Share of other comprehensive
expense from associates
and joint ventures
Revaluation losses on
property held for own use
Effect of remeasurement of
net liability of defined
benefit schemes
Total comprehensive income/
(expense) for the year
Dividends
14
Shares issued under share
option scheme and
agency share purchase
plan
Acquisition of
non-controlling interests
Share-based compensation
Purchase of shares held by
employee share-based
trusts
Transfer of vested shares
from employee
share-based trusts
–
–
–
–
–
–
–
–
–
–
26
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3)
80
(16)
–
81
(81)
5,779
–
–
4,850
–
–
–
–
–
–
–
–
5,779
3,501
(1,997)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
931
–
–
–
–
–
–
–
–
–
–
–
–
(46)
–
(46)
–
–
–
–
–
–
–
–
–
–
6
–
–
(8)
(2)
–
–
–
–
–
–
–
5,779
15
4,865
–
(1,345)
10
–
–
–
–
951
6
(14)
(46)
(8)
25
(5)
10,188
(2,002)
–
–
–
–
–
26
(3)
80
(16)
–
Balance at 31 December 2020
14,155
(155)
(11,891)
44,704
15,170
233
1,027
(43)
468
63,668
Notes:
(1) Where applicable, amounts are presented net of tax, policyholders’ participation and other shadow accounting related movements.
(2) Gross of tax, policyholders’ participation and other shadow accounting related movements, US$8,212m relates to the fair value gains on available
for sale financial assets and US$1,443m relates to the fair value gains on available for sale financial assets transferred to income on disposal
during the year ended 31 December 2020.
145
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
Year ended
31 December
2021
Year ended
31 December
2020
Notes
US$m
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Financial investments
Insurance and investment contract liabilities, and deferred
acquisition and origination costs
Obligations under repurchase agreements
31
Reinsurance commission related to acquisition of subsidiaries
Other non-cash operating items, including investment income and
the effect of exchange rate changes on certain operating items
Operating cash items:
Interest received
Dividends received
Interest paid
Tax paid
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for intangible assets
Distribution or dividend from associates
Payments for increase in interest of joint ventures
Prepayment for investment in an associate
Proceeds from sales of investment property and property,
plant and equipment
Payments for investment property and property, plant and equipment
Acquisition of subsidiaries, net of cash acquired
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of medium-term notes and securities
Redemption of medium-term notes
Proceeds from other borrowings
Repayment of other borrowings
Capital contributions from non-controlling interest
Acquisition of non-controlling interests
Payments for lease liabilities(1)
Interest paid on medium-term notes and securities
Dividends paid during the year
Purchase of shares held by employee share-based trusts
Shares issued under share option scheme and agency share purchase plan
Net cash (used in)/provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of the financial year
15
16
16
24
17, 18
17, 18
5
30
30
30
30
Note:
(1) The total cash outflow for leases for the year ended 31 December 2021 was US$176m (2020: US$187m).
146
8,468
7,270
(22,637)
(26,100)
17,953
23,159
(102)
–
(280)
(131)
(7,434)
(8,510)
7,410
1,129
(47)
(831)
3,909
(640)
–
(27)
(1,865)
5
(238)
(16)
7,054
961
(39)
(1,027)
2,357
(254)
3
(9)
–
–
(120)
(839)
(2,781)
(1,219)
2,079
(1,002)
1,959
(1,959)
11
–
(170)
(303)
(2,175)
(106)
5
(1,661)
(533)
5,393
(165)
4,695
2,792
–
934
(934)
–
(3)
(180)
(225)
(2,002)
(16)
26
392
1,530
3,753
110
5,393
FINANCIAL STATEMENTSCONSOLIDATED STATEMENT OF CASH FLOWSAIA GROUP LIMITED
Cash and cash equivalents in the above consolidated statement of cash flows can be further analysed as follows:
US$m
Cash and cash equivalents in the consolidated statement of financial position
Bank overdrafts
Cash and cash equivalents in the consolidated statement of cash flows
Note
26
As at
31 December
2021
As at
31 December
2020
4,989
(294)
4,695
5,619
(226)
5,393
147
CONSOLIDATED STATEMENT OF CASH FLOWSOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 1. CORPORATE INFORMATION
AIA Group Limited (the “Company”) was established as a company with limited liability incorporated in Hong Kong on 24
August 2009. The address of its registered office is 35/F, AIA Central, No. 1 Connaught Road Central, Hong Kong.
AIA Group Limited is listed on the Main Board of The Stock Exchange of Hong Kong Limited under the stock code “1299”
with American Depositary Receipts (Level 1) being traded on the over-the-counter market (ticker symbol: “AAGIY”).
AIA Group Limited and its subsidiaries (collectively “AIA” or the “Group”) is a life insurance based financial services provider
operating in 18 markets. The Group’s principal activity is the writing of life insurance business, providing life insurance,
accident and health insurance and savings plans throughout Asia, and distributing related investment and other financial
services products to its customers.
2. MATERIAL ACCOUNTING POLICY INFORMATION
2.1 Basis of preparation and statement of compliance
The consolidated financial statements have been prepared in accordance with all applicable Hong Kong Financial
Reporting Standards (HKFRS), International Financial Reporting Standards (IFRS) and the Hong Kong Companies
Ordinance. IFRS is substantially consistent with HKFRS and the accounting policy selections that the Group has made in
preparing these consolidated financial statements are such that the Group is able to comply with both HKFRS and IFRS.
References to IFRS, International Accounting Standards (IAS) and Interpretations developed by the IFRS Interpretations
Committee (IFRS IC) in these consolidated financial statements should be read as referring to the equivalent HKFRS, Hong
Kong Accounting Standards (HKAS) and Hong Kong (IFRIC) Interpretations (HK(IFRIC) - Int) as the case may be.
Accordingly, there are not any differences of accounting practice between HKFRS and IFRS affecting these consolidated
financial statements.
The consolidated financial statements have been approved for issue by the Board of Directors on 11 March 2022.
The consolidated financial statements have been prepared using the historical cost convention, as modified by the
revaluation of available for sale financial assets, certain financial assets and liabilities designated at fair value through
profit or loss, derivative financial instruments, property held for own use and investment properties, all of which are carried
at fair value.
The presentation currency of the Company and the Group is the US dollar. The consolidated financial statements are
presented in millions of US dollars (US$m) unless otherwise stated.
The accounting policies adopted are consistent with those of the previous financial year, except as described as follows.
148
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONAIA GROUP LIMITED 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.1 Basis of preparation and statement of compliance (continued)
(a) The following standard and amendments are effective for the financial year ended 31 December 2021, but the Group
has elected to apply the temporary exemption described further below:
•
IFRS 9, Financial Instruments, addresses the classification, measurement and recognition of financial assets and
financial liabilities. IFRS 9 requires financial assets to be classified into separate measurement categories: those
measured as at fair value with changes either recognised in profit or loss (FVTPL) or in other comprehensive income
(FVOCI) and those measured at amortised cost. The determination is made at initial recognition depending on the
entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the
instrument. An option is also available at initial recognition to irrevocably designate a financial asset that otherwise
meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or
significantly reduces an accounting mismatch that would otherwise arise. In addition, an expected credit loss (ECL)
model replaces the incurred loss impairment model under IAS 39. For financial liabilities, the standard retains most
of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial
liabilities, part of the fair value change due to an entity’s own credit risk is recorded in other comprehensive income
rather than profit or loss, unless this creates an accounting mismatch. In addition, the new standard revises the
hedge accounting model to more closely align with the entity’s risk management strategies. The International
Accounting Standards Board (IASB) made further changes to two areas of IFRS 9. Financial assets containing
prepayment features with negative compensation can be measured at amortised cost or at FVOCI if the cash flow
represents solely payments of principal and interest and the financial assets are held within a business model of
“hold to collect” or “hold to collect and sell”. Non-substantial modifications or exchange of financial liabilities that
do not result in derecognition will be required to be recognised in profit or loss. The Group is conducting a detailed
assessment of the new standard.
The standard is mandatorily effective for financial periods beginning on or after 1 January 2018 (except for
prepayment features with negative compensation and modifications or exchange of financial liabilities that do not
result in derecognition which are effective for financial periods beginning on or after 1 January 2019), but the
Group qualifies for a temporary exemption as explained below.
• On 12 September 2016, the IASB issued amendments to IFRS 4, Insurance Contracts, Applying IFRS 9 Financial
Instruments with IFRS 4, which provides two alternative measures to address the different effective dates of IFRS
9 and IFRS 17, Insurance Contracts. These measures include a temporary option (known as the “deferral approach”)
for companies whose activities are predominantly connected with insurance to defer the effective date of IFRS 9
until the earlier of the effective date of IFRS 17 and financial reporting periods beginning on or after 1 January
2021, as well as an approach that allows an entity to remove from profit or loss the effects of certain accounting
mismatches that may occur before IFRS 17 is applied. On 25 June 2020, the IASB issued the amendments to IFRS
4 and IFRS 17, the effective date of IFRS 17 will be deferred to annual reporting periods beginning on or after 1
January 2023, and that the exemption currently in place for some insurers, including the Group, regarding the
application of IFRS 9 will be extended to enable the implementation of both IFRS 9 and IFRS 17 at the same time.
On 9 December 2021, the IASB issued the amendment of IFRS 17 relating to the presentation of comparative
information of financial assets on initial application of IFRS 17. The amendment adds a transition option that
permits an entity to apply an optional classification overlay in the comparative period(s) presented on initial
application of IFRS 17. The overlay allows all financial assets to be classified, on an instrument-by-instrument
basis, in the comparative period(s) in a way that aligns with how the entity expects those assets to be classified on
initial application of IFRS 9.
149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.1 Basis of preparation and statement of compliance (continued)
(a) The following standard and amendments are effective for the financial year ended 31 December 2021, but the Group
has elected to apply the temporary exemption described further below: (continued)
The Group performed an initial eligibility assessment and met the IFRS 9 requirements for the deferral approach, and
accordingly has decided to apply IFRS 9 to annual reporting periods beginning 1 January 2023. Subsequent to the
initial eligibility assessment, there has been no change in the Group’s activities that requires a reassessment of the
eligibility test. Further details on the eligibility assessment are contained in the consolidated financial statements in
the Group’s Annual Report 2019. Additional information on financial assets in relation to the election of the deferral
approach is illustrated per below:
Financial assets of the Group are separated into the following two groups:
(i) financial assets with contractual terms that give rise to cash flows that are solely payments of principal and interest
on the principal amount outstanding (SPPI) in accordance with IFRS 9 and are not held for trading or managed on
fair value basis; and
(ii) all financial assets other than those specified in (i).
The following tables show the fair value and change in fair value of these two groups of financial assets:
Fair value as at 31 December 2021
Change in fair value for the year ended
31 December 2021
Financial assets that
met SPPI criteria and
not held for trading or
managed on
fair value basis
Financial assets that
met SPPI criteria and
not held for trading or
managed on
fair value basis
Others
Total
Others
Total
US$m
Debt securities
189,353
10,727
200,080
(8,485)
(230)
(8,715)
Other financial assets
14,101(1) 71,370(2)
85,471
Total(3)
203,454
82,097
285,551
281
(8,204)
2,056
1,826
2,337
(6,378)
Fair value as at 31 December 2020
Change in fair value for the year ended
31 December 2020
Financial assets that
met SPPI criteria and
not held for trading or
managed on
fair value basis
Financial assets that
met SPPI criteria and
not held for trading or
managed on
fair value basis
Others
Total
Others
Total
US$m
Debt securities
192,362
9,519
201,881
Other financial assets
13,001(1)
60,397(2)
73,398
Total(3)
205,363
69,916
275,279
9,181
–
9,181
223
6,394
6,617
9,404
6,394
15,798
Notes:
(1) Balance of other financial assets qualifying as SPPI includes loans and deposits, other receivables, accrued investment income and cash
and cash equivalents.
(2) Balance predominantly represents equity shares and interests in investment funds, derivative financial instruments and cash equivalents.
(3) Certain financial assets included within the consolidated financial statements, including policy loans under loans and deposits,
reinsurance receivables and insurance receivables under other receivables amounting to US$6,384m (2020: US$6,348m) are not
included above since they will be accounted for under IFRS 17 where its adoption is in parallel with IFRS 9.
The financial assets presented above that met SPPI criteria and not held for trading or managed on fair value basis
are primarily debt securities. Additional information on the credit quality analysis of these debt securities is provided
in note 21.
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FINANCIAL STATEMENTSAIA GROUP LIMITED 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.1 Basis of preparation and statement of compliance (continued)
(a) The following standard and amendments are effective for the financial year ended 31 December 2021, but the Group
has elected to apply the temporary exemption described further below: (continued)
• The Company is not eligible for the deferral approach in its separate financial statements since the Company did not
meet the eligibility criteria for the temporary exemption.
IFRS 9 categorises financial assets into three principal classification categories: measured at amortised cost, at
FVOCI and at FVTPL. These supersede IAS 39’s categories of held to maturity investments, loans and receivables,
available for sale financial assets and financial assets measured at FVTPL. The classification of financial assets
under IFRS 9 is based on the business model under which the financial asset is managed and its contractual cash
flow characteristics. In addition, on initial recognition the Company may irrevocably designate a financial asset that
otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates
or significantly reduces an accounting mismatch that would otherwise arise. The classification and measurement
categories for financial liabilities have remained the same.
IFRS 9 replaces the “incurred loss” model in IAS 39 with a forward-looking ECL model. The ECL model requires an
ongoing measurement of credit risk associated with a financial asset and therefore recognises ECLs earlier than
under the “incurred loss” accounting model in IAS 39. The new impairment model applies to financial assets
measured at amortised cost and debt securities at FVOCI.
The statement of financial position and statement of changes in equity of the Company are disclosed in notes 46
and 47 of the Group’s consolidated financial statements, respectively.
(b) The following relevant new amendments to standards have been adopted for the first time for the financial year ended
31 December 2021 and have no material impact to the Group:
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform Phase 2; and
• Amendment to IFRS 16, Covid-19-Related Rent Concessions.
(c) The following relevant new amendments to standards have been issued and are required for annual reporting periods
beginning on or after 1 January 2023, with earlier application permitted. The Group has early adopted the amendments
during the financial year ended 31 December 2021:
• Amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting Policies.
The amendments to IAS 1, Presentation of Financial Statements, require the Group to disclose material accounting
policy information rather than significant accounting policies. The amendments to IFRS Practice Statement 2,
Making Materiality Judgements, provide guidance and examples on the application of materiality to accounting
policies disclosures so as to help identifying accounting policies disclosures that provide material information to
users of the financial statements. As a result the Group has refined the accounting policies disclosures to the
consolidated financial statements to disclose material accounting policy information. Apart from the changes to the
accounting policies disclosures in this note, the adoption of the amendments does not change any of the existing
accounting policies application and has no financial impact to the Group.
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2.1 Basis of preparation and statement of compliance (continued)
(d) The following relevant new amendments to standards have been issued but are not effective for the financial year
ended 31 December 2021 and have not been early adopted (the financial years for which the adoption is required for
the Group are stated in parentheses). The Group has assessed the impact of these new amendments on its financial
position and results of operations and they are not expected to have a material impact on the financial position or
results of operations of the Group:
• Amendments to IAS 1, Classification of Liabilities as Current or Non-Current (2023);
• Amendments to IAS 8, Definition of Accounting Estimates (2023);
• Amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising from a Single Transaction (2023);
• Amendments to IAS 16, Property, Plant and Equipment: Proceeds before Intended Use (2022);
• Amendments to IAS 37, Onerous Contracts – Cost of Fulfilling a Contract (2022);
• Amendment to IAS 41, Taxation in Fair Value Measurements (2022);
• Amendment to IFRS 1, First-time Adoption of International Financial Reporting Standards (2022);
• Amendments to IFRS 3, Reference to the Conceptual Framework (2022); and
• Amendment to IFRS 16, Covid-19-Related Rent Concessions beyond 30 June 2021 (2022).
(e) The following relevant new standard has been issued but is not effective for the financial year ended 31 December
2021 and has not been early adopted:
•
IFRS 17, Insurance Contracts (previously IFRS 4 Phase II) will replace the current IFRS 4, Insurance Contracts. IFRS
17 includes fundamental differences to current accounting in both insurance contract measurement and profit
recognition. The general model is based on a discounted cash flow model with a risk adjustment and deferral of
unearned profits. A separate approach applies to insurance contracts that are linked to returns on underlying items
and meet certain requirements. Additionally, IFRS 17 requires more granular information and a new presentation
format for the statement of comprehensive income as well as extensive disclosures. On 12 December 2017, the
Hong Kong Institute of Certified Public Accountants (HKICPA) approved the issuance of HKFRS 17, Insurance
Contracts. On 25 June 2020, the IASB issued the amendments to IFRS 17 and the effective date of IFRS 17 will be
deferred to annual reporting periods beginning on or after 1 January 2023. In October 2020, the HKICPA has
finalised the endorsement of, and issued, equivalent Amendments to HKFRS 17. On 9 December 2021, the IASB
amended IFRS 17 to add a transition option to address the possible accounting mismatches between financial
assets and insurance contract liabilities in the comparative information presented on initial application of IFRS 17.
The HKICPA has issued the equivalent Amendment to HKFRS 17 in February 2022. The implementation of IFRS 17
is progressing well. The Group is assessing the impacts on the Group’s consolidated financial statements.
The material accounting policies adopted in the preparation of the Group’s consolidated financial statements are set out
below. These policies have been applied consistently in all periods presented. The Company’s statement of financial
position and the statement of changes in equity, as set out in notes 46 and 47 respectively, have been prepared in
accordance with the Group’s accounting policies, except for the accounting policies in respect of the Company’s investments
as set out in note 46 and financial instruments as set out in note 2.4.5.
152
FINANCIAL STATEMENTSAIA GROUP LIMITED 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.2 Operating profit
The long-term nature of much of the Group’s operations means that, for management’s decision-making and internal
performance management purposes, the Group evaluates its results and its operating segments using a financial
performance measure referred to as “operating profit”. Operating profit includes among others the expected long-term
investment returns for investments in equities and real estate based on the assumptions applied by the Group in the
Supplementary Embedded Value Information. The Group defines operating profit after tax as net profit excluding the
following non-operating items:
• short-term fluctuations between expected and actual investment returns related to equities and real estate;
• other investment return (including short-term fluctuations due to market factors); and
• other significant items that management considers to be non-operating income and expenses.
The Group considers that the presentation of operating profit enhances the understanding and comparability of its
performance and that of its operating segments. The Group considers that trends can be more clearly identified without
the fluctuating effects of these non-operating items, many of which are largely dependent on market factors.
Operating profit is provided as additional information to assist in the comparison of business trends in different reporting
periods on a consistent basis and enhance overall understanding of financial performance.
2.3 Insurance and investment contracts
Consistent accounting policies for the measurement and recognition of insurance and investment contracts have been
adopted throughout the Group, except for in a limited number of cases, the Group measures insurance contract liabilities
with reference to statutory requirements in the applicable jurisdiction (see note 2.3.3).
Product classification
The Group classifies its contracts written as either insurance contracts or investment contracts, depending on the level of
insurance risk. Insurance contracts are those contracts that transfer significant insurance risk, while investment contracts
are those contracts without significant insurance risk. Some insurance and investment contracts, referred to as traditional
participating life business, have discretionary participation features (DPF), which may entitle the customer to receive, as a
supplement to guaranteed benefits, additional non-guaranteed benefits, such as policyholder dividends or bonuses. The
Group applies the same accounting policies for the recognition and measurement of obligations and the deferral of
acquisition costs arising from investment contracts with DPF as it does for insurance contracts. The Group refers to such
contracts as traditional participating life business.
In the event that a scenario (other than those lacking commercial substance) exists in which an insured event would
require the Group to pay significant additional benefits to its customers, the contract is accounted for as an insurance
contract. For investment contracts that do not contain DPF, IAS 39, Financial Instruments: Measurement and Recognition,
and, if the contract includes an investment management element, IFRS 15, Revenue from Contracts with Customers, are
applied. IFRS 4 permits the continued use of previously applied accounting policies for insurance contracts and investment
contracts with DPF, and this basis has been adopted by the Group in accounting for such contracts. Once a contract has
been classified as an insurance or investment contract, reclassification is not subsequently performed unless the terms of
the agreement are later amended.
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2.3 Insurance and investment contracts (continued)
Product classification (continued)
Certain contracts with DPF supplement the amount of guaranteed benefits due to policyholders. These contracts are
distinct from other insurance and investment contracts as the Group has discretion in the amount and/or timing of the
benefits declared, and how such benefits are allocated between groups of policyholders. Customers may be entitled to
receive, as a supplement to guaranteed benefits, additional benefits or bonuses:
•
that are likely to be a significant portion of the total contractual benefits;
• whose amount or timing is contractually at the discretion of the Group; and
•
that are contractually based on:
–
the performance of a specified pool of contracts or a specified type of contract;
– realised and/or unrealised investment returns on a specified pool of assets held by the issuer; or
–
the profit or loss of the company, fund or other entity that issues the contract.
In some jurisdictions traditional participating life business is written in a participating fund which is distinct from the other
assets of the company or branch. The allocation of benefits from the assets held in such participating funds is subject to
minimum policyholder participation mechanisms which are established by regulation. Other participating business with
distinct portfolios refers to business where it is expected that the policyholder will receive, at the discretion of the insurer,
additional benefits based on the performance of underlying segregated assets where this asset segregation is supported
by an explicit statutory reserve and reporting in the relevant territory. The allocation of benefit from the assets held in such
other participating business with distinct portfolios is set according to the underlying bonus rule as determined by the
relevant Board based on applicable regulatory requirements after considering the Appointed Actuary’s recommendation.
The extent of such policyholder participation may change over time. The current policyholder participation ratio applied for
recognition and measurement of the insurance contract liabilities for locations with participating funds and other
participating business with distinct portfolios is set out below.
Country
Participating funds
Mainland China
Singapore
Malaysia
Australia
Brunei
Other participating business with distinct portfolios
Hong Kong
Current policyholder
participation
70%
90%
90%
80%
80%
70% – 90%
In some jurisdictions participating business is not written in a distinct fund and the Group refers to this as other participating
business without distinct portfolios.
154
FINANCIAL STATEMENTSAIA GROUP LIMITED 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance and investment contracts (continued)
Product classification (continued)
The Group’s products may be divided into the following main categories:
Policy type
Description of benefits payable
Insurance contract liabilities(1)
Investment contract liabilities
Basis of accounting for:
Not applicable, as IFRS 4
permits contracts with DPF to
be accounted for as insurance
contracts
Insurance contract liabilities make provision for
the present value of guaranteed benefits less
estimated future net premiums to be collected
from policyholders. In addition, an insurance
liability is recorded for the proportion of the net
assets of the participating funds and other
participating business with distinct portfolios that
would be allocated to policyholders, assuming all
performance would be declared as a dividend
based upon current policyholder participation. In
addition, deferred profit liabilities for limited
payment contracts are recognised
Traditional
participating
life
Participating
funds and other
participating
business with
distinct
portfolios
Participating products include protection
and savings elements. The basic sum
assured, payable on death or maturity, may
be enhanced by dividends or bonuses, the
aggregate amount of which is determined
by the performance of a distinct fund of
assets and liabilities. The timing of
dividend and bonus declarations is at the
discretion of the insurer
For participating funds, local regulations
generally prescribe a minimum proportion
of policyholder participation in declared
dividends
For other participating business with
distinct portfolios, the allocation of benefit
from the assets held in such distinct
portfolios is set according to the
underlying bonus rule as determined by
the relevant Board based on applicable
regulatory requirements after considering
the Appointed Actuary’s recommendation.
The extent of such policyholder
participation may change over time
Other
participating
business
without distinct
portfolios
Participating products include protection
and savings elements. The basic sum
assured, payable on death or maturity, may
be enhanced by dividends or bonuses, the
timing or amount of which are at the
discretion of the insurer taking into account
factors such as investment experience
Insurance contract liabilities make provision for
the present value of guaranteed benefits and
non-guaranteed participation less estimated
future net premiums to be collected from
policyholders. In addition, deferred profit liabilities
for limited payment contracts are recognised
Not applicable, as IFRS 4
permits contracts with DPF to
be accounted for as insurance
contracts
Non-participating life, annuities
and other protection products
Benefits payable are not at the discretion
of the insurer
Universal life
Benefits are based on an account
balance, credited with interest at a rate
set by the insurer, and a death benefit,
which may be varied by the customer
Unit-linked
These may be primarily savings products
or may combine savings with an element
of protection
Insurance contract liabilities reflect the present
value of future policy benefits to be paid less the
present value of estimated future net premiums to
be collected from policyholders. In addition,
deferred profit liabilities for limited payment
contracts are recognised
Insurance contract liabilities reflect the
accumulation value, representing premiums
received and investment return credited, less
deductions for front-end loads, mortality and
morbidity costs and expense charges. In addition,
liabilities for unearned revenue and additional
insurance benefits are recorded
Insurance contract liabilities reflect the
accumulation value, representing premiums
received and investment return credited, less
deductions for front-end loads, mortality and
morbidity costs and expense charges. In addition,
liabilities for unearned revenue and additional
insurance benefits are recorded
Investment contract liabilities
are measured at amortised cost
Not applicable as such
contracts generally contain
significant insurance risk
Investment contract liabilities
are measured at fair value
(determined with reference to
the accumulation value)
Note:
(1) In a limited number of cases, the Group measures insurance contract liabilities with reference to statutory requirements in the applicable
jurisdiction.
In the notes to the financial statements, unit-linked contracts are presented together with pension contracts for disclosure
purposes.
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2.3 Insurance and investment contracts (continued)
Product classification (continued)
The basis of accounting for insurance and investment contracts is discussed in notes 2.3.1 and 2.3.2 below.
2.3.1 Insurance contracts and investment contracts with DPF
Premiums
Premiums from life insurance contracts, including participating policies and annuity policies with life contingencies, are
recognised as revenue when due from the policyholder. Benefits and expenses are provided in respect of such revenue so
as to recognise profits over the estimated life of the policies. For limited pay contracts, premiums are recognised in profit
or loss when due, with any excess profit deferred and recognised in income in a constant relationship to the insurance in-
force or, for annuities, the amount of expected benefit payments.
Amounts collected as premiums from insurance contracts with investment features but with sufficient insurance risk to be
considered insurance contracts, such as universal life, and certain unit-linked contracts, are accumulated as deposits.
Revenue from these contracts consists of policy fees for the cost of insurance, administration, and surrenders during the
period.
Upfront fees are recognised over the estimated life of the contracts to which they relate. Policy benefits and claims that are
charged to expenses include benefit claims incurred in the period in excess of related policyholder contract deposits and
interest credited to policyholder deposits.
Unearned revenue liability
Unearned revenue liability represents upfront fees and other non-level charges that have been collected and released to
the consolidated income statement over the estimated life of the business. A separate liability for accumulation value is
established.
Deferred profit liability
Deferred profit liability arising from traditional insurance contracts represents excess profits that have been collected and
released to the consolidated income statement over the estimated life of the business. A separate liability for future policy
benefits is established.
Deferred acquisition costs
The costs of acquiring new insurance contracts, including commissions and distribution costs, underwriting and other
policy issue expenses which vary with and are primarily related to the production of new business or renewal of existing
business, are deferred as an asset. Deferred acquisition costs are assessed for recoverability in the year of policy issue to
ensure that these costs are recoverable out of the estimated future margins to be earned on the policy. Deferred acquisition
costs are assessed for recoverability at least annually thereafter. Future investment income is also taken into account in
assessing recoverability. To the extent that acquisition costs are not considered to be recoverable at inception or thereafter,
these costs are expensed in the consolidated income statement.
Deferred acquisition costs for life insurance and annuity policies are amortised over the expected life of the contracts as a
constant percentage of expected premiums. Expected premiums are estimated at the date of policy issue and are
consistently applied throughout the life of the contract unless a deficiency occurs when performing liability adequacy
testing (see below).
156
FINANCIAL STATEMENTSAIA GROUP LIMITED 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance and investment contracts (continued)
2.3.1 Insurance contracts and investment contracts with DPF (continued)
Deferred acquisition costs (continued)
Deferred acquisition costs for universal life and unit-linked contracts are amortised over the expected life of the contracts
based on a constant percentage of the present value of estimated gross profits expected to be realised over the life of the
contract or on a straight-line basis. Estimated gross profits include expected amounts to be assessed for mortality,
administration, investment and surrenders, less benefit claims in excess of policyholder balances, administrative expenses
and interest credited. Estimated gross profits are revised regularly. The interest rate used to compute the present value of
revised estimates of expected gross profits is the latest revised rate applied to the remaining benefit period. Deviations of
actual results from estimated experience are reflected in earnings.
In a limited number of cases where the Group measures insurance contract liabilities with reference to statutory
requirements in the applicable jurisdiction, acquisition costs deemed recoverable are included as a component of insurance
contract liabilities, and are therefore deferred and amortised over the life of the corresponding policies.
Deferred sales inducements
Deferred sales inducements, consisting of day one bonuses, persistency bonuses and enhanced crediting rates are deferred
and amortised using the same methodology and assumptions used to amortise acquisition costs when:
•
•
•
•
the sales inducements are recognised as part of insurance contract liabilities;
they are explicitly identified in the contract on inception;
they are incremental to amounts credited on similar contracts without sales inducements; and
they are higher than the expected ongoing crediting rates for periods after the inducement.
Unbundling
The deposit component of an insurance contract is unbundled when both of the following conditions are met:
•
•
the deposit component (including any embedded surrender option) can be measured separately (i.e. without taking
into account the insurance component); and
the Group’s accounting policies do not otherwise require the recognition of all obligations and rights arising from the
deposit component.
Bifurcation
To the extent that certain of the Group’s insurance contracts include embedded derivatives that are not clearly and closely
related to the host contract, these are bifurcated from the insurance contracts and accounted for as derivatives.
Benefits and claims
Insurance contract benefits reflect the cost of all maturities, surrenders, withdrawals and claims arising during the period,
as well as policyholder dividends accrued in anticipation of dividend declarations.
Accident and health claims incurred include all losses occurring during the period, whether reported or not, related
handling costs, a reduction for recoveries, and any adjustments to claims outstanding from previous years.
Claims handling costs include internal and external costs incurred in connection with the negotiation and settlement of
claims, and are included in operating expenses.
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2.3 Insurance and investment contracts (continued)
2.3.1 Insurance contracts and investment contracts with DPF (continued)
Insurance contract liabilities (including liabilities in respect of investment contracts with DPF)
Insurance contract liabilities represent the estimated future policyholder benefit liability for life insurance policies.
Future policy benefits for life insurance policies are calculated using a net level premium valuation method which
represents the present value of estimated future policy benefits to be paid, less the present value of estimated future net
premiums to be collected from policyholders.
For contracts with an explicit account balance, such as universal life and unit-linked contracts, insurance contract liabilities
are equal to the accumulation value, which represents premiums received and investment returns credited to the policy
less deductions for mortality and morbidity costs and expense charges.
Settlement options are accounted for as an integral component of the underlying insurance or investment contract unless
they provide annuitisation benefits, in which case an additional liability is established to the extent that the present value
of expected annuitisation payments at the expected annuitisation date exceeds the expected account balance at that date.
Where settlement options have been issued with guaranteed rates less than market interest rates, the insurance or
investment contract liability does not reflect any provision for subsequent declines in market interest rates unless a
deficiency is identified through liability adequacy testing.
The Group accounts for insurance contract liabilities for participating business written in participating funds and other
participating business with distinct portfolios by establishing a liability for the present value of guaranteed benefits less
estimated future net premiums to be collected from policyholders. In addition, an insurance liability is recorded for the
proportion of the net assets of the participating funds and the other participating business with distinct portfolios that
would be allocated to policyholders assuming all relevant surplus at the date of the consolidated statement of financial
position were to be declared as a policyholder dividend based upon policyholder participation as described in note 2.3
above. The Group accounts for other participating business without distinct portfolios by establishing a liability for the
present value of guaranteed benefits and non-guaranteed participation, less estimated future net premiums to be collected
from policyholders.
Liability adequacy testing
The adequacy of liabilities is assessed by portfolio of contracts, in accordance with the Group’s manner of acquiring,
servicing and measuring the profitability of its insurance contracts. Liability adequacy testing is performed for each
reportable segment.
For traditional life insurance contracts, insurance contract liabilities reduced by deferred acquisition costs and value of
business acquired on acquired insurance contracts, are compared to the gross premium valuation calculated on a best
estimate basis, as of the valuation date. If there is a deficiency, the unamortised balance of deferred acquisition cost and
value of business acquired on acquired insurance contracts are written down to the extent of the deficiency. If, after writing
down the unamortised balance for the specific portfolio of contracts to nil, a deficiency still exists, the net liability is
increased by the amount of the remaining deficiency.
For universal life and investment contracts with DPF, deferred acquisition costs, net of unearned revenue liabilities, are
compared to estimated gross profits. If a deficiency exists, deferred acquisition costs are written down.
Financial guarantees
Financial guarantees are regarded as insurance contracts. Liabilities in respect of such contracts are recognised when loss
is incurred.
158
FINANCIAL STATEMENTSAIA GROUP LIMITED 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance and investment contracts (continued)
2.3.2 Investment contracts
Investment contracts do not contain sufficient insurance risk to be considered insurance contracts and are accounted for
as a financial liability, other than investment contracts with DPF which are excluded from the scope of IAS 39 and are
accounted for as insurance contracts.
Revenue from these contracts consists of various charges (policy fees, handling fees, management fees and surrender
charges) made against the contract for the cost of insurance, expenses and early surrender. First year charges are amortised
over the life of the contract as the services are provided.
Investment contract fee revenue
Customers are charged fees for policy administration, investment management, surrenders or other contract services. The
fees may be fixed amounts or vary with the amounts being managed, and will generally be charged as an adjustment to the
policyholder’s account balance. The fees are recognised as revenue in the period in which they are received unless they
relate to services to be provided in future periods, in which case they are deferred and recognised as the service is provided.
When part of the fee received from a policyholder is expected to be refunded in the future, the related fee is not recognised
as a revenue and a sales inducement liability is established which forms part of the investment contract liabilities.
Origination and other “upfront” fees (fees that are assessed against the account balance as consideration for origination of
the contract) are charged on some non-participating investment and pension contracts. Where the investment contract is
recorded at amortised cost, these fees are amortised and recognised over the expected term of the policy as an adjustment
to the effective yield. Where the investment contract is measured at fair value, the front-end fees that relate to the provision
of investment management services are amortised and recognised as the services are provided.
Deferred origination costs
The costs of acquiring investment contracts with investment management services, including commissions and other
incremental expenses directly related to the issue of each new contract, are deferred and amortised over the period that
services are provided. Deferred origination costs are tested for recoverability at each reporting date.
The costs of acquiring new investment contracts without investment management services are included as part of the
effective interest rate used to calculate the amortised cost of the related investment contract liabilities.
Investment contract liabilities
Deposits received in respect of investment contracts are not accounted for through the consolidated income statement,
except for the investment income and fees attributable to those contracts, but are accounted for directly through the
consolidated statement of financial position as an adjustment to the investment contract liability, which reflects the
account balance.
The majority of the Group’s contracts classified as investment contracts are unit-linked contracts, with measurement
directly linked to the underlying investment assets. These represent investment portfolios maintained to meet specific
investment objectives of policyholders who generally bear the credit and market risks on those investments. The liabilities
are carried at fair value determined with reference to the accumulation value (current unit value) with changes recognised
in profit or loss. The costs of policy administration, investment management, surrender charges and certain policyholder
taxes assessed against customers’ account balances are included in revenue, and accounted for as described under
“Investment contract fee revenue” above.
Non unit-linked investment contract liabilities are carried at amortised cost, being the fair value of consideration received
at the date of initial recognition, less the net effect of principal payments such as transaction costs and front-end fees, plus
or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and
the maturity value, and less any write-down for surrender payments. The effective interest rate equates the discounted
cash payments to the initial amount. At each reporting date, the unearned revenue liability is determined as the value of
the future best estimate cash flows discounted at the effective interest rate. Any adjustment is immediately recognised as
income or expense in the consolidated income statement.
The amortised cost of the financial liability is never recorded at less than the amount payable on surrender, discounted for
the time value of money where applicable, if the investment contract is subject to a surrender option.
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2.3 Insurance and investment contracts (continued)
2.3.2 Investment contracts (continued)
Deferred fee income liability
Deferred fee income liability represents upfront fees and other non-level charges that have been collected and released to
the consolidated income statement over the estimated life of the business. A separate liability for accumulation value is
established.
2.3.3 Insurance and investment contracts
Reinsurance
The Group cedes reinsurance in the normal course of business, with retentions varying by line of business. The cost of
reinsurance is accounted for over the life of the underlying reinsured policies, using assumptions consistent with those
used to account for such policies.
Premiums ceded and claims reimbursed are presented on a gross basis in the consolidated income statement and
statement of financial position.
Reinsurance assets consist of amounts receivable in respect of ceded insurance liabilities. Amounts recoverable from
reinsurers are estimated in a manner consistent with the reinsured insurance or investment contract liabilities or benefits
paid and in accordance with the relevant reinsurance contract.
To the extent that reinsurance contracts principally transfer financial risk (as opposed to insurance risk) they are accounted
for directly through the consolidated statement of financial position and are not included in reinsurance assets or liabilities.
A deposit asset or liability is recognised, based on the consideration paid or received less any explicitly identified premiums
or fees to be retained by the reinsured.
If a reinsurance asset is impaired, the Group reduces the carrying amount accordingly and recognises that impairment loss
in the consolidated income statement. A reinsurance asset is impaired if there is objective evidence, as a result of an event
that occurred after initial recognition of the reinsurance asset, that the Group may not receive all amounts due to it under
the terms of the contract, and the impact on the amounts that the Group will receive from the reinsurer can be reliably
measured.
The upfront premium rebate received on reinsurance contracts is a reinsurance liability. This liability is initially recognised
as a reduction in deferred acquisition and origination costs up to the carrying value of associated deferred acquisition
costs or associated value of business acquired, if any, with any excess being recognised in other liabilities. This reinsurance
liability is released in line with the release of the underlying insurance contracts. Change in this reinsurance liability during
the period is recognised as insurance and investment contract benefits ceded.
Value of business acquired (VOBA)
The VOBA in respect of a portfolio of long-term insurance contracts and investment contracts with DPF, either directly or
through the purchase of a subsidiary, is recognised as an asset. If this results from the acquisition of an investment in a
joint venture or an associate, the VOBA is held within the carrying amount of that investment. In all cases, the VOBA is
amortised over the estimated life of the contracts in the acquired portfolio on a systematic basis. The rate of amortisation
reflects the profile of the value of in-force business acquired. The carrying value of VOBA is reviewed annually for
impairment and any reduction is charged to the consolidated income statement.
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FINANCIAL STATEMENTSAIA GROUP LIMITED 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance and investment contracts (continued)
2.3.3 Insurance and investment contracts (continued)
Shadow accounting
Shadow accounting is applied to insurance and certain investment contracts with discretionary participation feature
where financial assets backing insurance and investment contract liabilities are classified as available for sale. Shadow
accounting is applied to deferred acquisition costs, VOBA, deferred origination costs, and the contract liabilities for
investment contracts with DPF to take into account the effect of unrealised gains or losses on insurance liabilities or assets
that are recognised in other comprehensive income in the same way as for a realised gain or loss recognised in the
consolidated income statement. Such assets or liabilities are adjusted with corresponding charges or credits recognised
directly in shareholders’ equity as a component of the related unrealised gains and losses.
Insurance contracts (including investment contracts with DPF) liabilities measured with reference to statutory
requirements
In a limited number of cases, the Group measures insurance contract liabilities with reference to statutory requirements in
the applicable jurisdiction. The insurance contract liabilities of those countries are predominately measured at the net
present value of future receipts from and payments to policyholders. The discount rate applied reflects the current market
rate. The excess of premium received over claims and expenses (the margin) is recognised over the life of the contract in
a manner that reflects the pattern of service provided to the policyholder. The movement in insurance contract liabilities
recognised in the profit or loss reflects the planned release of this margin.
Other assessments and levies
The Group is potentially subject to various periodic insurance-related assessments or guarantee fund levies. Related
provisions are established where there is a present obligation (legal or constructive) as a result of a past event. Such
amounts are not included in insurance or investment contract liabilities but are included under “Provisions” in the
consolidated statement of financial position.
2.4 Financial instruments
2.4.1 Classification of and designation of financial instruments
Financial assets and liabilities at fair value through profit or loss
Financial assets and liabilities at fair value through profit or loss comprise two categories:
•
•
financial assets or liabilities designated at fair value through profit or loss upon initial recognition; and
financial assets or liabilities classified as held for trading.
Management designates financial assets and liabilities at fair value through profit or loss if this eliminates a measurement
inconsistency or if the related assets and liabilities are actively managed on a fair value basis, including:
•
financial assets held to back unit-linked contracts and participating funds;
• other financial assets managed on a fair value basis; consisting of the Group’s equity portfolio and investments held by
the Group’s fully consolidated investment funds; and
• compound instruments containing an embedded derivative, where the embedded derivative would otherwise require
bifurcation.
Financial assets and liabilities classified as held for trading include financial assets acquired principally for the purpose of
selling them in the near future and those that form part of a portfolio of financial assets in which there is evidence of short-
term profit taking, as well as derivative assets and liabilities.
