AIA GROUP LIMITED
友邦保險控股有限公司
STOCK CODE 1299
INVESTING IN
A HEALTHY ASIA
ANNUAL REPORT 2022
A
I
A
G
R
O
U
P
L
I
M
I
T
E
D
友
邦
保
險
控
股
有
限
公
司
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
AIA.COM
OUR PURPOSE
IS TO HELP
PEOPLE LIVE
HEALTHIER, LONGER,
BETTER LIVES.
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 41 million
individual policies and over 17 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$303 billion as of 31 December 2022.
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.
AIA AT-A-GLANCE
THE LARGEST
LISTED COMPANY
ON THE HONG KONG
STOCK EXCHANGE
which is incorporated and
headquartered in Hong Kong(1)
Present in
18 MARKETS AND
100% FOCUSED ON ASIA
THE LARGEST
LIFE INSURER
IN THE WORLD
by market capitalisation(1)
NO.1 WORLDWIDE FOR
MDRT REGISTERED MEMBERS
The only multinational
company to top the table for
EIGHT CONSECUTIVE YEARS
Note:
(1) As at 31 December 2022.
Serving the holders of
more than
41 MILLION
individual policies and
over
17 MILLION
participating members
of group insurance
schemes
RANKED TOP 10
in Fortune’s 2022
“Change the World” list
Provides protection
with total sum
assured of over
US$2 TRILLION
to people across Asia
“DIGITAL INSURER
OF THE YEAR”
by InsuranceAsia News
for two years
Benefits and
claims of
US$16 BILLION
in 2022
“ENTERPRISE
ARCHITECTURE
AWARD”
by Forrester’s 2022
Asia Pacific
Technology Awards
003
ANNUAL REPORT 2022 CONTENTS
OVERVIEW
014 Financial Highlights
016 Chairman’s Statement
019 Group Chief Executive and President’s Report
FINANCIAL AND OPERATING REVIEW
026 Group Chief Financial Officer’s Review
052 Business Review
067 Risk Management
073 Regulatory and International Developments
074 Our People
CORPORATE GOVERNANCE
079 Statement of Directors’ Responsibilities
080 Board of Directors
088 Executive Committee
093 Report of the Directors
106 Corporate Governance Report
122 Remuneration Report
FINANCIAL STATEMENTS
141
Independent Auditor’s Report
149 Consolidated Income Statement
150 Consolidated Statement of Comprehensive Income
151 Consolidated Statement of Financial Position
153 Consolidated Statement of Changes in Equity
155 Consolidated Statement of Cash Flows
157 Notes to the Consolidated Financial Statements and
Material Accounting Policy Information
264
Independent Auditor’s Report on the
Supplementary Embedded Value Information
268 Supplementary Embedded Value Information
ADDITIONAL INFORMATION
Information for Shareholders
295
298 Corporate Information
299 Glossary
004
AIA GROUP LIMITED 20
22
HIGHLIGHTS
005
ANNUAL REPORT 2022 2022 HIGHLIGHTS
AIA LEADS THE INDUSTRY WITH
OUR UNRIVALLED DISTRIBUTION
Local markets
establish
bancassurance
partnerships
AIA Vietnam and Vietnam
Prosperity Joint Stock Bank
extended their exclusive
bancassurance agreement for
another four years, AIA
Cambodia signed a five-year
bancassurance partnership
with Prince Bank, and
Tata AIA Life announced a
bancassurance partnership
with City Union Bank.
AIA expands our
presence in Mainland
China and completes
our investment in
China Post Life
AIA China opened a new
branch in Hubei and received
regulatory approval to prepare
a new branch in Henan. AIA
also completed our 24.99 per
cent equity investment in
China Post Life Insurance Co.,
Ltd. (China Post Life), which
increased AIA’s exposure to
the growth opportunities in
the Chinese life insurance
market.
AIA named #1 MDRT
company for eight
consecutive years
AIA had the largest number
of Million Dollar Round Table
(MDRT) members for an
unprecedented eight
consecutive years, testament
to the high quality
of our agency
force and Premier
Agency model.
AIA launches a US$10.0 billion
share buy-back programme
AIA launched a three-year, US$10.0 billion share
buy-back programme, enhancing shareholder
returns while retaining the financial strength to
invest in significant growth opportunities.
006
AIA GROUP LIMITED AIA EXPANDS HEALTH OFFERING
ACROSS ASIA
AIA establishes
Amplify Health,
a pan-Asian Health
InsurTech business
with Discovery
Limited
AIA launched Amplify Health,
which will deploy health
technology assets, proprietary
data analytics and extensive
health expertise to transform
how individuals, corporates,
payors and providers
experience and manage health
insurance and healthcare
delivery.
AIA acquires Blue
Cross and deepens
The Bank of East Asia
partnership
AIA acquired Blue Cross
(Asia-Pacific) Insurance
Limited (Blue Cross) and
Blue Care JV (BVI) Holdings
Limited from The Bank of
East Asia, Limited (BEA).
AIA and BEA extended the
scope of their existing
exclusive bancassurance
partnership to include
personal lines general
insurance products.
AIA acquires MediCard
in the Philippines
The acquisition of MediCard
Philippines, Inc. (MediCard),
a leading health maintenance
organisation, brings new
products, customer segments
and distribution capabilities,
increasing AIA’s exposure to
the Philippines’ large and
fast-growing health insurance
market. MediCard provides
significant opportunities for
value creation through the
deployment of AIA’s new
Health InsurTech solutions
from Amplify Health.
007
ANNUAL REPORT 2022
2022 HIGHLIGHTS
AIA ONE BILLION
IS OUR BOLD
AMBITION TO ENGAGE
ONE BILLION PEOPLE
TO LIVE HEALTHIER,
LONGER, BETTER
LIVES BY 2030
Through AIA One Billion, we are
reaching far beyond our immediate
customer base to improve the health
and wellness of individuals and
help create a more sustainable
future in Asia. In 2022, we brought
our Purpose to life further through
these creative community initiatives
to meaningfully contribute to this
ambition.
008
AIA GROUP LIMITED AIA Healthiest Schools
support young people
AIA launched the AIA
Healthiest Schools
programme, which encourages
healthy living habits among
students aged five to 16 by
promoting healthy eating,
active lifestyles, mental
well-being, as well as health
and sustainability in schools in
four pilot markets – Australia,
Hong Kong, Thailand, and
Vietnam.
AIA celebrates
10 years of supporting
our communities with
Tottenham Hotspur
AIA’s partnership with
Tottenham Hotspur has been a
powerful vehicle to deepen
engagement with AIA
customers and communities
across the region. Our highly
popular football clinics have
benefitted 80,000 children
with inspiration and advice on
living an active and healthy
life. AIA also welcomed Son
Heung Min and Cho So Hyun
as AIA Ambassadors.
AIA Voices
engage and inspire
communities
across Asia
AIA launched AIA Voices, a
platform for thought leaders to
educate, motivate and inspire
people to make positive
behavioural changes on their
health and wellness journey.
AIA grants a second
round of scholarship
awards to 100
university students in
Hong Kong
AIA granted scholarship
awards to 100 university
students in Hong Kong as part
of our US$100 million
scholarship pledge. AIA also
donated HK$40 million to
support Hong Kong during the
pandemic this year,
demonstrating our continued
commitment to the local
community.
009
ANNUAL REPORT 2022 AIA LAUNCHES OUR
INTEGRATED
HEALTH
STRATEGY
TO MAKE
HEALTHCARE MORE
ACCESSIBLE, AFFORDABLE,
AND EFFECTIVE
010
AIA GROUP LIMITED Asia is the fastest growing healthcare
market, with long-term structural forces
driving huge demand. Unmatched economic
expansion is creating unprecedented levels
of wealth for a growing and ageing
population. However, while Asia is becoming
wealthier, it is not getting healthier. Millions
are missing out on necessary medical
treatment due to limited access to
healthcare and health insurance resources.
This is the right time for AIA to play a
leading role in making healthcare more
accessible, affordable and effective for our
communities. Our Integrated Health Strategy
is a bold new vision that goes beyond
fragmented partnerships and ecosystems to
deliver simpler customer journeys, including
how people buy health insurance and
navigate the healthcare system. This
strategy brings together the unique
strengths of AIA to build on our substantial
competitive advantages, significantly
enhance our core business and capture new
opportunities for additional growth.
011
ANNUAL REPORT 2022 THREE PILLARS OF
AIA’S INTEGRATED
HEALTH STRATEGY
Personalised
Health
Insurance
AIA aims to be the
leading provider of
personalised health
insurance advice
and innovative
solutions that provide
enhanced coverage
for customers and
greater value.
AIA China’s Retirement
Ecosystem 2.0 is enhanced with
home-based Retirement Services,
Medical Care and Assistance for
customers at the “early elderly age”
AIA Hong Kong’s Health Journey
Guardian offers customers
comprehensive protection for
prevention, prediction, diagnosis,
treatment and recovery
AIA Malaysia’s Total Health Solution
enables customers to Live Well,
Protect Well and Get Well
Integration
with Outpatient
Clinics
AIA can help deliver
better health outcomes
at lower costs through
strategic partnerships
with outpatient clinics
and direct better
healthcare journeys.