Dividend income from equity instruments designated at fair value through profit or loss is recognised in investment income
in the consolidated income statement, generally when the security becomes ex-dividend. Interest income is recognised on
an accrued basis. For all financial assets designated at fair value through profit or loss, changes in fair value are recognised
in investment experience.
Transaction costs in respect of financial assets and liabilities at fair value through profit or loss are expensed as they are
incurred.
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2.4 Financial instruments (continued)
2.4.1 Classification of and designation of financial instruments (continued)
Available for sale financial assets
Financial assets, other than those at fair value through profit or loss, and loans and receivables, are classified as available
for sale.
The available for sale category is used where the relevant investments backing insurance and investment contract liabilities
and shareholders’ equity are not managed on a fair value basis. These principally consist of the Group’s debt securities
(other than those backing participating funds and unit-linked contracts). Available for sale financial assets are initially
recognised at fair value plus attributable transaction costs. For available for sale debt securities, the difference between
their cost and par value is amortised. Available for sale financial assets are subsequently measured at fair value. Interest
income from debt securities classified as available for sale is recognised in investment income in the consolidated income
statement using the effective interest method.
Unrealised gains and losses on securities classified as available for sale are analysed between differences resulting from
foreign currency translation, and other fair value changes. Foreign currency translation differences on monetary available
for sale investments, such as debt securities are calculated as if they were carried at amortised cost and so are recognised
in the consolidated income statement as investment experience. For impairments of available for sale financial assets,
reference is made to the section “Impairment of financial assets”.
Changes in the fair value of securities classified as available for sale, except for impairment losses and relevant foreign
exchange gains and losses, are recognised in other comprehensive income and accumulated in a separate fair value
reserve within equity. Impairment losses and relevant foreign exchange gains and losses are recognised in the consolidated
income statement.
Realised gains and losses on financial assets
Realised gains and losses on available for sale financial assets are determined as the difference between the sale proceeds
and its original cost or amortised cost as appropriate. Amortised cost is determined by specific identification.
Recognition of financial instruments
Purchases and sales of financial instruments are recognised on the trade date, which is the date at which the Group
commits to purchase or sell the assets.
Derecognition and offset of financial assets
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where
the Group has transferred substantially all risks and rewards of ownership. If the Group neither transfers nor retains
substantially all the risks and rewards of ownership of a financial asset, it derecognises the financial asset if it no longer
has control over the asset. In transfers where control over the asset is retained, the Group continues to recognise the asset
to the extent of its continuing involvement. The extent of continuing involvement is determined by the extent to which the
Group is exposed to changes in the fair value of the asset.
Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position
only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net
basis, or realise the asset and settle the liability simultaneously.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are initially recognised at fair value plus transaction costs. Subsequently, they are carried at amortised
cost using the effective interest method less any impairment losses. Interest income from loans and receivables is
recognised in investment income in the consolidated income statement using the effective interest method.
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FINANCIAL STATEMENTSAIA GROUP LIMITED 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.4 Financial instruments (continued)
2.4.1 Classification of and designation of financial instruments (continued)
Term deposits
Deposits include time deposits with financial institutions which do not meet the definition of cash and cash equivalents as
their maturity at acquisition exceeds three months. Certain of these balances are subject to regulatory or other restriction
as disclosed in note 21 Financial investments. Deposits are stated at amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid
investments held for cash management purposes, which have maturities at acquisition of three months or less, or are
convertible into known amounts of cash and subject to insignificant risk of changes in value. Cash and cash equivalents
also include cash received as collateral for derivative transactions, and repo and reverse repo transactions, as well as cash
and cash equivalents held for the benefit of policyholders in connection with unit-linked products. Cash and cash
equivalents are measured at amortised cost using the effective interest method.
2.4.2 Fair values of non-derivative financial instruments
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date, having regard to the specific characteristics
of the asset or liability concerned, assuming that the transfer takes place in the most advantageous market to which the
Group has access. The fair values of financial instruments traded in active markets (such as financial instruments at fair
value through profit or loss and available for sale securities) are based on quoted market prices at the date of the
consolidated statement of financial position. The quoted market price used for financial assets held by the Group is the
current bid price, which is considered to be the price within the bid-ask spread that is most representative of the fair value
in the circumstances. The fair values of financial instruments that are not traded in active markets are determined using
valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions at
the date of each consolidated statement of financial position. The objective of using a valuation technique is to estimate
the price at which an orderly transaction would take place between market participants at the date of the consolidated
statement of financial position.
Financial instruments carried at fair value are measured using a fair value hierarchy described in note 23.
2.4.3 Impairment of financial assets
General
Financial assets are assessed for impairment on a regular basis. The Group assesses at each reporting date whether there
is objective evidence that a financial asset or group of financial assets is impaired. A financial asset, or group of financial
assets, is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one
or more events that have occurred after the initial recognition of the asset (a loss event) and that loss event (or events) has
an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably
estimated.
For loans and receivables, the Group first assesses whether objective evidence of impairment exists for financial assets
that are individually significant. If the Group determines that objective evidence of impairment does not exist for an
individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with
similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment
of impairment.
Available for sale financial instruments
When a decline in the fair value of an available for sale asset has been recognised in other comprehensive income and
there is objective evidence that the asset is impaired, the cumulative loss already recognised directly in other comprehensive
income is recognised in current period profit or loss.
If the fair value of a debt instrument classified as available for sale increases in a subsequent period, and the increase can
be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss
is reversed through profit or loss. Where, following the recognition of an impairment loss in respect of an available for sale
debt security, the asset suffers further falls in value, such further falls are recognised as an impairment only in the case
when objective evidence exists of a further impairment event to which the losses can be attributed.
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2.4 Financial instruments (continued)
2.4.3 Impairment of financial assets (continued)
Loans and receivables
For loans and receivables, impairment is considered to have taken place if it is probable that the Group will not be able to
collect principal and/or interest due according to the contractual terms of the instrument. When impairment is determined
to have occurred, the carrying amount is decreased through a charge to profit or loss. The carrying amount of mortgage
loans or receivables is reduced through the use of an allowance account, and the amount of any allowance is recognised
as an impairment loss in profit or loss.
2.4.4 Derivative financial instruments
Derivative financial instruments primarily include foreign exchange and interest rate contracts that derive their value
mainly from underlying foreign exchange rates and interest rates. All derivatives are initially recognised in the consolidated
statement of financial position at their fair value, which represents their cost excluding transaction costs, which are
expensed, giving rise to a day one loss. They are subsequently remeasured at their fair value, with movements in this value
recognised in profit or loss. Fair values are obtained from quoted market prices or, if these are not available, by using
valuation techniques such as discounted cash flow models or option pricing models. All derivatives are carried as assets
when the fair values are positive and as liabilities when the fair values are negative.
Derivative instruments for economic hedging
Whilst the Group enters into derivative transactions to provide economic hedges under the Group’s risk management
framework, it adopts hedge accounting to these transactions only in limited circumstances. This is either because the
transactions would not meet the specific IFRS rules to be eligible for hedge accounting or the documentation requirements
to meet hedge accounting criteria would be unduly onerous. Where hedge accounting does not apply, these transactions
are treated as held for trading and fair value movements are recognised immediately in investment experience.
Cash flow hedge
The Group has, in a limited number of cases, designated certain derivatives as hedges of interest rate risk associated with
the cash flows of highly probable forecast transactions such as forecast purchases of debt securities. To the extent these
hedges are effective, the change in fair value of the derivatives designated as hedging instruments is recognised in the
cash flow hedge reserve in other comprehensive income within equity. The gain or loss relating to the ineffective portion
is recognised immediately in profit or loss. Amounts accumulated in the cash flow hedge reserve are reclassified to profit
or loss when the hedged item affects profit or loss. In respect of a forecast purchase of a debt security classified as
available for sale, the cash flows are expected to affect profit or loss when the coupons from the purchased bonds are
recognised, or on disposal of the security. The application of hedge accounting is discontinued when one of the following
situations occurs: when a derivative designated as the hedging instrument expires or is sold, terminated or exercised prior
to the occurrence of the forecast transaction, when the hedge is no longer highly effective or expected to be highly effective,
or when the Group revokes the designation of the hedging relationship. In these situations, the cumulative gain or loss on
the hedging instrument that has been recognised in other comprehensive income from the period when the hedge was
effective remains separately in equity until the forecast transaction occurs. This amount is reclassified to profit or loss
when the hedged item affects profit or loss. If the forecast transaction is no longer expected to occur, the entire amount is
reclassified immediately to profit or loss.
Embedded derivatives
Embedded derivatives are derivatives embedded within other non-derivative host financial instruments to create hybrid
instruments. Where the economic characteristics and risks of the embedded derivatives are not closely related to the
economic characteristics and risks of the host instrument, and where the hybrid instrument is not measured at fair value
with changes in fair value recognised in profit or loss, the embedded derivative is bifurcated and carried at fair value as a
derivative in accordance with IAS 39.
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FINANCIAL STATEMENTSAIA GROUP LIMITED 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.4 Financial instruments (continued)
2.4.5 The Company’s financial instruments
Financial assets are classified as measured at amortised cost, FVOCI or FVTPL. The classification of financial assets is
based on the business model under which the financial asset is managed and its contractual cash flow characteristics.
A financial asset is measured at amortised cost if it meets both of the following conditions:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
A debt security is measured at FVOCI if it meets both of the following conditions:
•
•
it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling
financial assets; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL.
Changes in fair value of debt securities measured at FVOCI are recognised in other comprehensive income, except for
those relating to expected credit losses, interest income (calculated using the effective interest method) and foreign
exchange gains and losses which are recognised in profit or loss. When the investment is derecognised, the amount
accumulated in other comprehensive income is recycled from equity to profit or loss.
Changes in fair value of financial assets measured at FVTPL and interest are recognised in profit or loss.
The Company recognises loss allowances for ECL on financial assets measured at amortised cost and debt securities
measured at FVOCI, which measured at either lifetime ECL or 12-month ECL according to a ’three-stage’ impairment
model. A financial instrument that is not credit-impaired on initial recognition is classified in ’Stage 1’. If a significant
increase in credit risk since initial recognition is identified but the financial instrument is not yet assessed as credit
impaired, the financial instrument is moved to ’Stage 2’. If the financial instrument is credit-impaired, it is then moved to
’Stage 3’. Financial instruments in Stages 2 and 3 have their loss allowances measured at Lifetime ECL which are the ECL
that result from all possible default events over the expected life of a financial instrument. Financial instruments in Stage
1 have their loss allowances measured at 12-month ECL which are the portion of ECL that results from default events that
are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less
than 12 months). The maximum period considered when estimating ECL is the maximum contractual period over which
the Company is exposed to credit risk.
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2.4 Financial instruments (continued)
2.4.5 The Company’s financial instruments (continued)
ECL are a probability-weighted estimate of credit losses and are measured as the present value of all cash shortfalls – i.e.
the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the
Company expects to receive.
At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt securities at
FVOCI are credit-impaired. A financial asset is ’credit-impaired’ when one or more events that have a detrimental impact
on the estimated future cash flows of the financial asset have occurred.
Loss allowance for ECL of financial assets measured at amortised cost is deducted from the gross carrying amount of the
assets, while ECL of debt securities measured at FVOCI is charged to profit or loss and is recognised in other comprehensive
income.
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic
prospect of recovery. This is generally the case when the Company determines that the borrower does not have assets or
sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However,
financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s
procedures for recovery of amount due.
2.5 Presentation of the consolidated statement of financial position
The Group’s insurance and investment contract liabilities and related assets are realised and settled over periods of several
years, reflecting the long-term nature of the Group’s products. Accordingly, the Group presents the assets and liabilities in
its consolidated statement of financial position in approximate order of liquidity, rather than distinguishing current and
non-current assets and liabilities. The Group regards its intangible assets, investments in associates and joint ventures,
property, plant and equipment, investment property and deferred acquisition and origination costs as non-current assets
as these are held for the longer-term use of the Group.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes estimates and assumptions that affect the reported amounts of assets, liabilities, and revenue and
expenses. All estimates are based on management’s knowledge of current facts and circumstances, assumptions based on
that knowledge and predictions of future events and actions. Actual results can always differ from those estimates, possibly
significantly.
Items that are considered particularly sensitive to changes in estimates and assumptions, and the relevant accounting
policies are those which relate to product classification, insurance contract liabilities (including liabilities in respect of
investment contracts with DPF), deferred acquisition and origination costs, liability adequacy testing, fair value
measurement and impairment of goodwill and other intangible assets.
3.1 Product classification
The Group issues contracts that transfer insurance risk or financial risk or both. Insurance contracts are those contracts
that transfer significant insurance risk, while investment contracts are those contracts without significant insurance risk.
The Group exercises significant judgement to determine whether there is a scenario (other than those lacking commercial
substance) in which an insured event would require the Group to pay significant additional benefits to its customers. In the
event the Group has to pay significant additional benefits to its customers, the contract is accounted for as an insurance
contract.
The judgements exercised in determining the level of insurance risk in product classification affect the amounts recognised
in the consolidated financial statements as insurance and investment contract liabilities and deferred acquisition and
origination costs. The accounting policy on product classification is described in note 2.3.
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FINANCIAL STATEMENTSAIA GROUP LIMITED 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
3.2 Insurance contract liabilities (including liabilities in respect of investment contracts with DPF)
The Group calculates the insurance contract liabilities for traditional life insurance using a net level premium valuation
method, whereby the liability represents the present value of estimated future policy benefits to be paid, less the present
value of estimated future net premiums to be collected from policyholders. This method uses best estimate assumptions
at inception adjusted for a provision for the risk of adverse deviation for mortality, morbidity, expected investment yields,
policyholder dividends (for other participating business without distinct portfolios), surrenders and expenses set at the
policy inception date. These assumptions remain locked in thereafter, unless a deficiency arises on liability adequacy
testing. Interest rate assumptions can vary by geographical market, year of issuance and product. Mortality, morbidity,
surrender and expense assumptions are based on actual experience by each geographical market, modified to allow for
variations in policy form. The Group exercises significant judgement in making appropriate assumptions.
For contracts with an explicit account balance, such as universal life and unit-linked contracts, insurance contract liabilities
represent the accumulation value, which represents premiums received and investment returns credited to the policy less
deductions for mortality and morbidity costs and expense charges. Significant judgement is exercised in making appropriate
estimates of gross profits which are based on historical and anticipated future experiences, these estimates are regularly
reviewed by the Group.
The Group accounts for insurance contract liabilities for participating business written in participating funds and other
participating business with distinct portfolios by establishing a liability for the present value of guaranteed benefits less
estimated future net premiums to be collected from policyholders. In addition, an insurance liability is recorded for the
proportion of the net assets of the participating funds and other participating business with distinct portfolios that would
be allocated to policyholders assuming all relevant surplus at the date of the consolidated statement of financial position
were to be declared as a policyholder dividend based upon policyholder participation as described in note 2.3. Establishing
these liabilities requires the exercise of significant judgement. In addition, the assumption that all relevant performance is
declared as a policyholder dividend may not be borne out in practice. The Group accounts for other participating business
without distinct portfolios by establishing a liability for the present value of guaranteed benefits and non-guaranteed
participation, less estimated future net premiums to be collected from policyholders.
In a limited number of cases, the Group measures insurance contract liabilities with reference to statutory requirements in
the applicable jurisdiction. The insurance contract liabilities of those countries are predominately measured at the net
present value of future receipts from and payments to policyholders. The discount rate applied reflects the current market
rate. Significant judgement is exercised in making appropriate assumptions of the cash flows.
The judgements exercised in the valuation of insurance contract liabilities (including investment contracts with DPF)
affect the amounts recognised in the consolidated financial statements as insurance contract benefits and insurance
contract liabilities.
Further details of the related accounting policy, key risk and variables, and the sensitivities of assumptions to the key
variables in respect of insurance contract liabilities are provided in notes 2.3, 27 and 29.
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3.3 Deferred acquisition and origination costs
The judgements exercised in the deferral and amortisation of acquisition and origination costs affect amounts recognised
in the consolidated financial statements as deferred acquisition and origination costs and insurance and investment
contract benefits.
As noted in note 2.3.1, deferred acquisition costs for traditional life insurance and annuity policies are amortised over the
expected life of the contracts as a constant percentage of expected premiums. Expected premiums are estimated at the
date of policy issue and are applied consistently throughout the life of the contract unless a deficiency occurs when
performing liability adequacy testing.
As noted in note 2.3.1, deferred acquisition costs for universal life and unit-linked contracts are amortised over the expected
life of the contracts based on a constant percentage of the present value of estimated gross profits expected to be realised
over the life of the contract or on a straight-line basis. As noted in note 3.2, significant judgement is exercised in making
appropriate estimates of gross profits. The expensing of acquisition costs is accelerated following adverse investment
performance. Likewise, in periods of favourable investment performance, previously expensed acquisition costs are
reversed, not exceeding the amount initially deferred.
Additional details of deferred acquisition and origination costs are provided in notes 2.3 and 20.
3.4 Liability adequacy testing
The Group evaluates the adequacy of its insurance and investment contract liabilities with DPF at least annually. Significant
judgement is exercised in determining the level of aggregation at which liability adequacy testing is performed and in
selecting best estimate assumptions. Liability adequacy is assessed by portfolio of contracts in accordance with the
Group’s manner of acquiring, servicing and measuring the profitability of its insurance contracts. The Group performs
liability adequacy testing separately for each reportable segment.
The judgements exercised in liability adequacy testing affect amounts recognised in the consolidated financial statements
as commission and other acquisition expenses, deferred acquisition costs, insurance contract benefits and insurance and
investment contract liabilities.
3.5 Fair value measurement
3.5.1 Fair value of financial assets
The Group determines the fair values of financial assets traded in active markets using quoted bid prices as of each
reporting date. The fair values of financial assets that are not traded in active markets are typically determined using a
variety of other valuation techniques, such as prices observed in recent transactions and values obtained from current bid
prices of comparable investments. More judgement is used in measuring the fair value of financial assets for which market
observable prices are not available or are available only infrequently.
The degree of judgement used in measuring the fair value of financial assets generally correlates with the level of pricing
observability. Pricing observability is affected by a number of factors, including the type of financial instrument, whether
the financial instrument is new to the market and not yet established, the characteristics specific to the transaction and
general market conditions.
Changes in the fair value of financial assets held by the Group’s participating funds and other participating business with
distinct portfolios affect not only the value of financial assets, but are also reflected in corresponding movements in
insurance and investment contract liabilities. This is due to an insurance liability being recorded for the proportion of the
net assets of the participating funds and other participating business with distinct portfolios that would be allocated to
policyholders if all relevant surplus at the date of the consolidated statement of financial position were to be declared as a
policyholder dividend based upon policyholder participation as described in note 2.3. Both of the foregoing changes are
reflected in the consolidated income statement, except for those relating to other participating business with distinct
portfolios which recognise a portion of an amount due to changes in fair value of available for sale financial assets and
properties held for own use that are recognised in other comprehensive income.
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FINANCIAL STATEMENTSAIA GROUP LIMITED 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
3.5 Fair value measurement (continued)
3.5.1 Fair value of financial assets (continued)
Changes in the fair value of financial assets held to back the Group’s unit-linked contracts result in a corresponding change
in insurance and investment contract liabilities. Both of the foregoing changes are also reflected in the consolidated
income statement.
Further details of the fair value of financial assets and the sensitivity analysis to interest rates and equity prices are
provided in notes 23 and 38.
3.5.2 Fair value of property held for own use and investment property
The Group uses independent professional valuers to determine the fair value of properties on the basis of the highest and
best use of the properties that is physically possible, legally permissible and financially feasible. In most cases, current use
of the properties is considered to be the highest and best use for determining the fair value. Different valuation techniques
may be adopted to reach the fair value of the properties. Under the Market Data Approach, records of recent sales and
offerings of similar property are analysed and comparisons are made for factors such as size, location, quality and
prospective use. For investment properties, the discounted cash flow approach may be used by reference to net rental
income allowing for reversionary income potential to estimate the fair value of the properties. On some occasions, the cost
approach is used as well to calculate the fair value which reflects the cost that would be required to replace the service
capacity of the property.
Further details of the fair value measurement of property held for own use and investment property are provided in note
23.
3.6 Impairment of goodwill and other intangible assets
For the purposes of impairment testing, goodwill and other intangible assets are grouped into cash-generating units or
groups of cash generating units. These assets are tested for impairment by comparing the carrying amount of the cash-
generating unit (group of units), including goodwill, to the recoverable amount of that cash-generating unit (group of
units). The determination of the recoverable amount requires significant judgement regarding the selection of appropriate
valuation techniques and assumptions.
Further details of the impairment of goodwill during the period are provided in note 15.
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The Group’s principal overseas operations during the reporting period were located within Asia. The results and cash flows
of these operations have been translated into US dollars at the following average rates:
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Assets and liabilities have been translated at the following year-end rates:
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Exchange rates are expressed in units of local currency per US$1.
US dollar exchange rates
Year ended
31 December
2021
Year ended
31 December
2020
6.45
7.77
31.97
1.34
4.14
6.90
7.76
31.27
1.38
4.20
US dollar exchange rates
As at
31 December
2021
As at
31 December
2020
6.37
7.80
33.26
1.35
4.17
6.53
7.75
29.95
1.32
4.02
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FINANCIAL STATEMENTSAIA GROUP LIMITED 5. CHANGE IN GROUP COMPOSITION
In March 2021, the Group announced that it had reached an agreement to enter into a new exclusive 15-year strategic
bancassurance partnership with The Bank of East Asia, Limited (BEA) covering Hong Kong and Mainland China, and that
as part of the agreement, it would acquire 100 per cent of BEA Life Limited, (BEA Life), a life insurance company wholly
owned by BEA.
On 1 September 2021, the Group paid in cash a total gross consideration with respect to these transactions of HK$5,098m
(approximately US$655m) and acquired 100 per cent of the voting equity of BEA Life. Of this total consideration,
HK$2,010m (US$258m) was attributable to the strategic bancassurance partnership and has been recognised as an
intangible asset in the Group’s consolidated statement of financial position. The remaining cost of HK$3,088m (US$397m)
represented the cost of acquiring BEA life.
On 1 September 2021, the name of BEA Life was changed to AIA Everest Life Company Limited (AIA Everest).
The Group incurred US$11m of acquisition-related costs which were recognised as “other expenses” in the Group’s
consolidated income statement.
Details of the fair value of the assets and liabilities acquired and the final goodwill arising from the acquisition are set out
as follows:
US$m
Investment in securities
Other assets(1)
Cash and cash equivalents
Insurance and investment contract liabilities
Other liabilities
Net assets acquired
Final goodwill arising on acquisition
Fair value of consideration
Less:
Cash and cash equivalents held in acquired subsidiaries
Net change in cash and cash equivalents
Final fair values as
at the date of
acquisition
3,366
80
381
(3,687)
(17)
123
274
397
(381)
16
Note:
(1) Other assets include acquired receivables, including insurance and other receivables, for which the fair value approximated the gross contractual
amount at the acquisition date. As of the acquisition date there are no amounts for contractual cash flows from acquired receivables that are not
expected to be collected.
Goodwill
The goodwill recognised is mainly attributable to the operational benefits and investment synergies from combining AIA
Everest and the Group’s operations in Hong Kong. The goodwill is not expected to be deductible for tax purposes.
Impact of acquisition on the results of the Group
AIA Everest contributed revenue of US$75m and profit before tax of US$63m to the Group’s consolidated income statement
for the year ended 31 December 2021. Had AIA Everest been consolidated from 1 January 2021, the Group’s consolidated
income statement would have reported revenue of US$570m and profit before tax of US$94m for the year ended 31
December 2021.
171
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 6. PREMIUMS AND FEE INCOME
Included in premium and fee income of US$178m (2020: US$191m) is fee income for investment contracts without DPF
that refers to fees charged for the provision of investment management services for investment contracts without DPF,
which usually vary with the amounts being managed, and the release of deferred fee income. For the investment
management service fee charged, revenue is recognised as services are provided and the fees are deducted from the
customers’ account balances.
Generally, a customer can cancel an investment contract without DPF at any time after contract inception, subject to a
surrender charge which is not a significant component of revenue.
7. OPERATING PROFIT AFTER TAX
Operating profit after tax may be reconciled to net profit as follows:
US$m
Operating profit after tax
Non-operating items, net of related changes in insurance and
investment contract liabilities and taxes:
Short-term fluctuations in investment return related to equities and
real estate(1)
Reclassification of revaluation (gains)/losses for property held
for own use(1)
Corporate transaction related costs
Implementation costs for new accounting standards
Other non-operating investment return and other items(2)
Subtotal(3)
Net profit
Operating profit after tax attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Net profit attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Year ended
31 December
2021
Year ended
31 December
2020
6,455
5,986
Note
9
(273)
(425)
(66)
(49)
(43)
1,453
1,022
7,477
6,409
46
7,427
50
52
(56)
(30)
252
(207)
5,779
5,942
44
5,779
–
Notes:
(1) Short-term fluctuations in investment return include the revaluation gains and losses for property held for own use. This amount is then reclassified
out of net profit to conform to IFRS measurement and presentation.
(2) Includes the tax expense relating to provisions for uncertain tax positions in the year ended 31 December 2020.
(3) The amount is net of tax of US$40m (2020: US$(360)m). The gross amount before tax is US$982m (2020: US$153m).
Operating profit is determined using, among others, expected long-term investment return for equities and real estate.
Short-term fluctuations between expected long-term investment return and actual investment return for these asset
classes are excluded from operating profit. The assumptions used to determine expected long-term investment return are
the same, in all material respects, as those used by the Group in determining its embedded value and are disclosed in the
Supplementary Embedded Value Information.
172
FINANCIAL STATEMENTSAIA GROUP LIMITED
8. TOTAL WEIGHTED PREMIUM INCOME AND ANNUALISED NEW PREMIUMS
For management decision-making and internal performance management purposes, the Group measures business
volumes during the year using a performance measure referred to as total weighted premium income (TWPI). The Group
measures new business activity using a performance measure referred to as annualised new premiums (ANP). The
presentation of this note is consistent with our reportable segment presentation in note 9.
TWPI consists of 100 per cent of renewal premiums, 100 per cent of first year premiums and 10 per cent of single premiums,
before reinsurance ceded, and includes deposits and contributions for contracts that are accounted for as deposits in
accordance with the Group’s accounting policies.
Management considers that TWPI provides an indicative volume measure of transactions undertaken in the reporting
period that have the potential to generate profits for shareholders. The amounts shown are not intended to be indicative of
premiums and fee income recorded in the consolidated income statement.
ANP is a key internal measure of new business activities, which consists of 100 per cent of annualised first year premiums
and 10 per cent of single premiums, before reinsurance ceded. ANP excludes new business of pension business, personal
lines and motor insurance.
TWPI
US$m
TWPI by geography
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
First year premiums by geography
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
Single premiums by geography
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
Year ended
31 December
2021
Year ended
31 December
2020
6,999
11,904
4,428
3,433
2,479
7,616
5,622
13,042
4,462
3,088
2,216
6,978
36,859
35,408
1,355
1,149
771
596
374
421
988
4,505
236
3,069
538
1,419
319
960
6,541
910
605
342
321
1,013
4,340
322
1,891
239
1,319
243
924
4,938
173
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 8. TOTAL WEIGHTED PREMIUM INCOME AND ANNUALISED NEW PREMIUMS (continued)
Year ended
31 December
2021
Year ended
31 December
2020
5,620
10,826
3,778
2,917
2,026
6,533
4,441
11,943
3,833
2,614
1,871
5,872
31,700
30,574
Year ended
31 December
2021
Year ended
31 December
2020
1,404
1,106
677
549
491
1,420
5,647
1,197
1,138
661
520
369
1,334
5,219
TWPI (continued)
US$m
Renewal premiums by geography
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
ANP
US$m
ANP by geography
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
174
FINANCIAL STATEMENTSAIA GROUP LIMITED 9. SEGMENT INFORMATION
The Group’s operating segments, based on the reports received by the Group’s chief operating decision-maker, considered
to be the Executive Committee (ExCo), are each of the geographical markets in which the Group operates. Each of the
reportable segments, other than the “Group Corporate Centre” segment, writes life insurance business, providing life
insurance, accident and health insurance and savings plans to customers in its local market, and distributes related
investment and other financial services products. The reportable segments are Mainland China, Hong Kong (including
Macau), Thailand, Singapore (including Brunei), Malaysia, Other Markets and Group Corporate Centre. Other Markets
includes the Group’s operations in Australia, Cambodia, Indonesia, Myanmar, New Zealand, the Philippines, South Korea,
Sri Lanka, Taiwan (China), Vietnam and India. The activities of the Group Corporate Centre segment consist of the Group’s
corporate functions, shared services and eliminations of intra-group transactions.
The acquired subsidiary and respective operations mentioned in note 5 are included under the operations in Hong Kong
(including Macau).
As each reportable segment other than the Group Corporate Centre segment focuses on serving the life insurance needs
of its local market, there are limited transactions between reportable segments. The key performance indicators reported
in respect of each segment are:
• ANP;
• TWPI;
•
investment return;
• operating expenses;
• operating profit after tax attributable to shareholders of AIA Group Limited;
• expense ratio, measured as operating expenses divided by TWPI;
• operating margin, measured as operating profit after tax expressed as a percentage of TWPI; and
• operating return on shareholders’ allocated equity measured as operating profit after tax attributable to shareholders
of AIA Group Limited expressed as a percentage of the simple average of opening and closing shareholders’ allocated
segment equity (being the segment assets less segment liabilities in respect of each reportable segment less non-
controlling interests and fair value reserve).
Business volumes in respect of the Group’s five largest customers are less than 30 per cent of premiums and fee income.
The Group provides deferred tax liabilities in respect of unremitted earnings in jurisdictions where withholding tax charge
would be incurred upon dividend distribution. On 1 October 2020, AIA Company Limited (AIA Co.) converted its Mainland
China business to a wholly-owned subsidiary, AIA Life Insurance Company Limited, which was incorporated in Shanghai
on 9 July 2020. Upon the conversion of the Mainland China business to AIA Life Insurance Company Limited, any future
dividends to the Group from this subsidiary are subject to withholding tax at the applicable tax rate in Mainland China
(currently at 5 per cent). Consequently, deferred tax liability in respect of unremitted earnings of this subsidiary was
provided for in the year ended 31 December 2021 and 2020.
175
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 9. SEGMENT INFORMATION (continued)
US$m
China Hong Kong
Thailand
Singapore
Malaysia
Mainland
Other
Markets
Group
Corporate
Centre
Total
1,404
6,999
1,106
677
549
491
11,904
4,428
3,433
2,479
6,799
1,359
8,158
13,004
4,178
17,182
4,109
1,181
5,290
3,613
1,453
5,066
2,010
596
2,606
1,420
7,616
5,155
1,210
6,365
–
–
5,647
36,859
80
654
734
34,770
10,631
45,401
5,422
12,633
2,976
3,606
1,584
3,143
78
29,442
464
545
59
1,568
454
192
806
277
55
418
234
42
274
228
18
1,052
1,031
90
Total expenses
6,490
14,847
4,114
4,300
2,104
5,316
Share of losses from associates
and joint ventures
–
(1)
–
Operating profit before tax
1,668
2,334
1,176
Tax on operating profit before tax
(297)
(178)
1,371
2,156
(216)
960
–
766
(43)
723
–
502
(99)
403
(10)
1,039
(233)
806
15
262
299
654
–
80
4,597
3,031
755
37,825
(11)
7,565
(44)
(1,110)
36
6,455
Year ended 31 December 2021
ANP
TWPI
Net premiums, fee income and
other operating revenue
(net of reinsurance ceded)
Investment return
Total revenue
Net insurance and investment
contract benefits
Commission and other
acquisition expenses
Operating expenses
Finance costs and other expenses
Operating profit after tax
Operating profit after tax
attributable to:
Shareholders of AIA Group
Limited
Non-controlling interests
Key operating ratios:
Expense ratio
Operating margin
Operating return on shareholders’
allocated equity
Operating profit before tax includes:
1,371
2,143
–
13
960
–
723
–
392
11
784
22
36
–
6,409
46
7.8%
3.8%
6.3%
6.8%
9.2%
19.6%
18.1%
21.7%
21.1%
16.3%
13.5%
10.6%
30.1%
15.9%
14.7%
17.9%
18.8%
8.8%
–
–
–
8.2%
17.5%
12.8%
Finance costs
Depreciation and amortisation
34
106
29
95
1
23
2
30
2
23
8
101
274
29
350
407
176
FINANCIAL STATEMENTSAIA GROUP LIMITED
9. SEGMENT INFORMATION (continued)
US$m
China Hong Kong
Thailand
Singapore
Malaysia
Mainland
Other
Markets
Group
Corporate
Centre
Total
31 December 2021
Total assets
Total liabilities
Total equity
Shareholders’ allocated equity
Total assets include:
Investments in associates and
joint ventures
41,330 127,690
34,333
46,552
17,660
51,655
20,654 339,874
35,289 108,980
26,386
41,488
15,449
41,690
9,658 278,940
6,041
4,696
18,710
14,914
7,947
6,624
5,064
4,174
2,211
2,107
9,965
8,790
10,996
60,934
10,755
52,060
–
2
–
–
2
675
–
679
Segment information may be reconciled to the consolidated income statement as shown below:
Short-term
fluctuations in
investment
return related
to equities and
real estate
Segment
information
Other
non-operating
items(1)
Consolidated
income
statement
34,770
10,631
45,401
29,442
8,383
37,825
(11)
7,565
-
(631)
(631)
(340)
-
(340)
-
(291)
7
2,748
2,755
953
608
1,561
-
1,194
Net premiums, fee income
and other operating
34,777
revenue
12,748
Investment return
47,525
Total revenue
Net insurance and
investment contract
30,055
benefits
8,991 Other expenses
39,046
Total expenses
Share of losses
(11)
from associates and
joint ventures
8,468 Profit before tax
US$m
Year ended 31 December 2021
Net premiums, fee income
and other operating
revenue
Investment return
Total revenue
Net insurance and
investment contract
benefits
Other expenses
Total expenses
Share of losses from
associates and
joint ventures
Operating profit before tax
Note:
(1) Include unit-linked contracts.
177
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
9. SEGMENT INFORMATION (continued)
US$m
China Hong Kong
Thailand
Singapore
Malaysia
Mainland
Other
Markets
Group
Corporate
Centre
Total
1,197
5,622
1,138
13,042
661
4,462
520
3,088
369
2,216
1,334
6,978
–
–
5,219
35,408
5,594
1,083
6,677
13,879
3,511
17,390
4,238
1,268
5,506
3,395
1,274
4,669
1,818
573
2,391
4,655
1,184
5,839
87
505
592
33,666
9,398
43,064
4,421
12,878
3,224
3,357
1,537
2,858
71
28,346
365
439
38
1,618
464
186
773
235
53
414
222
52
244
190
16
974
943
86
Total expenses
5,263
15,146
4,285
4,045
1,987
4,861
Share of (losses)/profit from
associates and joint ventures
Operating profit before tax
Tax on operating profit before tax
Operating profit after tax
Operating profit after tax
attributable to:
–
1,414
(194)
1,220
(1)
2,243
(170)
2,073
–
1,221
(234)
987
Shareholders of AIA Group Limited
1,220
2,059
Non-controlling interests
–
14
987
–
–
624
(3)
621
621
–
1
405
(73)
332
326
6
(17)
961
(250)
711
687
24
14
202
227
514
–
78
(36)
42
42
–
–
–
–
4,402
2,695
658
36,101
(17)
6,946
(960)
5,986
5,942
44
7.6%
16.9%
13.0%
7.8%
21.7%
3.6%
15.9%
5.3%
22.1%
7.2%
20.1%
8.6%
15.0%
13.5%
10.2%
29.7%
18.8%
15.1%
16.7%
17.0%
7.9%
20
88
31
104
1
22
2
31
2
22
9
108
224
32
289
407
Year ended 31 December 2020
ANP
TWPI
Net premiums, fee income and
other operating revenue
(net of reinsurance ceded)
Investment return
Total revenue
Net insurance and investment
contract benefits
Commission and other
acquisition expenses
Operating expenses
Finance costs and other expenses
Key operating ratios:
Expense ratio
Operating margin
Operating return on
shareholders’ allocated equity
Operating profit before tax includes:
Finance costs
Depreciation and amortisation
178
FINANCIAL STATEMENTSAIA GROUP LIMITED
9. SEGMENT INFORMATION (continued)
US$m
China Hong Kong
Thailand
Singapore
Malaysia
Mainland
Other
Markets
Group
Corporate
Centre
Total
31 December 2020
Total assets
Total liabilities
Total equity
Shareholders’ allocated equity
Total assets include:
Investments in associates and
joint ventures
34,919 113,933
38,640
45,994
17,715
55,644
19,276 326,121
29,989
95,598
28,730
40,640
15,445
44,369
7,682 262,453
4,930
4,407
18,335
11,999
9,910
6,421
5,354
3,916
2,270
2,060
11,275
11,594
63,668
8,936
10,291
48,030
–
3
–
–
2
601
–
606
Segment information may be reconciled to the consolidated income statement as shown below:
Short-term
fluctuations in
investment
return related
to equities and
real estate
Segment
information
Other
non-operating
items(1)
Consolidated
income
statement
33,666
9,398
43,064
28,346
7,755
36,101
–
820
820
1,302
–
1,302
(17)
6,946
–
(482)
Net premiums, fee income
and other operating
(14)
33,652
revenue
6,489
6,475
5,091
578
5,669
–
806
16,707
Investment return
50,359
Total revenue
Net insurance and
investment contract
34,739
benefits
8,333 Other expenses
43,072
Total expenses
Share of losses from
associates and
joint ventures
(17)
7,270 Profit before tax
US$m
Year ended 31 December 2020
Net premiums, fee income
and other operating
revenue
Investment return
Total revenue
Net insurance and
investment contract
benefits
Other expenses
Total expenses
Share of losses from
associates and
joint ventures
Operating profit before tax
Note:
(1) Include unit-linked contracts.
179
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
10. REVENUE
Investment return
US$m
Interest income
Dividend income
Rental income(1)
Investment income
Available for sale
Net realised gains from debt securities
Net gains of available for sale financial assets reflected
in the consolidated income statement
At fair value through profit or loss
Net (losses)/gains of debt securities
Net gains of equity shares and interests in investment funds
Net fair value movement on derivatives
Net gains in respect of financial instruments at fair value through profit or loss
Net fair value movement of investment property
Net foreign exchange gains/(losses)
Other net realised losses
Investment experience
Investment return
Note:
(1) Represents rental income from operating leases contracts in which the Group acts as a lessor.
Year ended
31 December
2021
Year ended
31 December
2020
7,344
1,150
166
8,660
2,405
2,405
(960)
2,028
28
1,096
65
579
(57)
4,088
12,748
7,055
932
172
8,159
1,442
1,442
1,192
5,436
958
7,586
(292)
(132)
(56)
8,548
16,707
Foreign currency movements resulted in the following gains/(losses) recognised in the consolidated income statement
(other than gains and losses arising on items measured at fair value through profit or loss):
US$m
Foreign exchange gains/(losses)
Year ended
31 December
2021
Year ended
31 December
2020
524
(68)
Other operating revenue
The balance of other operating revenue largely consists of asset management fees, administrative fees and membership
fees.
180
FINANCIAL STATEMENTSAIA GROUP LIMITED
11. EXPENSES
US$m
Insurance contract benefits
Change in insurance contract liabilities
Investment contract benefits
Insurance and investment contract benefits
Insurance and investment contract benefits ceded
Insurance and investment contract benefits, net of reinsurance ceded
Commission and other acquisition expenses incurred
Deferral and amortisation of acquisition costs
Commission and other acquisition expenses
Employee benefit expenses
Depreciation
Amortisation
Other operating expenses(1)
Operating expenses
Investment management expenses and others
Depreciation on property held for own use
Restructuring and other non-operating costs(2)
Change in third-party interests in consolidated investment funds
Other expenses
Finance costs
Total
Year ended
31 December
2021
Year ended
31 December
2020
16,194
15,750
437
32,381
(2,326)
30,055
5,687
(1,090)
4,597
1,899
268
93
771
14,808
20,752
1,305
36,865
(2,126)
34,739
5,566
(1,164)
4,402
1,727
265
92
611
3,031
2,695
621
33
338
14
1,006
357
39,046
580
32
285
47
944
292
43,072
Other operating expenses include auditors’ remuneration of US$28m (2020: US$25m), an analysis of which is set out
below:
US$m
Audit services
Non-audit services, including:
Audit-related services
Tax services
Other services
Total
Year ended
31 December
2021
Year ended
31 December
2020
21
5
1
1
28
20
4
1
–
25
Notes:
(1) Includes payments for short-term leases of US$6m (2020: US$7m).
(2) Restructuring costs represent costs related to restructuring programmes and are primarily comprised of redundancy and contract termination
costs. Other non-operating costs primarily consist of corporate transaction related costs, implementation costs for new accounting standards and
other items that are not expected to be recurring in nature.