POWERED BY
Health Technology, Digital and Analytics
Our vision for Amplify Health is 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.
012
AIA GROUP LIMITED Advanced
Healthcare
Administration
and
Management
AIA will provide more
effective care
management
programmes and simpler
healthcare journeys for
our customers.
2.6 million
members across
in
11 markets
and our wellness
programme in
Mainland China
Personal Case
Management in
12 markets
Telemedicine in
10 markets
Regional Health
Passport in
9 markets
013
Health Technology, Digital and Analytics
ANNUAL REPORT 2022 OVERVIEW
2022 RESULTS AT-A-GLANCE
VALUE OF NEW BUSINESS(1)(7)
ANNUALISED NEW PREMIUMS(2)(7)
US$ MILLIONS
US$ MILLIONS
6,510
6,585
5,647
5,407
5,219
4,154
3,955
3,366
3,092
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
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
OPERATING PROFIT AFTER TAX(3)(8)
TOTAL WEIGHTED PREMIUM INCOME(4)
US$ MILLIONS
US$ MILLIONS
34,002
35,408
36,859
36,176
30,543
5,689
5,942
5,298
6,409
6,370
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
75,001
71,202
67,185
63,905
EV EQUITY(5)
US$ MILLIONS
80,000
70,000
60,000
56,203
50,000
40,000
30,000
20,000
10,000
0
TOTAL ASSETS AND TOTAL LIABILITIES(8)
US$ BILLIONS
340
326
284
262
303
279
264
230
229
190
350
300
250
200
150
100
50
0
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
TOTAL ASSETS TOTAL LIABILITIES
014
AIA GROUP LIMITED OVERVIEW
2022 BREAKDOWN BY MARKET SEGMENT
VALUE OF NEW BUSINESS(1)(6)
ANNUALISED NEW PREMIUMS(2)
13%
27%
9%
10%
17%
24%
26%
24%
8%
10%
12%
20%
OPERATING PROFIT AFTER TAX(3)
TOTAL WEIGHTED PREMIUM INCOME(4)
13%
22%
6%
12%
12%
35%
20%
21%
7%
10%
11%
31%
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 have not
been restated and do not include any contribution from Tata AIA Life.
ANP and VONB do not include any contribution from our 24.99 per
cent shareholding in China Post Life Insurance Co., Ltd. (China Post
Life). VONB for the Group from 2019 onwards excludes the VONB
attributable to non-controlling interests. VONB for 2018 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 and China Post Life are accounted
for using the equity method. The results of Tata AIA Life and China
Post Life are accounted for on a one-quarter-lag basis in AIA’s
consolidated results. The results of China Post Life starting from the
completion of the investment on 11 January 2022 are accounted for
in AIA’s consolidated results. For clarity, TWPI does not include any
contribution from Tata AIA Life and China Post Life.
(8) From 2019 onwards, the financial information is presented after the
change in AIA’s IFRS accounting treatment for the recognition and
measurement of insurance contract liabilities of other participating
business with distinct portfolios. The financial information for 2018
is presented before the above-mentioned changes.
015
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CHAIRMAN’S STATEMENT
AIA is an exceptional company and I am extremely
proud of the strength and resilience of our business
during a challenging operating environment in 2022.
Our long history in Asia, through many different market
cycles, has provided us with a trusted reputation of
supporting our customers when they need us the most.
As Asia rapidly emerges from the pandemic, AIA’s
Purpose of helping people live Healthier, Longer, Better
Lives has never been more relevant.
Mr. Edmund Sze-Wing Tse
Independent Non-executive
Chairman
016
AIA GROUP LIMITEDOVERVIEW AIA is the largest pan-Asian life and health insurer and we are uniquely positioned to make an enormous positive
difference by materially contributing to the economic and social development of the region. Over our long history, we
have been a trusted partner to our customers and our high-quality advice and products bring peace of mind, as well
as much-needed financial protection to millions of people in Asia.
Our substantial competitive advantages built over decades keep us uniquely positioned to capture the large and fast-
growing opportunities in life and health insurance in Asia over the long term. Our clear and ambitious strategy aligns
our scale, position and influence with the powerful drivers of growth prevalent in the region and we are confident that
our focused execution will deliver sustainable growth for many years to come.
In 2022, we experienced an unprecedented year with extraordinary macroeconomic volatility and extensive outbreaks
of the Omicron variant of COVID-19 creating a complex and challenging operating environment. Containment
measures and an exponential rise in infections caused disruptions to everyday life. While face-to-face sales of our
products in the first half of the year were affected, our digital capabilities allowed us to generate substantial sales
over this period and, as restrictions eased, in-person sales rebounded.