181
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 Year ended
31 December
2021
Year ended
31 December
2020
88
180
–
268
86
178
1
265
Year ended
31 December
2021
Year ended
31 December
2020
34
301
8
14
357
17
248
11
16
292
Year ended
31 December
2021
Year ended
31 December
2020
1,548
1,416
80
121
11
139
1,899
72
93
14
132
1,727
11. EXPENSES (continued)
Depreciation consists of:
US$m
Computer hardware, fixtures and fittings and others
Right-of-use assets
Property held for own use
Fixtures and fittings and others
Total
Finance costs may be analysed as:
US$m
Repurchase agreements
Medium-term notes and securities
Other loans
Lease liabilities
Total
Employee benefit expenses consist of:
US$m
Wages and salaries
Share-based compensation
Pension costs – defined contribution plans
Pension costs – defined benefit plans
Other employee benefit expenses
Total
182
FINANCIAL STATEMENTSAIA GROUP LIMITED 12. INCOME TAX
US$m
Tax charged in the consolidated income statement
Current income tax – Hong Kong Profits Tax
Current income tax – overseas
Deferred income tax on temporary differences
Total
Year ended
31 December
2021
Year ended
31 December
2020
173
808
10
991
158
901
432
1,491
Corporate income tax
The provision for Hong Kong Profits Tax is calculated at 16.5 per cent. Taxation for overseas subsidiaries and branches is
charged at the appropriate current rates of taxation ruling in the relevant jurisdictions of which the most significant
jurisdictions are outlined below.
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Year ended
31 December
2021
Year ended
31 December
2020
25%
16.5%
20%
17%
24%
25%
16.5%
20%
17%
24%
12% – 30% 12% – 30%
The table above reflects the principal rate of corporate income tax as at the end of each year. The rates reflect enacted or
substantively enacted corporate tax rates throughout the year in each jurisdiction.
In 2021, changes in the corporate income tax rates have been enacted in the Philippines and Sri Lanka. For the Philippines,
the corporate income tax rate changed from 30 per cent to 25 per cent effective from 1 July 2020. For Sri Lanka, the
corporate income tax rate changed from 28 per cent to 24 per cent effective from 1 January 2020.
AIA Korea is currently subject to an effective corporate income tax of 27.5 per cent, which includes an Accumulated
Earnings Tax. Based on current regulations, the corporate income tax rate will revert to 24.2 per cent from 1 January 2023.
Starting from 2020 onwards, the Indonesian government enacted a change in the corporate income tax rate from 25 per
cent to 22 per cent.
Withholding tax on dividends
In some jurisdictions where the Group operates, dividends remitted by subsidiaries to the Group are subject to withholding
tax. The Group recognises deferred tax liabilities in respect of unremitted earnings of operations in jurisdictions where
withholding tax charge would be incurred upon dividend distribution.
183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 12. INCOME TAX (continued)
US$m
Income tax reconciliation
Profit before income tax
Tax calculated at domestic tax rates applicable to profits in the respective jurisdictions
Reduction in tax payable from:
Life insurance tax(1)
Exempt investment income
Utilisation of previously unrecognised deferred tax assets
Adjustments in respect of prior years
Change in tax rate and law
Others
Increase in tax payable from:
Withholding taxes
Disallowed expenses
Unrecognised deferred tax assets
Provisions for uncertain tax positions(2)
Adjustments in respect of prior years
Others
Total income tax expense
Year ended
31 December
2021
Year ended
31 December
2020
8,468
1,559
(192)
(501)
–
(2)
(37)
(2)
7,270
1,258
(55)
(330)
(15)
–
(8)
–
(734)
(408)
132
12
18
4
–
–
166
991
25
66
–
184
106
260
641
1,491
Notes:
(1) Life insurance tax refers to the differences which arise where the tax regime specific to the life insurance business does not adopt net income as
the basis for calculating taxable profit, for example Hong Kong, where life business taxable profit is derived from life premiums.
(2) Provisions for uncertain tax positions relate to situations where the Group’s interpretation of the relevant law or regulation may differ from that of
the tax authorities. Provisions are recognised based on management’s judgement and best estimate in relation to the probability or likelihood of
different outcomes arising, which is subject to periodic re-assessment. Due to the uncertainty associated with these items, there remains a
possibility that the final outcomes may differ on conclusion of the relevant tax matters at a future date.
184
FINANCIAL STATEMENTSAIA GROUP LIMITED 12. INCOME TAX (continued)
The movement in net deferred tax liabilities in the year may be analysed as set out below:
Net deferred
tax asset/
(liability) at
1 January
Acquisition
of a
subsidiary(3)
Credited/
(charged) to
the income
statement
Fair value
reserve(2)
Foreign
exchange
Others
Net deferred
tax asset/
(liability) at
year end
Credited/(charged) to other
comprehensive income
(2,473)
(3,608)
304
(202)
144
249
(929)
(364)
(6,879)
(12)
–
43
–
–
3
–
–
34
(172)
(171)
664
(84)
4
–
(53)
(198)
(10)
779
–
–
–
–
–
–
–
779
(2)
122
(25)
13
(5)
(7)
33
26
155
–
–
–
–
(4)
–
(7)
–
(1,880)
(3,657)
986
(273)
139
245
(956)
(536)
(11)
(5,932)
Net deferred
tax asset/
(liability) at
1 January
Acquisition
of a
subsidiary(3)
Credited/
(charged) to
the income
statement
Fair value
reserve(2)
Foreign
exchange
Others
Net deferred
tax asset/
(liability) at
year end
Credited/(charged) to other
comprehensive income
(2,435)
(3,339)
626
(203)
215
170
(760)
(465)
(6,191)
–
–
–
–
–
–
–
–
–
55
(141)
(307)
9
(76)
71
(152)
109
(432)
(96)
–
–
–
–
–
–
–
(96)
3
(128)
(15)
(8)
4
8
(17)
(6)
(159)
–
–
–
–
1
–
–
(2)
(1)
(2,473)
(3,608)
304
(202)
144
249
(929)
(364)
(6,879)
US$m
31 December 2021
Revaluation of financial
instruments
Deferred acquisition costs
Insurance and investment
contract liabilities
Withholding taxes
Provision for expenses
Losses available for offset
against future taxable income
Life surplus(1)
Others
Total
US$m
31 December 2020
Revaluation of financial
instruments
Deferred acquisition costs
Insurance and investment
contract liabilities
Withholding taxes
Provision for expenses
Losses available for offset
against future taxable income
Life surplus(1)
Others
Total
Notes:
(1) Life surplus relates to the temporary difference which arises where the taxable profits are based on actual distributions from the long-term fund.
This primarily relates to Singapore and Malaysia.
(2) Of the fair value reserve deferred tax credit of US$779m for 2021 (2020: tax charge of US$96m), tax credit of US$703m (2020: tax charge of
US$194m) relates to fair value gains or losses on available for sale financial assets and tax credit of US$76m (2020: tax credit of US$98m) relates
to fair value gains on available for sale financial assets transferred to income on disposal.
(3) The amount of US$34m represents a one-time adjustment in respect of the acquisition of AIA Everest.
185
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
12. INCOME TAX (continued)
The principal temporary differences arise from the basis of recognition of insurance and investment contract liabilities,
revaluation of certain financial assets and liabilities including derivative contracts, deferred acquisition costs and the
future taxes arising on the surplus in life funds where the relevant local tax regime is distributions-based.
Deferred tax assets are recognised to the extent that sufficient future taxable profits will be available for realisation. The
Group has not recognised deferred tax assets of US$56m (2020: US$65m) on tax losses and the temporary difference on
insurance and investment contract liabilities arising from different accounting and statutory/tax reserving methodology
for certain branches and subsidiaries on the basis that they have histories of tax losses and there is insufficient evidence
that future profits will be available.
The Group has not provided deferred tax liabilities of US$277m (2020: US$295m) in respect of unremitted earnings of
operations in jurisdictions from which a withholding tax charge would be incurred upon distribution as the Group does not
consider it probable that this portion of accumulated earnings will be remitted in the foreseeable future.
The Group has unused income tax losses carried forward in Mainland China, Hong Kong, Macau, Thailand, Singapore,
Malaysia, Australia, Cambodia, Myanmar, New Zealand, the Philippines, South Korea, Sri Lanka and Taiwan (China). The tax
losses of Hong Kong, Singapore, Australia and New Zealand can be carried forward indefinitely. The tax losses of remaining
branches and subsidiaries are due to expire within the periods ending 2024 (Macau and Myanmar), 2026 (the Philippines,
Sri Lanka, Thailand, Cambodia and Mainland China), 2028 (Malaysia), 2030 (Taiwan (China)) and 2031 (South Korea).
186
FINANCIAL STATEMENTSAIA GROUP LIMITED 13. EARNINGS PER SHARE
Basic
Basic earnings per share is calculated by dividing the net profit attributable to shareholders of AIA Group Limited by the
weighted average number of ordinary shares in issue during the year. The shares held by employee share-based trusts are
not considered to be outstanding from the date of the purchase for the purposes of computing basic and diluted earnings
per share.
Net profit attributable to shareholders of AIA Group Limited (US$m)
Weighted average number of ordinary shares in issue (million)
Basic earnings per share (US cents per share)
Year ended
31 December
2021
Year ended
31 December
2020
7,427
12,066
61.55
5,779
12,060
47.92
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to
assume conversion of all dilutive potential ordinary shares. As of 31 December 2021 and 2020, the Group has potentially
dilutive instruments which are the share options, restricted share units, restricted stock purchase units and restricted
stock subscription units granted to eligible directors, officers, employees and agents under various share-based
compensation plans as described in note 40.
Net profit attributable to shareholders of AIA Group Limited (US$m)
Weighted average number of ordinary shares in issue (million)
Adjustment for share options, restricted share units, restricted stock purchase units
and restricted stock subscription units granted under share-based compensation
plans (million)
Weighted average number of ordinary shares for diluted earnings per share (million)
Diluted earnings per share (US cents per share)
Year ended
31 December
2021
Year ended
31 December
2020
7,427
12,066
21
12,087
61.45
5,779
12,060
20
12,080
47.84
At 31 December 2021, 1,839,793 share options (2020: 9,156,477) were excluded from the diluted weighted average
number of ordinary shares calculation as their effect would have been anti-dilutive.
Operating profit after tax per share
Operating profit after tax (see note 7) per share is calculated by dividing the operating profit after tax attributable to
shareholders of AIA Group Limited by the weighted average number of ordinary shares in issue during the year. As of 31
December 2021 and 2020, the Group has potentially dilutive instruments which are the share options, restricted share
units, restricted stock purchase units and restricted stock subscription units granted to eligible directors, officers,
employees and agents under various share-based compensation plans as described in note 40.
Basic (US cents per share)
Diluted (US cents per share)
Year ended
31 December
2021
Year ended
31 December
2020
53.12
53.02
49.27
49.19
187
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 14. DIVIDENDS
Dividends to shareholders of the Company attributable to the year:
US$m
Interim dividend declared and paid of 38.00 Hong Kong cents per share
(2020: 35.00 Hong Kong cents per share)
Final dividend proposed after the reporting date of 108.00 Hong Kong cents per share
(2020: 100.30 Hong Kong cents per share)(1)
Total
Year ended
31 December
2021
Year ended
31 December
2020
589
1,671
2,260
545
1,561
2,106
Notes:
(1) Based upon shares outstanding at 31 December 2021 and 2020 that are entitled to a dividend, other than those held by employee share-based
trusts.
(2) Interim dividends on ordinary shares are recognised when they have been paid. Final dividends on ordinary shares are recognised when they have
been approved by shareholders.
The above final dividend was proposed by the Board on 11 March 2022 subject to shareholders’ approval at the AGM to be
held on 19 May 2022. The proposed final dividend has not been recognised as a liability at the reporting date.
Dividends to shareholders of the Company attributable to the previous financial period, approved and paid during the year:
US$m
Final dividend in respect of the previous financial year, approved and
paid during the year of 100.30 Hong Kong cents per share
(2020: 93.30 Hong Kong cents per share)
Year ended
31 December
2021
Year ended
31 December
2020
1,558
1,452
188
FINANCIAL STATEMENTSAIA GROUP LIMITED
15. INTANGIBLE ASSETS
US$m
Cost
At 1 January 2020
Additions
Measurement period adjustment
Disposals
Foreign exchange movements
At 31 December 2020
Additions
Acquisition of a subsidiary
Disposals and derecognition
Foreign exchange movements
At 31 December 2021
Accumulated amortisation
At 1 January 2020
Amortisation charge for the year
Disposals
Foreign exchange movements
At 31 December 2020
Amortisation charge for the year
Disposals and derecognition
Foreign exchange movements
At 31 December 2021
Net book value
At 31 December 2020
At 31 December 2021
Goodwill
Computer
software
Distribution
and other
rights
Total
895
3,137
1,555
–
18
–
86
1,659
–
274
–
(79)
1,854
(4)
–
–
–
(4)
–
–
–
(4)
687
130
–
(22)
28
823
144
1
(23)
(22)
923
(422)
(92)
16
(14)
(512)
(93)
20
16
3
–
(2)
15
911
311
–
(309)
(10)
903
(191)
(50)
2
(4)
(243)
(46)
86
10
133
18
(24)
129
3,393
455
275
(332)
(111)
3,680
(617)
(142)
18
(18)
(759)
(139)
106
26
(766)
(569)
(193)
1,655
1,850
311
354
668
710
2,634
2,914
Intangible assets in this note exclude deferred acquisition and origination costs, which are separately disclosed with
further details provided in note 20.
The Group holds other intangible assets for its long-term use and, accordingly, the annual amortisation charge approximates
to the amount expected to be recovered through consumption within 12 months after the end of the reporting period.
As at 31 December 2020, the carrying amount of distribution and other rights was US$668m, a significant proportion of
which was related to the bancassurance partnership with Citibank, N.A. (Citibank). In April 2021, Citibank announced
publicly that it will pursue an exit from its consumer banking business in the markets covered by the bancassurance
partnership except for Hong Kong and Singapore. During the year ended 31 December 2021, the Group and Citibank have
signed an amendment agreement to amend certain terms of the bancassurance partnership agreement. As part of the
amendment agreement and arrangement, the Group has recognised a receivable asset in relation to the remaining
unamortised portion of the upfront payments for the exit markets. There was no resulting material impact on the Group’s
financial performance.
189
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 15. INTANGIBLE ASSETS (continued)
Impairment tests for goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary at the date of acquisition.
Goodwill arises primarily in respect of the Group’s insurance businesses in Malaysia of US$704m (2020: US$731m),
Australia of US$609m (2020: US$646m), Hong Kong of US$274m (2020: nil) and New Zealand of US$164m (2020:
US$174m). Goodwill is tested for impairment by comparing the carrying amount of the cash-generating unit (group of
units), including goodwill, to the recoverable amount of that cash-generating unit (group of units). If the recoverable
amount of the unit (group of units) exceeds the carrying amount of the unit (group of units), the goodwill allocated to that
unit (group of units) shall be regarded as not impaired. The recoverable amount is the value in use of the cash-generating
unit (group of units) unless otherwise stated.
The value in use is determined by calculating as an actuarially determined appraisal value, based on embedded value of
the business and the present value of expected future new business of the cash-generating unit (group of units). The
present value of expected future new business is based on financial budgets approved by management, typically covering
a three year period unless otherwise stated. These financial budgets reflect management’s best estimate of future profit
based on historical experience and best estimate operating assumptions such as premium and expenses. Further, the
present value of expected future new business beyond this initial three year period are extrapolated using a perpetual
growth rate, which typically does not exceed the long-term expected Gross Domestic Product (GDP) growth of the
geographical area in which the cash flows supporting the goodwill are generated.
The key assumptions used in the embedded value calculations include risk discount rate, investment returns, mortality,
morbidity, persistency, expenses and inflation. In the majority of instances these assumptions are aligned to those
assumptions detailed in Section 5 of Supplementary Embedded Value Information. The present value of expected future
new business is calculated based on a combination of indicators which include, among others, taking into account recent
production mix, business strategy, market trends and risk associated with the future new business projections. The risk
discount rates that are used in the value in use of in-force business and present value of expected future new business
ranges from 7 per cent to 16 per cent (2020: 8 per cent to 16 per cent) and the perpetual growth rates for future new
business cash flows of 3 per cent was used, where applicable, to extrapolate the present value of expected future new
business beyond the initial three year period; the rate was determined by reference to the long-term expected GDP growth
of the geographical area in which the cash flows supporting the goodwill are generated. The Group may apply alternative
methods to estimate the value of future new business if the described method is not appropriate under the circumstances.
190
FINANCIAL STATEMENTSAIA GROUP LIMITED 16. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
US$m
Group
Investments in associates
Investments in joint ventures
Total
As at
31 December
2021
As at
31 December
2020
646
33
679
592
14
606
Associates are entities over which the Group has significant influence, but which it does not control or joint control.
Generally, it is presumed that the Group has significant influence if it has between 20 per cent and 50 per cent of voting
rights. Joint ventures are entities whereby the Group and other parties undertake an economic activity which is subject to
joint control arising from a contractual agreement.
Investments in associates and joint ventures are accounted for using the equity method of accounting. Goodwill arising on
associates and joint ventures is included within the carrying value of those investments. These are held for their long-term
contribution to the Group’s performance, therefore all amounts are expected to be realised more than 12 months after the
end of the reporting period.
The Group’s interests in its principal associates and joint ventures are as follows:
Place of
incorporation
Principal
activity
Type of
shares held
Group’s interest %
As at
31 December
2021
As at
31 December
2020
Tata AIA Life Insurance Company Limited
India
Insurance
Ordinary
49%
49%
All associates and joint ventures are unlisted.
Aggregated financial information of associates and joint ventures
The investments in the associates and joint ventures are measured using the equity method. The following table analyses,
in aggregate, the carrying amount and share of losses and other comprehensive income/(expense) of these associates and
joint ventures.
US$m
Carrying amount in the statement of financial position
Losses from continuing operations
Other comprehensive income/(expense)
Total comprehensive income/(expense)
Year ended
31 December
2021
Year ended
31 December
2020
679
(11)
43
32
606
(17)
(14)
(31)
191
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 17. PROPERTY, PLANT AND EQUIPMENT
US$m
Cost or revaluation
At 1 January 2020
Additions
Disposals
Decrease from valuation
Foreign exchange movements
At 31 December 2020
Additions
Disposals
Net transfer from investment property
Increase from valuation
Foreign exchange movements
At 31 December 2021
Accumulated depreciation
At 1 January 2020
Depreciation charge for the year
Disposals
Revaluation adjustment
Foreign exchange movements
At 31 December 2020
Depreciation charge for the year
Disposals
Revaluation adjustment
Foreign exchange movements
At 31 December 2021
Net book value
At 31 December 2020
At 31 December 2021
Property held
for own use
Computer
hardware
Fixtures and
fittings and
others
2,741
118
(32)
(107)
33
2,753
196
(94)
15
76
(47)
2,899
(143)
(210)
32
30
–
(291)
(213)
80
31
3
221
28
(5)
–
5
249
28
(15)
–
–
(8)
254
(179)
(24)
4
–
(4)
(203)
(27)
14
–
7
585
51
(27)
–
11
620
45
(27)
–
–
(17)
621
(360)
(63)
24
–
(7)
(406)
(61)
24
–
12
Total
3,547
197
(64)
(107)
49
3,622
269
(136)
15
76
(72)
3,774
(682)
(297)
60
30
(11)
(900)
(301)
118
31
22
(390)
(209)
(431)
(1,030)
2,462
2,509
46
45
214
190
2,722
2,744
The Group leases various properties, computer hardware, fixtures, fittings and other small items as a lessee. These leases,
except for short-term leases and leases of low-value assets, are recognised as right-of-use assets and lease liabilities at
the date at which the leased assets are available for use by the Group. Right-of-use assets are presented as a component
of property, plant and equipment or investment property while lease liabilities are presented as a component of other
liabilities (see notes 18 and 34). The depreciation charge for right-of-use assets, by class of underlying asset, and finance
cost on lease liabilities are disclosed in note 11. Assets and liabilities arising from a lease are initially measured on a
present value basis. A maturity analysis of the Group’s lease liabilities is disclosed in note 38.
Extension and termination options are included in a number of leases across the Group. These terms are used to maximise
operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable
only by the Group and not by the respective lessor.
192
FINANCIAL STATEMENTSAIA GROUP LIMITED
17. PROPERTY, PLANT AND EQUIPMENT (continued)
Right-of-use assets in relation to leases are reported within property, plant and equipment. The carrying amount of right-
of-use assets, by class of underlying asset, is set out below:
US$m
Property held for own use
Fixtures and fittings and others
Total
As at
31 December
2021
As at
31 December
2020
1,473
3
1,476
1,438
4
1,442
Additions to right-of-use assets for the year ended 31 December 2021 were US$171m (2020: US$103m).
Properties held for own use and right-of-use assets with respect to the Group’s interest in leasehold land and land use
rights associated with property held for own use are carried at fair value at the reporting date less accumulated depreciation.
The fair value at the reporting date is determined by independent professional valuers. Details of valuation techniques and
process are disclosed in notes 3 and 23. All other property, plant and equipment and right-of-use assets in relation to other
leased property, plant and equipment are carried at cost less accumulated depreciation and any accumulated impairment
losses.
During the year, US$46m expenditure (2020: US$22m) recognised in the carrying amount of property held for own use
was in the course of its construction. Increase from revaluation on property held for own use of US$107m (2020: Decrease
of US$77m) were taken to other comprehensive income, of which US$66m was related to right-of-use assets (2020:
Decrease of US$66m).
If property held for own use (excluding right-of-use assets) were stated on a historical cost basis, the carrying value would
be US$357m (2020: US$345m). Similarly, stated on a historical basis the carrying value of the right-of-use assets related
to the Group’s interest in leasehold land and land use rights associated with property held for own use would be US$876m
(2020: US$878m). The Group holds property, plant and equipment for its long-term use and, accordingly, the annual
depreciation charge approximates to the amount expected to be recovered through consumption within 12 months after
the end of the reporting period.
193
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 18. INVESTMENT PROPERTY
US$m
Fair value
At 1 January 2020
Additions and capitalised subsequent expenditures
Disposals
Fair value losses
Foreign exchange movements
At 31 December 2020
Additions and capitalised subsequent expenditures
Disposals
Net transfers to property, plant and equipment
Fair value gains
Foreign exchange movements
At 31 December 2021
4,834
29
(1)
(292)
69
4,639
139
(4)
(15)
65
(108)
4,716
Investment property, including land and buildings, is initially recognised at cost with changes in fair values in subsequent
periods recognised in the consolidated income statement. The fair values at the reporting date are determined by
independent professional valuers. Details of valuation techniques and process are disclosed in notes 3 and 23.
The Group leases out its investment property under operating leases. The leases typically run for an initial period of one to
ten years, with an option to renew the lease based on future negotiations. Lease payments are usually negotiated every one
to five years to reflect market rentals. There were not any material contingent rentals earned as income for the period.
Rental income generated from investment property amounted to US$166m (2020: US$172m). Direct operating expenses
(including repair and maintenance) on investment property that generates rental income amounted to US$32m (2020:
US$27m).
The Group owns investment property in the form of freehold land outside Hong Kong and leasehold land. Leasehold land
which is held for long-term rental or capital appreciation or both that is not occupied by the Group is classified as investment
property. They are leased out under operating leases and are initially recognised as right-of-use assets at cost, with
changes in fair values in subsequent periods recognised in the consolidated income statement. The Group does not hold
freehold land in Hong Kong.
The future undiscounted lease payments under operating leases that the Group expects to receive in future periods may
be analysed as follows:
US$m
Leases of investment property classified as operating leases
Expiring no later than one year
Expiring later than one year and no later than two years
Expiring later than two years and no later than three years
Expiring later than three years and no later than four years
Expiring later than four years and no later than five years
Expiring after five years or more
Total undiscounted lease receipts
As at
31 December
2021
As at
31 December
2020
132
97
75
28
10
17
359
132
99
56
44
13
25
369
194
FINANCIAL STATEMENTSAIA GROUP LIMITED 19. REINSURANCE ASSETS
US$m
Amounts recoverable from reinsurers
Ceded insurance and investment contract liabilities
Total(1)
Note
27
As at
31 December
2021
As at
31 December
2020
992
3,999
4,991
671
3,889
4,560
Note:
(1) Including US$1,641m (2020: US$1,290m) which is expected to be recovered within 12 months after the end of the reporting period.
20. DEFERRED ACQUISITION AND ORIGINATION COSTS
US$m
Carrying amount
Deferred acquisition costs on insurance contracts
Deferred origination costs on investment contracts
Value of business acquired
Less: Upfront reinsurance premium rebate
Total
Movements in the year
At beginning of financial year
Deferral and amortisation of acquisition and origination costs
Foreign exchange movements
Impact of assumption changes
Other movements
At end of financial year
As at
31 December
2021
As at
31 December
2020
28,385
27,549
229
387
(293)
28,708
261
432
(327)
27,915
Year ended
31 December
2021
Year ended
31 December
2020
27,915
1,142
(822)
(52)
525
26,328
1,220
559
(55)
(137)
28,708
27,915
Deferred acquisition and origination costs are expected to be recoverable over the mean term of the Group’s insurance and
investment contracts, and liability adequacy testing is performed at least annually to confirm their recoverability.
Accordingly, the annual amortisation charge, which varies with investment performance for certain universal life and unit-
linked products, approximates to the amount which is expected to be realised within 12 months of the end of the reporting
period.
195
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 21. FINANCIAL INVESTMENTS
The following tables analyse the Group’s financial investments by type and nature. The Group manages its financial
investments in two distinct categories: unit-linked investments and policyholder and shareholder investments. The
investment risk in respect of unit-linked investments is generally wholly borne by our customers, and does not directly
affect the profit for the year before tax. Furthermore, unit-linked contract holders are responsible for allocation of their
policy values amongst investment options offered by the Group. Although profit for the year before tax is not affected by
unit-linked investments, the investment return from such financial investments is included in the Group’s profit for the year
before tax, as the Group has elected the fair value option for all unit-linked investments with corresponding changes in
insurance and investment contract liabilities for unit-linked contracts. Policyholder and shareholder investments include
all financial investments other than unit-linked investments. The investment risk in respect of policyholder and shareholder
investments is partially or wholly borne by the Group.
Policyholder and shareholder investments are further categorised as participating funds and other participating business
with discretionary expected sharing with policyholders and underlying distinct investment portfolios (“Other participating
business with distinct portfolios”), and other policyholder and shareholder. Other participating business with distinct
portfolios refers to business where it is expected that the policyholder will receive, at the discretion of the insurer, additional
benefits based on the performance of underlying segregated investment assets where this asset segregation is supported
by an explicit statutory reserve and reporting in the relevant territory.
The reason for separately analysing financial investments held by participating funds and other participating business
with distinct portfolios is that participating funds are subject to local regulations that generally prescribe a minimum
proportion of policyholder participation in declared dividends, and for other participating business with distinct portfolios
it is, as explained above, expected that the policyholder will receive, at the discretion of the insurer, additional benefits
based on the performance of the underlying segregated investment assets where this asset segregation is supported by an
explicit statutory reserve and reporting in the relevant territory. The Group has elected the fair value option for debt
securities, equity shares and interests in investment funds of participating funds. For other participating business with
distinct portfolio, the Group has elected the fair value option for equity shares and interests in investment funds and the
available for sale classification for the majority of debt securities. The Group’s accounting policy is to record an insurance
liability for the proportion of net assets of the participating funds and other participating business with distinct portfolio
that would be allocated to policyholders assuming all performance would be declared as a dividend based upon policyholder
participation as at the date of the consolidated statement of financial position as described in note 2.3. As a result, the
Group’s net profit before tax for the year is impacted by the proportion of investment return that would be allocated to
shareholders as described above.
Other policyholder and shareholder investments are distinct from unit-linked investments, participating funds and other
participating business with distinct portfolios as there is not any direct contractual or regulatory requirement governing
the amount, if any, for allocation to policyholders or it is not expected that the policyholder will receive at the discretion of
the insurer additional benefits based on the performance of the underlying segregated investment assets where this asset
segregation is supported by an explicit statutory reserve and reporting in the relevant territory. The Group has elected to
apply the fair value option for equity shares and interests in investment funds in this category and the available for sale
classification in respect of the majority of debt securities in this category. The investment risk from investments in this
category directly impacts the Group’s financial statements. Although a proportion of investment return may be allocated to
policyholders through policyholder dividends, the Group’s accounting policy for insurance and certain investment contract
liabilities utilises a net level premium methodology that includes best estimates as at the date of issue for non-guaranteed
participation. To the extent investment return from these investments either is not allocated to participating contracts or
varies from the best estimates, it will impact the Group’s profit before tax.
In the following tables, “FVTPL” indicates financial investments classified at fair value through profit or loss and “AFS”
indicates financial investments classified as available for sale.
196
FINANCIAL STATEMENTSAIA GROUP LIMITED 21. FINANCIAL INVESTMENTS (continued)
Debt securities
In compiling the tables, external ratings have been used in accordance with the Group’s credit risk assessment framework.
Where external ratings are not readily available an internal rating methodology has been adopted, if applicable.
Credit risk limits are set according to the Group’s credit risk assessment framework, which define the relative risk level of
a debt security.
External ratings
Internal ratings
Reported as
Standard and Poor’s and Fitch
AAA
AA+ to AA-
A+ to A-
BBB+ to BBB-
BB+ and below
Moody’s
Aaa
Aa1 to Aa3
A1 to A3
Baa1 to Baa3
Ba1 and below
Debt securities by type comprise the following:
1
2+ to 2-
3+ to 3-
4+ to 4-
AAA
AA
A
BBB
5+ and below
Below investment grade
Policyholder and shareholder
Participating funds and
other participating
business with distinct
portfolios
Other policyholder and
shareholder
Consolidated
investment
Unit-linked
funds(1)
US$m
FVTPL
AFS
FVTPL
AFS
Subtotal
FVTPL
FVTPL
Total
31 December 2021
Government bonds(2)
Thailand
Mainland China
South Korea
Singapore
Philippines
Malaysia
Indonesia
Other
Subtotal
–
5,819
–
3,716
–
1,161
–
396
11,092
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
176
13,857
13,857
15,914
21,733
7,271
1,549
2,094
823
569
7,271
5,265
2,094
1,984
745
1,016
1,632
3,044
–
55
283
718
132
123
128
88
1,192
43,709
55,993
1,527
–
–
–
–
–
–
–
–
–
13,857
21,788
7,554
5,983
2,226
2,107
873
3,132
57,520
Notes:
(1) Consolidated investment funds reflect 100 per cent of assets and liabilities held by such funds.
(2) Government bonds include bonds issued in local or foreign currencies by the government of the country where respective business unit operates.
The Group’s credit risk assessment framework does not apply credit risk limits on these government bonds, therefore credit ratings are not shown
in the table. Of the total balance as at 31 December 2021, 98 per cent are rated as investment grade.
197
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 21. FINANCIAL INVESTMENTS (continued)
Debt securities (continued)
Debt securities by type comprise the following: (continued)
Policyholder and shareholder
Participating funds and
other participating
business with distinct
portfolios
Other policyholder and
shareholder
Consolidated
investment
Unit-linked
funds(1)
US$m
FVTPL
AFS
FVTPL
AFS
Subtotal
FVTPL
FVTPL
Total
31 December 2021
Other government and government
agency bonds(3)
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
Corporate bonds
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
Structured securities(4)
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
Total(5)(6)
2,682
284
3,375
589
26
–
689
1,272
1,580
852
23
–
6,956
4,416
11
335
633
3,218
4,746
20,235
4,624
20,988
400
–
223
–
7
20
3
50
13
–
93
2,948
3,455
6,326
5,031
8,694
13,652
3,840
5,331
315
–
377
–
194
120
155
37
5
29
288
315
105
–
–
24
6,808
5,466
13,912
5,368
382
53
19,252
30,717
540
732
31,989
–
817
237
140
342
986
2,603
6,973
20,872
46,090
21,507
47,259
1,010
1,741
3,374
18
–
18
23
7
245
650
129
221
13
311
1,022
7,291
1,451
47,786
556
48,465
69
25
3,572
264
10,116
45,297
2,222
47,065 104,700
1,275
2,425 108,400
60
38
98
71
–
17
284
–
–
–
–
–
–
–
122
–
–
–
–
256
378
20
135
596
595
1
1
202
173
694
666
1
274
95
–
9
10
–
47
1,348
2,010
161
–
–
–
–
–
–
–
297
173
703
676
1
321
2,171
28,448
49,713
3,885 111,374 193,420
3,503
3,157 200,080
Notes:
(1) Consolidated investment funds reflect 100 per cent of assets and liabilities held by such funds.
(3) Other government and government agency bonds comprise other bonds issued by government and government-sponsored institutions such as
national, provincial and municipal authorities; government-related entities; multilateral development banks and supranational organisations.
(4) Structured securities include collateralised debt obligations, mortgage-backed securities and other asset-backed securities.
(5) Debt securities of US$9,238m are restricted due to local regulatory requirements.
(6) AFS debt securities with contractual terms that give rise to cash flows qualifying as SPPI in accordance with IFRS 9 amounted to US$160,465m
with 98 per cent rated as investment grade.
198
FINANCIAL STATEMENTSAIA GROUP LIMITED 21. FINANCIAL INVESTMENTS (continued)
Debt securities (continued)
Debt securities by type comprise the following: (continued)
Policyholder and shareholder
Participating funds and
other participating
business with distinct
portfolios
Other policyholder and
shareholder
Consolidated
investment
Unit-linked
funds(1)
US$m
FVTPL
AFS
FVTPL
AFS
Subtotal
FVTPL
FVTPL
Total
31 December 2020
Government bonds(2)
Thailand
Mainland China
South Korea
Singapore
Philippines
Malaysia
Indonesia
Other
Subtotal
Other government and government
agency bonds(3)
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
–
4,041
–
3,396
–
1,422
–
465
9,324
2,501
268
3,269
676
53
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
148
1,041
1,189
16,524
16,524
13,706
17,747
8,225
1,588
2,777
769
586
8,225
4,984
2,777
2,191
734
1,575
3,081
–
38
311
867
157
168
92
213
45,750
56,263
1,846
1,296
1,028
1,545
1,046
19
–
7
3
4
58
3
–
5,247
4,324
4,440
4,450
382
–
9,051
5,623
9,258
6,230
457
–
183
165
87
63
6
4
–
–
–
–
–
–
–
–
–
–
260
71
1
–
–
16,524
17,785
8,536
5,851
2,934
2,359
826
3,294
58,109
9,234
6,048
9,416
6,294
463
4
6,767
4,934
75
18,843
30,619
508
332
31,459
Notes:
(1) Consolidated investment funds reflect 100 per cent of assets and liabilities held by such funds.
(2) Government bonds include bonds issued in local or foreign currencies by the government of the country where respective business unit operates.
The Group’s credit risk assessment framework does not apply credit risk limits on these government bonds, therefore credit ratings are not shown
in the table. Of the total balance as at 31 December 2020, 99 per cent are rated as investment grade.
(3) Other government and government agency bonds comprise other bonds issued by government and government-sponsored institutions such as
national, provincial and municipal authorities; government-related entities; multilateral development banks and supranational organisations.
199
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 21. FINANCIAL INVESTMENTS (continued)
Debt securities (continued)
Debt securities by type comprise the following: (continued)
Policyholder and shareholder
Participating funds and
other participating
business with distinct
portfolios
Other policyholder and
shareholder
Consolidated
investment
Unit-linked
funds(1)
US$m
FVTPL
AFS
FVTPL
AFS
Subtotal
FVTPL
FVTPL
Total
31 December 2020
Corporate bonds
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
Structured securities(4)
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
Total(5)(6)
12
323
5,220
5,880
481
6
352
2,428
18,954
20,645
289
–
–
9
600
964
3,052
5,812
55
22,063
46,292
156
24,158
50,839
20
24
2,102
2,892
–
30
25
10
256
892
122
154
–
989
315
6,137
1,299
47,847
395
52,126
54
–
3,068
184
11,922
42,668
264
51,975 106,829
1,459
2,063 110,351
97
30
100
90
–
40
357
–
–
–
–
–
–
–
203
–
–
–
–
271
474
10
146
471
286
12
11
310
176
571
376
12
322
149
–
25
20
–
1
936
1,767
195
–
–
–
–
–
–
–
459
176
596
396
12
323
1,962
28,370
47,602
2,002 117,504 195,478
4,008
2,395 201,881
Notes:
(1) Consolidated investment funds reflect 100 per cent of assets and liabilities held by such funds.
(4) Structured securities include collateralised debt obligations, mortgage-backed securities and other asset-backed securities.
(5) Debt securities of US$9,188m are restricted due to local regulatory requirements.
(6) The Group revisited the disclosure for AFS debt securities with contractual terms that give rise to cash flows qualifying as SPPI in accordance with
IFRS 9, which amounted to US$164,505m with 98 per cent rated as investment grade.
The Group’s debt securities classified at fair value through profit or loss are all designated at fair value through profit or
loss.
200
FINANCIAL STATEMENTSAIA GROUP LIMITED 21. FINANCIAL INVESTMENTS (continued)
Equity shares and interests in investment funds
Equity shares and interests in investment funds by type comprise the following:
Policyholder and shareholder
Participating
funds and other
participating
business
with distinct
portfolios
Other
policyholder
and
shareholder
Unit-linked
US$m
FVTPL
FVTPL
Subtotal
FVTPL
Consolidated
investment
funds(1)
FVTPL
31 December 2021
Equity shares
Interests in investment funds
Total
15,718
13,467
29,185
5,096
4,827
9,923
20,814
18,294
39,108
7,258
20,605
27,863
2,750
1,296
4,046
Policyholder and shareholder
Participating
funds and other
participating
business
with distinct
portfolios
Other
policyholder
and
shareholder
Unit-linked
US$m
FVTPL
FVTPL
Subtotal
FVTPL
Consolidated
investment
funds(1)
FVTPL
31 December 2020
Equity shares
Interests in investment funds
Total
15,596
8,296
23,892
6,302
756
7,058
21,898
9,052
30,950
7,185
19,974
27,159
1,073
–
1,073
Total
30,822
40,195
71,017
Total
30,156
29,026
59,182
Note:
(1) Investment funds in which the Group has interests and power to direct their relevant activities that affect the return of the funds are consolidated
in the financial statements. Consolidated investment funds reflect 100 per cent of assets and liabilities held by such funds.
201
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 21. FINANCIAL INVESTMENTS (continued)
Interests in structured entities
The Group has determined that the investment funds and structured securities, such as collateralised debt obligations,
mortgage-backed securities and other asset-backed securities that the Group has interest are structured entities.
The Group has consolidated certain investment funds for which the Group provides guarantee on capital or rate of return
to the investors and deemed to have control based on an analysis of the guidance in IFRS 10. For these investment funds,
the Group has the ability to reduce the guaranteed rates of return, subject to obtaining approvals of applicable regulators.
The Group has an obligation to absorb losses in the event that the returns of the funds are insufficient to cover the capital
or rate of return guarantee provided to the investors.
The following table summarises the Group’s interest in unconsolidated structured entities:
US$m
As at 31 December 2021
As at 31 December 2020
Investment
funds
Structured
securities(1)
Investment
funds
Structured
securities(1)
Available for sale debt securities
Debt securities at fair value through profit or loss
Interests in investment funds at fair value through
profit or loss
Total
2,818(2)
709(2)
40,195
43,722
1,348
823
–
2,171
2,984(2)
811(2)
29,026
32,821
936
1,026
–
1,962
Notes:
(1) Structured securities include collateralised debt obligation, mortgage-backed securities and other asset-backed securities.
(2) Balance represents the Group’s interests in debt securities issued by real estate investment trusts.
The Group’s maximum exposure to loss arising from its interests in these unconsolidated structured entities is limited to
the carrying amount of the assets. Dividend income and interest income are received during the reporting period from
these interests in unconsolidated structured entities.
In addition, the Group receives management fees and trustee fees in respect of providing trustee, management and
administrative services to certain retirement scheme funds and investment funds. These funds are not held and the
associated investment risks are not borne by the Group, the Group does not have exposure to loss in these funds.
202
FINANCIAL STATEMENTSAIA GROUP LIMITED 21. FINANCIAL INVESTMENTS (continued)
Loans and deposits
US$m
Policy loans
Mortgage loans on residential real estate
Mortgage loans on commercial real estate
Other loans
Allowance for loan losses
Loans
Term deposits
Promissory notes(1)
Total
Note:
(1) The promissory notes are issued by a government.
As at
31 December
2021
As at
31 December
2020
3,625
3,547
525
44
732
(13)
4,913
2,850
1,548
9,311
590
49
760
(14)
4,932
2,683
1,720
9,335
Certain term deposits with financial institutions and promissory notes are restricted due to local regulatory requirements
or other pledge restrictions. The restricted balance held within term deposits and promissory notes is US$1,905m (2020:
US$2,057m).
Other loans include receivables from reverse repurchase agreements (reverse repos) under which the Group does not take
physical possession of securities purchased under the agreements. Sales or transfers of securities are not permitted by the
respective clearing house on which they are registered while the loan is outstanding. In the event of default by the
counterparty to repay the loan, the Group has the right to the underlying securities held by the clearing house. Reverse
repos are initially recorded at the cost of the loan or collateral advanced. At 31 December 2021, the carrying value of such
receivables is US$407m (2020: US$271m).
203
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 21. FINANCIAL INVESTMENTS (continued)
Effect of Inter-bank offered rate (IBOR) reform
The IASB published Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform Phase
2 to address the implications on financial reporting when an existing interest rate benchmark is replaced with an alternative
benchmark interest rate. These amendments have been adopted for the first time for the year ended 31 December 2021
and have no material impact to the Group.
The Group currently holds a number of financial instrument contracts which reference USD London Interbank Offered Rate
(LIBOR), Singapore Swap Offer Rate (SOR) and Thai Baht Interest Rate Fixing (THBFIX), that extend beyond 2021
(collectively “Original Benchmark Interest Rates”) and have not yet transitioned to replacement benchmark interest rates.
The Group monitors the exposure to instruments subject to such reform and is in the process of implementing changes to
systems, processes, risk management procedures and valuation models that may arise as a consequence of the reform.
Such reform has no impact on the Group’s risk management strategy. Risks arising from instruments that are subject to
such transition are not considered significant.
While the impact of IBOR reform on profit or loss and other comprehensive income is not considered significant to the
Group, the following table contains the carrying value of relevant financial instruments that the Group holds at 31 December
2021.
US$m
Non-derivative financial assets
Non-derivative financial liabilities
Net derivative financial liabilities
Carrying value at 31 December 2021
and have yet to transition to a replacement
benchmark interest rate
USD LIBOR
SOR
THBFIX
2,110
–
(243)
909
(359)
–
–
–
(127)
204
FINANCIAL STATEMENTSAIA GROUP LIMITED 22. DERIVATIVE FINANCIAL INSTRUMENTS
The Group’s derivative exposure was as follows:
US$m
31 December 2021
Foreign exchange contracts
Cross-currency swaps
Forwards
Foreign exchange futures
Total foreign exchange contracts
Interest rate contracts
Interest rate swaps
Other
Warrants and options
Forward contracts
Swaps
Netting
Total
31 December 2020
Foreign exchange contracts
Cross-currency swaps
Forwards
Foreign exchange futures
Total foreign exchange contracts
Interest rate contracts
Interest rate swaps
Other
Warrants and options
Forward contracts
Swaps
Netting
Total
Notional amount
Assets
Liabilities
Fair value
7,191
3,726
73
10,990
9,174
200
35,233
1,492
(73)
57,016
8,172
2,694
100
10,966
8,510
1,342
10,658
1,267
(100)
32,643
79
72
–
151
326
2
973
16
-
(401)
(10)
–
(411)
(223)
(1)
(754)
(3)
-
1,468
(1,392)
313
121
–
434
561
51
18
5
–
(158)
(17)
–
(175)
(308)
(45)
(469)
(6)
–
1,069
(1,003)
The column “notional amount” in the above table refers to the pay leg of derivative transactions other than equity-index
options. For certain equity-index call and put options with the same notional amount that are purchased to hedge the
downside risk of the underlying equities by means of a collar strategy, the notional amount represents the exposure of the
hedged equities.
Of the total derivatives, US$23m (2020: US$25m) are listed in exchange or dealer markets and the rest are over-the-
counter (OTC) derivatives. OTC derivative contracts are individually negotiated between contracting parties and not cleared
through an exchange. OTC derivatives include forwards, swaps and options. Derivatives are subject to various risks
including market, liquidity and credit risks, similar to those related to the underlying financial instruments.
205
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
22. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Derivative assets and derivative liabilities are recognised in the consolidated statement of financial position as financial
assets at fair value through profit or loss and derivative financial liabilities respectively. The Group’s derivative contracts
are established to provide an economic hedge to financial exposures. The Group adopts hedge accounting in limited
circumstances. The notional or contractual amounts associated with derivative financial instruments are not recorded as
assets or liabilities in the consolidated statement of financial position as they do not represent the fair value of these
transactions. The notional amounts in the previous table reflect the aggregate of individual derivative positions on a gross
basis and so give an indication of the overall scale of derivative transactions.
Foreign exchange contracts
Foreign exchange forward and futures contracts represent agreements to exchange the currency of one country for the
currency of another country at an agreed price and settlement date. Currency options are agreements that give the buyer
the right to exchange the currency of one country for the currency of another country at agreed prices and settlement
dates. Currency swaps are contractual agreements that involve the exchange of both periodic and final amounts in two
different currencies. Exposure to gains and losses on the foreign exchange contracts will increase or decrease over their
respective lives as a function of maturity dates, interest and foreign exchange rates, implied volatilities of the underlying
indices and the timing of payments.
Interest rate swaps
Interest rate swaps are contractual agreements between two parties to exchange periodic payments in the same currency,
each of which is computed on a different interest rate basis, on a specified notional amount. Most interest rate swaps
involve the net exchange of payments calculated as the difference between the fixed and floating rate interest payments.
Other derivatives
Warrants and options are option agreements that give the owner the right to buy or sell securities at an agreed price and
settlement date. Forward contracts are contractual obligations to buy or sell a financial instrument on a predetermined
future date at a specified price. Swaps are OTC contractual agreements between the Group and a third party to exchange
a series of cash flows based upon an index, rates or other variables applied to a notional amount.
Netting adjustment
The netting adjustment is related to futures contracts executed through clearing house where the settlement arrangement
satisfied the netting criteria under IFRS.
Collateral under derivative transactions
At 31 December 2021, the Group had posted cash collateral of US$322m (2020: US$86m) and pledged debt securities
with carrying value of US$664m (2020: US$696m) for liabilities, and held cash collateral of US$642m (2020: US$500m)
and debt securities collateral with carrying value of US$21m (2020: US$17m) for assets in respect of derivative
transactions. The Group did not sell or repledge the debt collateral received. These transactions are conducted under terms
that are usual and customary to collateralised transactions including, where relevant, standard repurchase agreements.
206
FINANCIAL STATEMENTSAIA GROUP LIMITED 23. FAIR VALUE MEASUREMENT
Fair value of financial instruments
The Group classifies all financial assets as either at fair value through profit or loss, or as available for sale, which are
carried at fair value, or as loans and receivables, which are carried at amortised cost. Financial liabilities are classified as
either at fair value through profit or loss or at amortised cost, except for investment contracts with DPF which are accounted
for under IFRS 4.
The following tables present the fair values of the Group’s financial assets and financial liabilities:
US$m
31 December 2021
Financial investments
Loans and deposits
Debt securities
Equity shares and interests
in investment funds
Derivative financial instruments
Reinsurance receivables
Other receivables
Accrued investment income
Cash and cash equivalents
Financial assets
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Derivative financial instruments
Other liabilities
Financial liabilities
Fair value
Fair value
through
profit or loss
Available
for sale
Cost/
amortised
cost
Total
carrying
value
Total
fair value
Notes
21
22
19
24
24
26
–
–
9,311
9,311
9,592
38,993
161,087
71,017
1,468
–
–
–
–
–
–
–
–
–
–
–
–
–
992
3,352
1,837
4,989
200,080
200,080
71,017
71,017
1,468
992
3,352
1,837
4,989
1,468
992
3,352
1,837
4,989
111,478
161,087
20,481
293,046
293,327
Fair value
through
profit or loss
Cost/
amortised
cost
Total
carrying
value
Total
fair value
Notes
28
30
31
22
34
11,023
–
–
1,392
925
13,340
572
9,588
1,588
–
7,599
19,347
11,595
9,588
1,588
1,392
8,524
11,595
10,285
1,588
1,392
8,524
32,687
33,384
207
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
23. FAIR VALUE MEASUREMENT (continued)
Fair value of financial instruments (continued)
US$m
31 December 2020
Financial investments
Loans and deposits
Debt securities
Equity shares and interests
in investment funds
Derivative financial instruments
Reinsurance receivables
Other receivables
Accrued investment income
Cash and cash equivalents
Financial assets
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Derivative financial instruments
Other liabilities
Financial liabilities
Fair value
Fair value
through
profit or loss
Available
for sale
Cost/
amortised
cost
Total
carrying
value
Total
fair value
Notes
21
22
19
24
24
26
–
–
9,335
9,335
9,333
36,775
165,106
59,182
1,069
–
–
–
–
–
–
–
–
–
–
–
–
–
671
3,053
1,822
5,619
201,881
201,881
59,182
59,182
1,069
671
3,053
1,822
5,619
1,069
671
3,053
1,822
5,619
97,026
165,106
20,500
282,632
282,630
Fair value
through
profit or loss
Cost/
amortised
cost
Total
carrying
value
Total
fair value
Notes
28
30
31
22
34
12,026
–
–
1,003
1,025
14,054
543
8,559
1,664
–
6,772
17,538
12,569
12,569
8,559
1,664
1,003
7,797
9,555
1,664
1,003
7,797
31,592
32,588
The carrying amount of assets included in the above tables represents the maximum credit exposure.
Foreign currency exposure, including the net positions of foreign currency derivative, is shown in note 38 for the Group’s
key foreign exchange exposures.
The fair value of investment contract liabilities measured at amortised cost is not considered to be materially different from
the amortised cost carrying value.
The carrying value of financial instruments expected to be settled within 12 months (after taking into account valuation
allowances, where applicable) is not considered to be materially different from the fair value.
208
FINANCIAL STATEMENTSAIA GROUP LIMITED
23. FAIR VALUE MEASUREMENT (continued)
Fair value measurements on a recurring basis
The Group measures at fair value property held for own use, investment property, financial instruments classified at fair
value through profit or loss, available for sale securities portfolios, derivative assets and liabilities, investments held by
investment funds which are consolidated, investments in non-consolidated investment funds and certain investment
contract liabilities on a recurring basis.
The fair value of a financial instrument is the amount that would be received on sale of an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.
The degree of judgement used in measuring the fair value of financial instruments generally correlates with the level of
pricing observability. Financial instruments with quoted prices in active markets generally have more pricing observability
and less judgement is used in measuring fair value. Conversely, financial instruments traded in other than active markets
or that do not have quoted prices have less observability and are measured at fair value using valuation models or other
pricing techniques that require more judgement. An active market is one in which transactions for the asset or liability
being valued occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
An other than active market is one in which there are few transactions, the prices are not current, price quotations vary
substantially either over time or among market makers, or in which little information is released publicly for the asset or
liability being valued. Pricing observability is affected by a number of factors, including the type of financial instrument,
whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction
and general market conditions.
Fair value of properties is based on valuation by independent professional valuers.
The Group does not have assets or liabilities measured at fair value on a non-recurring basis during the year ended 31
December 2021 and 2020.
The following methods and assumptions were used by the Group to estimate the fair value of financial instruments and
properties.
Determination of fair value
Loans and receivables
For loans and advances that are repriced frequently and have not had any significant changes in credit risk, carrying
amounts represent a reasonable estimate of fair values. The fair values of other loans are estimated by discounting expected
future cash flows using interest rates offered for similar loans to borrowers with similar credit ratings.
The fair values of mortgage loans are estimated by discounting future cash flows using interest rates currently being
offered in respect of similar loans to borrowers with similar credit ratings. The fair values of fixed rate policy loans are
estimated by discounting cash flows at the interest rates charged on policy loans of similar policies currently being issued.
Loans with similar characteristics are aggregated for purposes of the calculations. The carrying values of policy loans with
variable rates approximate to their fair values.
Debt securities, equity shares and interests in investment funds
The fair values of equity shares and interests in investment funds are based on quoted market prices or, if unquoted, on
estimated market values generally based on quoted prices for similar securities. Fair values for fixed interest securities are
based on quoted market prices, where available. For those securities not actively traded, fair values are estimated using
values obtained from brokers, private pricing services or by discounting expected future cash flows using a current market
rate applicable to the yield, credit quality and maturity of the investment. Priority is given to values from independent
sources when available, but overall the source of pricing and/or valuation technique is chosen with the objective of arriving
at the price at which an orderly transaction would take place between market participants on the measurement date. The
inputs to determining fair value that are relevant to fixed interest securities include, but not limited to risk-free interest
rates, the obligor’s credit spreads, foreign exchange rates and credit default rates. For holdings in hedge funds and limited
partnerships, fair values are determined based on the net asset values provided by the general partner or manager of each
investment, the accounts of which are generally audited on an annual basis. The transaction price is used as the best
estimate of fair value at inception.
209
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 23. FAIR VALUE MEASUREMENT (continued)
Determination of fair value (continued)
Derivative financial instruments
The Group values its derivative financial assets and liabilities using market transactions and other market evidence
whenever possible, including market-based inputs to models, model calibration to market clearing transactions, broker or
dealer quotations or alternative pricing sources with reasonable levels of price transparency. When models are used, the
selection of a particular model to value a derivative depends on the contract terms of, and specific risks inherent in, the
instrument as well as the availability of pricing information in the market. The Group generally uses similar models to value
similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices and rates,
yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. For derivatives that
trade in liquid markets, such as generic forwards, swaps and options, model inputs can generally be verified and model
selection does not involve significant management judgement. Examples of inputs that are generally observable include
foreign exchange spot and forward rates, benchmark interest rate curves and volatilities for commonly traded option
products. Examples of inputs that may be unobservable include volatilities for less commonly traded option products and
correlations between market factors.
When the Group holds a group of derivative assets and derivative liabilities entered into with a particular counterparty, the
Group takes into account the arrangements that mitigate credit risk exposure in the event of default (e.g. International
Swap and Derivatives Association (ISDA) Master Agreements and Credit Support Annex (CSA) that require the exchange of
collateral on the basis of each party’s net credit risk exposure). The Group measures the fair value of the group of financial
assets and financial liabilities on the basis of its net exposure to the credit risk of that counterparty or the counterparty’s
net exposure to our credit risk that reflects market participants’ expectations about the likelihood that such an arrangement
would be legally enforceable in the event of default.
Property held for own use and investment property
The Group engaged external, independent and qualified valuers to determine the fair value of the Group’s properties at
least on an annual basis. The valuation on an open market value basis by independent professional valuer for certain
investment properties was calculated by reference to net rental income allowing for reversionary income potential. The fair
values of certain other properties were derived using the Market Data Approach. In this approach, the values are based on
sales and listing of comparable property registered in the vicinity. Certain other properties are valued using a combination
of these two methods.
The properties held for own use and investment properties, in most cases, are valued on the basis of the highest and best
use of the properties that is physically possible, legally permissible and financially feasible. The current use of the properties
is considered to be its highest and best use; records of recent sales and offerings of similar property are analysed and
comparison made for such factors as size, location, quality and prospective use. On limited occasions, potential
redevelopment of the properties in use would be taken into account when they would maximise the fair value of the
properties; the Group is occupying these properties for operational purposes.
Cash and cash equivalents
The carrying amount of cash approximates its fair value.
Reinsurance receivables
The carrying amount of amounts receivable from reinsurers is not considered materially different to their fair value.
Fair value of securities sold under repurchase agreements and the associated payables
The contract values of payables under repurchase agreements approximate their fair value as these obligations are short-
term in nature.
Other assets
The carrying amount of other financial assets is not materially different to their fair value. The fair values of deposits with
banks are generally based on quoted market prices or, if unquoted, on estimates based on discounting future cash flows
using available market interest rates offered for receivables with similar characteristics.
210
FINANCIAL STATEMENTSAIA GROUP LIMITED 23. FAIR VALUE MEASUREMENT (continued)
Determination of fair value (continued)
Investment contract liabilities
For investment contract liabilities, the fair values have been estimated using a discounted cash flow approach based on
interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts
being valued. For investment contracts where the investment risk is borne by the policyholder, the fair value generally
approximates to the fair value of the underlying assets.
Investment contracts with DPF enable the contract holder to receive additional benefits as a supplement to guaranteed
benefits. These are referred to as participating business and are measured and classified according to the Group practice
for insurance contract liabilities and hence are disclosed within note 27. These are not measured at fair value.
Borrowings
The fair values of borrowings have been estimated based on discounting future cash flows using the interest rates currently
applicable to deposits of similar maturities or prices obtained from brokers.
Other liabilities
The fair values of other unquoted financial liabilities are estimated by discounting expected future cash flows using current
market rates applicable to their yield, credit quality and maturity, except for those without stated maturity, where the
carrying value approximates to fair value.
Fair value hierarchy for fair value measurement on a recurring basis
Assets and liabilities recorded at fair value in the consolidated statement of financial position are measured and classified
in a hierarchy for disclosure purposes consisting of three “levels” based on the observability of inputs available in the
marketplace used to measure their fair values as discussed below:
• Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets for identical assets or liabilities
that the Group has the ability to access as of the measurement date. Market price data is generally obtained from
exchange or dealer markets. The Group does not adjust the quoted price for such instruments. Assets measured at fair
value on a recurring basis and classified as Level 1 are actively traded equities. The Group considers that government
debt securities issued by G7 countries (the United States, Canada, France, Germany, Italy, Japan, the United Kingdom)
and traded in a dealer market to be Level 1, until they no longer trade with sufficient frequency and volume to be
considered actively traded.
• Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 2 inputs include quoted prices
for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets
that are not active and inputs other than quoted prices that are observable for the asset and liability, such as interest
rates and yield curves that are observable at commonly quoted intervals. Assets and liabilities measured at fair value
on a recurring basis and classified as Level 2 generally include government securities issued by non-G7 countries, most
investment grade corporate bonds, hedge fund investments and derivative contracts.
• Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable.
Unobservable inputs are only used to measure fair value to the extent that relevant observable inputs are not available,
allowing for circumstances in which there is little, if any, market activity for the asset or liability. Assets and liabilities
measured at fair value on a recurring basis and classified as Level 3 include properties held for own use, investment
properties, certain classes of structured securities, certain derivative contracts, private equity and real estate fund
investments, and direct private equity investments.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases,
the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the
lowest level input that is significant to the fair value measurement in its entirety. The Group’s assessment of the significance
of a particular input to the fair value measurement in its entirety requires judgement. In making the assessment, the Group
considers factors specific to the asset or liability.
211
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 23. FAIR VALUE MEASUREMENT (continued)
Fair value hierarchy for fair value measurement on a recurring basis (continued)
A summary of assets and liabilities carried at fair value on a recurring basis according to fair value hierarchy is given below:
US$m
Level 1
Level 2
Level 3
Total
Fair value hierarchy
31 December 2021
Non-financial assets
Property held for own use
Investment property
Financial assets
Available for sale
Debt securities
Participating funds and other participating business
with distinct portfolios
Other policyholder and shareholder
At fair value through profit or loss
Debt securities
Participating funds and other participating business
with distinct portfolios
Unit-linked and consolidated investment funds
Other policyholder and shareholder
Equity shares and interests in investment funds
Participating funds and other participating business
with distinct portfolios
Unit-linked and consolidated investment funds
Other policyholder and shareholder
Derivative financial instruments
Foreign exchange contracts
Interest rate contracts
Other contracts
–
–
–
–
1
15
–
23,129
30,003
6,847
–
–
12
–
–
1,037
4,716
1,037
4,716
49,701
109,770
12
1,604
49,713
111,374
27,564
6,645
3,588
1,000
310
1,256
151
326
979
883
–
297
5,056
1,596
1,820
–
–
–
28,448
6,660
3,885
29,185
31,909
9,923
151
326
991
Total assets on a recurring fair value measurement basis
60,007
201,290
17,021
278,318
% of Total
Financial liabilities
Investment contract liabilities
Derivative financial instruments
Foreign exchange contracts
Interest rate contracts
Other contracts
Other liabilities
Total liabilities on a recurring fair value measurement
basis
% of Total
21.6
72.3
6.1
100.0
–
–
–
11
–
11
0.1
10,723
300
11,023
411
223
747
925
–
–
–
–
411
223
758
925
13,029
97.7
300
2.2
13,340
100.0
212
FINANCIAL STATEMENTSAIA GROUP LIMITED
23. FAIR VALUE MEASUREMENT (continued)
Fair value hierarchy for fair value measurement on a recurring basis (continued)
US$m
Level 1
Level 2
Level 3
Total
Fair value hierarchy
31 December 2020
Non-financial assets
Property held for own use
Investment property
Financial assets
Available for sale
Debt securities
Participating funds and other participating business
with distinct portfolios
Other policyholder and shareholder
At fair value through profit or loss
Debt securities
Participating funds and other participating business
with distinct portfolios
Unit-linked and consolidated investment funds
Other policyholder and shareholder
Equity shares and interests in investment funds
Participating funds and other participating business
with distinct portfolios
Unit-linked and consolidated investment funds
Other policyholder and shareholder
Derivative financial instruments
Foreign exchange contracts
Interest rate contracts
Other contracts
Total assets on a recurring fair value measurement basis
% of Total
Financial liabilities
Investment contract liabilities
Derivative financial instruments
Foreign exchange contracts
Interest rate contracts
Other contracts
Other liabilities
Total liabilities on a recurring fair value measurement
basis
% of Total
–
–
–
69
14
14
1
20,272
27,640
5,481
–
–
13
53,504
20.0
–
–
–
12
–
12
0.1
–
–
1,025
4,639
1,025
4,639
47,594
116,178
8
1,257
47,602
117,504
27,426
6,386
1,697
877
285
1,077
434
561
61
930
3
304
2,743
307
500
–
–
–
28,370
6,403
2,002
23,892
28,232
7,058
434
561
74
202,576
11,716
267,796
75.6
4.4
100.0
–
12,026
12,026
175
308
508
1,025
2,016
14.3
–
–
–
–
175
308
520
1,025
12,026
85.6
14,054
100.0
213
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
23. FAIR VALUE MEASUREMENT (continued)
Fair value hierarchy for fair value measurement on a recurring basis (continued)
The Group’s policy is to recognise transfers of assets and liabilities between Level 1 and Level 2 at their fair values as at
the end of each reporting period, consistent with the date of the determination of fair value. Assets are transferred out of
Level 1 when they are no longer transacted with sufficient frequency and volume in an active market. During the year
ended 31 December 2021, the Group transferred US$184m (2020: US$127m) of assets measured at fair value from Level
1 to Level 2. Conversely, assets are transferred from Level 2 to Level 1 when transaction volume and frequency are
indicative of an active market. The Group transferred US$15m of assets (2020: US$9m) from Level 2 to Level 1 during the
year ended 31 December 2021.
The Group’s Level 2 financial instruments include debt securities, equity shares and interests in investment funds,
derivative instruments, investment contract liabilities and other liabilities. The fair values of Level 2 financial instruments
are estimated using values obtained from private pricing services and brokers corroborated with internal review as
necessary. When the quotes from private pricing services and brokers are not available, internal valuation techniques and
inputs will be used to derive the fair value for the financial instruments.
The tables below set out a summary of changes in the Group’s Level 3 assets and liabilities measured at fair value on a
recurring basis for the year ended 31 December 2021 and 2020. The tables reflect gains and losses, including gains and
losses on assets and liabilities categorised as Level 3 as at 31 December 2021 and 2020.
Level 3 assets and liabilities
US$m
Property
held for
own use
Investment
property
Debt
securities
Equity
shares and
interests in
investment
funds
Derivative
financial
assets/
(liabilities)
At 1 January 2021
1,025
4,639
2,502
3,550
Net movement on investment contract
liabilities
Total gains/(losses)
Reported under investment return and
other expenses in the consolidated
income statement
Reported under fair value reserve, foreign
currency translation reserve and
property revaluation reserve in the
consolidated statement of
comprehensive income
Transfer to/from investment property
Purchases
Sales
Settlements
Transfer into/out of Level 3
At 31 December 2021
Change in unrealised gains or losses
included in the consolidated income
statement for assets and liabilities held
at the end of the reporting period, under
investment return and other expenses
–
–
(16)
65
4
(2)
26
–
–
–
(108)
(15)
139
(4)
–
–
–
2
3
–
898
(14)
(601)
6
–
644
(38)
–
4,580
(264)
–
–
1,037
4,716
2,796
8,472
(16)
65
(43)
635
–
–
–
–
–
–
–
–
–
–
–
Investment
contracts
(12,026)
7
–
–
–
–
–
–
11,719
(300)
–
In 2021, the Group has revisited the fair value hierarchy disclosure of its investment contract liabilities. Of the total
investment contract liabilities reported, US$11,719m have been valued based on quoted prices of the underlying
investments hence they are classified as Level 2.
214
FINANCIAL STATEMENTSAIA GROUP LIMITED
23. FAIR VALUE MEASUREMENT (continued)
Fair value hierarchy for fair value measurement on a recurring basis (continued)
Level 3 assets and liabilities (continued)
US$m
Property
held for
own use
Investment
property
Debt
securities
Equity
shares and
interests in
investment
funds
Derivative
financial
assets/
(liabilities)
At 1 January 2020
1,019
4,834
2,134
2,412
Net movement on investment contract
liabilities
Total gains/(losses)
Reported under investment return and
other expenses in the consolidated
income statement
Reported under fair value reserve, foreign
currency translation reserve and
property revaluation reserve in the
consolidated statement of
comprehensive income
Purchases
Sales
Settlements
Transfer into Level 3
At 31 December 2020
Change in unrealised gains or losses
included in the consolidated income
statement for assets and liabilities held
at the end of the reporting period, under
investment return and other expenses
–
–
–
–
(15)
(292)
(26)
75
3
18
–
–
–
69
29
(1)
–
–
99
798
(313)
(233)
43
80
1,141
(258)
–
100
1,025
4,639
2,502
3,550
(15)
(292)
(26)
(5)
–
–
–
–
–
–
–
–
–
–
Investment
contracts
(11,391)
(635)
–
–
–
–
–
–
(12,026)
–
Movements in investment contract liabilities at fair value are offset by movements in the underlying portfolio of matching
assets. Details of the movement in investment contract liabilities are provided in note 28.
There are not any differences between the fair values on initial recognition and the amounts determined using valuation
techniques since the models adopted are calibrated using initial transaction prices.
215
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
23. FAIR VALUE MEASUREMENT (continued)
Significant unobservable inputs for level 3 fair value measurements
As at 31 December 2021 and 2020, the valuation techniques and applicable unobservable inputs used to measure the
Group’s Level 3 financial instruments are summarised as follows:
Description
Fair value at
31 December 2021 (US$m) Valuation techniques
Unobservable inputs
Range
Debt securities
978
Discounted cash flows Risk adjusted discount rate 3.62% – 12.99%
Description
Fair value at
31 December 2020 (US$m) Valuation techniques
Unobservable inputs
Range
Debt securities
997
Discounted cash flows Risk adjusted discount rate 3.40% – 10.40%
Fair value of the Group’s properties are determined based on appropriate valuation techniques which may consider among
others income projection, value of comparable property and adjustments for factors such as size, location, quality and
prospective use. These valuation inputs are deemed unobservable.
Valuation processes
The Group has the valuation policies, procedures and analyses in place to govern the valuation of financial assets required
for financial reporting purposes, including Level 3 fair values. In determining the fair values of financial assets, the Group
in general uses private pricing providers and, only in rare cases when third-party prices do not exist, will use prices derived
from internal models. The Chief Investment Officers of each of the business units are required to review the reasonableness
of the prices used and report price exceptions, if any. The Group Investment team analyses reported price exceptions and
reviews price challenge responses from private pricing providers and provides the final recommendation on the appropriate
price to be used. Any changes in valuation policies are reviewed and approved by the Group Valuations Advisory Committee
which is part of the Group’s wider financial risk governance processes. Changes in Level 2 and 3 fair values are analysed
at each reporting date.
The main Level 3 input used by the Group pertains to the discount rate for the debt securities and investment contracts.
The unobservable inputs for determining the fair value of these instruments include the obligor’s credit spread and/or the
liquidity spread. A significant increase/(decrease) in any of the unobservable input may result in a significantly lower/
(higher) fair value measurement. The Group has subscriptions to private pricing services for gathering such information. If
the information from private pricing services is not available, the Group uses the proxy pricing method based on internally-
developed valuation inputs.
216
FINANCIAL STATEMENTSAIA GROUP LIMITED 23. FAIR VALUE MEASUREMENT (continued)
Fair value of financial and insurance assets and liabilities for which the fair value is disclosed at reporting
date
A summary of fair value hierarchy of assets and liabilities not carried at fair value but for which the fair value is disclosed
as at 31 December 2021 and 2020 is given below.
US$m
31 December 2021
Assets for which the fair value is disclosed
Financial assets
Loans and deposits
Reinsurance receivables
Other receivables
Accrued investment income
Cash and cash equivalents
Total assets for which the fair value is disclosed
Liabilities for which the fair value is disclosed
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Other liabilities
Total liabilities for which the fair value is disclosed
US$m
31 December 2020
Assets for which the fair value is disclosed
Financial assets
Loans and deposits
Reinsurance receivables
Other receivables
Accrued investment income
Cash and cash equivalents
Total assets for which the fair value is disclosed
Liabilities for which the fair value is disclosed
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Other liabilities
Total liabilities for which the fair value is disclosed
Fair value hierarchy
Level 1
Level 2
Level 3
Total
2,332
–
61
47
4,989
7,429
–
9,390
–
545
9,935
2,892
991
3,222
1,790
–
8,895
–
895
1,588
6,987
9,470
4,368
1
69
–
–
9,592
992
3,352
1,837
4,989
4,438
20,762
572
–
–
67
639
572
10,285
1,588
7,599
20,044
Fair value hierarchy
Level 1
Level 2
Level 3
Total
2,153
–
27
37
5,619
7,836
–
8,132
–
575
8,707
2,700
671
2,975
1,785
–
8,131
–
1,423
1,664
6,132
9,219
4,480
–
51
–
–
9,333
671
3,053
1,822
5,619
4,531
20,498
543
–
–
65
608
543
9,555
1,664
6,772
18,534
217
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 24. OTHER ASSETS
US$m
Accrued investment income
Pension scheme assets
Defined benefit pension scheme surpluses
Insurance receivables due from insurance and investment contract holders
Prepayment for investment in an associate(1)
Others(2)
Total
As at
31 December
2021
As at
31 December
2020
1,837
1,822
48
1,628
1,865
2,709
8,087
46
1,983
–
1,982
5,833
Notes:
(1) Represents the payment for the 24.99 per cent equity stake, post investment, in China Post Life Insurance Co., Ltd. (China Post Life). The investment
was completed on 11 January 2022, upon receiving all necessary regulatory approvals. See note 45 for further details.
(2) Represents, among others, prepayments and investment-related receivables.
All amounts other than certain prepayments are generally expected to be recovered within 12 months after the end of the
reporting period.
25. IMPAIRMENT OF FINANCIAL ASSETS
In accordance with the Group’s accounting policies, impairment reviews were performed for available for sale securities
and loans and receivables.
Available for sale debt securities
During the year ended 31 December 2021, no impairment loss (2020: nil) was recognised in respect of available for sale
debt securities.
The carrying amounts of available for sale debt securities that are individually determined to be impaired at 31 December
2021 was nil (2020: nil).
Loans and receivables
The Group’s primary potential credit risk exposure in respect of loans and receivables arises in respect of policy loans and
a portfolio of mortgage loans on residential and commercial real estate (see note 21 Financial investments for further
details). The Group’s credit exposure on policy loans is mitigated because, if and when the total indebtedness on any policy,
including interest due and accrued, exceeds the cash surrender value, the policy terminates and becomes void. The Group
has a first lien on all policies which are subject to policy loans.
The carrying amounts of loans and receivables that are individually determined to be impaired at 31 December 2021 was
US$20m (2020: US$15m). The Group has a portfolio of residential and commercial mortgage loans which it originates. To
the extent that any such loans are past their due dates specific allowance is made, together with a collective allowance,
based on historical delinquency. Insurance receivables are short-term in nature and cover is not provided if consideration
is not received. An ageing of accounts receivable is not provided as all amounts are due within one year and cover is
cancelled if consideration is not received.
218
FINANCIAL STATEMENTSAIA GROUP LIMITED 26. CASH AND CASH EQUIVALENTS
US$m
Cash
Cash equivalents
Total(1)
As at
31 December
2021
As at
31 December
2020
2,868
2,121
4,989
2,877
2,742
5,619
Note:
(1) US$892m (2020: US$1,111m) are held to back unit-linked contracts and US$184m (2020: US$108m) are held by consolidated investment funds.
Cash comprises cash at bank and cash in hand. Cash equivalents comprise bank deposits and highly liquid short-term
investments with maturities at acquisition of three months or less and money market funds that are convertible into known
amounts of cash and subject to insignificant risk of changes in value. Accordingly, all such amounts are expected to be
realised within 12 months after the end of the reporting period.
27. INSURANCE CONTRACT LIABILITIES
The movements of insurance contract liabilities (including liabilities in respect of investment contracts with DPF) and
ceded insurance contract liabilities (see note 19) are shown as follows:
US$m
Gross
Reinsurance
Net
At 1 January 2020
Valuation premiums and deposits
Liabilities released for policy termination or other
policy benefits paid and related expenses
Fees from account balances
Accretion of interest
Change in net asset values attributable to policyholders
Foreign exchange movements
Other movements
At 31 December 2020
Valuation premiums and deposits
Liabilities released for policy termination or
other policy benefits paid and related expenses
Fees from account balances
Accretion of interest
Change in net asset values attributable to policyholders
Acquisition of a subsidiary
Foreign exchange movements
Other movements
At 31 December 2021
192,181
35,438
(23,038)
(2,427)
6,056
11,491
3,657
(287)
223,071
37,599
(25,634)
(2,652)
6,742
1,306
3,687
(5,126)
430
(3,150)
(2,128)
1,720
–
(33)
–
(298)
–
(3,889)
(2,258)
2,088
–
(37)
–
(1)
98
–
189,031
33,310
(21,318)
(2,427)
6,023
11,491
3,359
(287)
219,182
35,341
(23,546)
(2,652)
6,705
1,306
3,686
(5,028)
430
239,423
(3,999)
235,424
219
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 27. INSURANCE CONTRACT LIABILITIES (continued)
Insurance contract liabilities (including liabilities in respect of investment contracts with DPF) can also be analysed as
follows:
US$m
Deferred profit
Unearned revenue
Policyholders’ share of participating surplus
Liabilities for future policyholder benefits
Total
As at
31 December
2021
As at
31 December
2020
28,893
2,042
31,269
177,219
239,423
24,972
1,751
31,151
165,197
223,071
220
FINANCIAL STATEMENTSAIA GROUP LIMITED 27. INSURANCE CONTRACT LIABILITIES (continued)
Business description
The table below summarises the key variables on which insurance and investment contract cash flows depend.
Type of contract
Material terms and conditions
Nature of benefits and
compensation for claims
Factors affecting
contract cash
flows
Key reportable
segments
Minimum guaranteed benefits
may be enhanced based on
investment experience and
other considerations
• Investment
performance
• Expenses
• Mortality
• Surrenders
• Morbidity
Mainland China,
Hong Kong,
Singapore,
Malaysia
Participating products include
protection and savings elements. The
basic sum assured, payable on death
or maturity, may be enhanced by
dividends or bonuses, the aggregate
amount of which is determined by the
performance of a distinct fund of
assets and liabilities. The timing of
dividend and bonus declarations is at
the discretion of the insurer
For participating funds, local
regulations generally prescribe a
minimum proportion of policyholder
participation in declared dividends
For other participating business with
distinct portfolios, the allocation of
benefit from the assets held in such
distinct portfolios is set according to
the underlying bonus rule as
determined by the relevant Board
based on applicable regulatory
requirements after considering the
Appointed Actuary’s recommendation.
The extent of such policyholder
participation may change over time
Participating products include
protection and savings elements. The
basic sum assured, payable on death
or maturity, may be enhanced by
dividends or bonuses, the timing or
amount of which are at the discretion
of the insurer taking into account
factors such as investment experience
Benefits paid on death, maturity,
sickness or disability that are fixed
and guaranteed and not at the
discretion of the insurer
These products provide morbidity or
sickness benefits and include health,
disability, critical illness and accident
cover
Traditional
participating life
Participating
funds and
other
participating
business with
distinct
portfolios
Other
participating
business
without
distinct
portfolios
Traditional
non-participating
life
Accident and
health
Unit-linked
Universal life
Note:
(1) Other than the Group Corporate Centre segment.
Minimum guaranteed benefits
may be enhanced based on
investment experience and
other considerations
Benefits, defined in the
insurance contract, are
determined by the contract and
are not affected by investment
performance or the
performance of the contract as
a whole
Benefits, defined in the
insurance contract, are
determined by the contract and
are not affected by investment
performance or the
performance of the contract as
a whole
• Investment
performance
Thailand,
Other Markets
• Expenses
• Mortality
• Surrenders
• Morbidity
• Mortality
• Morbidity
• Lapses
• Expenses
• Mortality
• Morbidity
• Lapses
• Expenses
• Investment
performance
• Lapses
• Expenses
• Mortality
• Investment
performance
• Crediting rates
• Lapses
• Expenses
• Mortality
All(1)
All(1)
All(1)
All(1)
221
Unit-linked contracts combine savings
with protection, the cash value of the
policy depending on the value of
unitised funds
Benefits are based on the value
of the unitised funds and death
benefits
The customer pays flexible premiums
subject to specified limits
accumulated in an account balance
which are credited with interest at a
rate set by the insurer, and a death
benefit which may be varied by the
customer
Benefits are based on the
account balance and death
benefit
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 27. INSURANCE CONTRACT LIABILITIES (continued)
Methodology and assumptions
The most significant items to which profit for the year and shareholders’ equity are sensitive are market, insurance and
lapse risks which are shown in the table below. Indirect exposure indicates that there is a second order impact. For example,
whilst the profit for the year attributable to shareholders is not directly affected by investment income earned where the
investment risk is borne by policyholders (for example, in respect of unit-linked contracts), there is a second-order effect
through the investment management fees which the Group earns by managing such investments. The distinction between
direct and indirect exposure is not intended to indicate the relative sensitivity to each of these items. Where the direct
exposure is shown as being “net neutral”, this is because the exposure to market and credit risks is offset by a corresponding
movement in insurance contract liabilities.
Market and credit risks
Direct exposure
Type of contract
Traditional
participating
life
Insurance and investment
contract liabilities
Risks associated with
related investment portfolio Indirect exposure
Significant insurance and
lapse risks
Participating
funds and other
participating
business with
distinct
portfolios
• Net neutral except for
the insurer’s share of
participating
investment
performance
• Net neutral except for
the insurer’s share of
participating
investment
performance
• Guarantees
• Guarantees
Other
participating
business
without distinct
portfolios
• Net neutral except for
the insurer’s share of
participating
investment
performance
• Net neutral except for
the insurer’s share of
participating
investment
performance
• Guarantees
• Guarantees
• Investment
performance subject to
smoothing through
dividend declarations
• Impact of persistency
on future dividends
• Mortality
• Morbidity
• Investment
performance subject to
smoothing through
dividend declarations
• Impact of persistency
on future dividends
• Mortality
• Morbidity
Traditional
non-participating
life
• Guarantees
• Asset-liability
mismatch risk
Accident and health
• Asset-liability
mismatch risk
Pension
• Net neutral
• Asset-liability
mismatch risk
• Investment
performance
• Asset-liability
mismatch risk
• Credit risk
• Investment
performance
• Credit risk
• Asset-liability
mismatch risk
• Net neutral
• Asset-liability
mismatch risk
• Not applicable
• Mortality
• Persistency
• Morbidity
• Not applicable
• Morbidity
• Persistency
• Performance-related
• Persistency
investment
management fees
Unit-linked
• Net neutral
• Net neutral
• Performance-related
investment
management fees
• Persistency
• Mortality
Universal life
• Guarantees
• Asset-liability
mismatch risk
• Investment
performance
• Credit risk
• Asset-liability
mismatch risk
• Spread between earned
rate and crediting rate
to policyholders
• Mortality
• Persistency
• Withdrawals
The Group is also exposed to foreign exchange rate risk in respect of its operations, and to interest rate risk, credit risk and
equity price risk on assets representing net shareholders’ equity, and to expense risk to the extent that actual expenses
exceed those that can be charged to insurance and investment contract holders on non-participating business. Expense
assumptions applied in the Group’s actuarial valuation models assume a continuing level of business volumes.
222
FINANCIAL STATEMENTSAIA GROUP LIMITED 27. INSURANCE CONTRACT LIABILITIES (continued)
Methodology and assumptions (continued)
Valuation interest rates
Cash flows of our traditional insurance contracts are discounted using the appropriate long-term investment return
assumptions that reflect the expected underlying asset mix. In determining the long-term returns on the fixed income
assets, an allowance is made for the risk of default which varies by the credit rating of the underlying asset. The Group has
set the equity return and property return assumptions by reference to the long-term return on 10-year government bonds,
allowing for an internal assessment of risk premia that vary by asset class and by territory. Further, an adjustment is made
to the long-term investment return assumptions to provide for the risk of adverse deviation. These assumptions are
determined at the policy inception date and remain locked in thereafter, unless a deficiency arises on liability adequacy
testing.
As at 31 December 2021 and 2020, the ranges of applicable valuation interest rates for traditional insurance contracts,
which vary by operating segment, year of issuance and products, within the first 20 years are as follows:
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Australia
New Zealand
Indonesia
Philippines
South Korea
Sri Lanka
Taiwan (China)
Vietnam
28. INVESTMENT CONTRACT LIABILITIES
US$m
At beginning of financial year
Investment contract benefits
Fees charged
Net withdrawals and other movements
Foreign exchange movements
At end of financial year(1)
As at
31 December
2021
As at
31 December
2020
2.75% – 7.00%
2.75% – 7.00%
1.80% – 7.50%
3.00% – 7.50%
2.14% – 9.00%
2.49% – 9.00%
2.00% – 7.00%
2.00% – 7.00%
3.00% – 5.43%
3.00% – 5.43%
0.22% – 3.84%
0.01% – 7.11%
2.30% – 6.15%
0.85% – 6.15%
3.02% – 8.61%
3.02% – 8.61%
2.20% – 9.20%
2.20% – 9.20%
2.01% – 6.50%
2.05% – 6.50%
7.87% – 9.67%
8.87% – 10.29%
1.75% – 6.50%
1.75% – 6.50%
4.44% – 11.48%
5.53% – 11.48%
Year ended
31 December
2021
Year ended
31 December
2020
12,881
437
(80)
(1,091)
(287)
11,860
12,273
1,305
(88)
(1,046)
437
12,881
Note:
(1) Of investment contract liabilities, US$265m (2020: US$312m) represents deferred fee income. Movement of deferred fee income of US$47m
(2020: US$55m) represents revenue recognised as a result of performance obligations satisfied during the year.