As normal activities resumed, our key strategic initiatives delivered strong new business momentum in the second
half. Although value of new business (VONB) of US$3,092 million was lower by 5 per cent for the full year, VONB
grew by 6 per cent year-on-year in the second half and all five of our largest operating segments delivered positive
year-on-year growth.
Underlying free surplus generation (UFSG) of US$6,039 million grew by 7 per cent per share on a comparable basis(1)
and operating profit after tax (OPAT) of US$6,370 million increased by 5 per cent per share, reflecting our high-
quality, recurring sources of earnings.
AIA has a long-standing commitment since our historic initial public offering, to create value by delivering high-
quality and sustainable sources of growth, earnings and cash for our shareholders. In March 2022, the board of
Directors (Board) approved AIA’s first-ever return of capital to shareholders through a share buy-back programme to
be conducted over three years of up to US$10 billion. This represents capital that is surplus to our needs, allowing for
financial market stress conditions and retention of capital for strategic and financial flexibility. As of 31 December
2022, we had delivered US$3,570 million in returns to shareholders as part of this programme.
The Group’s capital position and financial flexibility remained very strong in 2022. Free surplus grew to US$23,679
million at 31 December 2022 before the payment of shareholder dividends of US$2,259 million and an additional
US$3,570 million return of capital to shareholders during the year from our share buy-back programme, totalling
US$5,829 million. Net of these items, free surplus was US$17,850 million at 31 December 2022.
EV Equity was US$77,031 million at 31 December 2022, before dividends and the share buy-back. EV Equity net of
these items was US$71,202 million. Our cover ratio under the Group Local Capital Summation Method (LCSM) was
also very strong at 283 per cent on the new prescribed capital requirement (PCR) basis at the end of the year.
The Board has recommended a final dividend of 113.40 Hong Kong cents per share, which is an increase of 5 per cent,
reflecting the resilience of our financial performance and the Board’s continued confidence in the future prospects of
the Group. This brings the total dividend for 2022 to 153.68 Hong Kong cents per share, up by 5.3 per cent. 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.
017
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CHAIRMAN’S STATEMENT
All of AIA’s non-executive directors are independent and together, the Board is united in upholding the highest
standards of corporate governance. It is my pleasure to work alongside highly distinguished Board members who
contribute extensive and diverse leadership experience from the public and private sectors. We firmly believe that
strong governance, supported by a sound risk management framework, is fundamental to ensuring the sustainability
of our organisation. AIA’s Operating Philosophy of “Doing the Right Thing, in the Right Way, with the Right People…
and the Right Results will come” is the bedrock of AIA’s culture and is essential to successfully managing risk in an
increasingly complex operating environment.
Our Purpose also underscores our responsibility to help safeguard a better future for the societies in which we
operate by addressing material Environmental, Social and Governance (ESG) issues. I am pleased that, once again,
our efforts have gained us positive recognition. In 2022, Sustainalytics, a global leader in ESG and Corporate
Governance research and ratings, ranked AIA in the top 10th percentile of the insurance industry in its ESG Risk
Rating assessment. We have been “ESG Industry Top Rated” as well as “ESG Regional Top Rated” by Sustainalytics
for two years in a row. I am also delighted that AIA has been included in the 2023 Bloomberg Gender-Equality Index
(GEI), making us one of only five Hong Kong-headquartered companies to be included globally.
I would like to thank Yuan Siong, our senior leadership team and all of our people for their dedication and tireless
efforts in managing our business through the prolonged uncertainties over the last three years. Without them our
sustainable success would not be possible.
As our markets rebound from the pandemic, I am confident that AIA is ideally positioned to capture the enormous
opportunities ahead of us by continuing to serve our customers and communities to the best of our abilities. The
strong drivers of demand and major demographic trends in the region will continue to generate an increasing need
for our products. Our substantial competitive advantages and ambitious strategy build on these powerful structural
drivers of growth, and the long-term prospects for AIA are truly exceptional.
Finally, AIA’s strong track record of delivering sustainable value for all our stakeholders would not have been possible
without the enduring trust of our customers and shareholders. On behalf of the entire Board, I am deeply grateful for
your ongoing support.
Edmund Sze-Wing Tse
Independent Non-executive Chairman
10 March 2023
Notes:
(1) Growth on a comparable basis for UFSG per share excludes the effects on the growth rate of the early adoption of the Hong Kong Risk-based Capital
(HKRBC) regime from 1 January 2022 and the release of additional resilience margins held by the Group at 1 January 2022 under the previous Hong
Kong Insurance Ordinance (HKIO) basis. For clarity, the reported figures for UFSG are unadjusted as a result.
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.