223
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 29. EFFECT OF CHANGES IN ASSUMPTIONS AND ESTIMATES
The table below sets out the sensitivities of the assumptions in respect of insurance and investment contracts with DPF to
key variables. This disclosure only allows for the impact on liabilities and related assets, such as reinsurance, and deferred
acquisition costs and does not allow for offsetting movements in the fair value of financial assets backing those liabilities.
US$m
(Increase)/decrease in insurance contract liabilities, increase/(decrease) in equity
and profit before tax
0.5 pps increase in investment return
0.5 pps decrease in investment return
10% increase in expenses
10% increase in mortality rates
10% increase in lapse/discontinuance rates
As at
31 December
2021
As at
31 December
2020
126
(144)
(51)
(89)
(80)
140
(162)
(63)
(92)
(76)
Future policy benefits for the Group’s majority traditional life insurance policies (including investment contracts with DPF)
are calculated using a net level premium valuation method with reference to best estimate assumptions set at policy
inception date unless a deficiency arises on liability adequacy testing. There is not any impact of the above assumption
sensitivities on the carrying amount of these traditional life insurance liabilities as the sensitivities presented would not
have triggered a liability adequacy adjustment. During the years presented there were not any effect of changes in
assumptions and estimates on the Group’s traditional life products, except for a limited number of cases where statutory
requirements are adopted in the applicable jurisdiction.
For interest sensitive insurance contracts, such as universal life products and unit-linked contracts, assumptions are made
at each reporting date including mortality, persistency, expenses, future investment earnings and future crediting rates.
The impact of changes in assumptions on the valuation of insurance and investment contracts with DPF was US$21m
increase (2020: US$166m decrease) in profit.
224
FINANCIAL STATEMENTSAIA GROUP LIMITED 30. BORROWINGS
US$m
Medium-term notes and securities
Senior notes
Subordinated securities
Total
As at
31 December
2021
As at
31 December
2020
5,820
3,768
9,588
6,824
1,735
8,559
Borrowings are recognised initially at their issue proceeds less transaction costs incurred. Subsequently, borrowings are
stated at amortised cost, and any difference between net proceeds and redemption value is recognised in the consolidated
income statement over the period of the borrowings using the effective interest method.
Interest expense on borrowings is shown in note 11. Further information relating to interest rates and the maturity profile
of borrowings is presented in note 38.
The following table summarises the Company’s outstanding medium-term notes and securities placed to the market at 31
December 2021:
Senior notes
Issue date
13 March 2013(1)
11 March 2014(1)
11 March 2015(1)
16 March 2016(1)
23 May 2017(2)
6 April 2018(1)
16 January 2019
16 January 2019
9 April 2019(1)
7 April 2020(1)
24 June 2020
Subordinated securities
Issue date
16 September 2020(1)(3)
7 April 2021(1)(3)(4)
11 June 2021(1)(3)(4)
9 September 2021(1)(3)(4)
19 October 2021(1)(3)(4)
Nominal amount
Interest rate
Tenor at issue
Maturity
US$500m
US$500m
US$750m
US$750m
US$500m
US$500m
HK$1,300m
HK$1,100m
US$1,000m
US$1,000m
A$90m
3.125%
4.875%
3.200%
4.500%
4.470%
3.900%
2.950%
3.680%
3.600%
3.375%
2.950%
10 years
30 years
10 years
30 years
30 years
10 years
3.5 years
12 years
10 years
10 years
10 years
13 March 2023
11 March 2044
11 March 2025
16 March 2046
23 May 2047
6 April 2028
16 July 2022
16 January 2031
9 April 2029
7 April 2030
24 June 2030
Nominal amount
Interest rate
Tenor at issue
Maturity
US$1,750m
US$750m
SG$500m
EUR750m
SG$105m
3.200%
2.700%
2.900%
0.880%
3.000%
20 years 16 September 2040
Perpetual
Perpetual
n/a
n/a
12 years
9 September 2033
30 years
19 October 2051
Notes:
(1) These medium-term notes and securities are listed on The Stock Exchange of Hong Kong Limited.
(2) These medium-term notes are listed on The Taipei Exchange, Taiwan. The Company has the right to redeem these notes at par on 23 May of each
year beginning on 23 May 2022.
(3) The Company has the right to redeem these securities, in whole, at par on predetermined dates as set out within the terms and conditions of the
securities. No change in terms since issue date.
(4) The coupon rate of these securities is fixed for a predetermined period as set out within the terms and conditions of the securities, and then resets
to the initial spread plus a then prevailing benchmark rate if the securities have not been redeemed.
The net proceeds from issuance during the year ended 31 December 2021 are used for refinancing and general corporate
purposes.
The Group has access to an aggregate of US$2,290m unsecured committed credit facilities, which includes a US$100m
revolving three-year credit facility expiring in 2024 and a US$2,190m five-year credit facility expiring in 2026. The credit
facilities will be used for general corporate purposes. There were no outstanding borrowings under these credit facilities
as of 31 December 2021 and 2020.
225
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 31. OBLIGATIONS UNDER REPURCHASE AGREEMENTS
The Group has entered into repurchase agreements whereby securities are sold to third parties with a concurrent agreement
to repurchase the securities at a specified date. At 31 December 2021, the obligations under repurchase agreements were
US$1,588m (2020: US$1,664m).
The securities sold under repurchase agreements continue to be recognised within the appropriate financial asset
classification. A liability is established for the consideration received. During the term of the repurchase agreements, the
Group is restricted from selling or pledging the transferred debt securities. The following table specifies the amounts
included within financial investments subject to repurchase agreements which do not qualify for de-recognition at each
year end:
US$m
Debt securities – AFS
Repurchase agreements
Debt securities – FVTPL
Repurchase agreements
Total
As at
31 December
2021
As at
31 December
2020
1,511
1,444
92
1,603
232
1,676
Collateral under repurchase agreements
At 31 December 2021, the Group had posted cash collaterals of US$1m (2020: nil) and pledged debt securities with
carrying value of US$8m (2020: US$1m). Cash collateral of US$1m (2020: nil) was held based on the market value of the
securities transferred. In the absence of default, the Group does not sell or repledge the debt securities collateral received.
226
FINANCIAL STATEMENTSAIA GROUP LIMITED 32. OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Offsetting, enforceable master netting agreements and similar agreements
The following table shows the assets that are subject to offsetting, enforceable master netting agreements and similar
arrangements at each year end:
Gross
amount of
recognised
financial
liabilities
set off in the
consolidated
statement
of financial
position
Net amount
of financial
assets
presented
in the
consolidated
statement of
financial
position
Gross
amount of
recognised
financial
assets
Related amounts
not set off in the
consolidated statement
of financial position
Financial
instruments
Cash
collateral
received
Net
amount
1,468
407
1,875
–
–
–
1,468
407
1,875
(21)
(407)
(428)
(642)
–
(642)
805
–
805
Gross
amount of
recognised
financial
liabilities
set off in the
consolidated
statement
of financial
position
Net amount
of financial
assets
presented
in the
consolidated
statement of
financial
position
Gross
amount of
recognised
financial
assets
Related amounts
not set off in the
consolidated statement
of financial position
Financial
instruments
Cash
collateral
received
Net
amount
1,069
271
1,340
–
–
–
1,069
271
1,340
(17)
(271)
(288)
(500)
–
(500)
552
–
552
US$m
31 December 2021
Financial assets:
Derivative assets
Reverse repurchase agreements
Total
US$m
31 December 2020
Financial assets:
Derivative assets
Reverse repurchase agreements
Total
227
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 32. OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
Offsetting, enforceable master netting agreements and similar agreements (continued)
The following table shows the liabilities that are subject to offsetting, enforceable master netting agreements and similar
arrangements at each year end:
Gross
amount of
recognised
financial
assets
set off in the
consolidated
statement
of financial
position
Net amount
of financial
liabilities
presented
in the
consolidated
statement
of financial
position
Gross
amount of
recognised
financial
liabilities
Related amounts
not set off in the
consolidated statement
of financial position
Financial
instruments
Cash
collateral
pledged
Net
amount
1,392
1,588
2,980
–
–
–
1,392
1,588
2,980
(664)
(1,588)
(2,252)
(322)
–
(322)
406
–
406
Gross
amount of
recognised
financial
assets
set off in the
consolidated
statement
of financial
position
Net amount
of financial
liabilities
presented
in the
consolidated
statement
of financial
position
Gross
amount of
recognised
financial
liabilities
Related amounts
not set off in the
consolidated statement
of financial position
Financial
instruments
Cash
collateral
pledged
Net
amount
1,003
1,664
2,667
–
–
–
1,003
1,664
2,667
(696)
(1,664)
(2,360)
(86)
–
(86)
221
–
221
US$m
31 December 2021
Financial liabilities:
Derivative liabilities
Repurchase agreements
Total
US$m
31 December 2020
Financial liabilities:
Derivative liabilities
Repurchase agreements
Total
The Group entered into enforceable master netting agreements for derivative transactions, as well as the repurchase
agreements for debt instruments with various counterparties. Except for certain futures contracts executed through
clearing house mechanism where the settlement arrangement satisfied the IFRS netting criteria, the transactions under
the enforceable master netting agreements and similar agreements involving the exchange of financial instruments or
cash as collateral do not satisfy the IFRS netting criteria. The provision in the master netting agreement and similar
agreements enables a party to terminate transactions early and settle at a net amount if a default or termination event
occurs.
228
FINANCIAL STATEMENTSAIA GROUP LIMITED 33. PROVISIONS
US$m
At 1 January 2020
Charged to the consolidated income statement
Charged to other comprehensive income
Exchange differences
Released during the year
Utilised during the year
At 31 December 2020
Charged to the consolidated income statement
Credited to other comprehensive income
Exchange differences
Released during the year
Utilised during the year
Other movements
At 31 December 2021
Employee benefits
Other
176
14
10
–
–
(5)
195
11
(20)
(14)
–
(13)
(1)
158
49
36
–
2
(13)
(39)
35
24
–
(1)
(5)
(17)
–
36
Total
225
50
10
2
(13)
(44)
230
35
(20)
(15)
(5)
(30)
(1)
194
Other provisions
Other provisions comprise provisions in respect of regulatory matters, litigation, reorganisation and restructuring. In view
of the diverse nature of the matters provided for and the contingent nature of the matters to which they relate, the Group
is unable to provide an accurate assessment of the term over which provisions are expected to be utilised.
34. OTHER LIABILITIES
US$m
Trade and other payables
Lease liabilities
Third-party interests in consolidated investment funds
Reinsurance-related payables
Total
As at
31 December
2021
As at
31 December
2020
5,617
475
925
1,507
8,524
4,850
502
1,025
1,420
7,797
Third-party interests in consolidated investment funds consist of third-party unit holders’ interests in consolidated
investment funds which are reflected as a liability since they can be put back to the Group for cash.
Trade and other payables are generally expected to be settled within 12 months after the end of the reporting period. The
realisation of third-party interests in investment funds cannot be predicted with accuracy since these represent the
interests of third-party unit holders in consolidated investment funds held to back insurance and investment contract
liabilities and are subject to market risk and the actions of third-party investors.
Reinsurance-related payables of US$427m (2020: US$563m) are expected to be settled more than 12 months after the
end of the reporting period.
229
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 35. SHARE CAPITAL AND RESERVES
Share capital
Ordinary shares(1), issued and fully paid
At beginning of the financial year
Shares issued under share option scheme and
agency share purchase plan
At end of the financial year
As at 31 December 2021
As at 31 December 2020
Million shares
US$m
Million shares
US$m
12,095
14,155
12,089
14,129
2
5
6
12,097
14,160
12,095
26
14,155
Note:
(1) Ordinary shares have no nominal value and there is no obligation to transfer cash or other assets to the holders of ordinary shares.
The Company issued 871,896 shares under share option scheme (2020: 4,876,916 shares) and 1,192,355 shares under
agency share purchase plan (2020: 1,185,442 shares) during the year ended 31 December 2021.
The Company and its subsidiaries have not purchased, sold or redeemed any of the Company’s shares during the year
ended 31 December 2021 with the exception of 8,277,353 shares (2020: 1,552,886 shares) of the Company purchased by
and nil share (2020: nil) of the Company sold by the employee share-based trusts. These purchases were made by the
relevant scheme trustees on the Hong Kong Stock Exchange (HKSE). These shares are held on trust for participants of the
relevant schemes and therefore were not cancelled.
During the year ended 31 December 2021, 6,714,317 shares (2020: 12,667,066 shares) were transferred to eligible
directors, officers and employees of the Group from the employee share-based trusts under share-based compensation
plans as a result of vesting. As at 31 December 2021, 30,311,301 shares (2020: 28,748,261 shares) of the Company were
held by the employee share-based trusts.
Reserves
Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value of available for sale securities held at the end
of the reporting period.
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign currency exchange differences arising from the translation
of the financial statements of foreign operations.
Employee share-based trusts
Trusts have been established to acquire shares of the Company for distribution to participants in future periods through the
share-based compensation plans. Where the Group is deemed to control the trusts, they are consolidated. Those shares
acquired by the trusts, to the extent not transferred to the participants upon vesting, are reported as “Employee share-
based trusts” and carried at cost.
Property revaluation reserve
Property revaluation reserve comprises the cumulative net change in the revalued amount of property held for own use at
the end of the reporting period. Property revaluation surplus is not considered to be a realised profit available for distribution
to shareholders.
Other reserves
Other reserves mainly include the impact of merger accounting for business combinations under common control and
share-based compensation.
230
FINANCIAL STATEMENTSAIA GROUP LIMITED 36. NON-CONTROLLING INTERESTS
US$m
Equity shares in subsidiaries
Share of earnings
Share of other reserves
Total
As at
31 December
2021
As at
31 December
2020
80
391
(4)
467
69
369
30
468
37. GROUP CAPITAL STRUCTURE
Capital Management Approach
The Group’s capital management objectives focus on maintaining a strong capital base to support the development of its
business, maintaining the ability to move capital freely among Group members and satisfying regulatory capital
requirements at all times.
The Group’s capital management function oversees all capital-related activities of the Group and assists senior management
in making capital decisions. The capital management function participates in decisions concerning asset-liability
management, strategic asset allocation and ongoing solvency management. This includes ensuring capital considerations
are paramount in the strategy and business planning processes and when determining AIA’s capacity to pay dividends to
shareholders.
Group-wide Supervision Framework and the Local Capital Summation Method
In 2021, the HKIA implemented the new Group-wide Supervision (GWS) framework under which the HKIA, as the Group
supervisor of the Group, has direct regulatory powers over Hong Kong-incorporated holding companies of designated
insurance groups. On 14 May 2021, the Company became a designated insurance holding company that is therefore
subject to the GWS framework, including the Insurance (Group Capital) Rules (GWS Capital Rules). Under the GWS Capital
Rules, the Group available capital and the Group minimum capital requirement are based on a “summation approach”, and
are referred to as the Local Capital Summation Method (LCSM). The Group is in compliance with the group capital adequacy
requirements as applied to it by the HKIA.
Under the LCSM, the Group available capital and the Group minimum capital requirement are calculated based on summing
up of the available capital and applicable minimum required capital according to the respective regulatory requirements
for each entity within the Group, subject to any variation considered necessary by the HKIA. The Group LCSM surplus is the
difference between the Group available capital and the Group minimum capital requirement. The Group LCSM cover ratio
is the ratio of the Group available capital to the Group minimum capital requirement.
At 31 December 2021, the Group available capital includes:
(i) US$3,768m(1) of subordinated securities. Subordinated securities with a fixed maturity receive full capital credit up to
the date that is 5 years prior to the date of maturity, with the capital credit then reducing at the rate of 20 per cent per
annum until maturity. Perpetual subordinated securities receive full capital credit unless they are redeemed; and
(ii) US$5,820m(1) of senior notes issued before designation that have been approved by the HKIA. Prior to maturity, the
approved senior notes receive full capital credit until 14 May 2031, after which the capital credit reduces at the rate of
20 per cent per annum until 14 May 2036.
The comparative figures as at 31 December 2020 were based on the Group’s understanding of the likely application of the
GWS framework to the Group at the time and included US$1,735m of subordinated securities, while excluding US$5,822m
carrying amount of senior notes not then approved as contributing to Group available capital. This is largely consistent with
the basis of calculation of the Group LCSM solvency position as at 31 December 2021 with the key difference being the
treatment of senior notes.
Note:
(1) The amounts represent the carrying value of medium-term notes and securities contributing to Group available capital. These are counted as tier
2 group capital under the GWS Capital Rules.
231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 37. GROUP CAPITAL STRUCTURE (continued)
Group-wide Supervision Framework and the Local Capital Summation Method (continued)
A summary of the Group LCSM solvency position is as follows:
US$m
Group available capital
Group minimum capital requirement
Group LCSM surplus
Group LCSM cover ratio
As at
31 December
2021
As at
31 December
2020
(Unaudited)
67,611
16,948
50,663
399%
59,830
16,013
43,817
374%
Local Regulatory Solvency
The Group’s individual branches and subsidiaries are also subject to the supervision of government regulators in the
jurisdictions in which those branches and subsidiaries and their parent entity operate and, in relation to subsidiaries, in
which they are incorporated. The various regulators overseeing the Group actively monitor our local solvency positions.
The Group’s principal operating companies AIA Co. and AIA International Limited (AIA International), as authorised insurers
in Hong Kong, are required by the HKIA to meet the solvency margin requirements of the Hong Kong Insurance Ordinance.
During the year ended 31 December 2021 and 31 December 2020, these two principal operating companies were in
compliance with these solvency requirements.
Dividends, remittances and other payments from individual branches and subsidiaries
The ability of the Company to pay dividends to shareholders and to meet other obligations depends ultimately on dividends,
remittances and other payments being received from its operating branches and subsidiaries, which are subject to
contractual, regulatory and other limitations. The various regulators overseeing the individual branches and subsidiaries
of the Group have the discretion to impose additional restrictions on the ability of those regulated branches and subsidiaries
to make payment of dividends, remittances and other payments to AIA Co., including increasing the required margin of
solvency that an operating unit must maintain. For example, capital may not be remitted without the consent from regulators
for certain individual branches or subsidiaries of the Group.
232
FINANCIAL STATEMENTSAIA GROUP LIMITED 37. GROUP CAPITAL STRUCTURE (continued)
Capital and Regulatory Orders Specific to the Group
On 14 May 2021, AIA Group Limited became a designated insurance holding company and is therefore subject to the GWS
framework. The HKIA has confirmed that the requirements and restrictions summarised below, which were previously in
place, have ceased to apply as of 14 May 2021.
Hong Kong Insurance Authority
AIA Group Limited had given to the HKIA an undertaking that AIA Group Limited will:
(i) ensure that (a) each of AIA Co. and AIA International will at all times maintain an excess of assets over liabilities of not
less than the aggregate of 150 per cent of the Hong Kong statutory minimum solvency margin requirement in respect
of the Hong Kong branch and no less than 100 per cent of the Hong Kong statutory minimum solvency margin
requirement for branches other than Hong Kong (“minimum amount”); (b) it will not withdraw capital or transfer any
funds or assets out of AIA Co. or AIA International that will cause the solvency ratio to fall below the minimum amounts
specified in (a), except with, in either case, the prior written consent of the HKIA; and (c) should the solvency ratio of
either AIA Co. or AIA International fall below the respective minimum amounts, AIA Group Limited will take steps as
soon as possible to restore it to at least the respective minimum amounts in a manner acceptable to the HKIA;
(ii) notify the HKIA in writing as soon as the Company becomes aware of any person (a) becoming a controller (within the
meaning of Section 9(1)(a)(iii)(B) of the Hong Kong Insurance Ordinance (HKIO)) of AIA Co. and AIA International
through the acquisition of our shares traded on the HKSE; or (b) ceasing to be a controller (within the meaning of
Section 9(1)(a)(iii)(B) of the HKIO) of AIA Co. and AIA International through the disposal of our shares traded on the
HKSE;
(iii) be subject to the supervision of the HKIA and AIA Group Limited will be required to continually comply with the HKIA’s
guidance on the “fit and proper” standards of a controller pursuant to Section 8(2) of the HKIO. The HKIA is empowered
by the HKIO to raise objection if it appears to it that any person is not fit and proper to be a controller or director of an
authorised insurer. These standards include the sufficiency of a holding company’s financial resources; the viability
of a holding company’s business plan for its insurance subsidiaries which are regulated by the HKIA; the clarity of the
Group’s legal, managerial and operational structures; the identities of any other holding companies or major regulated
subsidiaries; whether the holding company, its directors or controllers is subject to receivership, administration,
liquidation or other similar proceedings or failed to satisfy any judgement debt under a court order or the subject of
any criminal convictions or in breach of any statutory or regulatory requirements; the soundness of the Group’s
corporate governance; the soundness of the Group’s risk management framework; the receipt of information from its
insurance subsidiaries which are regulated by the HKIA to ensure that they are managed in compliance with applicable
laws, rules and regulation; and its role in overseeing and managing the operations of its insurance subsidiaries which
are regulated by the HKIA; and
(iv) fulfil all enhancements or improvements to the guidance referred to in subparagraph (iii) above, as well as
administrative measures issued from time to time by the HKIA or requirements that may be prescribed by the HKIA in
accordance with the HKIO, regulations under the HKIO or guidelines issued by the HKIA from time to time.
233
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 38. RISK MANAGEMENT
Risk management framework
AIA recognises the importance of sound risk management in every aspect of our business and for all our stakeholders. The
Risk Management Framework (RMF) provides the structure for identifying, quantifying and mitigating risk across the
Group. An effective RMF is the key to avoiding the financial and reputational damage that arises from inadequate or
ineffective control of the risks in the business.
Insurance risk
Insurance risk is the risk arising from changes in claims experience as well as more general exposure relating to the
acquisition and persistency of insurance business. This also includes changes to assumptions regarding future experience
for these risks.
Lapse
Lapse risk is the risk policies lapse, on average, earlier than assumed in the pricing or reserving assumptions.
Ensuring customers buy products that meet their needs is central to the Group’s Operating Philosophy. Through effective
implementation of the Business Quality Framework, comprehensive sales training programmes and active monitoring of
sales activities and persistency, the Group seeks to ensure that appropriate products are sold by qualified sales
representatives and that standards of service consistently meet our customers’ needs.
Expense
Expense risk is the risk of greater than expected trends in, or sudden shocks to, the amount or timing of expenses incurred
by the business.
Daily operations follow a disciplined budgeting and control process that allows for the management of expenses based on
the Group’s very substantial experience within the markets in which we operate.
Morbidity and Mortality
Morbidity and mortality risk is the risk that the incidence and/or amounts of medical/death claims are higher than the
assumptions made in pricing and/or reserving.
The Group adheres to well-defined market-oriented underwriting and claims guidelines and practices that have been
developed based on extensive historical experience and with the assistance of professional reinsurers.
The Group’s actuarial teams conduct regular experience studies of all the insurance risk factors in its in-force book. These
internal studies together with external data are used to identify emerging trends which can then be used to inform product
design, pricing, underwriting, claims management and reinsurance needs.
Through monitoring the development of both local and global trends in medical technology, health and wellness, the
impact of legislation and general social, political and economic conditions the Group seeks to anticipate and respond
promptly to potential adverse experience impacts on its products.
Reinsurance is used to reduce concentration and volatility risk, especially with large policies or new risks, and as protection
against catastrophic events such as pandemics or natural disasters.
The Group manages insurance risk concentration by diversification, reinsurance and establishing retention limits. Insurance
risk concentration can arise when there is concentrated exposure geographically or to one single insured life. Geographical
concentration of insured individuals could increase the severity of claims from natural catastrophic events or human-made
disasters. The Group’s insured populations are geographically dispersed, thereby diversifying the insurance exposure. The
Group also has catastrophic reinsurance in place to cover losses due to a single catastrophic event exceeding a pre-
determined level. The Group limits its exposure to large claims on any single insured by applying retention limits that vary
by market and insurance benefit type to the amount of insurance coverage per insured. The exposure in excess of these
limits is ceded to reinsurers. For the year ended 31 December 2021 and 2020, there were no significant insurance
concentration risks.
234
FINANCIAL STATEMENTSAIA GROUP LIMITED 38. RISK MANAGEMENT (continued)
Investment and financial risks
Investment objectives, policies and processes
The Group manages its financial investments in two distinct categories: unit-linked investments and policyholder and
shareholder investments. The investment risk in respect of unit-linked investments is generally wholly borne by our
customers, and does not directly affect the profit for the year before tax. Policyholder and shareholder investments include
all financial investments other than unit-linked investments. The investment risk in respect of policyholder and shareholder
investments is partially or wholly borne by the Group and directly affects the profit for the year before tax.
The primary investment objectives of our policyholder and shareholder investments are generally designed to achieve
optimal levels of risk-adjusted return for policyholders and shareholders over the long-term, while preserving capital,
maintaining adequate solvency and liquidity levels, meeting our risk management and asset-liability management
objectives and ensuring full compliance with applicable regulations and internal policies.
The Group has comprehensive, integrated frameworks to ensure investments are properly authorised, monitored and
managed within internal policies that address asset-liability management, financial and operational risks, whether assets
are invested directly by the Group or through external investment managers. This framework consists of three elements: a
strategic asset allocation framework; a tactical asset allocation process; and a combination of internal and external
investment management for individual asset classes where appropriate.
The Group’s investment management function is empowered with decision-making authority and complies with exposure
limits as defined in Risk Standards.
Asset-liability management
Asset-liability management for the Group is overseen by the Group Asset-Liability Committee and by asset-liability
committees in each business unit. The Group manages its asset-liability risks in a variety of ways, including the strategic
asset allocation process under which the strategic asset allocation in each entity and for major different product groups is
governed, defining the amount of assets that can be allocated to each asset type taking into account the characteristics of
the liabilities and related risks, capital and other requirements including economic and regulatory bases. The Group
manages asset-liability risks predominantly on an economic basis, while also considering the effect on all applicable
regulatory solvency requirements and other considerations such as the effect on earnings. Asset-liability management
actions include product pricing and product design, reviews of policyholder dividends, reinsurance, and the management
of discretionary policyholder benefits. Derivatives are used to manage the asset-liability position against adverse market
movements. The key asset-liability risks for the Group are credit risk, interest rate risk, credit spread risk, equity risk and
foreign exchange rate risk which are summarised below.
235
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 38. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Credit risk
Credit risk is the risk that third parties fail to meet their obligations to the Group when they fall due. Although the primary
source of credit risk is the Group’s investment portfolio, such risk can also arise through reinsurance, procurement, and
treasury activities.
The Group’s credit risk management oversight process is governed centrally, but provides for decentralised management
and accountability by our lines of defence. A key to AIA’s credit risk management is adherence to a well-controlled
underwriting process. The Group’s credit risk management starts with the assignment of an internal rating to all
counterparties. A detailed analysis of each counterparty is performed and a rating is determined by the investment teams.
The Group’s Risk Management function manages the Group’s internal ratings framework and conducts periodic rating
validations. Measuring and monitoring of credit risk is an ongoing process and is designed to enable early identification of
emerging risk.
Interest rate risk and credit spread risk
The Group’s exposure to interest rate risk predominantly arises from any differences between the duration of the Group’s
liabilities and assets. Since most markets do not have assets of sufficient tenor to match life insurance liabilities, an
uncertainty arises around the reinvestment of maturing assets to match the Group’s insurance liabilities.
Credit spread risk is the risk of changes in credit spreads affecting the value of assets and liabilities.
AIA manages interest rate risk and credit spread risk primarily on an economic basis to determine the durations of both
assets and liabilities. Interest rate risk on local solvency basis is also taken into consideration for business units where local
solvency regimes deviate from economic basis. Furthermore, for products with discretionary benefits, additional modelling
of interest rate risk is performed to guide determination of appropriate management actions. Management also takes into
consideration the asymmetrical impact of interest rate movements when evaluating products with options and guarantees.
Exposure to interest rate risk
The table below summarises the nature of the interest rate risk associated with financial assets and financial liabilities. In
preparing this analysis, fixed rate interest bearing instruments that mature or reprice within 12 months of the reporting
date have been disclosed as variable rate instruments.
US$m
31 December 2021
Financial assets
Loans and deposits
Other receivables
Debt securities
Equity shares and interests in investment funds
Reinsurance receivables
Accrued investment income
Cash and cash equivalents
Derivative financial instruments
Total financial assets
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Other liabilities
Derivative financial instruments
Total financial liabilities
236
Variable
interest rate
Fixed
interest rate
Non-interest
bearing
Total
1,329
312
7,307
2
13,170
186,910
–
–
–
4,227
–
–
–
–
–
–
675
2,701
–
71,017
992
1,837
762
1,468
9,311
3,015
200,080
71,017
992
1,837
4,989
1,468
19,038
194,219
79,452
292,709
–
–
1,588
222
–
1,810
–
9,588
–
479
–
10,067
11,595
11,595
–
–
7,823
1,392
20,810
9,588
1,588
8,524
1,392
32,687
FINANCIAL STATEMENTSAIA GROUP LIMITED
38. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Exposure to interest rate risk (continued)
US$m
31 December 2020
Financial assets
Loans and deposits
Other receivables
Debt securities
Equity shares and interests in investment funds
Reinsurance receivables
Accrued investment income
Cash and cash equivalents
Derivative financial instruments
Total financial assets
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Other liabilities
Derivative financial instruments
Total financial liabilities
Variable
interest rate
Fixed
interest rate
Non-interest
bearing
Total
1,020
69
10,735
–
–
–
4,071
–
7,421
1
191,146
–
–
–
–
–
894
2,636
–
59,182
671
1,822
1,548
1,069
9,335
2,706
201,881
59,182
671
1,822
5,619
1,069
15,895
198,568
67,822
282,285
–
500
1,664
409
–
2,573
–
8,059
–
503
–
8,562
12,569
12,569
–
–
6,885
1,003
20,457
8,559
1,664
7,797
1,003
31,592
Equity price risk
Equity price risk arises from changes in the market value of equity shares and interests in investment funds. Investments
in equity shares and interests in investment funds on a long-term basis are expected to align policyholders’ expectations,
provide diversification benefits and enhance returns. The extent of exposure to equities at any time is subject to the terms
of the Group’s strategic asset allocations.
Equity price risk is managed in the first instance through the individual investment mandates which define benchmarks
and any tracking error targets. Equity limits are also applied to contain individual exposures. Equity exposures are included
in the aggregate exposure reports on each individual counterparty to ensure concentrations are avoided.
237
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
38. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Concentration risk
The greatest aggregate concentration of fair value to an individual issuer (excluding all government bonds) is less than 1
per cent of the total equity and debt investments as at 31 December 2021 and 2020.
Sensitivity analysis
Sensitivity analysis to the key variables affecting financial assets and liabilities is set out in the table below. Information
relating to sensitivity of insurance and investment contracts with DPF is provided in note 29. The carrying values of other
financial assets are not subject to changes in response to movements in interest rates or equity prices. In calculating the
sensitivity of debt and equity instruments to changes in interest rates and equity prices, the Group has made assumptions
about the corresponding impact of asset valuations on liabilities to policyholders. Assets held to support unit-linked
contracts have been excluded on the basis that changes in fair value are wholly borne by policyholders. Sensitivity analysis
for assets held in participating funds has been calculated after allocation of returns to policyholders using the applicable
minimum policyholder participation ratios described in note 2.
Information is presented to illustrate the estimated impact on profits and total equity arising from a change in a single
variable before taking into account the effects of taxation.
The impact of any impairments of financial assets has been ignored for the purpose of illustrating the sensitivity of profit
before tax and total equity before the effects of taxation to changes in interest rates and equity prices on the grounds that
default events reflect the characteristics of individual issuers. As the Group’s accounting policies lock in interest rate
assumptions on policy inception and the Group’s assumptions incorporate a provision for adverse deviations, the level of
movement illustrated in this sensitivity analysis does not result in loss recognition and so there is not any corresponding
effect on liabilities.
31 December 2021
31 December 2020
Impact on
total equity
(before the
effects of
taxation)
Impact on
allocated
equity
(before the
effects of
taxation)
Impact on
profit
before tax
Impact on
total equity
(before the
effects of
taxation)
Impact on
allocated
equity
(before the
effects of
taxation)
Impact on
profit
before tax
US$m
Equity price risk
10 per cent increase in equity prices
1,608
1,608
1,608
1,091
1,091
1,091
10 per cent decrease in equity prices
(1,608)
(1,608)
(1,608)
(1,091)
(1,091)
(1,091)
Interest rate risk
+ 50 basis points shift in yield curves
(1,152)
(8,585)
(1,152)
– 50 basis points shift in yield curves
1,193
9,539
1,193
(550)
584
(8,403)
9,356
(550)
584
238
FINANCIAL STATEMENTSAIA GROUP LIMITED 38. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Foreign exchange rate risk
The Group’s foreign exchange rate risk arises mainly from the Group’s operations in multiple geographical markets in Asia
and the translation of multiple currencies to US dollar for financial reporting purposes. The balance sheet values of our
operating units and subsidiaries are not hedged to the Group’s presentation currency, the US dollar.
Assets, liabilities and local regulatory and stress capital in each business unit are generally currency matched with the
exception of holdings of equities denominated in currencies other than the functional currency, or any expected capital
movements due within one year which may be hedged. Bonds denominated in currencies other than the functional
currency are commonly hedged with cross-currency swaps or foreign exchange forward contracts.
Foreign exchange rate net exposure
US$m
United States
Dollar
China
Renminbi
Hong Kong
Dollar
Thai
Baht
Singapore
Dollar
Malaysian
Ringgit
31 December 2021
Equity analysed by original currency
Net positions of currency derivatives
Currency exposure
5% strengthening of original currency
Impact on profit before tax
Impact on other comprehensive income
Impact on total equity
5% strengthening of the US dollar
Impact on profit before tax
Impact on other comprehensive income
Impact on total equity
30,845
(8,610)
22,235
11,470
-
11,470
2,539
323
2,862
5,144
2,739
7,883
(5,700)
3,704
(1,996)
2,410
329
2,739
469
(487)
(18)
469
(487)
(18)
253
320
573
(249)
(324)
(573)
33
44
77
2
(79)
(77)
9
385
394
(8)
(386)
(394)
7
(106)
(99)
13
86
99
5
132
137
(5)
(132)
(137)
US$m
United States
Dollar
China
Renminbi
Hong Kong
Dollar
Thai
Baht
Singapore
Dollar
Malaysian
Ringgit
31 December 2020
Equity analysed by original currency
Net positions of currency derivatives
Currency exposure
5% strengthening of original currency
Impact on profit before tax
Impact on other comprehensive income
Impact on total equity
5% strengthening of the US dollar
Impact on profit before tax
Impact on other comprehensive income
Impact on total equity
35,400
(9,942)
25,458
5,862
–
5,862
4,617
650
5,267
6,445
3,457
9,902
(4,644)
4,239
(405)
2,516
135
2,651
260
(286)
(26)
260
(286)
(26)
41
252
293
(34)
(259)
(293)
71
141
212
(5)
(207)
(212)
9
485
494
(6)
(488)
(494)
25
(45)
(20)
(9)
29
20
5
128
133
(4)
(129)
(133)
239
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 38. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Liquidity risk
The liquidity principle adopted by the Group Board is “AIA will maintain sufficient liquidity to meet our expected financial
commitments as they fall due” and as such AIA has defined liquidity risk as the risk of failure to meet current and future
financial commitments as they fall due. This incorporates the risks arising from the timing mismatch of cash inflows and
outflows in day-to-day operations, including policyholder and third-party payments, collateral requirements, as well as
insufficient market liquidity of assets required for policyholder liabilities.
AIA manages liquidity risk in accordance with the Group’s liquidity framework. This framework contains the standards,
procedures and tools used by the Group to monitor and manage liquidity risk on a forward-looking basis in base and
stressed conditions across multiple time horizons from daily to twelve months. The forward-looking management of
liquidity allows early detection of trends enabling management to proactively manage liquidity with reference to the pre-
defined contingency plan. The framework is comprised of four key pillars:
• Daily Cash Forecasting and Liquidity Adequacy Ratio;
• Structural Liquidity Adequacy Ratio;
• Market-based Asset Liquidity Monitoring; and
• Liquidity Management and Contingency Plans.
AIA supports its liquidity internally by maintaining appropriate pools of unencumbered high-quality liquid investment
assets. Liquidity is further supported externally via access to committed credit facilities, use of bond repurchase markets
and debt markets via the Group’s Global Medium-term Note and Securities Programme.
The Group’s liquidity framework builds liquidity resiliency in all our markets while providing central oversight and the
ability to take timely management action if required to ensure we meet all our financial commitments as they fall due.
The maturity profile of our financial assets, financial liabilities and insurance contract liabilities are presented below which
provides a supplemental long-term view on the Group’s liquidity profile.
240
FINANCIAL STATEMENTSAIA GROUP LIMITED 38. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Liquidity risk (continued)
US$m
31 December 2021
Financial assets (Policyholder and
shareholder investments)
Loans and deposits
Other receivables
Debt securities
Equity shares and interests
in investment funds
Reinsurance receivables
Accrued investment income
Cash and cash equivalents
Derivative financial instruments
Due in
one year
or less
Due after
one year
through
five years
Due after
five years
through
ten years
Total
Due after
ten years
No fixed
maturity(2)
754
47
458
6
1,623
3,634
7
8,946
2,694
193,420
39,108
992
1,764
3,913
1,419
2,477
2,598
4,234
–
992
1,754
3,913
21,155
28,484
139,547
–
–
2
–
–
–
–
–
–
–
–
–
51
1,037
97
234
36
–
39,108
–
8
–
–
Subtotal
252,256
16,019
22,995
29,045
141,411
42,786
Financial assets (Unit-linked contracts and
consolidated investment funds)
Total
Financial and insurance contract liabilities
(Policyholder and shareholder investments)
Insurance and investment contract liabilities
(net of deferred acquisition and origination
40,453
–
–
–
–
40,453(3)
292,709
16,019
22,995
29,045
141,411
83,239
costs, and reinsurance)
182,484
4,857
17,564
18,621
141,442
–
Borrowings
Obligations under repurchase agreements
Other liabilities excluding lease liabilities
Lease liabilities
Derivative financial instruments
9,588
1,588
6,811
502
1,369
167
1,588
5,330
174
356
1,247(1)
2,686
4,374
1,114
–
213
303
659
–
141
24
131
–
154
1
223
–
973
–
–
Subtotal
202,342
12,472
19,986
21,603
146,194
2,087
Financial and insurance contract liabilities
(Unit-linked contracts and consolidated
investment funds)
Total
37,109
–
–
–
–
239,451
12,472
19,986
21,603
146,194
37,109
39,196
Note:
(1) Including US$748m which fall due after 2 years through 5 years.
241
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
38. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Liquidity risk (continued)
US$m
31 December 2020
Financial assets (Policyholder and
shareholder investments)
Loans and deposits
Other receivables
Debt securities
Equity shares and interests
in investment funds
Reinsurance receivables
Accrued investment income
Cash and cash equivalents
Derivative financial instruments
Subtotal
Financial assets (Unit-linked contracts and
consolidated investment funds)
Total
Financial and insurance contract liabilities
(Policyholder and shareholder investments)
Insurance and investment contract liabilities
(net of deferred acquisition and origination
costs, and reinsurance)
Borrowings
Obligations under repurchase agreements
Other liabilities excluding lease liabilities
Lease liabilities
Derivative financial instruments
Subtotal
Financial and insurance contract liabilities
(Unit-linked contracts and consolidated
investment funds)
Total
Due in
one year
or less
Total
Due after
one year
through
five years
Due after
five years
through
ten years
Due after
ten years
No fixed
maturity(2)
8,940
2,574
195,478
30,950
671
1,757
4,400
1,016
1,997
2,477
3,973
–
671
1,756
4,400
189
1,013
50
580
13
1,793
3,557
–
21,353
31,072
139,080
–
–
1
–
–
–
–
–
–
–
–
–
189
249
389
34
–
30,950
–
–
–
–
245,786
15,463
22,606
31,914
141,262
34,541
36,499
–
–
–
–
36,499(3)
282,285
15,463
22,606
31,914
141,262
71,040
169,477
8,559
1,664
4,025
539
991
4,316
1,002
1,664
2,305
177
135
15,559
17,309
132,293
1,414(4)
2,548
3,595
–
240
325
534
–
150
35
109
–
171
2
213
–
–
–
1,159
–
–
185,255
9,599
18,072
20,151
136,274
1,159
35,125
220,380
–
–
–
–
9,599
18,072
20,151
136,274
35,125
36,284
Notes:
(2) Financial assets with no fixed maturity are equities or receivables on demand which the Group has the choice to call. Borrowings with no fixed
maturity are resettable subordinated perpetual securities issued by the Company. Other financial liabilities with no fixed maturity are payables on
demand as the counterparty has a choice of when the amount is paid.