018
AIA GROUP LIMITEDOVERVIEW OVERVIEW
GROUP CHIEF EXECUTIVE AND
PRESIDENT’S REPORT
AIA has delivered a robust performance in 2022 with strong new business
momentum growing in the second half of the year, higher free surplus and
increased capital returns to shareholders. Our results demonstrate the
breadth and diversity of our high-quality portfolio of businesses as well
as the structural growth drivers underpinning the enormous need for life
and health protection across our markets. Our significant investments in
reinforcing AIA’s unique strengths ensure that the Group is exceptionally
well-positioned to meet the immediate as well as evolving demands of
our customers and to benefit from the tremendous opportunities as Asia
rapidly opens up for further growth.
Mr. Lee Yuan Siong
Group Chief Executive
and President
019
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP CHIEF EXECUTIVE AND PRESIDENT’S REPORT
AIA has been protecting people for life, securing financial futures into retirement, and improving the well-being
of families for more than a century. This has earned us a reputation that is synonymous with trust, resilience and
doing the right thing through many market cycles. Our unrelenting focus on building AIA’s substantial competitive
advantages has enabled us to significantly enhance our operations and capture new opportunities for additional
growth across each of our 18 markets. The macroeconomic and operating environment since early 2020 has been
unprecedented. During this time, we have steadfastly delivered on our key strategic priorities, reinforced our unique
strengths and successfully navigated the wide-ranging effects of the COVID-19 pandemic as well as its aftermath.
Our resilient business performance is a direct consequence of our high-quality diversified portfolio of growth
businesses, incomparable distribution platform, innovative products tailored to local market conditions, financial
strength and proven management team. I am deeply proud of our employees, agents and partners who have shown
unwavering professionalism in supporting our customers and communities during these extraordinary times. In
2022, we paid US$16 billion in claims and benefits and, by helping our customers cope with the challenges and
uncertainties they encounter, we provided much-needed support for communities.
Across the region, there is an undeniable and growing need for personalised life and health insurance products,
value-added services and high-quality advice. This immense potential for our business is fuelled by the rapid
increases in affluence, healthcare expenditure and shifting population demographics. The pandemic has accelerated
many of these structural trends and higher expectations of quality of life is top of mind for millions of Asians.
I firmly believe that the prospects for AIA’s business remain as clear and as strong as ever. I have full confidence that
through the focused execution of our growth strategy and our unmatched financial flexibility, we will continue to
create and deliver long-term sustainable value for all of our stakeholders.
2022 FINANCIAL PERFORMANCE HIGHLIGHTS
From the beginning of 2022, outbreaks of the Omicron variant of COVID-19 affected all of our markets with a sudden
and exponential surge in infections and the reintroduction of containment measures impacting our communities,
severely dampening consumer demand and reducing distributor activity in the first half of the year. In Mainland
China, our largest growth market, pandemic restrictions were in place for most of 2022 and there was a rapid increase
in COVID-19 infections towards the end of the year.
The Group delivered a robust value of new business (VONB) performance in 2022, with 6 per cent year-on-year
growth in the second half as the effects of the initial Omicron wave subsided. While VONB of US$3,092 million
was lower by 5 per cent for the full year, our key strategic initiatives delivered strong new business momentum in
the second half of the year. All five of our largest operating segments delivered positive year-on-year growth in the
second half and we achieved double-digit growth in our combined ASEAN business and Tata AIA Life in India.
AIA’s balance sheet strength is a direct result of our profitable growth strategy underpinned by consistent financial
discipline. The Group’s very strong financial position is an important differentiator and a substantial competitive
advantage, particularly during times of considerable capital market volatility. AIA has significant opportunities to
invest capital in superior profitable growth that generates increased shareholder value. We are able to move forward
with confidence, financing organic new business and value-enhancing inorganic opportunities, while delivering
attractive shareholder returns. Last March, we began AIA’s first-ever share buy-back programme of up to US$10
billion over three years and, as of 31 December 2022, we had repurchased 366 million shares, delivering US$3,570
million in additional returns to shareholders.
020
AIA GROUP LIMITEDOVERVIEW Underlying free surplus generation (UFSG) of US$6,039 million grew by 7 per cent per share on a comparable basis(1).
EV Equity was US$77,031 million at 31 December 2022, before the payment of shareholder dividends of US$2,259
million and an additional US$3,570 million return of capital to shareholders during the year from our share buy-back
programme, totalling US$5,829 million. EV Equity net of these items was US$71,202 million.
Our growing in-force portfolio and the proactive management of our high-quality, recurring sources of earnings
underpinned operating profit after tax (OPAT) of US$6,370 million, an increase of 5 per cent per share. The Group’s
capital position remained very strong with free surplus growing to US$23,679 million before dividends and the share
buy-back programme. Net of these items, free surplus was US$17,850 million at 31 December 2022.
As at 31 December 2022, the Group Local Capital Summation Method (LCSM) cover ratio(2) remained very strong
at 283 per cent on the new prescribed capital requirement (PCR) basis and 552 per cent on the minimum capital
requirement (MCR) basis previously disclosed.
The Board has recommended a final dividend of 113.40 Hong Kong cents per share which brings the total dividend
for 2022 to 153.68 Hong Kong cents per share, an increase of 5.3 per cent compared with 2021. This follows AIA’s
established prudent, sustainable and progressive dividend policy, allowing for future growth opportunities and the
financial flexibility of the Group.
Our resilient financial results in an unprecedented market environment demonstrate the strengths of our robust
operating model, which is built on differentiated distribution, personalised and valuable propositions, and backed by
world-class technology and digital platforms to deliver outstanding customer service. Since July 2020, we have been
transforming AIA’s significant competitive advantages to fully leverage the powerful structural drivers of growth
across our markets and ensure we remain well-positioned for future success.
TRANSFORMING OUR COMPETITIVE ADVANTAGES
At the heart of our growth strategy is world-class Technology, Digital and Analytics, supporting increased distributor
productivity, streamlined operations and enhanced customer experience while creating access to new growth
opportunities. We are ahead of global financial services benchmarks with more than 86 per cent of our information
technology infrastructure hosted in the public cloud. Since we announced our new strategy in 2020, our technology
capacity has doubled while delivering cost efficiencies compared with our legacy infrastructure platform.
We delivered an additional 111 high-impact use cases in 2022 as we industrialise and deepen our usage of
responsible artificial intelligence and analytics across the Group. The number of leads generated through our digital
tools increased by 30 per cent compared with 2021 and the enhanced quality of these targeted leads improved
sales lead conversion rates, generating more than US$500 million in annualised new premiums from our agency and
bancassurance channels.
Our Unrivalled Distribution remains a distinctive competitive advantage for the Group, offering customers professional,
high-quality advice and products that are personalised to their needs. Although face-to-face new business activities
were affected at the start of the year by the Omicron outbreak, agency new business sales momentum improved
from the second quarter and VONB grew by 8 per cent in the second half of the year. Increased adoption of our full
range of digital agency tools has ensured the resilience of our proprietary agency model with total number of agents
exceeding pre-pandemic levels at the end of 2019.
AIA China became the Million Dollar Round Table (MDRT) company with the most members globally, followed by
AIA Thailand and AIA Hong Kong in second and third place respectively. Overall, AIA was the number one MDRT
multinational company in the world for a record eighth consecutive year, proving the effectiveness of our differentiated
high-quality Premier Agency strategy.
021
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP CHIEF EXECUTIVE AND PRESIDENT’S REPORT
Our strategic partnerships with leading banks delivered a 10 per cent increase in VONB, driven by growth from
Public Bank Berhad (Public Bank) in Malaysia, PT Bank Central Asia Tbk (BCA) in Indonesia, The Bank of East Asia,
Limited (BEA) in Hong Kong and Mainland China, ASB Bank Limited in New Zealand and across all key domestic
partnerships in India. Our successful digitally-led model builds on our strong track record of converting in-branch
referrals by leveraging customer analytics, digital marketing platforms and social media to increase leads and
increase productivity for our insurance specialists. Our next-generation partnerships with technology companies
offer lifestyle-related digital insurance propositions to customers with unmet needs and uses new analytical models
to identify suitable customers for referral to our distribution channels for more comprehensive advice and product
solutions. Last year, we welcomed 15 additional digital platform partners and acquired more than one million
customers, the majority of which were new to AIA.
We believe that providing simplified journeys with faster turnaround times will deliver a Leading Customer
Experience and a range of business benefits including improved customer satisfaction and sustainable profitability.
End-to-end straight-through-processing (STP) is crucial to achieving this and, as of December 2022, we had reached
70 per cent STP across the Group, up 12 pps from the previous year. Our re-designed claims processes have resulted
in faster and more cashless settlements with 63 per cent of claims settled on the same day as submission and 93 per
cent of claims paid digitally across the Group. Our investments in back-office operations, technology and artificial
intelligence have driven greater automation and more personalised service, resulting in better customer outcomes
across our markets.
Through our Compelling Propositions we aim to create shared economic value by tying our financial success to
community success. We support our customers by helping them save more effectively to meet their financial goals at
different life stages, rewarding them for taking actions that positively impact their well-being, and assisting them to
access the right medical treatment when needed. The AIA Vitality programme continues to deliver positive impacts
on health outcomes to increasing numbers of customers, including a launch in India in 2022. We now have 2.6
million members across AIA Vitality and our wellness programme in Mainland China.