(3) The total value of amounts within financial assets (Unit-linked contracts and consolidated investment funds) is included within the no fixed
maturity category to facilitate comparison with the corresponding total value of amounts within financial and insurance contract liabilities (Unit-
linked contracts and consolidated investment funds). Included within financial assets (Unit-linked contracts and consolidated investment funds)
are debt securities of US$626m (2020: US$433m) due in one year or less, US$2,753m (2020: US$2,622m) due after 1 year through 5 years,
US$2,019m (2020: US$1,934m) due after 5 years through 10 years and US$1,262m (2020: US$1,414m) due after 10 years, in accordance with
the contractual terms of the financial investments.
(4) Including US$1,246m which fall due after 2 years through 5 years.
242
FINANCIAL STATEMENTSAIA GROUP LIMITED
38. RISK MANAGEMENT (continued)
Transactions within the Group
Intra-group transactions are overseen by the relevant Group Office functions to ensure adherence with the relevant Group
policies. The Group Risk function oversees the processes to identify and assess material systematic intra-group transaction
risks, and ensure risks assumed are within the Group’s Risk Management Framework.
During the period ended 31 December 2021, material intra-group transactions related to financing, reinsurance, service
supports, insourcing and collective investment funds that provide a simple return of capital guarantee and are backed by
investment grade fixed income assets.
39. EMPLOYEE BENEFITS
Post-retirement benefit obligations
The Group operates a number of funded and unfunded post-retirement employee benefit schemes, whose members
receive benefits on either a defined benefit basis (generally related to salary and length of service) or a defined contribution
basis (generally related to the amount invested, investment return and annuity rates), the assets of which are generally
held in separate trustee-administered funds. The defined benefit plans provide life and medical benefits for employees
after retirement and a lump sum benefit on cessation of employment, and the defined contribution plans provide post-
retirement pension benefits.
Defined benefit plans
The Group operates funded and unfunded defined benefit plans that provide life and medical benefits for participating
employees after retirement and a lump sum benefit on cessation of employment. The locations covered by these plans
include Hong Kong, Singapore, Malaysia, Thailand, Indonesia, South Korea, the Philippines, Sri Lanka, Taiwan (China) and
Vietnam. The latest independent actuarial valuation of the plans was at 31 December 2021 and was prepared by
credentialed actuaries of Towers Watson Hong Kong Limited. All the actuaries are qualified members of professional
actuarial organisations to render the actuarial opinions.
For defined benefit plans, the costs are assessed using the projected unit credit method. Under this method, the cost of
providing benefits is charged to the consolidated income statement so as to spread the regular cost over the service lives
of employees, in accordance with the advice of qualified actuaries. The obligation is measured as the present value of the
estimated future cash outflows, using a discount rate based on market yields for high-quality corporate bonds that are
denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms
of the related liability. The resulting scheme surplus or deficit appears as an asset or liability in the consolidated statement
of financial position.
The actuarial valuations indicate that the Group’s obligations under these defined benefit retirement plans are 46 per cent
(2020: 39 per cent) covered by the plan assets held by the trustees. The fair value of plan assets as at year end at the date
of valuation was US$96m (2020: US$96m). The total expenses relating to these plans recognised in the consolidated
income statement was US$11m (2020: US$14m).
Defined contribution plans
For defined contribution plans, the Group pays contributions to publicly or privately administered pension plans. Once the
contributions have been paid, the Group, as employer, does not have any further payment obligations. The Group’s
contributions are charged to the consolidated income statement in the reporting period to which they relate and are
included in employee benefit expenses. The total expense relating to these plans in the current year was US$121m (2020:
US$93m). Employees and the employer are required to make monthly contributions equal to 1 per cent to 20 per cent of
the employees’ monthly basic salaries, depending on years of service and subject to any applicable caps of monthly
relevant income in different jurisdictions. For defined contribution pension plans with vesting conditions, any forfeited
contributions by employers on behalf of employees who leave the scheme prior to vesting fully in such contributions are
used by the employer to reduce any future contributions. The amount of forfeited contributions used to reduce the existing
level of contributions is not material.
243
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 40. SHARE-BASED COMPENSATION
Share-based compensation plans
The Group’s share-based compensation plans are equity-settled plans. Under equity-settled share-based compensation
plan, the fair value of the employee services received in exchange for the grant of shares and/or share options is recognised
as an expense in profit or loss over the vesting period with a corresponding amount recorded in equity.
The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares and/or
share options granted. Non-market vesting conditions are included in assumptions about the number of shares and/or
share options that are expected to be vested. At each period end, the Group revises its estimates of the number of shares
and/or share options that are expected to be vested. Any impact of the revision to original estimates is recognised in profit
or loss with a corresponding adjustment to equity. Where grants of share-based payment arrangements have graded
vesting terms, each tranche is recognised as a separate grant, and therefore the fair value of each tranche is recognised
over the applicable vesting period.
Where modification or cancellation of an equity-settled share-based compensation plan occurs, the grant date fair value
continues to be recognised, together with any incremental value arising on the date of modification if non-market conditions
are met.
During the year ended 31 December 2020, the 2010 Share Option (SO) Scheme, the 2010 Restricted Share Unit (RSU)
Scheme and the 2011 Employee Share Purchase Plan (ESPP) were terminated. There shall be no further grants under
either of these schemes. However, these schemes shall remain in full force and effect for all grants prior to its termination,
and the exercise and the vesting of these grants shall be subject to and in accordance with the terms on which they were
granted under the provisions of each of these schemes, and the Listing Rules, where applicable. In the same year, the
Group adopted the 2020 SO Scheme, the 2020 RSU Scheme and the 2020 ESPP Plan.
During the year ended 31 December 2021, the Group made new grants of SOs, RSUs and restricted stock purchase units
(RSPUs) to certain directors, officers and employees of the Group under these new schemes.
On 1 February 2021, the Company adopted the new 2021 Agency Share Purchase Plan (ASPP) with an effective period of
10 years from the date of adoption. The 2012 ASPP was terminated with effect from 31 March 2021, after which time no
further restricted stock subscription units (RSSUs) can be granted under such plan. The 2012 ASPP shall remain in full
force and effect for all RSSUs granted prior to this termination, and the vesting of such RSSUs shall be subject to and in
accordance with the terms on which they were granted under the provisions of the 2012 ASPP.
During the year ended 31 December 2021, the Group made new grants of RSSUs to eligible agents under the 2021 ASPP
and 2012 ASPP.
RSU Schemes
Under the RSU Schemes, the vesting of the granted RSUs is conditional upon the eligible participants remaining in
employment with the Group during the respective vesting periods. RSU grants are vested either entirely after a specific
period of time or in tranches over the vesting period during which, the eligible participants are required to remain in
employment with the Group. For RSU grants that are vested in tranches, each vesting tranche is accounted for as a separate
grant for the purposes of recognising the expense over the respective vesting period. For most RSUs, performance
conditions are also attached which include both market and non-market conditions. RSUs subject to performance
conditions are released to the participants at the end of the vesting period depending on the actual achievement of the
performance conditions. During the vesting period, the participants are not entitled to dividends of the underlying shares.
Except in jurisdictions where restrictions apply, the granted RSUs are expected to be settled in equity. The total number of
shares that can be granted under this scheme is 302,264,978 (2020: 302,264,978), representing 2.5 per cent of the
number of shares in issue on the reference date, being the 2020 AGM date.
244
FINANCIAL STATEMENTSAIA GROUP LIMITED 40. SHARE-BASED COMPENSATION (continued)
Share-based compensation plans (continued)
RSU Schemes (continued)
Number of shares
Restricted Share Units
Outstanding at beginning of financial year
Granted
Forfeited
Vested
Outstanding at end of financial year
Year ended
31 December
2021
Year ended
31 December
2020
31,787,067
32,733,981
9,484,581
13,451,940
(7,157,591)
(2,836,395)
(5,695,099)
(11,562,459)
28,418,958
31,787,067
SO Schemes
The objectives of the SO Schemes are to align eligible participants’ interests with those of the shareholders of the Company
by allowing eligible participants to share in the value created at the point they exercise their options. SO grants are vested
either entirely after a specific period of time or in tranches over the vesting period approximately three to five years, during
which the eligible participants are required to remain in employment with the Group. For SO grants that are vested in
tranches, each vesting tranche is accounted for as a separate grant for the purposes of recognising the expense over the
respective vesting periods. The granted SOs expire 10 years from the date of grant and each SO entitles the eligible
participant to subscribe for one ordinary share. Subject to restrictions in the applicable laws, regulations and rules of the
relevant jurisdictions, the granted SOs are expected to be settled in equity. The total number of shares under options that
can be granted under this scheme is 302,264,978 (2020: 302,264,978), representing 2.5 per cent of the number of shares
in issue on the date of adoption.
Information about SOs outstanding and SOs exercisable by the Group’s employees and directors as at the end of the
reporting period is as follows:
Share options
Outstanding at beginning of financial year
Granted
Exercised
Forfeited or expired
Outstanding at end of financial year
Share options exercisable at end of financial year
Year ended
31 December 2021
Year ended
31 December 2020
Number of
share options
Weighted
average
exercise price
(HK$)
Number of
share options
Weighted
average
exercise price
(HK$)
23,703,809
1,849,222
(871,896)
(1,321,364)
23,359,771
13,167,380
59.53
97.33
31.27
70.77
62.94
52.72
23,798,042
5,856,668
(4,876,916)
(1,073,985)
23,703,809
10,115,925
53.86
68.10
40.01
69.34
59.53
45.22
At the respective dates on which the SOs were exercised, the weighted average share price of the Company was HK$92.01
for the year ended 31 December 2021 (2020: HK$80.73).
245
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 40. SHARE-BASED COMPENSATION (continued)
Share-based compensation plans (continued)
SO Schemes (continued)
The range of exercise prices for the SOs outstanding as of 31 December 2021 and 2020 is summarised in the table below.
Range of exercise price
HK$26 – HK$35
HK$36 – HK$45
HK$46 – HK$55
HK$56 – HK$65
HK$66 – HK$75
HK$76 – HK$85
HK$86 – HK$95
Outstanding at end of financial year
Year ended
31 December 2021
Year ended
31 December 2020
Number of
share options
outstanding
Weighted
average
remaining
contractual life
(years)
Number of
share options
outstanding
Weighted
average
remaining
contractual life
(years)
753,331
2,628,717
5,103,806
830,436
8,774,030
3,429,658
1,839,793
23,359,771
0.87
3.56
4.60
5.58
7.36
7.24
9.23
6.19
1,542,961
2,633,722
5,108,806
830,436
9,759,038
3,828,846
–
23,703,809
1.30
4.57
5.60
6.58
8.42
8.24
–
6.83
ESPP
Under the ESPPs, eligible employees of the Group can purchase ordinary shares of the Company with qualified employee
contributions and the Company will grant one matching RSPU to them at the end of the vesting period for each two shares
purchased through the qualified employee contributions (contribution shares). Contribution shares are purchased from
the open market. During the relevant vesting period, the eligible employees must hold the contribution shares purchased
and remain employed by the Group in order to qualify to receive the matching shares upon the vesting of the matching
RSPUs. The granted matching RSPUs are expected to be settled in equity. Under the 2011 ESPP, the level of qualified
employee contribution was subject to a maximum amount equal to 8 per cent of the monthly base salary or HK$9,750 (or
local currency equivalent) per month, whichever is lower. Under the 2020 ESPP, the level of qualified employee contribution
is subject to a maximum amount equal to 10 per cent of the monthly base salary or HK$12,500 (or local currency equivalent)
per month, whichever is lower. For the year ended 31 December 2021, eligible employees paid US$38m (2020: US$32m)
to purchase 3,172,021 ordinary shares (2020: 3,126,641 ordinary shares) of the Company under the ESPPs.
ASPP
The structure of the ASPPs generally follows those of the ESPPs, the key difference is that the eligible agents are required
to pay a subscription price of US$1 to subscribe for each new share in the Company at the end of the vesting period. Under
the plans, eligible agents of the Group can purchase ordinary shares of the Company with qualified agent contributions and
the Company will grant one matching RSSU to them at the end of the vesting period for each two shares purchased
through the qualified agent contributions (agent contribution shares). Each RSSU entitles eligible agents to subscribe for
one new share of the Company. Agent contribution shares are purchased from the open market. During the vesting period,
the eligible agents must hold the contribution shares purchased and maintain their agent contracts with the Group in order
to qualify to receive the matching shares upon the vesting of the matching RSSUs. The granted matching RSSUs are
expected to be settled in equity. Under the ASPPs, the level of qualified agent contribution is subject to a maximum amount
of HK$9,750 (or local currency equivalent) per month and HK$12,500 (or local currency equivalent) per month respectively.
For the year ended 31 December 2021, eligible agents paid US$20m (2020: US$24m) to purchase 1,717,835 ordinary
shares (2020: 2,411,360 ordinary shares) of the Company under the ASPPs.
246
FINANCIAL STATEMENTSAIA GROUP LIMITED 40. SHARE-BASED COMPENSATION (continued)
Valuation methodology
The Group utilises a binomial lattice model to calculate the fair value of the SO grants, a Monte-Carlo simulation model
and/or discounted cash flow technique to calculate the fair value of the RSU, RSPU and RSSU grants, taking into account
the terms and conditions upon which the grants were made. The price volatility is estimated on the basis of implied volatility
of the Company’s shares which is based on an analysis of historical data since they are traded in the HKSE. The expected
life of the SOs is derived from the output of the valuation model and is calculated based on an analysis of expected exercise
behaviour of the Company’s employees. The estimate of market condition for performance-based RSUs is based on one-
year historical data preceding the grant date. An allowance for forfeiture prior to vesting is not included in the valuation of
the grants.
The fair value calculated for SOs is inherently subjective due to the assumptions made and the limitations of the model
utilised.
Year ended 31 December 2021
Share options
Restricted
share units
ESPP Restricted
stock purchase
units
ASPP Restricted
stock subscription
units
Assumptions
Risk-free interest rate
Volatility
Dividend yield
Exercise price (HK$)
Share option life (in years)
Expected life (in years)
Weighted average fair value per option/unit at
measurement date (HK$)
Assumptions
Risk-free interest rate
Volatility
Dividend yield
Exercise price (HK$)
Share option life (in years)
Expected life (in years)
Weighted average fair value per option/unit at
measurement date (HK$)
* Applicable to RSU with market conditions.
1.24% 0.19% – 0.27%* 0.14% – 0.83%
26%
26%
n/a
1.60% 1.60% – 1.70% 1.60% – 1.70%
n/a
n/a
n/a
n/a
n/a
n/a
97.33
10
7.82
22.26
24%
1.60%
68.10
10
7.84
15.51
66.28
72.39
71.39
Year ended 31 December 2020
Share options
Restricted
share units
ESPP Restricted
stock purchase
units
ASPP Restricted
stock subscription
units
0.85% 0.31% – 0.78%* 0.09% – 1.68%
24%
1.60%
n/a
n/a
n/a
n/a
1.60%
n/a
n/a
n/a
63.20
79.07
59.48
0.37%
n/a
1.60%
n/a
n/a
n/a
0.87%
n/a
1.60%
n/a
n/a
n/a
The weighted average share price for SO valuation for grants made during the year ended 31 December 2021 is HK$92.75
(2020: HK$68.10). The total fair value of SO granted during the year ended 31 December 2021 is US$5m (2020: US$12m).
Recognised compensation cost
The total recognised compensation cost (net of expected forfeitures) related to various share-based compensation grants
made by the Group for the year ended 31 December 2021 is US$86m (2020: US$80m).
247
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 41. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL
Directors’ remuneration
The Executive Director receives compensation in the form of salaries, bonuses, contributions to pension schemes, long-
term incentives, housing and other allowances, and benefits in kind subject to applicable laws, rules and regulations.
Bonuses and long-term incentives represent the variable components in the Executive Director’s compensation and are
linked to the performance of the Group and the Executive Director. Details of share-based payment schemes are described
in note 40.
US$
Year ended 31 December 2021
Executive Director
Mr. Lee Yuan Siong(6)
Total
US$
Year ended 31 December 2020
Executive Directors
Mr. Ng Keng Hooi(5)
Mr. Lee Yuan Siong(6)
Total
Salaries,
allowances
and benefits
in kind(1)
Bonuses
Director’s
fees
Share-
based
payments(2)
Pension
scheme
contributions
Other
benefits
Other
payments(4)
Total
–
–
1,669,062
4,400,000
3,192,974
1,669,062
4,400,000
3,192,974
66,446
66,446
–
–
6,377,470 15,705,952
6,377,470 15,705,952
Salaries,
allowances
and benefits
in kind(1)
Bonuses
Director’s
fees
Share-
based
payments(2)
Pension
scheme
contributions
Other
benefits(3)
Other
payments(4)
Total
–
–
–
688,987
2,839,400
7,631,345
1,428,337
3,960,000
1,493,396
2,117,324
6,799,400
9,124,741
40,933
56,271
97,204
112,203
– 11,312,868
– 10,892,303 17,830,307
112,203 10,892,303 29,143,175
Notes:
(1) Includes non-cash benefits for housing, medical and life insurance, club and professional membership, company car and perquisites.
(2) Includes amortised expenses for unvested SOs, RSUs and matching shares under ESPP based on the fair value at the respective grant dates.
(3) Other benefits for the year ended 31 December 2020 include retirement bonus, long-service payment and annual leave pay.
(4) This represents amortised expenses in relation to the awarded compensation for unvested long-term incentives and deferred payments that Mr.
Lee Yuan Siong forfeited on leaving his prior employments.
(5) For the year ended 31 December 2020, Mr. Ng Keng Hooi’s remuneration includes compensation and benefits up to his retirement as Group Chief
Executive and President and Director effective 31 May 2020, with the bonus for the year ended 31 December 2020 paid on full-year basis and
subject to actual performance assessments.
(6) Mr. Lee Yuan Siong is currently the Group Chief Executive and President of the Company. He receives his remuneration exclusively for his role as
Group Chief Executive and President of the Company and receives no separate fees for his role as a director of the Company or for acting as a
director of any subsidiary of the Company.
248
FINANCIAL STATEMENTSAIA GROUP LIMITED 41. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL (continued)
Directors’ remuneration (continued)
The remuneration of Independent Non-executive Directors of the Company at 31 December 2021 and 2020 are included
in the tables below:
US$
fees(1)
in kind(2)
Bonuses
Salaries,
allowances
and benefits
Director’s
Share-
based
payments
Pension
scheme
contributions
Other
benefits
Other
payments
Total
Year ended 31 December 2021
Independent Non-executive
Directors
Mr. Edmund Sze-Wing Tse
Mr. Jack Chak-Kwong So
Mr. Chung-Kong Chow
Mr. John Barrie Harrison
Mr. George Yong-Boon Yeo
685,000
268,000
228,000
287,180
253,000
Professor Lawrence Juen-Yee Lau
213,000
Ms. Swee-Lian Teo
Dr. Narongchai Akrasanee(4)
Mr. Cesar Velasquez Purisima
Ms. Sun Jie (Jane)(5)
Total
222,370
323,000
215,329
102,896
146,513
–
–
–
–
–
–
–
–
–
2,797,775
146,513
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
831,513
268,000
228,000
287,180
253,000
213,000
222,370
323,000
215,329
102,896
– 2,944,288
249
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 41. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL (continued)
Directors’ remuneration (continued)
US$
fees(1)
in kind(2)
Bonuses
Salaries,
allowances
and benefits
Director’s
Share-
based
payments
Pension
scheme
contributions
Other
benefits
Other
payments
Total
Year ended 31 December 2020
Independent Non-executive
Directors
Mr. Edmund Sze-Wing Tse
Mr. Jack Chak-Kwong So
Mr. Chung-Kong Chow
Mr. John Barrie Harrison
Mr. George Yong-Boon Yeo
Mr. Mohamed Azman Yahya(3)
685,000
268,000
228,000
268,000
253,000
87,295
Professor Lawrence Juen-Yee Lau
213,000
Ms. Swee-Lian Teo
Dr. Narongchai Akrasanee(4)
Mr. Cesar Velasquez Purisima
213,000
281,333
183,000
143,315
–
–
–
–
–
–
–
–
–
Total
2,679,628
143,315
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
828,315
268,000
228,000
268,000
253,000
87,295
213,000
213,000
281,333
183,000
2,822,943
Notes:
(1) Save as disclosed below, all Directors receive the fees for their role as a director of the Company and not for acting as a director of any subsidiary
of the Company.
(2) Includes non-cash benefits for housing, club and professional membership, medical insurance and company car.
(3) Mr. Mohamed Azman Yahya retired as Independent Non-executive Director of the Company with effect from 29 May 2020.
(4) US$100,000 and US$58,333 which represented remuneration to Dr. Narongchai Akrasanee in respect of his services as Chairman of Advisory
Board of AIA Thailand for the year ended 31 December 2021 and 2020 respectively are included in his fees stated above.
(5) Ms. Sun Jie (Jane) was appointed as Independent Non-executive Director of the Company on 1 June 2021.
Remuneration of five highest-paid individuals
The aggregate remuneration of the five highest-paid individuals employed by the Group in the year ended 31 December
2021 and 2020 is presented in the table below.
US$
Salaries,
allowances
and benefits
in kind(1)
Bonuses
Director’s
fees
Share-
based
payments(2)
Pension
scheme
contributions
Other
benefits(3)
Other
payments(4)
Total
Year ended 31 December 2021
– 5,959,080 9,318,940 9,187,513
383,982
–
6,377,470 31,226,985
Year ended 31 December 2020
– 5,367,242
9,502,800 15,162,153
303,157
112,203 10,892,303 41,339,858
Notes:
(1) 2021 and 2020 non-cash benefits include housing, medical and life insurance, medical check-up, children’s education, club and professional
membership, company car and perquisites.
(2) Includes amortised expenses for unvested SOs, RSUs and matching shares under ESPP to the five highest-paid individuals based on the fair value
at the respective grant dates.
(3) Other benefits for the year ended 31 December 2020 include retirement bonus, long-service payment and annual leave pay.
(4) This represents amortised expenses in relation to the awarded compensation for unvested long-term incentives and deferred payments that Mr.
Lee Yuan Siong forfeited on leaving his prior employments.
250
FINANCIAL STATEMENTSAIA GROUP LIMITED 41. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL (continued)
Remuneration of five highest-paid individuals (continued)
The emoluments of the five individuals with the highest emoluments are within the following bands:
HK$
26,000,001 to 26,500,000
28,000,001 to 28,500,000
28,500,001 to 29,000,000
30,500,001 to 31,000,000
31,000,001 to 31,500,000
35,000,001 to 35,500,000
87,500,001 to 88,000,000
122,000,001 to 122,500,000
138,000,001 to 138,500,000
Year ended
31 December
2021
Year ended
31 December
2020
1
1
–
–
1
1
–
1
–
–
–
1
1
–
1
1
–
1
Key management personnel remuneration
Key management personnel have been identified as the members of the Group’s Executive Committee.
US$
Key management compensation and other expenses
Salaries and other short-term employee benefits
Post-employment benefits
Share-based payments(1)
Termination benefits
Total
Year ended
31 December
2021
Year ended
31 December
2020
30,355,005
30,844,469
701,749
1,118,468
18,422,129
28,808,491
–
1,707,434
49,478,883
62,478,862
Note:
(1) Includes amortised expenses for unvested SOs, RSUs and matching shares under ESPP to the key management personnel based on the fair value
at the respective grant dates.
The emoluments of the key management personnel are within the following bands:
US$
Below 1,000,000
1,000,001 to 2,000,000
2,000,001 to 3,000,000
3,000,001 to 4,000,000
4,000,001 to 5,000,000
Over 10,000,000
Year ended
31 December
2021
Year ended
31 December
2020
–
–
7
3
1
1
1
–
6
4
1
2
251
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 42. RELATED PARTY TRANSACTIONS
Remuneration of Directors and key management personnel is disclosed in note 41.
43. COMMITMENTS AND CONTINGENCIES
Investment and capital commitments
US$m
Not later than one year
Later than one and not later than five years
Later than five years
Total
As at
31 December
2021
As at
31 December
2020
7,830
130
–
7,960
2,504
174
16
2,694
Investment and capital commitments consist of commitments to invest in private equity partnerships and other assets.
Contingencies
The Group is subject to regulation in each of the geographical markets in which it operates from insurance, securities,
capital markets, pension, data privacy and other regulators and is exposed to the risk of regulatory actions in response to
perceived or actual non-compliance with regulations relating to suitability, sales or underwriting practices, claims
payments and procedures, product design, disclosure, administration, denial or delay of benefits and breaches of fiduciary
or other duties. The Group believes that these matters have been adequately provided for in these financial statements.
The Group is exposed to legal proceedings, complaints and other actions from its activities including those arising from
commercial activities, sales practices, suitability of products, policies, claims and taxes. The Group believes that these
matters are adequately provided for in these financial statements.
The Group operates in many jurisdictions across Asia and in certain of those jurisdictions, the Group’s interpretation of the
relevant law or regulation may differ from that of the tax authorities, which can result in disputes arising. The Group has
made provisions to cover the potential tax implications, based on management’s judgement and best estimate in relation
to the probability or likelihood of the potential outcomes, which is subject to periodic re-assessment. Due to the uncertainty
associated with these items, there remains a possibility that the final outcomes may differ on conclusion of the relevant tax
matters at a future date.
The Group is the reinsurer in a residential mortgage credit reinsurance agreement covering residential mortgages in
Australia. The Group is exposed to the risk of losses in the event of the failure of the retrocessionaire, a subsidiary of
American International Group, Inc., to honour its outstanding obligations which is mitigated by a trust agreement. The
principal balance outstanding of mortgage loans to which the reinsurance agreement relates were approximately US$428m
at 31 December 2021 (2020: US$479m). The liabilities and related reinsurance assets, which totalled US$3m (2020:
US$3m), respectively, arising from these agreements are reflected and presented on a gross basis in these financial
statements in accordance with the Group’s accounting policies. The Group expects to fully recover amounts outstanding at
the reporting date under the terms of this agreement from the retrocessionaire.
252
FINANCIAL STATEMENTSAIA GROUP LIMITED 44. SUBSIDIARIES
The following is a list of AIA’s directly and indirectly held principal operating subsidiaries which materially contribute to the
net income of the Group or hold a material element of its assets and liabilities:
Name of entity
Place of
incorporation
and operation
Principal activity Issued share capital
As at
31 December 2021
As at
31 December 2020
Group’s
interest %
NCI’s
interest %
Group’s
interest %
NCI’s
interest %
AIA Company Limited(1)
Hong Kong
Insurance
AIA Australia Limited
Australia
Insurance
AIA Bhd.
Malaysia
Insurance
2,596,049,861 ordinary shares
of US$9,267,084,182 issued
100%
share capital
2,125,462,500 ordinary shares
of A$2,207,267,000 issued
share capital
191,859,543 ordinary shares
of RM810,000,000 issued
share capital
100%
100%
AIA Life Insurance Company Limited Mainland
Insurance
Registered share capital of
100%
China
RMB3,777,399,440
AIA Philippines Life and General
Philippines
Insurance
199,560,671 ordinary shares
100%
Insurance Company Inc. (formerly
known as The Philippine American
Life and General Insurance
(PHILAM LIFE) Company)
of PHP10 each and 439,329
treasury shares
–
–
–
–
–
100%
100%
100%
100%
100%
–
–
–
–
–
BPI AIA Life Assurance Corporation
Philippines
Insurance
(formerly known as BPI-Philam Life
Assurance (BPLAC) Corporation)
749,993,979 ordinary shares
of PHP1 each and 6,000
treasury shares
51%
49%
51%
49%
AIA Singapore Private Limited
Singapore
Insurance
1,558,021,163 ordinary shares
100%
of S$1 each
AIA Everest Life Company Limited
(formerly known as BEA Life
Limited)
Hong Kong
Insurance
500,000,000 ordinary shares
100%
of HK$500,000,000
issued share capital
AIA International Limited
Bermuda
Insurance
6,500,000 ordinary shares of
100%
US$1.20 each
PT. AIA Financial
Indonesia
Insurance
1,910,844,141 ordinary shares
100%
of Rp1,000 each
AIA (Vietnam) Life Insurance
Vietnam
Insurance
Contributed capital of
100%
Company Limited
VND3,224,420,000,000
–
–
–
–
–
100%
100%
100%
100%
100%
–
–
–
–
–
100 ordinary shares of US$1
90%
10%
90%
10%
each
Bayshore Development Group Limited British Virgin
Islands
Investment
holding
company
AIA Life Insurance Co. Ltd.
South Korea
Insurance
AIA New Zealand Limited
New Zealand Insurance
60,328,932 ordinary shares
of KRW603,289,320,000
issued share capital
248,217,572 ordinary shares
of NZD863,709,199 issued
share capital
100%
100%
AIA Reinsurance Limited
Bermuda
Reinsurance 250,000 common shares
100%
of US$1 each
Notes:
(1) The Company’s subsidiary.
(2) All of the above subsidiaries are audited by PricewaterhouseCoopers.
All subsidiaries are unlisted.
–
–
–
100%
100%
100%
–
–
–
253
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 45. EVENTS AFTER THE REPORTING PERIOD
On 11 March 2022, a Committee appointed by the Board of Directors proposed a final dividend of 108.00 Hong Kong cents
per share (2020: final dividend of 100.30 Hong Kong cents per share).
On 11 March 2022, the Board of Directors approved a return of capital to shareholders of up to US$10.0b to be conducted
through a share buy-back programme over the next three years.
On 11 January 2022, the Group completed its investment in China Post Life. The investment was completed upon receiving
all necessary regulatory approvals for AIA Co. to invest RMB12,033m (approximately US$1,860m) for a 24.99 per cent
equity stake in China Post Life.
The HKIA is in the process of developing amendments to the HKIO to cater for the new Hong Kong Risk-based Capital
(HKRBC) regime with an effective date of 1 January 2024. On 28 December 2021, the HKIA released a circular setting out
requirements for insurers that are “sufficiently advanced” in their preparations to adopt the HKRBC regime at an early date
and the Group submitted an application for early adoption of the HKRBC regime for AIA International. The application is
currently under review by the HKIA. The requirements under the HKRBC regime have not been applied to the Group LCSM
solvency reporting as of 31 December 2021.
The China Banking and Insurance Regulatory Commission (CBIRC) announced the new rules for the China Risk-Oriented
Solvency System phase 2 (C-ROSS II) for insurers effective from the first quarter of 2022. These new C-ROSS II requirements
have not been applied to the Group LCSM solvency reporting as of 31 December 2021.
254
FINANCIAL STATEMENTSAIA GROUP LIMITED 46. STATEMENT OF FINANCIAL POSITION OF THE COMPANY
US$m
Assets
Investment in subsidiaries at cost(2)
Financial investments:
At fair value through other comprehensive income
Debt securities(3)
At fair value through profit or loss
Debt securities
Equity shares
Interests in investment funds(2)
Loans to/amounts due from subsidiaries
Other assets
Promissory notes from subsidiaries(4)
Cash and cash equivalents
Total assets
Liabilities
Borrowings
Obligations under repurchase agreements
Derivative financial instruments
Other liabilities
Total liabilities
Equity
Share capital
Employee share-based trusts
Other reserves
Retained earnings
Amounts reflected in other comprehensive income
Total equity
Total liabilities and equity
As at
31 December
2021
As at
31 December
2020
19,062
17,341
7,024
9,871
27
126
4,359
11,536
1,917
49
2,510
90
35,164
10,181
1,000
–
95
11,276
14,160
(225)
309
9,519
125
23,888
35,164
37
227
–
10,135
1,904
78
1,844
409
31,711
9,152
–
12
92
9,256
14,155
(155)
259
7,360
836
22,455
31,711
Notes:
(1) The financial information of the Company should be read in conjunction with the consolidated financial statements of the Group.
(2) The Company’s interests in investment funds such as mutual funds and unit trusts, including funds controlled by the Group, are measured at fair
value through profit or loss. Interests in other entities controlled by the Group are measured at cost, unless impaired, and presented as investment
in subsidiaries at cost. Interests in investment funds include US$2,359m (2020: nil) comprising the combined value of debt securities held by an
investment fund controlled by the Group and interests in an external fixed income fund. Fixed income fund refers to the investment fund solely
investing in fixed income instruments and cash equivalents, where investors of the fund own a pro-rata share of economic interests of the fund
according to the number of shares or units they own of the fund. Investment fund may use derivatives for hedging purpose.
(3) Includes United States Treasury securities of US$1,589m (2020: US$3,372m) and China Government bonds of US$4,262m (2020: nil) as at 31
December 2021.
(4) The promissory notes from subsidiaries are repayable on demand.
Approved and authorised for issue by the Board of Directors on 11 March 2022.
Lee Yuan Siong
Director
Edmund Sze-Wing Tse
Director
255
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
47. STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
US$m
Share capital
Employee
share-based
trusts
Other
reserves
Retained
earnings
Amounts
reflected in other
comprehensive
income
Total equity
Balance at 1 January 2021
14,155
(155)
259
Net profit
Fair value losses on debt securities at fair
value through other comprehensive
income
Fair value gains on debt securities at fair
value through other comprehensive
income transferred to profit or loss on
disposal
Dividends
Shares issued under share option scheme
and agency share purchase plan
Share-based compensation
Purchase of shares held by employee
share-based trusts
Transfer of vested shares from employee
share-based trusts
–
–
–
–
5
–
–
–
Balance at 31 December 2021
14,160
–
–
–
–
–
–
(106)
36
(225)
–
–
–
–
–
86
–
(36)
309
7,360
4,306
836
–
22,455
4,306
–
–
(2,147)
–
–
–
–
(296)
(296)
(415)
–
–
–
–
–
(415)
(2,147)
5
86
(106)
–
9,519
125
23,888
US$m
Share capital
Employee
share-based
trusts
Other
reserves
Retained
earnings
Amounts
reflected in other
comprehensive
income
Total equity
Balance at 1 January 2020
14,129
(220)
260
Net profit
Fair value gains on debt securities at fair
value through other comprehensive
income
Fair value gains on debt securities at fair
value through other comprehensive
income transferred to profit or loss on
disposal
Dividends
Shares issued under share option scheme
and agency share purchase plan
Share-based compensation
Purchase of shares held by employee
share-based trusts
Transfer of vested shares from employee
share-based trusts
–
–
–
–
26
–
–
–
Balance at 31 December 2020
14,155
–
–
–
–
–
–
(16)
81
(155)
–
–
–
–
–
80
–
(81)
259
7,079
2,278
395
–
21,643
2,278
–
–
(1,997)
–
–
–
–
549
549
(108)
–
–
–
–
–
(108)
(1,997)
26
80
(16)
–
7,360
836
22,455
256
FINANCIAL STATEMENTSAIA GROUP LIMITED
INDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY EMBEDDED VALUE
INFORMATION AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021
TO THE BOARD OF DIRECTORS OF AIA GROUP LIMITED
(incorporated in Hong Kong with limited liability)
Opinion
What we have audited
The Supplementary Embedded Value Information (the “EV Information”) of AIA Group Limited
(the “Company”) and its subsidiaries (the “Group”), which is set out on pages 261 to 286,
comprises:
•
•
the consolidated EV results as at and for the year ended 31 December 2021;
the sensitivity analysis as at and for the year then ended; and
• a summary of significant methodology and assumptions and other explanatory notes.
Our opinion
In our opinion, the EV Information of the Group as at and for the year ended 31 December 2021 is
prepared, in all material respects, in accordance with the EV basis of preparation set out in
Sections 4 and 5 of the EV Information.
Basis for Opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued
by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the EV
Information section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independence
We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional
Accountants (“the Code”), and we have fulfilled our other ethical responsibilities in accordance
with the Code.
Emphasis of Matter – Basis of Preparation
We draw attention to Sections 4 and 5 of the EV Information, which describe the EV basis of
preparation. As a result, the EV Information may not be suitable for another purpose. Our opinion
is not modified in respect of this matter.
257
FINANCIAL STATEMENTSINDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 Other Matter
The Group has prepared a separate set of consolidated financial statements for the year ended 31
December 2021 in accordance with Hong Kong Financial Reporting Standards issued by the
HKICPA and International Financial Reporting Standards issued by the International Accounting
Standards Board, on which we issued a separate auditor’s report to the shareholders of the
Company dated 11 March 2022.
Other Information
The Directors of the Company are responsible for the other information. The other information
comprises all of the information included in the annual report other than the EV Information and
our auditor’s report thereon.
Our opinion on the EV Information does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the EV Information, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the EV Information or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this regard.
258
FINANCIAL STATEMENTSAIA GROUP LIMITED Responsibilities of Directors and Those Charged with Governance for the EV Information
The Directors of the Company are responsible for the preparation of the EV Information in
accordance with the EV basis of preparation set out in Sections 4 and 5 of the EV Information and
for such internal control as the Directors determine is necessary to enable the preparation of the
EV Information that is free from material misstatement, whether due to fraud or error.
In preparing the EV Information, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either intend to liquidate the Group or
to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s EV Information
reporting process.
Auditor’s Responsibilities for the Audit of the EV Information
Our objectives are to obtain reasonable assurance about whether the EV Information as a whole
is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. We report our opinion solely to you, as a body, and for no other purpose.
We do not assume responsibility towards or accept liability to any other person for the contents
of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with HKSAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of this EV Information.
As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the EV Information, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
259
INDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 Auditor’s Responsibilities for the Audit of the EV Information (continued)
• Evaluate the appropriateness of the EV basis of preparation used and the reasonableness of
accounting estimates and related disclosures made by the Directors.
• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the EV Information or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
• Obtain sufficient appropriate audit evidence regarding the EV Information of the entities or
business activities within the Group to express an opinion on the EV Information. We are
responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, actions taken to eliminate threats or safeguards applied.
The engagement partner on the audit resulting in this independent auditor’s report is Ling Tung
Man, Tom.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
11 March 2022
260
FINANCIAL STATEMENTSAIA GROUP LIMITED CAUTIONARY STATEMENTS CONCERNING SUPPLEMENTARY EMBEDDED VALUE INFORMATION
This report includes non-IFRS financial measures and should not be viewed as a substitute for IFRS financial measures.
The results shown in this report are not intended to represent an opinion of market value and should not be interpreted in
that manner. This report does not purport to encompass all of the many factors that may bear upon a market value.
The results shown in this report are based on a series of assumptions as to the future. It should be recognised that actual
future results may differ from those shown, on account of the changes in the operating and economic environments and
natural variations in experience. The results shown are presented at the valuation dates stated in this report and no
warranty is given by the Group that future experience after these valuation dates will be in line with the assumptions made.
261
FINANCIAL STATEMENTSSUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 1. HIGHLIGHTS
The Embedded Value (EV) is a measure of the value of shareholders’ interests in the earnings distributable from assets
allocated to the in-force business after allowance for the aggregate risks in that business. AIA Group Limited (the
“Company”), together with its subsidiaries (collectively the “Group”) use a traditional deterministic discounted cash flow
methodology for determining its EV and value of new business (VONB) for all entities other than Tata AIA Life Insurance
Company Limited (Tata AIA Life). This methodology makes an implicit overall level of allowance for risk including the cost
of investment return guarantees and policyholder options, asset-liability mismatch risk, credit risk, the risk that actual
experience in future years differs from that assumed, and the economic cost of capital, through the use of a risk discount
rate. For Tata AIA Life, the Group uses the Indian Embedded Value (IEV) methodology as defined in Actuarial Practice
Standard 10 issued by the Institute of Actuaries of India, consistent with local practice in India.
The equity attributable to shareholders of the Company on the embedded value basis (EV Equity) is the total of EV, goodwill
and other intangible assets attributable to shareholders of the Company, after allowing for taxes. More details on the EV
results, methodology and assumptions are covered in later sections of this report.
The Group announced in March 2021 that it had reached an agreement to enter into an exclusive 15-year strategic
bancassurance partnership with The Bank of East Asia, Limited (BEA) covering Hong Kong and Mainland China. As part of
the agreement, the Group acquired 100 per cent of BEA Life Limited (subsequently renamed as AIA Everest Life Company
Limited (AIA Everest)), a wholly-owned subsidiary of BEA. The agreement has been reflected in this report, including
consolidation of the financial results of AIA Everest from the date of acquisition to 31 December 2021.
The Group announced in June 2021 that it had reached an agreement to invest RMB12,033 million (approximately
US$1,860 million) for a 24.99 per cent equity stake, post investment, in China Post Life Insurance Co., Ltd. (China Post
Life), which has been reflected in this report.
Unless otherwise stated, the growth rates provided in the commentaries are shown on a constant exchange rate (CER)
basis.
Summary of Key Metrics(1) (US$ millions)
EV Equity
EV
Adjusted net worth (ANW)
Value of in-force business (VIF)
VONB
Annualised new premiums (ANP)
VONB margin
EV operating profit
Operating return on EV (Operating ROEV)
Underlying free surplus generation (UFSG)
As at
31 December
2021
As at
31 December
2020
Change
CER
Change
AER
75,001
72,987
33,302
39,685
67,185
65,247
28,503
36,744
Year ended
31 December
2021
Year ended
31 December
2020
3,366
5,647
59.3%
7,896
12.1%
6,451
2,765
5,219
52.6%
7,243
11.7%
5,843
13%
13%
15%
11%
YoY
CER
18%
6%
6.3 pps
7%
0.4 pps
8%
12%
12%
17%
8%
YoY
AER
22%
8%
6.7 pps
9%
0.4 pps
10%
Note:
(1) The results are after adjustment to reflect the consolidated reserving and capital requirements and the present value of future after-tax unallocated
Group Office expenses.