With annual healthcare expenditure in our markets on track to exceed US$4 trillion in 2030 and much of the burden
falling to individuals, this is an opportune time to transform health insurance and healthcare in the region. Our new
Integrated Health Strategy, announced in August, reinforces the many benefits of our core life insurance business
and makes health insurance and health care management more accessible, more affordable and more effective. As
the leading life and health insurer in Asia, we are in an advantaged position to build on our key competitive strengths
to deliver on our Purpose of helping people live Healthier, Longer, Better Lives.
INVESTING IN ADDITIONAL GROWTH OPPORTUNITIES
Our financial discipline over time has also ensured that we retain the flexibility to invest capital in inorganic growth
opportunities that increase our scale and diversity in the world’s most attractive region for life and health insurance.
Amplify Health, our new Health InsurTech business, is the engine that powers our Integrated Health Strategy. Our
new company offers a broad suite of services through a full health technology stack, along with the associated
intellectual property, data sets and expertise, developed over the last three decades by Discovery Limited, our
joint venture partner. Amplify Health materially accelerates our capability build in health and creates a new and
sustainable competitive advantage as AIA is uniquely positioned to deliver truly personalised health insurance with
fully integrated and end-to-end care for our customers.
In March, we extended the scope of our distribution partnership with BEA following our acquisition of Blue Cross
(Asia-Pacific) Insurance Limited, a leading health insurer, and Blue Care JV (BVI) Holdings Limited, a health services
provider with a medical network in Hong Kong. This transaction advances our health strategy in Hong Kong and
deepens our distribution partnership with BEA, bringing new product expertise to support all of AIA’s distribution
channels in Hong Kong and the Greater Bay Area.
022
AIA GROUP LIMITEDOVERVIEW Our focus on bringing comprehensive, affordable and quality healthcare to customers was the driving force behind
the acquisition of MediCard Philippines, Inc. (MediCard), a leading Health Maintenance Organisation with an
extensive medical service network of over 1,000 partner hospitals and clinics across major cities. MediCard provides
health insurance and healthcare services to more than 920,000 members across corporate and individual plans in
the Philippines and brings new products, customer segments and distribution capabilities to AIA.
The completion of our 24.99 per cent equity investment in China Post Life Insurance Co., Ltd. (China Post Life)
enables the Group to access significant upside from additional distribution channels and customer segments that are
highly complementary to AIA China’s strategy. China Post Life brings financial protection to the mass and emerging
mass-affluent segments and is the leading bank-affiliated life insurer in Mainland China.
A joint technical assistance advisory committee with dedicated support from AIA Group Office, together with
committed business transformation from China Post Life, has achieved a very strong performance in 2022. Since
our announcement, China Post Life’s VONB has grown by a multiple of 3.8 times from 2020. This has been driven
by a strategic shift towards sales of longer-term savings and protection products, which have significantly improved
VONB margin, as well as enhancements to distribution productivity. AIA China has also begun sales through Postal
Savings Bank of China Co., Ltd., as we deepen our cooperation to bring compelling propositions to more customers.
We continue to execute on AIA China’s expansion strategy, capturing new growth opportunities available only to AIA,
as we replicate our high-quality differentiated Premier Agency in our new geographies and deepen our presence
within our existing footprint. Following our successful launch in Hubei province, we were delighted to receive
approval from the China Banking and Insurance Regulatory Commission (CBIRC) to begin preparations for operations
in Henan, the third most populous province with close to 100 million residents. We were also granted approval by the
CBIRC to upgrade our operations in Tianjin and Shijiazhuang and have expanded our presence through additional
sales offices.
OUR PEOPLE
AIA’s strong culture of empowerment with accountability is a reflection of our people and a product of the decisions
and actions each of us takes every day. We have been transforming AIA into a simpler, faster, more connected
organisation by reducing organisational layers and implementing cross-functional agile operating models to drive
better business outcomes. Attracting technology, digital and analytics talent is crucial to securing the execution of
our strategic priorities and the overall number of employees with these skill sets has increased significantly, up by
63 per cent since we began our transformation in July 2020. Our new ways of working enable us to innovate at pace
while enhancing our business capabilities and operational resilience.