262
FINANCIAL STATEMENTSAIA GROUP LIMITED 2. EMBEDDED VALUE RESULTS
2.1 Embedded Value by Business Unit
The EV as at 31 December 2021 is presented consistently with the segment information in the IFRS consolidated financial
statements.
Summary of EV by Business Unit (US$ millions)
As at 31 December 2021
Business Unit
AIA China
AIA Hong Kong
AIA Thailand
AIA Singapore
AIA Malaysia
Other Markets
Group Corporate Centre
Subtotal
Adjustment to reflect consolidated
reserving and capital requirements(2)
After-tax value of unallocated Group
Office expenses
Total (before non-controlling interests)
Non-controlling interests
Total
Business Unit
AIA China
AIA Hong Kong
AIA Thailand
AIA Singapore
AIA Malaysia
Other Markets
Group Corporate Centre
Subtotal
Adjustment to reflect consolidated
reserving and capital requirements(2)
After-tax value of unallocated Group
Office expenses
Total (before non-controlling interests)
Non-controlling interests
Total
EV
13,237
27,048
7,785
7,014
3,274
8,946
10,602
77,906
EV
11,844
22,895
7,057
6,586
3,144
9,440
11,472
72,438
ANW(1)
VIF before
CoC
4,509
8,669
4,345
3,020
1,239
4,998
10,602
37,382
8,734
20,372
4,331
4,743
2,283
5,311
–
CoC
6
1,993
891
749
248
1,363
–
VIF after
CoC
8,728
18,379
3,440
3,994
2,035
3,948
–
45,774
5,250
40,524
(3,723)
1,547
1,096
451
(3,272)
–
33,659
(357)
33,302
(1,103)
46,218
(198)
46,020
–
6,346
(11)
6,335
(1,103)
39,872
(187)
39,685
(1,103)
73,531
(544)
72,987
As at 31 December 2020
ANW(1)
VIF before
CoC
3,439
7,735
3,008
2,984
1,293
5,983
11,472
35,914
8,409
17,319
5,145
4,416
2,084
5,018
–
CoC
4
2,159
1,096
814
233
1,561
–
VIF after
CoC
8,405
15,160
4,049
3,602
1,851
3,457
–
42,391
5,867
36,524
(7,064)
3,115
1,596
1,519
(5,545)
–
28,850
(347)
28,503
(1,138)
44,368
(173)
44,195
–
7,463
(12)
7,451
(1,138)
36,905
(161)
36,744
(1,138)
65,755
(508)
65,247
Notes:
(1) ANW by Business Unit is after net capital flows between Business Units and Group Corporate Centre.
(2) Adjustment to reflect the consolidated reserving and capital requirements as described in Section 4.4 of this report.
263
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021
2. EMBEDDED VALUE RESULTS (continued)
2.2 Reconciliation of ANW from IFRS Equity
Derivation of the Consolidated ANW from IFRS Equity (US$ millions)
IFRS equity attributable to shareholders of the Company
Elimination of IFRS deferred acquisition and origination costs assets
Difference between IFRS policy liabilities and local statutory policy liabilities
Difference between net IFRS policy liabilities and local statutory policy
liabilities
Mark-to-market adjustment for property, mortgage loan and other
investments, net of amounts attributable to participating funds
Elimination of intangible assets
Recognition of deferred tax impacts of the above adjustments
Recognition of non-controlling interests impacts of the above adjustments
ANW (Business Unit)
Adjustment to reflect consolidated reserving requirements, net of tax
ANW (Consolidated)
As at
31 December
2021
As at
31 December
2020
60,467
(28,708)
4,365
63,200
(27,915)
(937)
(24,343)
(28,852)
282
(2,914)
3,423
110
37,025
(3,723)
33,302
(3)
(2,634)
3,735
121
35,567
(7,064)
28,503
2.3 Breakdown of ANW
The breakdown of ANW for the Group between the required capital, as defined in Section 4.6 of this report, the investment
in China Post Life, and the free surplus, which is the ANW in excess of the required capital and the investment in China Post
Life at cost, is set out below. The investment in China Post Life is an asset within the IFRS consolidated financial statements
as per note 24 to the IFRS consolidated financial statements, but does not contribute to the eligible asset value for
regulatory capital purposes under both the Group Local Capital Summation Method (LCSM) and the Hong Kong Insurance
Ordinance (HKIO) bases.
Breakdown of ANW for the Group (US$ millions)
Free surplus
Required capital
Investment in China Post Life
ANW
As at 31 December 2021
As at 31 December 2020
Business Unit
Consolidated
Business Unit
Consolidated
23,440
11,725
1,860
37,025
17,025
14,417
1,860
33,302
24,093
11,474
–
13,473
15,030
–
35,567
28,503
264
FINANCIAL STATEMENTSAIA GROUP LIMITED 2. EMBEDDED VALUE RESULTS (continued)
2.4 Earnings Profile
The tables below show how the after-tax distributable earnings from the assets backing the statutory reserves and required
capital of the in-force business of the Group are projected to emerge over future years. The projected values reflect the
consolidated reserving and capital requirements.
Profile of Projected After-Tax Distributable Earnings for the Group’s In-force Business (US$ millions)
Expected period of emergence
1 – 5 years
6 – 10 years
11 – 15 years
16 – 20 years
21 years and thereafter
Total
Expected period of emergence
1 – 5 years
6 – 10 years
11 – 15 years
16 – 20 years
21 years and thereafter
Total
As at 31 December 2021
Undiscounted
Discounted
22,225
20,405
21,695
21,795
151,924
238,044
18,516
11,579
8,502
5,903
9,602
54,102
As at 31 December 2020
Undiscounted
Discounted
21,452
19,489
22,452
20,070
143,817
227,280
17,845
10,980
8,615
5,356
8,978
51,774
The profile of distributable earnings is shown on an undiscounted and discounted basis. The discounted value of after-tax
distributable earnings of US$54,102 million (2020: US$51,774 million) plus the free surplus of US$17,025 million (2020:
US$13,473 million) and the investment in China Post Life of US$1,860 million (2020: nil) shown in Section 2.3 of this
report is equal to the EV of US$72,987 million (2020: US$65,247 million) shown in Section 2.1 of this report.
265
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 2. EMBEDDED VALUE RESULTS (continued)
2.5 Value of New Business
The VONB for the Group for the year ended 31 December 2021 is summarised in the table below. The VONB is defined as
the present value, at the point of sale, of the projected after-tax statutory profits less the cost of required capital. Results
are presented consistently with the segment information in the IFRS consolidated financial statements. Section 4.1 of this
report contains a list of the entities included in this report and the mapping of these entities to Business Units for the
purpose of this report.
The Group VONB for the year ended 31 December 2021 was US$3,366 million, an increase of US$601 million, or 18 per
cent, from US$2,765 million for the year ended 31 December 2020.
Summary of VONB by Business Unit (US$ millions)
Business Unit
AIA China(1)
AIA Hong Kong
AIA Thailand
AIA Singapore
AIA Malaysia
Other Markets
Total before unallocated Group Office
expenses and non-controlling interests
(Business Unit)
Adjustment to reflect consolidated reserving
and capital requirements
Total before unallocated Group Office
expenses and non-controlling interests
Year ended 31 December 2021
Year ended 31 December 2020
VONB
before
CoC
1,173
806
645
369
306
611
VONB
after
CoC
VONB
before
CoC
1,108
1,030
756
609
356
283
511
670
520
347
239
632
CoC
65
50
36
13
23
100
VONB
after
CoC
968
550
469
330
222
514
CoC
62
120
51
17
17
118
3,910
287
3,623
3,438
385
3,053
(49)
8
(57)
(56)
47
(103)
(Consolidated)
3,861
295
3,566
3,382
432
2,950
After-tax value of unallocated Group Office
expenses
Total before non-controlling interests
(Consolidated)
Non-controlling interests
Total
(167)
–
(167)
(161)
–
(161)
3,694
(33)
3,661
295
–
295
3,399
(33)
3,366
3,221
(25)
3,196
432
(1)
431
2,789
(24)
2,765
Note:
(1) Following the subsidiarisation of AIA China in July 2020 as described in section 4.1 of the Supplementary Embedded Value Information in the
Company’s Annual Report 2020, the VONB for AIA China in the year ended 31 December 2021 is presented after deducting withholding tax at the
applicable rate in Mainland China (currently set at 5 per cent). The VONB for AIA China in the first six months of the year ended 31 December 2020
is presented before deducting withholding tax.
266
FINANCIAL STATEMENTSAIA GROUP LIMITED
2. EMBEDDED VALUE RESULTS (continued)
2.5 Value of New Business (continued)
The table below shows the breakdown of the VONB, ANP, VONB margin, and present value of new business premium
(PVNBP) margin for the Group, by quarter, for business written in the year ended 31 December 2021.
The VONB margin and PVNBP margin are defined as VONB, gross of non-controlling interests and excluding pension
business, expressed as a percentage of ANP and PVNBP, respectively. The VONB used in the margin calculation is gross of
non-controlling interests and excludes pension business to be consistent with the definition of ANP and PVNBP.
The Group VONB margin for the year ended 31 December 2021 was 59.3 per cent compared with 52.6 per cent for the year
ended 31 December 2020. The Group PVNBP margin for the year ended 31 December 2021 was 10 per cent compared
with 9 per cent for the year ended 31 December 2020.
Breakdown of VONB, ANP, VONB Margin and PVNBP Margin (US$ millions)
VONB
after CoC
ANP
VONB
margin
PVNBP
margin
Year
Values for 2021
Twelve months ended 31 December 2021
3,366
5,647
59.3%
Values for 2020
Twelve months ended 31 December 2020
2,765
5,219
52.6%
Quarter
Values for 2021
Three months ended 31 March 2021
Three months ended 30 June 2021
Three months ended 30 September 2021
Three months ended 31 December 2021
Values for 2020
Three months ended 31 March 2020
Three months ended 30 June 2020
Three months ended 30 September 2020
Three months ended 31 December 2020
1,052
762
735
817
841
569
706
649
1,703
1,357
1,249
1,338
1,483
1,096
1,359
1,281
61.6%
55.7%
58.5%
60.6%
56.6%
51.4%
51.6%
50.2%
10%
9%
10%
9%
9%
10%
10%
9%
9%
9%
267
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 2. EMBEDDED VALUE RESULTS (continued)
2.5 Value of New Business (continued)
The table below shows the VONB (excluding pension business), ANP, and VONB margin by Business Unit.
Summary of VONB Excluding Pension, ANP and VONB Margin by Business Unit (US$ millions)
Business Unit
AIA China(1)
AIA Hong Kong
AIA Thailand
AIA Singapore
AIA Malaysia
Other Markets
Total before unallocated Group Office
expenses (Business Unit)
Adjustment to reflect consolidated
reserving and capital requirements
Total before unallocated Group Office
expenses (Consolidated)
After-tax value of unallocated Group
Office expenses
Total
Year ended 31 December 2021
Year ended 31 December 2020
VONB
excluding
pension
1,108
708
609
356
282
509
VONB
margin
78.9%
64.0%
90.0%
64.7%
57.3%
35.9%
VONB
excluding
pension
968
509
469
330
221
512
ANP
1,404
1,106
677
549
491
1,420
ANP
1,197
1,138
661
520
369
1,334
VONB
margin
80.9%
44.7%
71.0%
63.4%
59.9%
38.4%
3,572
5,647
63.2%
3,009
5,219
57.7%
(58)
–
(102)
–
3,514
5,647
62.2%
2,907
5,219
55.7%
(167)
3,347
–
5,647
59.3%
(161)
2,746
–
5,219
52.6%
Note:
(1) Following the subsidiarisation of AIA China in July 2020 as described in section 4.1 of the Supplementary Embedded Value Information in the
Company’s Annual Report 2020, the VONB for AIA China in the year ended 31 December 2021 is presented after deducting withholding tax at the
applicable rate in Mainland China (currently set at 5 per cent). The VONB for AIA China in the first six months of the year ended 31 December 2020
is presented before deducting withholding tax.
268
FINANCIAL STATEMENTSAIA GROUP LIMITED 2. EMBEDDED VALUE RESULTS (continued)
2.6 Analysis of EV Movement
Analysis of Movement in EV (US$ millions)
Year ended 31 December 2021
Year ended 31 December 2020
YoY AER
ANW
VIF
EV
ANW
VIF
EV
EV
Opening EV
Purchase price(2)
Acquired EV(3)
Effect of acquisition
BEA Upfront Payment(4)
Value of new business
Expected return on EV
Operating experience variances
Operating assumption changes
Finance costs
EV operating profit
Investment return variances
Effect of changes in economic
assumptions
Other non-operating variances
Total EV profit
Dividends
Other capital movements
Effect of changes in exchange
rates
Closing EV
28,503
36,744
65,247
28,241
33,744
61,985
(397)
266
(131)
(258)
(810)
5,156
626
64
(309)
4,727
1,636
(26)
1,163
7,500
(2,147)
9
–
254
254
–
4,176
(754)
(175)
(78)
–
3,169
(343)
460
37
(397)
520
123
(258)
3,366
4,402
451
(14)
(309)
7,896
1,293
434
1,200
(18)
–
(18)
–
(726)
5,591
538
(31)
(247)
5,125
(3,446)
35
160
3,323
10,823
1,874
–
–
(2,147)
(1,997)
9
81
–
–
–
–
3,491
(1,415)
(5)
47
–
2,118
1,578
(18)
–
(18)
–
2,765
4,176
533
16
(247)
7,243
(1,868)
(1,048)
(1,013)
(490)
2,158
–
–
(330)
4,032
(1,997)
5%
n/m (1)
n/m
n/m
n/m
22%
5%
n/m
n/m
25%
9%
n/m
n/m
n/m
n/m
8%
81
(89)%
(174)
(636)
(810)
322
842
33,302
39,685
72,987
28,503
36,744
1,164
65,247
n/m
12%
Notes:
(1) Not meaningful (n/m).
(2) The purchase price in 2021 refers to the cost of acquiring AIA Everest as per note 5 to the IFRS consolidated financial statements, and the
purchase price in 2020 refers to the purchase price adjustments for the alternative arrangements with Commonwealth Bank of Australia (CBA) in
relation to The Colonial Mutual Life Assurance Society Limited (CMLA) as per note 5 to the IFRS consolidated financial statements in the Company’s
Annual Report 2020.
(3) As at 31 August 2021.
(4) Refers to the consideration for the strategic bancassurance partnership.
269
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 2. EMBEDDED VALUE RESULTS (continued)
2.6 Analysis of EV Movement (continued)
EV grew to US$72,987 million at 31 December 2021, an increase of 13 per cent over the year from US$65,247 million at
31 December 2020. EV operating profit was US$7,896 million (2020: US$7,243 million), reflecting VONB of US$3,366
million (2020: US$2,765 million), an expected return on EV of US$4,402 million (2020: US$4,176 million), operating
experience variances and operating assumption changes which were again positive and amounted to US$437 million
(2020: US$549 million), net of finance costs of US$309 million (2020: US$247 million).
The VONB for the year ended 31 December 2021 is calculated at the point of sale for business written during the year. The
expected return on EV is the expected change in the EV over the year plus the expected return on the VONB up to 31
December 2021. Operating experience variances reflect the impact on the ANW and VIF from differences between the
actual experience over the year and that expected based on the operating assumptions.
The operating experience variances, net of tax, increased EV by US$451 million (2020: increased by US$533 million),
driven by:
• Expense variances of US$(18) million (2020: US$6 million) and development costs of US$9 million (2020: US$5
million);
• Mortality and morbidity claims variances of US$221 million (2020: US$384 million); and
• Persistency and other variances of US$257 million (2020: US$148 million) which included persistency variances of
US$(6) million (2020: US$(49) million) and other variances including management actions of US$263 million (2020:
US$197 million).
The effect of changes in operating assumptions during the year was a decrease in EV of US$14 million (2020: an increase
in EV of US$16 million).
The EV profit of US$10,823 million (2020: US$4,032 million) is the total of EV operating profit, investment return variances,
the effect of changes in economic assumptions and other non-operating variances.
The investment return variances, reflecting short-term fluctuations in investment returns, arise from the impact of
differences between the actual investment returns in the year and the expected investment returns. This amounted to an
increase in EV of US$1,293 million (2020: a decrease in EV of US$1,868 million) driven by the effect of short-term
fluctuations in interest rates and equity markets, and other capital market movements, on the Group’s investment portfolio
and the reserves and capital requirements compared with the expected returns.
The effect of changes in economic assumptions was an increase in EV of US$434 million (2020: a decrease in EV of
US$1,013 million).
Other non-operating variances increased EV by US$1,200 million (2020: reduced EV by US$330 million) which comprised
positive impacts from model-related enhancements, adjustments to capital requirements on consolidation, and the
amendment agreement with Citibank, N.A. as per note 15 to the IFRS consolidated financial statements, partly offset by
certain non-operating expenses.
The Group paid total shareholder dividends of US$2,147 million (2020: US$1,997 million). Other capital movements
increased EV by US$9 million (2020: increased EV by US$81 million).
Foreign exchange movements reduced EV by US$810 million (2020: increased EV by US$1,164 million).
270
FINANCIAL STATEMENTSAIA GROUP LIMITED 2. EMBEDDED VALUE RESULTS (continued)
2.6 Analysis of EV Movement (continued)
Operating ROEV (US$ millions)
Operating return on EV (operating ROEV) is calculated as EV operating profit expressed as a percentage of the opening EV
and was 12.1 per cent (2020: 11.7 per cent) for the year ended 31 December 2021.
EV operating profit
Opening EV
Operating ROEV
Year ended
31 December
2021
Year ended
31 December
2020
7,896
65,247
12.1%
7,243
61,985
11.7%
YoY
CER
7%
3%
YoY
AER
9%
5%
0.4 pps
0.4 pps
2.7 EV Equity
EV Equity grew to US$75,001 million at 31 December 2021, an increase of 13 per cent from US$67,185 million as at 31
December 2020.
Derivation of EV Equity from EV (US$ millions)
EV
Goodwill and other intangible assets(1)
EV Equity
As at
31 December
2021
As at
31 December
2020
Change
CER
Change
AER
72,987
2,014
75,001
65,247
1,938
67,185
13%
7%
13%
12%
4%
12%
Note:
(1) Consistent with the IFRS consolidated financial statements. Net of tax, amounts attributable to participating funds and non-controlling interests.
271
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 2. EMBEDDED VALUE RESULTS (continued)
2.8 Free Surplus Generation
Free Surplus Generation (US$ millions)
Opening free surplus
Effect of acquisition(1)
BEA Upfront Payment(3)
Investment in China Post Life
UFSG
Free surplus used to fund new business
Investment return variances and other items
Unallocated Group Office expenses
Dividends
Finance costs and other capital movements
Closing free surplus
Year ended
31 December
2021
Year ended
31 December
2020
13,473
(312)
(258)
(1,860)
6,451
(1,712)
3,963
(273)
(2,147)
(300)
17,025
14,917
(18)
–
–
5,843
(1,428)
(3,505)
(173)
(1,997)
(166)
13,473
YoY
CER
YoY
AER
(11)%
(10)%
n/m
n/m
n/m
8%
18%
n/m
58%
8%
n/m
19%
n/m(2)
n/m
n/m
10%
20%
n/m
58%
8%
n/m
26%
Notes:
(1) The effect of acquisition in 2021 refers to the cost of acquiring AIA Everest of US$397 million as per note 5 to the IFRS consolidated financial
statements, less the acquired free surplus of US$85 million. The effect of acquisition in 2020 refers to the purchase price adjustments for the
alternative arrangements with CBA in relation to CMLA as per note 5 to the IFRS consolidated financial statements in the Company’s Annual Report
2020.
(2) Not meaningful (n/m).
(3) Refers to the consideration for the strategic bancassurance partnership.
Free surplus increased by US$3,552 million (2020: decreased by US$1,444 million) to US$17,025 million (2020:
US$13,473 million) as of 31 December 2021.
UFSG, as defined in Section 4.8, increased by 8 per cent, to US$6,451 million (2020: US$5,843 million). Investment in
writing new business reduced free surplus by US$1,712 million (2020: US$1,428 million).
Investment return variances and other items amounted to US$3,963 million (2020: US$(3,505) million), reflecting the
effect of short-term fluctuations in interest rates and equity markets, and other capital market movements, on the Group’s
investment portfolio and the reserves and capital requirements compared with the expected returns and other items,
including the free surplus impacts arising from other non-operating variances as described in Section 2.6.
Unallocated Group Office expenses amounted to US$273 million (2020: US$173 million) in 2021.
272
FINANCIAL STATEMENTSAIA GROUP LIMITED 3. SENSITIVITY ANALYSIS
The EV as at 31 December 2021 and the VONB for the year ended 31 December 2021 have been recalculated to illustrate
the sensitivity of the results to changes in certain central assumptions discussed in Section 5 of this report.
The sensitivities analysed were:
• Risk discount rates 200 basis points per annum higher than the central assumptions;
• Risk discount rates 200 basis points per annum lower than the central assumptions;
•
•
Interest rates 50 basis points per annum higher than the central assumptions;
Interest rates 50 basis points per annum lower than the central assumptions;
• Equity return, property return and risk discount rates 100 basis points per annum lower than the central assumptions;
• The presentation currency (as explained below) appreciated by 5 per cent;
• The presentation currency depreciated by 5 per cent;
• Lapse and premium discontinuance rates increased proportionally by 10 per cent (i.e. 110 per cent of the central
assumptions);
• Lapse and premium discontinuance rates decreased proportionally by 10 per cent (i.e. 90 per cent of the central
assumptions);
• Mortality/morbidity rates increased proportionally by 10 per cent (i.e. 110 per cent of the central assumptions);
• Mortality/morbidity rates decreased proportionally by 10 per cent (i.e. 90 per cent of the central assumptions);
• Maintenance expenses 10 per cent lower (i.e. 90 per cent of the central assumptions); and
• Expense inflation set to 0 per cent.
The EV as at 31 December 2021 has been further analysed for the following sensitivities:
• Equity prices increased proportionally by 10 per cent (i.e. 110 per cent of the prices at 31 December 2021); and
• Equity prices decreased proportionally by 10 per cent (i.e. 90 per cent of the prices at 31 December 2021).
For the interest rate sensitivities, the investment return assumptions and the risk discount rates were changed by 50 basis
points per annum; the projected bonus rates on participating business, the statutory reserving bases at 31 December 2021
and the values of debt instruments and derivatives held at 31 December 2021 were changed to be consistent with the
interest rate assumptions in the sensitivity analysis, while all the other assumptions were unchanged.
For the equity return, property return and risk discount rates sensitivity, the projected bonus rates on participating business
were changed to be consistent with the equity return assumptions and property return assumptions in the sensitivity
analysis, while all the other assumptions were unchanged.
As the Group operates in multiple geographical markets, the EV results for the Group are translated from multiple currencies
to US dollar which is the Group’s presentation currency. In order to provide sensitivity results for EV and VONB of the
impact of foreign currency movements, a change of 5 per cent to the US dollar is included.
For the equity price sensitivities, the projected bonus rates on participating business and the values of equity securities
and equity funds held at 31 December 2021 were changed to be consistent with the equity price assumptions in the
sensitivity analysis, while all the other assumptions were unchanged.
For each of the remaining sensitivity analyses, the statutory reserving bases as at 31 December 2021 and the projected
bonus rates on participating business were changed to be consistent with the sensitivity analysis assumptions, while all
the other assumptions remain unchanged.
273
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 3. SENSITIVITY ANALYSIS (continued)
The sensitivities chosen do not represent the boundaries of possible outcomes, but instead illustrate how certain alternative
assumptions would affect the results.
Sensitivity of EV (US$ millions)
Scenario
Central value
Impact of:
200 bps increase in risk discount rates
200 bps decrease in risk discount rates
10% increase in equity prices
10% decrease in equity prices
50 bps increase in interest rates
50 bps decrease in interest rates
100 bps decrease in equity and property returns
and risk discount rates
5% appreciation in the presentation currency
5% depreciation in the presentation currency
10% increase in lapse/discontinuance rates
10% decrease in lapse/discontinuance rates
10% increase in mortality/morbidity rates
10% decrease in mortality/morbidity rates
10% decrease in maintenance expenses
Expense inflation set to 0%
Sensitivity of VONB (US$ millions)
Scenario
Central value
Impact of:
200 bps increase in risk discount rates
200 bps decrease in risk discount rates
50 bps increase in interest rates
50 bps decrease in interest rates
100 bps decrease in equity and property returns
and risk discount rates
5% appreciation in the presentation currency
5% depreciation in the presentation currency
10% increase in lapse/discontinuance rates
10% decrease in lapse/discontinuance rates
10% increase in mortality/morbidity rates
10% decrease in mortality/morbidity rates
10% decrease in maintenance expenses
Expense inflation set to 0%
274
As at 31 December 2021
As at 31 December 2020
EV
% Change
EV
% Change
72,987
65,247
(9,806)
(13.4)%
(9,098)
(13.9)%
15,325
1,878
(1,871)
(330)
279
3,876
(2,164)
2,164
(1,135)
1,280
(4,876)
4,779
865
1,047
21.0%
2.6%
(2.6)%
(0.5)%
0.4%
5.3%
(3.0)%
3.0%
(1.6)%
1.8%
(6.7)%
6.5%
1.2%
1.4%
14,409
1,099
(1,095)
652
(1,294)
n/a
(1,906)
1,906
(891)
1,049
(4,556)
4,665
882
1,063
22.1%
1.7%
(1.7)%
1.0%
(2.0)%
n/a
(2.9)%
2.9%
(1.4)%
1.6%
(7.0)%
7.1%
1.4%
1.6%
Year ended 31 December 2021
Year ended 31 December 2020
VONB
% Change
VONB
% Change
3,366
(739)
1,099
74
(108)
411
(140)
140
(227)
253
(437)
437
102
75
(22.0)%
32.7%
2.2%
(3.2)%
12.2%
(4.2)%
4.2%
(6.7)%
7.5%
(13.0)%
13.0%
3.0%
2.2%
2,765
(655)
(23.7)%
963
193
34.8%
7.0%
(298)
(10.8)%
n/a
(116)
116
(176)
182
(357)
337
89
54
n/a
(4.2)%
4.2%
(6.4)%
6.6%
(12.9)%
12.2%
3.2%
2.0%
FINANCIAL STATEMENTSAIA GROUP LIMITED 4. METHODOLOGY
4.1 Entities Included in This Report
The Group operates through a number of subsidiaries and branches. Its two main operating subsidiaries are AIA Company
Limited (AIA Co.), a company incorporated in Hong Kong and a subsidiary of the Company, and AIA International Limited
(AIA International), a company incorporated in Bermuda and an indirect subsidiary of the Company. Furthermore, AIA Co.
has branches located in Thailand and AIA International has branches located in Hong Kong, Macau and Taiwan.
The following is a list of the entities and their mapping to Business Units included in this report.
• AIA Australia refers to AIA Australia Limited, a subsidiary of AIA Co., and the business acquired by the Group from
Commonwealth Bank of Australia (CBA) upon the completion of the portfolio transfer of CBA’s life insurance business
conducted through The Colonial Mutual Life Assurance Society Limited (CMLA) under Part 9 of the Life Insurance Act
1995 (Cth) of Australia;
• AIA Cambodia refers to AIA (Cambodia) Life Insurance Plc., a subsidiary of AIA International;
• AIA China refers to AIA Life Insurance Company Limited, a subsidiary of AIA Co.;
• AIA Hong Kong refers to the total of the following four entities:
–
the Hong Kong and Macau branches of AIA International;
–
the Hong Kong business written by AIA Co.;
– AIA Pensions (BVI) Limited, a subsidiary of AIA Co.; and
– AIA Everest Life Company Limited, a subsidiary of AIA Co. acquired from The Bank of East Asia, Limited (BEA);
• AIA Indonesia refers to PT. AIA Financial, a subsidiary of AIA International;
• AIA Korea refers to AIA Life Insurance Co. Ltd., a subsidiary of AIA International;
• AIA Malaysia refers to AIA Bhd., a subsidiary of AIA Co., and AIA PUBLIC Takaful Bhd., a 70 per cent owned subsidiary
of AIA Bhd., and AIA General Berhad, a subsidiary of AIA Bhd.;
• AIA Myanmar refers to AIA Myanmar Life Insurance Company Limited, a subsidiary of AIA Co.;
• AIA New Zealand refers to AIA Sovereign Limited, a subsidiary of AIA International and the holding company of AIA
New Zealand Limited;
• AIA Philippines refers to AIA Philippines Life and General Insurance Company Inc., a subsidiary of AIA Co., and its 51
per cent owned subsidiary BPI AIA Life Assurance Corporation;
• AIA Singapore refers to AIA Singapore Private Limited, a subsidiary of AIA Co., and its Brunei branch;
• AIA Sri Lanka refers to AIA Insurance Lanka Limited, a subsidiary of AIA Co.;
• AIA Taiwan refers to the Taiwan branch of AIA International;
• AIA Thailand refers to the Thailand branches of AIA Co.;
• AIA Vietnam refers to AIA (Vietnam) Life Insurance Company Limited, a subsidiary of AIA International; and
• Tata AIA Life refers to Tata AIA Life Insurance Company Limited, an associate 49 per cent owned by AIA International.
Results are presented consistently with the segment information in the IFRS consolidated financial statements. The
summary of the EV of the Group by Business Unit in this report also includes the ANW for the “Group Corporate Centre”
segment, which is derived from the IFRS equity for this segment plus mark-to-market adjustments less the value of
intangible assets. In the presentation of EV and VONB, the present value of withholding tax payable on future remittances
from local business units is presented under the appropriate operating segment.
275
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 4. METHODOLOGY (continued)
4.2 Embedded Value and Value of New Business
The Group uses a traditional deterministic discounted cash flow methodology for determining its EV and VONB for all
entities other than Tata AIA Life. This methodology makes an implicit overall level of allowance for risk including the cost
of investment return guarantees and policyholder options, asset-liability mismatch risk, credit risk, the risk that actual
experience in future years differs from that assumed, and the economic cost of capital, through the use of a risk discount
rate. Typically, the higher the risk discount rate, the greater the allowance for these factors. This is a common methodology
used by life insurance companies in Asia currently.
The business included in the VIF and VONB calculations includes all life business written by the Business Units of the
Group, plus other lines of business which may not be classified as life business but have similar characteristics. These
include accident and health, group and pension businesses. The projected in-force business included in the VIF also
incorporates expected renewals on short-term business with a term of one year or less.
The VONB is the present value, measured at the point of sale, of projected after-tax statutory profits emerging in the future
from new business sold in the period less the cost of holding required capital in excess of regulatory reserves to support
this business. The VONB for the Group is calculated based on assumptions applicable at the point of sale, after allowing for
any acquisition expense overruns in excess of the relevant expense assumptions.
The EV is the sum of the ANW and VIF. The ANW is the market value of assets in excess of the assets backing the policy
reserves and other liabilities of the life (and similar) business of the Group, plus the IFRS equity value of other activities,
such as general insurance business, less the value of intangible assets. It excludes any amounts not attributable to
shareholders of the Company. The market value of investment property and property held for own use that is used to
determine the ANW is based on the fair value disclosed as per note 23 to the Group’s IFRS consolidated financial statements
as at the valuation date.
The VIF is the present value of projected after-tax statutory profits by Business Units emerging in the future from the
current in-force business less the cost arising from holding the required capital (CoC) to support the in-force business. CoC
is calculated as the face value of the required capital as at the valuation date less the present value of the net-of-tax
investment return on the shareholder assets backing required capital and the present value of projected releases from the
assets backing the required capital. Where the required capital may be covered by policyholder assets such as surplus
assets in a participating fund, there is no associated cost of capital included in the VIF or VONB.
EV Equity is the total of EV, goodwill and other intangible assets attributable to shareholders of the Company, after allowing
for taxes.
A deduction has been made from the EV and VONB for the present value of future after-tax unallocated Group Office
expenses, representing the expenses incurred by the Group Office which are not allocated to the Business Units. These
unallocated Group Office expenses have been allocated to acquisition and maintenance activities, and a deduction made
from the VONB and VIF respectively.
For Tata AIA Life, the Group uses the IEV methodology as defined in Actuarial Practice Standard 10 issued by the Institute
of Actuaries of India, consistent with local practice in India. The EV and VONB reported for Tata AIA Life are reported on a
one-quarter-lag basis.
276
FINANCIAL STATEMENTSAIA GROUP LIMITED 4. METHODOLOGY (continued)
4.3 Definition of New Business
New business includes the sale of new contracts during the period, additional single premium payments on recurrent
single premium contracts and increments to existing contracts where these are not variations allowed for in the calculation
of the VIF. The VONB also includes the present value of cash flows associated with new policies written during the reporting
period but subsequently terminated before the valuation date.
For group renewable business including group yearly renewable term business, new business is composed of new schemes
set up during the period plus any premium payable on existing schemes that exceeds the prior year’s premiums. For
individually significant group cases, the VONB is calculated over each premium rate guarantee period entered upon
contract inception or renewal.
For short-term accident and health business with a term of one year or less, renewals of existing contracts are not
considered new business, and the value of expected renewals on this business is included in the VIF.
For pension business, sales of new contracts during the period and any new contributions, including assets transferred in,
are considered as new business for the calculation of the VONB.
New business volumes shown in this report are measured using annualised new premiums (ANP), which is an internal
measure of new business sales.
4.4 Consolidation of Branches and Subsidiaries of AIA Co. and AIA International
The Company’s subsidiaries, AIA Co. and AIA International, are both Hong Kong-regulated entities and subject to the Hong
Kong reserving and capital requirements. In addition, AIA International, which is incorporated in Bermuda, is subject to the
Bermuda Monetary Authority (BMA) reserving and capital requirements. Since 2021, the Company is also subject to the
group-wide supervision (GWS) requirements implemented by the Hong Kong Insurance Authority (HKIA). AIA operates in
a number of territories as branches and subsidiaries of these entities. These regulatory and other consolidated reserving
and capital requirements as determined by the Group apply in addition to the relevant local requirements applicable to our
Business Units, and are discussed in Section 4.6.
The EV and VONB results for the Group shown in Section 2 of this report have been adjusted to reflect the consolidated
reserving and capital requirements. This approach was taken to reflect the distribution of profits from AIA Co. and AIA
International after allowing for the Hong Kong, BMA, local and group-wide regulatory requirements, and other reserving
and capital requirements as determined by the Group. The EV and VONB for each Business Unit reflect the local reserving
and capital requirements, as discussed in Section 4.6 of this report, before a Group-level adjustment to reflect the
consolidated reserving and capital requirements.
4.5 Valuation of Future Statutory Losses
For certain lines of business, projected future statutory profits are negative due to the local statutory reserves being
insufficient to meet the value of future policyholder cash flows. There are a number of acceptable methods for determining
the value of a combination of positive and negative statutory profits for different lines of business.
For the purposes of this valuation, future projected statutory losses have been valued by discounting them at the risk
discount rate for the relevant Business Unit, with any negative VIF eliminated for each reported segment by reducing the
ANW. This has been done because the allowance for risk in the range of selected risk discount rates for each Business Unit
has been set taking into account the presence of any such business lines with projected statutory losses. Also, the
consolidated reserving and capital requirements have the effect of reducing the level of any future projected statutory
losses. Based on the assumptions described in Section 5 of this report, and allowing for the consolidated statutory reserving
and capital requirements, the overall projected annual distributable profits from the current in-force business and the
assets backing the required capital of the Group are positive over the remaining lifetime of the business. Therefore, it is not
considered necessary to change the discounting approach described above.
277
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 4. METHODOLOGY (continued)
4.6 Capital Requirements
Each of the Business Units has a regulatory requirement to hold shareholder capital in addition to the assets backing the
insurance liabilities. The table below sets out the Group’s assumed level of capital requirement for each Business Unit:
Business Unit
Capital requirements
AIA Australia
AIA China
AIA Hong Kong
AIA Indonesia
AIA Korea
AIA Malaysia
AIA New Zealand
AIA Philippines
AIA Singapore
AIA Sri Lanka
AIA Taiwan
AIA Thailand
AIA Vietnam
Tata AIA Life
100% of regulatory capital adequacy requirement
100% of required capital as specified under the CAA EV assessment guidance
150% of required minimum solvency margin
120% of regulatory Risk-Based Capital requirement
150% of regulatory Risk-Based Capital requirement
170% of regulatory Risk-Based Capital requirement
100% of regulatory capital adequacy requirement
100% of regulatory Risk-Based Capital requirement
Higher of 135% of capital adequacy requirement and 80% of Tier 1 capital
requirement under the regulatory Risk-Based Capital framework
120% of regulatory Risk-Based Capital requirement
250% of regulatory Risk-Based Capital requirement
140% of regulatory Risk-Based Capital requirement(1)
100% of required minimum solvency margin
175% of required minimum solvency margin
Note:
(1) The Capital Requirement ratio assumed in the EV calculation is 120 per cent up to year-end of 2021, and 140 per cent thereafter, in line with the
regulatory requirement under Thailand RBC 2.
Capital Requirements on Consolidation
The Company’s subsidiaries, AIA Co. and AIA International, are both subject to the HKIA Hong Kong reserving and capital
requirements. The non-Hong Kong branches of AIA Co. and AIA International hold required capital of no less than 100 per
cent of the Hong Kong statutory minimum solvency margin requirement.
In addition, AIA International, which is incorporated in Bermuda, is subject to the BMA reserving and capital requirements.
AIA International and its subsidiaries hold required capital of no less than 120 per cent of the BMA regulatory capital
requirement.
The above regulatory reserving and capital requirements, and other consolidated reserving and capital requirements as
determined by the Group, apply in addition to the relevant local requirements applicable to our Business Units.
Since 2021, the Company is also subject to the new GWS framework implemented by the HKIA, including group capital
adequacy requirements based on the LCSM, under which the Company’s group-level total available capital and minimum
capital requirement are calculated as the sum of the available and applicable minimum required capital according to the
respective regulatory requirements for each entity within the Group, subject to any variation considered necessary by the
HKIA. This has not imposed any additional capital requirement to those mentioned above.
278
FINANCIAL STATEMENTSAIA GROUP LIMITED
4. METHODOLOGY (continued)
4.7 Foreign Exchange
The EV as at 31 December 2021 and 31 December 2020 have been translated into US dollars using exchange rates as at
each valuation date. The VONB results shown in this report have been translated into US dollars using the corresponding
average exchange rates for each quarter. The other components of the EV profit shown in the analysis of EV movement
have been translated using average exchange rates for the period.
Change on actual exchange rates (AER) is calculated based on the translated figures as described above. Change on
constant exchange rates (CER) is calculated for all figures for the current year and for the prior year, using the current year
constant average exchange rates, other than for EV and its components as at the end of the current year and as at the end
of the prior year, which are translated using the CER as at the end of the current year.
4.8 Underlying Free Surplus Generation
The free surplus is defined as the ANW in excess of the required capital after reflecting the consolidated reserving and
capital requirements and the investment in China Post Life at cost. The underlying free surplus generation represents free
surplus generated from the in-force business, adjusted for certain non-recurring items, and before free surplus used to
fund new business, unallocated Group Office expenses, finance costs, investment return variances and other non-operating
items. The underlying free surplus generation is also calculated after reflecting the consolidated reserving and capital
requirements.
5. ASSUMPTIONS
5.1 Introduction
This section summarises the assumptions used by the Group to determine the EV as at 31 December 2021 and the VONB
for the year ended 31 December 2021 and highlights certain differences in assumptions between the EV as at 31 December
2020 and the EV as at 31 December 2021.
5.2 Economic Assumptions
Investment Returns
The Group has set the assumed long-term future returns for fixed income assets to reflect its view of expected returns
having regard to estimates of long-term forward rates from yields available on government bonds and current bond yields.
In determining returns on fixed income assets the Group allows for the risk of default, and this allowance varies by the
credit rating of the underlying asset.
Where long-term views of investment return assumptions differ from current market yields on existing fixed income assets,
an adjustment was made to make allowance for the current market yields. In these cases, in calculating the VIF, adjustments
have been made to the investment return assumptions such that the investment returns on existing fixed income assets
were set consistently with the current market yield on these assets for their full remaining term, to be consistent with the
valuation of the assets backing the policy liabilities.
The Group has set the equity return and property return assumptions by reference to the long-term return on 10-year
government bonds, allowing for an internal assessment of risk premia that vary by asset class and by territory.
For each Business Unit, the non-linked portfolio is divided into a number of distinct product groups, and the returns for
each of these product groups have been derived by considering current and future targeted asset allocations and associated
investment returns for major asset classes.
For unit-linked business, fund growth assumptions have been determined based on actual asset mix within the funds at
the valuation date and expected long-term returns for major asset classes.
For Tata AIA Life, the Group uses the IEV methodology as defined in Actuarial Practice Standard 10 issued by the Institute
of Actuaries of India for determining its EV and VONB. This methodology uses investment returns and risk discount rates
that reflect the market-derived government bond yield curve. Therefore, the risk discount rate and long-term investment
returns are not provided for Tata AIA Life.
279
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 5. ASSUMPTIONS (continued)
5.2 Economic Assumptions (continued)
Risk Discount Rates
The risk discount rates can be considered as the sum of the appropriate risk-free interest rate, to reflect the time value of
money, and a risk margin to make an implicit allowance for risk.
The table below summarises the current market 10-year government bond yields referenced in EV calculations.
Business Unit
AIA Australia
AIA China
AIA Hong Kong(1)
AIA Indonesia
AIA Korea
AIA Malaysia
AIA New Zealand
AIA Philippines
AIA Singapore
AIA Sri Lanka
AIA Taiwan
AIA Thailand
AIA Vietnam
Current market 10-year government
bond yields referenced in EV
calculations (%)
As at
31 December
2021
As at
31 December
2020
1.67
2.78
1.51
6.38
2.26
3.58
2.39
4.82
1.67
11.71
0.73
1.90
2.08
0.97
3.15
0.91
5.89
1.72
2.65
0.99
3.00
0.84
7.55
0.32
1.28
2.60
Note:
(1) The majority of AIA Hong Kong’s assets and liabilities are denominated in US dollars. The 10-year government bond yields shown above are those
of US dollar-denominated bonds.
280
FINANCIAL STATEMENTSAIA GROUP LIMITED 5. ASSUMPTIONS (continued)
5.2 Economic Assumptions (continued)
Risk Discount Rates (continued)
The table below summarises the risk discount rates and long-term investment returns assumed in EV calculations. The risk
discount rates in 2021 reflect the weighted average of the risk margins of the in-force business at the start of 2021, and
those of the new business written during 2021 which, as disclosed in the Company’s Annual Report 2020, are determined
at a product level starting from 2021 to better reflect the market and non-market risks associated with the mix of products
sold during the reporting period. In addition, the VONB results are calculated based on start-of-quarter long-term
investment return assumptions consistent with the measurement at the point of sale. The present value of unallocated
Group Office expenses was calculated using the AIA Hong Kong risk discount rate. The investment returns on existing fixed
income assets were set consistently with the market yields on these assets. The investment returns shown are gross of tax
and investment expenses.
Risk discount rates assumed in EV
calculations (%)
Business Unit
As at
31 Dec
2021
As at
30 Jun
2021
(Unaudited)
AIA Australia
AIA China
AIA Hong Kong(1)
6.41
9.72
6.98
6.43
9.73
7.00
As at
31 Dec
2020
6.45
9.75
7.00
AIA Indonesia
12.98
12.99
13.00
AIA Korea
AIA Malaysia
AIA New Zealand
AIA Philippines
AIA Singapore
AIA Sri Lanka
AIA Taiwan
AIA Thailand
AIA Vietnam
8.10
8.56
6.53
11.80
6.59
14.70
7.25
7.69
9.16
8.10
8.55
6.53
11.80
6.60
15.70
7.25
7.75
9.71
8.10
8.55
6.55
11.80
6.60
15.70
7.25
7.80
9.80
Long-term investment returns assumed in EV calculations (%)
10-year government bonds
Local equities
As at
31 Dec
2021
As at
30 Jun
2021
(Unaudited)
As at
31 Dec
2020
As at
31 Dec
2021
As at
30 Jun
2021
(Unaudited)
2.30
3.70
2.20
7.50
2.20
4.00
2.30
5.30
2.20
9.00
1.00
2.70
3.50
2.30
3.70
2.20
7.50
2.20
4.00
2.30
5.30
2.20
2.30
3.70
2.20
7.50
2.20
4.00
2.30
5.30
2.20
10.00
10.00
1.00
2.70
4.00
1.00
2.70
4.00
As at
31 Dec
2020
6.60
9.30
7.00
6.60
9.30
7.00
6.60
9.30
7.00
12.00
12.00
12.00
6.50
8.60
6.80
10.50
6.70
11.00
5.60
7.70
8.80
6.50
8.60
6.80
10.50
6.70
12.00
5.60
7.70
9.30
6.50
8.60
6.80
10.50
6.70
12.00
5.60
7.70
9.30
Note:
(1) The majority of AIA Hong Kong’s assets and liabilities are denominated in US dollars. The 10-year government bond assumptions shown above are
those of US dollar-denominated bonds.
281
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 5. ASSUMPTIONS (continued)
5.3 Persistency
Persistency covers the assumptions required, where relevant, for policy lapse (including surrender), premium persistency,
premium holidays, partial withdrawals and retirement rates for pension products.
Assumptions have been developed by each of the Business Units based on their recent historical experience and expected
future experience. Persistency assumptions vary by policy year and product type with different rates for regular and single
premium products.
Where experience for a particular product was not credible enough to allow any meaningful analysis to be performed,
experience for similar products was used as a basis for future persistency experience assumptions.
In the case of surrenders, the valuation assumes that current surrender value bases will continue to apply in the future.
5.4 Expenses
The expense assumptions have been set based on the most recent expense analysis. The purpose of the expense analysis
is to allocate total expenses between acquisition and maintenance activities, and then to allocate these acquisition and
maintenance expenses to various product categories to derive unit cost assumptions.
Where the expenses associated with certain activities have been identified as being one-off, these expenses have been
excluded from the expense analysis.
Expense assumptions have been determined for acquisition and maintenance activities, split by product type, and unit
costs expressed as a percentage of premiums, sum assured and an amount per policy. Where relevant, expense assumptions
have been calculated per distribution channel.
Expense assumptions do not make allowance for any anticipated future expense savings as a result of any strategic
initiatives aimed at improving policy administration and claims handling efficiency.
Assumptions for commission rates and other sales-related payments have been set in line with actual experience.
Group Office Expenses
Group Office expense assumptions have been set, after excluding non-operating expenses, based on actual acquisition
and maintenance expenses in the year ended 31 December 2021. The Group Office acquisition expenses have been
deducted from the VONB. The present value of the projected future Group Office maintenance expenses has been deducted
from the Group EV. The maintenance expense assumptions in the VONB also allow for the allocation of Group Office
expenses.
282
FINANCIAL STATEMENTSAIA GROUP LIMITED 5. ASSUMPTIONS (continued)
5.5 Expense Inflation
The expected long-term expense inflation rates used by each Business Unit are set out below:
Expense Inflation Assumptions by Business Unit (%)
Business Unit
AIA Australia
AIA China
AIA Hong Kong
AIA Indonesia
AIA Korea
AIA Malaysia
AIA New Zealand
AIA Philippines
AIA Singapore
AIA Sri Lanka
AIA Taiwan
AIA Thailand
AIA Vietnam
Tata AIA Life(1)
As at
31 December
2021
As at
31 December
2020
2.05
2.00
2.00
3.50
3.50
3.00
2.00
3.50
2.00
6.50
1.20
2.00
4.00
5.75
2.05
2.00
2.00
3.50
3.50
3.00
2.00
3.50
2.00
6.50
1.20
2.00
4.00
5.60
Note:
(1) For Tata AIA Life, in accordance with the IEV methodology as defined in Actuarial Practice Standard 10 issued by the Institute of Actuaries of India,
the inflation assumption is derived by applying a spread to the reference interest rate.
Unallocated Group Office expenses are assumed to inflate by the weighted average of the Business Unit expense inflation
rates.
283
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 5. ASSUMPTIONS (continued)
5.6 Mortality
Assumptions have been developed by each Business Unit based on their recent historical experience and expected future
experience. Where historical experience is not credible, reference has been made to pricing assumptions supplemented by
market data, where available.
Mortality assumptions have been expressed as a percentage of either standard industry experience tables or, where
experience is sufficiently credible, as a percentage of tables that have been developed internally by the Group.
For annuity products that are exposed to longevity risk, an allowance has been made for expected future improvements in
mortality; otherwise no allowance has been made for mortality improvements.
5.7 Morbidity
Assumptions have been developed by each Business Unit based on their recent historical experience and expected future
experience. Morbidity rate assumptions have been expressed as a percentage of standard industry experience tables or as
expected claims ratios.
5.8 Reinsurance
Reinsurance assumptions have been developed by each Business Unit based on the reinsurance arrangements in force as
at the valuation date and the recent historical and expected future experience.
5.9 Policyholder Dividends, Profit Sharing and Interest Crediting
The projected policyholder dividends, profit sharing and interest crediting assumptions set by each Business Unit that
have been used in calculating the EV results presented in this report, reflect contractual and regulatory requirements,
policyholders’ reasonable expectations (where clearly defined) and each Business Unit’s expectation of future policies,
strategies and operations consistent with the investment return assumptions used in the EV results.
Participating fund surpluses have been assumed to be distributed between policyholders and shareholders via future final
bonuses or at the end of the projection period so that there are no residual assets at the end of the projection period.
284
FINANCIAL STATEMENTSAIA GROUP LIMITED 5. ASSUMPTIONS (continued)
5.10 Taxation
The EV and VONB presented in this report are net of tax based on current taxation legislation. The projected corporate
income tax payable in any year allows for the benefits arising from any tax loss carried forward where relevant. Where
applicable, tax payable on investment income has been reflected in the projected investment returns. Any withholding tax
payable on future remittances from local business units are also reflected under the appropriate operating segment.
The local corporate income tax rates used by each Business Unit are set out below:
Local Corporate Income Tax Rates by Business Unit (%)
Business Unit
AIA Australia
AIA China
AIA Hong Kong
AIA Indonesia(1)
AIA Korea(2)
AIA Malaysia
AIA New Zealand
AIA Philippines(3)
AIA Singapore
AIA Sri Lanka(4)
AIA Taiwan
AIA Thailand
AIA Vietnam
Tata AIA Life
As at
31 December
2021
As at
31 December
2020
30.0
25.0
16.5
22.0
27.5
24.0
28.0
25.0
17.0
24.0
20.0
20.0
20.0
14.6
30.0
25.0
16.5
22.0
27.5
24.0
28.0
30.0
17.0
28.0
20.0
20.0
20.0
14.6
Notes:
(1) Starting from 2020 onwards, the Indonesian government enacted a change in the corporate income tax rate from 25 per cent to 22 per cent.
(2) AIA Korea is subject to an assumed corporate income tax of 27.5 per cent up to fiscal year 2022, which includes an Accumulated Earnings Tax
following the subsidiarisation of the branch in AIA Korea. Based on current regulations, the corporate income tax rate will revert to 24.2 per cent
from 1 January 2023 onwards.
(3) During the reporting period, a change in corporate income tax rate has been enacted in the Philippines from 30 per cent to 25 per cent, and this
was effective from 1 July 2020 onwards.
(4) During the reporting period, a change in corporate income tax rate has been enacted in Sri Lanka from 28 per cent to 24 per cent, and this was
effective from 1 January 2020 onwards.
285
SUPPLEMENTARY EMBEDDED VALUE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONANNUAL REPORT 2021 5. ASSUMPTIONS (continued)
5.11 Statutory Valuation Bases
The projection of regulatory liabilities at future points in time assumes the continuation of the reserving methodologies
used to value policyholder liabilities as at the valuation date.
5.12 Product Charges
Management fees and product charges reflected in the VIF and VONB have been assumed to follow existing scales.
6. EVENTS AFTER THE REPORTING PERIOD
On 11 March 2022, a Committee appointed by the Board of Directors proposed a final dividend of 108.00 Hong Kong cents
per share (2020: final dividend of 100.30 Hong Kong cents per share).
On 11 March 2022, the Board of Directors approved a return of capital to shareholders of up to US$10.0 billion to be
conducted through a share buy-back programme over the next three years.
On 11 January 2022, the Group completed its investment in China Post Life. The investment was completed upon receiving
all necessary regulatory approvals for AIA Co. to invest RMB12,033 million (approximately US$1,860 million) for a 24.99
per cent equity stake in China Post Life.
The HKIA is in the process of developing amendments to the HKIO to cater for the new Hong Kong Risk-based Capital
(HKRBC) regime with an effective date of 1 January 2024. On 28 December 2021, the HKIA released a circular setting out
requirements for insurers that are “sufficiently advanced” in their preparations to adopt the HKRBC regime at an early date
and the Group submitted an application for early adoption of the HKRBC regime for AIA International. The application is
currently under review by the HKIA. The requirements under the HKRBC regime have not been applied to the Group EV
reporting as of 31 December 2021.
The China Banking and Insurance Regulatory Commission (CBIRC) announced the new rules for the China Risk-Oriented
Solvency System phase 2 (C-ROSS II) for insurers effective from the first quarter of 2022. These new C-ROSS II requirements
have not been applied to the Group EV reporting as of 31 December 2021.
286
FINANCIAL STATEMENTSAIA GROUP LIMITED FINANCIAL CALENDAR
Announcement of 2021 Annual Results for
the year ended 31 December 2021
Book Close Period for the AGM
Date of the AGM
Announcement of 2022 Interim Results
11 March 2022
16 May 2022 to 19 May 2022 (both days inclusive)
19 May 2022
25 August 2022
ANNUAL GENERAL MEETING
The AGM will be held at 11:00 a.m. (Hong Kong time) on Thursday, 19 May 2022. Details of the venue and business to be
transacted at the AGM are set out in the Company’s circular to be issued to the shareholders of the Company for the AGM.
Details of voting results at the AGM can be found on the websites of both the Hong Kong Exchanges and Clearing Limited
at www.hkex.com.hk and the Company at www.aia.com on Thursday, 19 May 2022 after the AGM.
FINAL DIVIDEND
The Board has recommended an increase of 8 per cent in the payment of a final dividend to 108.00 Hong Kong cents per
share for the year ended 31 December 2021 (2020: 100.30 Hong Kong cents per share), consistent with AIA’s established
prudent, sustainable and progressive dividend policy.
Subject to shareholders’ approval at the AGM, the final dividend will be payable on Friday, 10 June 2022 to shareholders
whose names appear on the register of members of the Company at the close of business on Wednesday, 25 May 2022,
being the record date for determining the entitlements to the final dividend.
RELEVANT DATES FOR THE FINAL DIVIDEND
Tuesday, 24 May 2022
Ex-dividend date
Record date
Payment date
Wednesday, 25 May 2022
Friday, 10 June 2022
ANNUAL STATEMENT ISSUED PURSUANT TO THE OFFSHORE FUND TAX EXEMPTION REGIME IN SINGAPORE
An indirect wholly-owned subsidiary of the Company, AIA Investment Management Private Limited, was incorporated in
Singapore on 15 June 2016. Its businesses include the management of certain assets of the Company and its subsidiaries
and branches, and it is required by the Income Tax (Exemption of Income of Prescribed Persons Arising from Funds
Managed by Fund Manager in Singapore) Regulations 2010 to issue an annual statement to each shareholder of the
Company. To comply with the above legal requirement in Singapore, an annual statement containing the profit and market
capitalisation information of the Company is available on the Company’s website. You may visit the Company’s website by
clicking “Annual Statements issued pursuant to The Offshore Fund Tax Exemption Regime In Singapore” under the sub-
section headed “Shareholder Centre” in the section headed “Investor Relations” to view the annual statement.
287
ADDITIONAL INFORMATIONINFORMATION FOR SHAREHOLDERSANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION SHARE REGISTRAR
If you have any enquiries relating to your shareholding, please contact the Company’s share registrar with the contact
details set out below:
Computershare Hong Kong Investor Services Limited
17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong
Telephone: +852 2862 8555
Email:
aia.ecom@computershare.com.hk (for printed copies of the Company’s corporate communications)
Website:
www.computershare.com
www.computershare.com/hk/contact (for general enquiries)
ANNUAL REPORT
The English and Chinese versions of this Annual Report are available on the website of the Company. If you would like to
have a printed version of this Annual Report, please contact the Company’s share registrar using the contact details
provided above.
The Company makes every effort to ensure consistency between the Chinese and English versions of this Annual Report.
In the event of any inconsistency, the English version shall prevail.
For environmental and cost reasons, shareholders are encouraged to elect to receive corporate communications (as
defined in the Listing Rules) electronically. You may at any time send written notice to the Company c/o the Company’s
share registrar or via email at aia.ecom@computershare.com.hk specifying your name, address and request to change your
choice of language or means of receipt of all corporate communications.
INVESTMENT COMMUNITY AND NEWS MEDIA
Enquiries may be directed to:
Investment Community
Lance Burbidge
Evelyn Lam
Feon Lee
Rachel Poon
+852 2832 1398
+852 2832 1633
+852 2832 4704
+852 2832 4792
News Media
Cecilia Ma Zecha
Duke Malan
Kitty Liu
+852 2832 5666
+852 2832 4726
+852 2832 1742
288
ADDITIONAL INFORMATIONAIA GROUP LIMITED FORWARD-LOOKING STATEMENTS
This document may contain certain forward-looking statements relating to the Group that are based on the beliefs of the
Group’s management as well as assumptions made by and information currently available to the Group’s management.
These forward-looking statements are, by their nature, subject to significant risks and uncertainties. These forward-looking
statements include, without limitation, statements relating to the Group’s business prospects, future developments, trends
and conditions in the industry and geographical markets in which the Group operates, its strategies, plans, objectives and
goals, its ability to control costs, statements relating to prices, volumes, operations, margins, overall market trends, risk
management and exchange rates.
When used in this document, the words “anticipate”, “believe”, “could”, “estimate”, “expect”, “going forward”, “intend”,
“may”, “ought to”, “plan”, “project”, “seek”, “should”, “will”, “would” and similar expressions, as they relate to the Group or
the Group’s management, are intended to identify forward-looking statements. These forward-looking statements reflect
the Group’s views as of the date hereof with respect to future events and are not a guarantee of future performance or
developments. You are strongly cautioned that reliance on any forward-looking statements involves known and unknown
risks and uncertainties. Actual results and events may differ materially from information contained in the forward-looking
statements as a result of a number of factors, including any changes in the laws, rules and regulations relating to any
aspects of the Group’s business operations, general economic, market and business conditions, including capital market
developments, changes or volatility in interest rates, foreign exchange rates, equity prices or other rates or prices, the
actions and developments of the Group’s competitors and the effects of competition in the insurance industry on the
demand for, and price of, the Group’s products and services, various business opportunities that the Group may or may not
pursue, changes in population growth and other demographic trends, including mortality, morbidity and longevity rates,
persistency levels, the Group’s ability to identify, measure, monitor and control risks in the Group’s business, including its
ability to manage and adapt its overall risk profile and risk management practices, its ability to properly price its products
and services and establish reserves for future policy benefits and claims, seasonal fluctuations and factors beyond the
Group’s control. Subject to the requirements of the Listing Rules, the Group does not intend to update or otherwise revise
the forward-looking statements in this document, whether as a result of new information, future events or otherwise. As a
result of these and other risks, uncertainties and assumptions, forward-looking events and circumstances discussed in this
document might not occur in the way the Group expects, or at all. Accordingly, you should not place reliance on any
forward-looking information or statements. All forward-looking statements in this document are qualified by reference to
the cautionary statements set forth in this section.
289
INFORMATION FOR SHAREHOLDERSANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION RISK COMMITTEE
Ms. Swee-Lian TEO (Chairman)
Mr. Chung-Kong CHOW
Mr. John Barrie HARRISON
Professor Lawrence Juen-Yee LAU
Mr. Cesar Velasquez PURISIMA
Mr. Edmund Sze-Wing TSE
Mr. LEE Yuan Siong
REGISTERED OFFICE
35/F, AIA Central
No. 1 Connaught Road Central
Hong Kong
WEBSITE
www.aia.com
COMPANY SECRETARY
Ms. Nicole PAO
AUTHORISED REPRESENTATIVES
Mr. LEE Yuan Siong
Ms. Nicole PAO
SHARE REGISTRAR
Computershare Hong Kong Investor Services Limited
17M Floor
Hopewell Centre
183 Queen’s Road East, Wanchai
Hong Kong
PRINCIPAL BANKERS
Citibank, N.A.
Standard Chartered Bank
The Hongkong and Shanghai Banking Corporation Limited
AUDITOR
PricewaterhouseCoopers
Certified Public Accountant
Registered Public Interest Entity Auditor
BOARD OF DIRECTORS
Independent Non-executive Chairman and
Independent Non-executive Director
Mr. Edmund Sze-Wing TSE
Executive Director,
Group Chief Executive and President
Mr. LEE Yuan Siong
Independent Non-executive Directors
Mr. Jack Chak-Kwong SO
Mr. Chung-Kong CHOW
Mr. John Barrie HARRISON
Mr. George Yong-Boon YEO
Professor Lawrence Juen-Yee LAU
Ms. Swee-Lian TEO
Dr. Narongchai AKRASANEE
Mr. Cesar Velasquez PURISIMA
Ms. SUN Jie (Jane)
AUDIT COMMITTEE
Mr. Cesar Velasquez PURISIMA (Chairman)
Mr. John Barrie HARRISON
Mr. Jack Chak-Kwong SO
Mr. George Yong-Boon YEO
Dr. Narongchai AKRASANEE
NOMINATION COMMITTEE
Mr. Edmund Sze-Wing TSE (Chairman)
Mr. Jack Chak-Kwong SO
Mr. Chung-Kong CHOW
Mr. John Barrie HARRISON
Mr. George Yong-Boon YEO
Professor Lawrence Juen-Yee LAU
Ms. Swee-Lian TEO
Dr. Narongchai AKRASANEE
Mr. Cesar Velasquez PURISIMA
Ms. SUN Jie (Jane)
REMUNERATION COMMITTEE
Mr. George Yong-Boon YEO (Chairman)
Mr. Jack Chak-Kwong SO
Mr. Edmund Sze-Wing TSE
290
ADDITIONAL INFORMATIONCORPORATE INFORMATIONAIA GROUP LIMITED 2010 RSU Scheme
2010 SO Scheme
2011 ESPP
2012 ASPP
2020 ESPP
2020 RSU Scheme
2020 SO Scheme
2021 ASPP
active agent
Restricted Share Unit Scheme of the Company adopted on 28 September 2010
(as amended) under which the Company granted restricted share units to
employees, directors (excluding independent non-executive directors) or
officers of the Company or any of its subsidiaries. It was terminated with effect
from 31 July 2020 prior to the adoption of the 2020 RSU Scheme.
Share Option Scheme of the Company adopted on 28 September 2010 (as
amended), under which the Company granted share options to employees,
directors (excluding independent non-executive directors) or officers of the
Company or any of its subsidiaries. It was terminated with effect from 29 May
2020 upon the adoption of the 2020 SO Scheme.
Employee Share Purchase Plan of the Company adopted on 25 July 2011 (as
amended), a voluntary share purchase plan with matching offer to facilitate and
encourage AIA share ownership by employees. It was terminated with effect
from 31 October 2020 (being the last day of the 2019/2020 plan year).
Agency Share Purchase Plan of the Company adopted on 23 February 2012, a
share purchase plan with matching offer to facilitate and encourage AIA share
ownership by agents. It was terminated with effect from 31 March 2021 (being
the last day of the 2020/2021 plan year).
Employee Share Purchase Plan of the Company adopted on 1 August 2020, a
voluntary share purchase plan with matching offer to facilitate and encourage
AIA share ownership by employees, and is effective for a period of 10 years from
the date of adoption.
Restricted Share Unit Scheme of the Company adopted on 1 August 2020,
under which the Company may grant restricted share units to employees,
directors (excluding independent non-executive directors) or officers of the
Company or any of its subsidiaries, and is effective for a period of 10 years from
the date of adoption.
Share Option Scheme of the Company adopted on 29 May 2020, under which
the Company may grant share options to employees, directors (excluding
independent non-executive directors) or officers of the Company or any of its
subsidiaries, and is effective for a period of 10 years from the date of adoption.
Agency Share Purchase Plan of the Company adopted on 1 February 2021, a share
purchase plan with matching offer to facilitate and encourage AIA share ownership by
agents, and is effective for a period of 10 years from the date of adoption.
An agent who sells at least one policy per month. The number of active agents
is calculated as the average number of active agents across the specific period.
active market
A market in which all the following conditions exist:
•
the items traded within the market are homogeneous;
• willing buyers and sellers can normally be found at any time; and
• prices are available to the public.
A financial instrument is regarded as quoted in an active market if quoted prices
are readily and regularly available from an exchange, dealer, broker, industry
group, pricing service or regulatory agency, and those prices represent actual
and regularly occurring market transactions on an arm’s length basis.
291
ADDITIONAL INFORMATIONGLOSSARYANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION adjusted net worth or ANW
AER
AGM
ANW is the market value of assets in excess of the assets backing the policy
reserves and other liabilities of the life (and similar) business of AIA, plus the
IFRS equity value of other activities, such as general insurance business, less
the value of intangible assets. It excludes any amounts not attributable to
shareholders of AIA Group Limited. ANW for AIA is stated after adjustment to
reflect consolidated reserving requirements. ANW by market is stated before
adjustment to reflect consolidated reserving requirements, and presented on a
local statutory basis.
Actual exchange rates.
2022 Annual General Meeting of the Company to be held at 11:00 a.m. (Hong
Kong time) on Thursday, 19 May 2022.
AIA or the Group
AIA Group Limited and its subsidiaries.
AIA Company Limited, a company incorporated in Hong Kong and a wholly-
owned subsidiary of the Company.
AIA Everest Life Company Limited, a subsidiary of AIA Co. acquired from The
Bank of East Asia, Limited.
AIA International Limited, a company incorporated in Bermuda and an indirect
wholly-owned subsidiary of the Company.
AIA Philippines Life and General Insurance Company Inc. (formerly known as
The Philippine American Life and General Insurance (PHILAM LIFE) Company),
a subsidiary of AIA Co., and its 51 per cent owned subsidiary BPI AIA Life
Assurance Corporation.
A science-backed wellness programme that provides participants with the
knowledge, tools and motivation to help them achieve their personal health
goals. The programme is a partnership between AIA and Discovery Limited, a
specialist insurer headquartered in South Africa.
American International Group, Inc.
The AIA Leadership Centre located in Bangkok, Thailand.
The amount at which the financial asset or financial liability is measured at
initial recognition minus principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference between the
initial amount and the maturity amount, and minus any reduction for impairment
or uncollectibility.
ANP represents 100 per cent of annualised first year premiums and 10 per cent
of single premiums, before reinsurance ceded. It is an internally used measure
of new business sales or activity for all entities within AIA. ANP excludes new
business of pension business, personal lines and motor insurance. For group
renewable business, it includes any premium payable on existing schemes that
exceeds the prior year’s premiums.
AIA Co.
AIA Everest
AIA International
AIA Philippines
AIA Vitality
AIG
ALC
amortised cost
annualised new premiums or ANP
292
ADDITIONAL INFORMATIONAIA GROUP LIMITED Asia
Mainland China, Hong Kong SAR, Thailand, Singapore, Malaysia, Australia,
Cambodia, Indonesia, Myanmar, New Zealand, the Philippines, South Korea, Sri
Lanka, Taiwan (China), Vietnam, Brunei, Macau SAR, and India.
available for sale (AFS) financial assets
Financial assets that may be sold before maturity and that are used to back
insurance and investment contract liabilities and shareholders’ equity, and
which are not managed on a fair value basis. Non-derivative financial assets
that are designated as available for sale or are not classified as loans and
receivables or as at fair value through profit or loss. Available for sale financial
instruments are measured at fair value, with movements in fair value recorded
in other comprehensive income.
bancassurance
The distribution of insurance products through banks or other financial
institutions.
BEA
BEA Life
BEPS 2.0
Board
CBA
CBIRC
CER
The Bank of East Asia, Limited.
BEA Life Limited, a wholly-owned subsidiary of The Bank of East Asia, Limited.
The common name for the tax policy work led by the Organisation for Economic
Co-operation and Development on the “Two-Pillar Solution to Address the Tax
Challenges Arising from the Digitalisation of the Economy”.
The board of Directors.
The Commonwealth Bank of Australia.
The China Banking and Insurance Regulatory Commission.
Constant exchange rates. Change on constant exchange rates is calculated for
all figures for the current year and for the prior year, using constant average
exchange rates, other than for balance sheet items as at the end of the current
year and as at the end of the prior year, which is translated using the constant
balance sheet exchange rates.
China Post Life
China Post Life Insurance Co., Ltd.
CMLA
Company
The Colonial Mutual Life Assurance Society Limited (including its affiliated
companies), one of the largest life insurance providers in Australia.
AIA Group Limited, a company incorporated in Hong Kong with limited liability,
whose shares are listed on the Main Board of the Hong Kong Stock Exchange
(stock code: 1299).
consolidated investment funds
Investment funds in which the Group has interests and power to direct their
relevant activities that affect the return of the funds.
Corporate Governance Code
Corporate Governance Code set out in Appendix 14 to the Listing Rules, as
amended from time to time.
293
GLOSSARYANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION cost of capital or CoC
CoC is calculated as the face value of the required capital as at the valuation
date less the present value of the net-of-tax investment return on the shareholder
assets backing the required capital and the present value of projected releases
from the assets backing the required capital. Where the required capital may be
covered by policyholder assets such as surplus assets in participating funds,
there is no associated cost of capital included in the VIF or VONB. CoC for AIA is
stated after adjustment to reflect consolidated capital requirements. CoC by
market is stated before adjustment to reflect consolidated capital requirements,
and presented on a local statutory basis.
COVID-19
COVID-19 is the disease caused by the coronavirus called SARS-CoV-2.
Dealing Policy
Directors’ and Chief Executives’ Dealing Policy of the Company.
deferred acquisition costs or DAC
deferred origination costs or DOC
Acquisition costs are expenses of an insurer which are incurred in connection
with the acquisition of new insurance contracts or the renewal of existing
insurance contracts. They include commissions and other variable sales
inducements and the direct costs of issuing the policy, such as underwriting
and other policy issue expenses. These costs are deferred and expensed to the
consolidated income statement on a systematic basis over the life of the policy.
Such assets are tested for recoverability at least annually.
Origination costs are expenses which are incurred in connection with the
origination of new investment contracts or the renewal of existing investment
contracts. For contracts that involve the provision of investment management
services, these include commissions and other incremental expenses directly
related to the issue of each new contract. Origination costs on contracts with
investment management services are deferred and recognised as an asset in
the consolidated statement of financial position and expensed to the
consolidated income statement on a systematic basis in line with the revenue
generated by the investment management services provided. Such assets are
tested for recoverability.
Director(s)
The director(s) of the Company.
embedded value or EV
An actuarially determined estimate of the economic value of a life insurance
business based on a particular set of assumptions as to future experience,
excluding any economic value attributable to future new business. EV for AIA is
stated after adjustments to reflect consolidated reserving and capital
requirements and the after-tax value of unallocated Group Office expenses. EV
by market is stated before adjustments to reflect consolidated reserving and
capital requirements and unallocated Group Office expenses, and presented on
a local statutory basis.
EPS
Earnings per share.
equity attributable to shareholders of
the Company on the embedded
EV Equity is the total of embedded value, goodwill and other intangible assets
attributable to shareholders of the Company, after allowing for taxes.
value basis or EV Equity
ExCo
The Executive Committee of the Group.
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ADDITIONAL INFORMATIONAIA GROUP LIMITED
fair value through profit or loss
or FVTPL
first year premiums
free surplus
group insurance
Group Office
Under IAS 39, Financial Instruments: Recognition and Measurement, financial
assets that are held to back unit-linked contracts and participating funds or
financial assets and liabilities that are held for trading. A financial asset or
financial liability that is measured at fair value in the statement of financial
position with gains and losses arising from movements in fair value being
presented in the consolidated income statement as a component of the profit or
loss for the year.
First year premiums are the premiums received in the first year of a recurring
premium policy. As such, they provide an indication of the volume of new
policies sold.
ANW in excess of the required capital and the investment in China Post life at
cost. Free surplus for AIA is stated after adjustment to reflect consolidated
reserving and capital requirements.
An insurance scheme whereby individual participants are covered by a master
contract held by a single group or entity on their behalf.
Group Office includes the activities of the Group Corporate Centre segment
consisting of the Group’s corporate functions, shared services and eliminations
of intragroup transactions.
GWS Capital Rules
Insurance (Group Capital) Rules (Chapter 41O of the Laws of Hong Kong).
HKFRS
Hong Kong Financial Reporting Standards.
Holding company financial resources
Debt, equity shares and interests in investment funds, deposits, cash and cash
equivalents and dividends paid but not settled by subsidiaries, net of obligations
under repurchase agreements, at the Group’s listed holding company, AIA Group
Limited. These are presented in note 46 to the consolidated financial statements.
Hong Kong
The Hong Kong Special Administrative Region (SAR) of the PRC; in the context
of our reportable market segments, Hong Kong includes Macau SAR.
Hong Kong Companies Ordinance
Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended
from time to time.
Hong Kong Insurance Authority or HKIA Insurance Authority established under the Hong Kong Insurance Ordinance.
Hong Kong Insurance Ordinance or HKIO Insurance Ordinance (Chapter 41 of the Laws of Hong Kong), as amended from
time to time. It provides a legislative framework for the prudential supervision of
the insurance industry in Hong Kong.
Hong Kong Stock Exchange or HKSE
The Stock Exchange of Hong Kong Limited.
IAIG
IAIS
Internationally Active Insurance Group.
International Association of Insurance Supervisors.
295
GLOSSARYANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION IAS
IASB
IFA
IFRS
International Accounting Standards.
International Accounting Standards Board.
Independent financial adviser.
Standards and interpretations adopted by the IASB comprising:
•
•
•
International Financial Reporting Standards;
IAS; and
Interpretations developed by the IFRS Interpretations Committee (IFRS IC)
or the former Standing Interpretations Committee (SIC).
Insurance Capital Standard or ICS
A risk-based global insurance capital standard applicable to IAIGs being
developed by the IAIS.
ING Malaysia
ING Management Holdings (Malaysia) Sdn. Bhd.
investment experience
Realised and unrealised investment gains and losses recognised in the
consolidated income statement.
investment income
Investment income comprises interest income, dividend income and rental
income.
investment return
Investment return consists of investment income plus investment experience.
IPO
Initial Public Offering.
liability adequacy testing
An assessment of whether the carrying amount of an insurance liability needs
to be increased or the carrying amount of related deferred acquisition and
origination costs or related intangible assets decreased based on a review of
future cash flows.
LIBOR
Listing Rules
Local Capital Summation
Model or LCSM
London Interbank Offered Rate.
The Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited, as amended from time to time.
Local Capital Summation Method is the method to be used by the HKIA as a
measure of group capital under the new Group-wide supervision (GWS)
framework. Group available capital is the sum of available capital of each
relevant entity within the Group. Group minimum capital requirement (MCR) is
the sum of the minimum required capital of those same entities. Adjustments
are made to eliminate double counting. Group LCSM surplus is the excess of
Group available capital over the Group MCR. The Group LCSM cover ratio is the
ratio of Group available capital to the Group MCR.
Million Dollar Round Table or MDRT
MDRT is a global professional trade association of life insurance and financial
services professionals that recognises significant sales achievements and high
service standards.
296
ADDITIONAL INFORMATIONAIA GROUP LIMITED Model Code
n/a
n/m
operating profit after tax or OPAT
Model Code for Securities Transactions by Directors of Listed Issuers set out in
Appendix 10 to the Listing Rules, as amended from time to time.
Not available.
Not meaningful.
Operating profit is determined using, among others, expected long-term
investment return for equities and real estate. Short-term fluctuations between
expected long-term investment return and actual investment return for these
asset classes are excluded from operating profit. The assumptions used to
determine expected long-term investment return are the same, in all material
respects, as those used by the Group in determining its embedded value and are
disclosed in the Supplementary Embedded Value Information.
operating return on EV or
operating ROEV
Operating return on EV is calculated as EV operating profit, expressed as a
percentage of the opening embedded value.
operating return on shareholders’
allocated equity or operating ROE
Operating return on shareholders’ allocated equity is calculated as operating
profit after tax attributable to shareholders of the Company, expressed as a
percentage of the simple average of opening and closing shareholders’ allocated
equity.
OTC
Over-the-counter.
Other Markets
AIA’s Other Markets are Australia, Cambodia, India, Indonesia, Myanmar, New
Zealand, the Philippines, South Korea, Sri Lanka, Taiwan (China) and Vietnam.
other participating business with
distinct portfolios
Business where it is expected that the policyholder will receive, at the discretion
of the insurer, additional benefits based on the performance of underlying
segregated investment assets where this asset segregation is supported by an
explicit statutory reserve and reporting in the relevant territory.
participating funds
Participating funds are distinct portfolios where the policyholders have a
contractual right to receive at the discretion of the insurer additional benefits
based on factors such as the performance of a pool of assets held within the
fund, as a supplement to any guaranteed benefits. The allocation of benefits
from the assets held in the participating funds is subject to minimum
policyholder participation mechanisms established by regulation.
persistency
The percentage of insurance policies remaining in force from month to month in
the past 12 months, as measured by premiums.
policyholder and shareholder
investments
Investments other than those held to back unit-linked contracts as well as
assets from consolidated investment funds.
pps
PRC
Percentage points.
People’s Republic of China.
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GLOSSARYANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
PVNBP margin
VONB gross of non-controlling interests excluding pension business, expressed
as a percentage of present value of new business premiums (PVNBP). PVNBP
margin for AIA is stated after adjustments to reflect consolidated reserving and
capital requirements and the after-tax value of unallocated Group Office
expenses.
renewal premiums
Premiums receivable in subsequent years of a recurring premium policy.
Risk-Based Capital or RBC
RBC represents an amount of capital based on an assessment of risks that a
company should hold to protect customers against adverse developments.
RSPUs
RSSUs
RSUs
SFO
Restricted stock purchase units.
Restricted stock subscription units.
Restricted share units.
Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as
amended from time to time.
share(s)
For the Company, shall mean ordinary share(s) in the capital of the Company.
Shareholder(s)
Holder(s) of shares of the Company.
shareholders’ allocated equity
Shareholders’ allocated equity is total equity attributable to shareholders of the
Company less fair value reserve.
Singapore
The Republic of Singapore; in the context of our reportable market segments,
Singapore includes Brunei.
single premium
A single payment that covers the entire cost of an insurance policy.
solvency
SOR
SOs
Takaful
The ability of an insurance company to satisfy its policyholder benefits and
claims obligations.
Singapore Swap Offer Rate.
Share options.
Islamic insurance which is based on the principles of mutual assistance and
risk sharing.
Tata AIA Life
Tata AIA Life Insurance Company Limited.
THBFIX
Thai Baht Interest Rate Fixing.
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ADDITIONAL INFORMATIONAIA GROUP LIMITED total weighted premium
income or TWPI
underlying free surplus
generation or UFSG
TWPI consists of 100 per cent of renewal premiums, 100 per cent of first year
premiums and 10 per cent of single premiums, before reinsurance ceded. As
such it provides an indication of AIA’s longer-term business volumes as it
smoothes the peaks and troughs in single premiums.
Underlying free surplus generation represents free surplus generated from the
in-force business, adjusted for certain non-recurring items and before free
surplus used to fund new business, unallocated Group Office expenses, finance
costs, investment return variances and other non-operating items. The
underlying free surplus generation
is also calculated after reflecting
consolidated reserving and capital requirements.
unit-linked investments
Financial investments held to back unit-linked contracts.
Unit-linked products
universal life
value of business acquired or VOBA
value of in-force business or VIF
Unit-linked products are insurance products where the policy value is linked to
the value of underlying investments (such as collective investment schemes,
internal investment pools or other property) or fluctuations in the value of
underlying investment or indices. Investment risk associated with the product is
usually borne by the policyholder. Insurance coverage, investment and
administration services are provided for which the charges are deducted from
the investment fund assets. Benefits payable will depend on the price of the
units prevailing at the time of death of the insured or surrender or maturity of
the policy, subject to surrender charges.
A type of insurance product where the customer pays flexible premiums, subject
to specified limits, which are accumulated in an account balance which are
credited with interest at a rate either set by the insurer or reflecting returns on
a pool of matching assets. The customer may vary the death benefit and the
contract may permit the policyholder to withdraw the account balance, typically
subject to a surrender charge.
VOBA in respect of a portfolio of long-term insurance and investment contracts
acquired is recognised as an asset, calculated using discounted cash flow
techniques, reflecting all future cash flows expected to be realised from the
portfolio. VOBA is amortised over the estimated life of the contracts in the
acquired portfolio on a systematic basis. The rate of amortisation reflects the
profile of the additional value of the business acquired. The carrying value of
VOBA is reviewed annually for impairment and any impairment is charged to the
consolidated income statement.
VIF is the present value of projected after-tax statutory profits by Business Units
emerging in the future from the current in-force business less the cost arising
from holding the required capital (CoC) to support the in-force business. VIF for
AIA is stated after adjustments to reflect consolidated reserving and capital
requirements and the after-tax value of unallocated Group Office expenses. VIF
by market is stated before adjustments to reflect consolidated reserving and
capital requirements and unallocated Group Office expenses, and presented on
a local statutory basis.
299
GLOSSARYANNUAL REPORT 2021OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
value of new business or VONB
VONB margin
VONB is the present value, measured at the point of sale, of projected after-tax
statutory profits emerging in the future from new business sold in the period
less the cost of holding the required capital in excess of regulatory reserves to
support this business. VONB for AIA is stated after adjustments to reflect
consolidated reserving and capital requirements and the after-tax value of
unallocated Group Office expenses. VONB by market is stated before adjustments
to reflect consolidated reserving and capital requirements and unallocated
Group Office expenses, and presented on a local statutory basis.
VONB gross of non-controlling interests excluding pension business, expressed
as a percentage of ANP. VONB margin for AIA is stated after adjustments to
reflect consolidated reserving and capital requirements and the after-tax value
of unallocated Group Office expenses. VONB margin by market is stated before
adjustments to reflect consolidated reserving and capital requirements and
unallocated Group Office expenses, and presented on a local statutory basis.
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ADDITIONAL INFORMATIONAIA GROUP LIMITED A
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AIA GROUP LIMITED
友邦保險控股有限公司
STOCK CODE 1299
LIVING OUR
PURPOSE
ANNUAL
REPORT
2021
AIA.COM