Employee engagement levels for the Group grew to a record high in 2022, and against a backdrop of an unprecedented
operating environment, AIA placed in the 94th percentile of Gallup’s global finance and insurance industry
benchmark. We have further cemented our status as an employer of choice by ranking in the top quartile for the
sixth consecutive year, and in the top 10th percentile for the second year running. AIA takes great pride in fostering
an inclusive and diverse workplace that believes in always doing better. We were delighted to be recognised for our
highly engaged workforce and performance-oriented culture as one of only three Asia-based companies out of the
41 global recipients of the Gallup Exceptional Workplace Award.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
The multi-generational nature of our business places sustainability at the forefront of how we operate, and AIA
has a vital role to play in addressing material ESG issues in our societies. We are committed to achieving net-zero
greenhouse gas emissions by 2050 and are using the latest climate science to set ambitious emissions reduction
targets that are expected to be validated by the Science Based Targets initiative (SBTi).
023
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP CHIEF EXECUTIVE AND PRESIDENT’S REPORT
The sustainable deployment of our investment portfolio is a vital enabler of our ambitions and our complete divestment
from directly-managed listed equity and fixed income exposures to coal mining and coal-fired power businesses is
a source of tremendous personal pride. Our global ESG leadership is well recognised and, by sustaining the delivery
of our Purpose, we can use our scale and influence as the largest pan-Asian life and health insurer to meaningfully
contribute to the economic and social development of the region.
OUTLOOK
Global economic growth slowed in 2022, as the combined effect of supply chain constraints and demand-led inflation
proved to be more persistent than expected in developed countries, prompting central banks to accelerate the pace
of monetary policy normalisation through rate hikes and quantitative tightening. The knock-on effects have been
felt in reduced living standards, higher borrowing costs and substantial falls in major asset classes globally. External
shocks such as the ongoing conflict in Ukraine have the potential to magnify volatility in global capital markets.
Managing inflation remains a key priority for economic policymakers in the West, fuelling uncertainty around the
likelihood and depth of any recession in the United States, in particular.
In Asia, fiscal easing policies were generally more restrained than in other parts of the world and economies have
been comparatively more resilient. Consumer spending has been supported by very low rates of unemployment and
greater use of excess savings accumulated during the pandemic. As a result, demand for services increased strongly,
particularly from tourism, after three years of social distancing and travel restrictions.
Mainland China’s reopening at the end of 2022 provides a platform for greater economic stability and can help
GDP growth return to its potential in 2023. Household consumption is expected to rebound as lower risk aversion
and greater certainty reduce high levels of cash savings, becoming an important driver of recovery alongside the
natural rebound from increased economic activity following reopening. In Hong Kong, the opening of the border with
Mainland China and the rest of the world will reaffirm its status as a vibrant international financial centre and its
unique role in connecting East and West. As the effects of the pandemic recede across the region, we expect to see
a continued strong recovery in activity levels and consumer demand.
AIA operates in the most attractive markets in the world for life and health insurance. Our resilient set of financial
results in 2022 and new business growth momentum in the second half of the year reflect our substantial competitive
advantages, the breadth and diversity of our markets, our financial strength and the quality of our people. The long-
term prospects for AIA’s business remain exceptional, powered by the structural drivers of rising wealth, low insurance
penetration levels and limited social welfare coverage across Asia. I am confident that AIA is uniquely positioned to
capture the enormous long-term opportunities in the Asian life and health insurance market and deliver long-term
sustainable value for all our stakeholders.
Lee Yuan Siong
Group Chief Executive and President
10 March 2023
Notes:
(1) Growth on a comparable basis for UFSG per share excludes the effects on the growth rate of the early adoption of the Hong Kong Risk-based Capital
(HKRBC) regime from 1 January 2022 and the release of additional resilience margins held by the Group at 1 January 2022 under the previous Hong
Kong Insurance Ordinance (HKIO) basis. For clarity, the reported figures for UFSG are unadjusted as a result.
(2) The Group LCSM cover ratio definition changed from: (i) the ratio of group available capital to the group minimum capital requirement (GMCR) at 31
December 2021, to (ii) the ratio of the group available capital to the group prescribed capital requirement (GPCR) from 1 January 2022 onwards.
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.
024
AIA GROUP LIMITEDOVERVIEW FINANCIAL AND OPERATING REVIEW
026 Group Chief Financial Officer’s Review
052 Business Review
067 Risk Management
073 Regulatory and International Developments
074 Our People
025
ANNUAL REPORT 2022 GROUP CHIEF FINANCIAL OFFICER’S REVIEW
AIA has delivered a resilient financial performance in 2022. Strong VONB
growth momentum returned in the second half of the year. Our capital
position remained very strong against the backdrop of an operating
environment affected by the emergence of Omicron and volatile capital
markets, and our free surplus grew while delivering increased dividends and
capital returns to shareholders. AIA’s unique business model and competitive
advantages enable us to capture the immense growth opportunities ahead
as our markets rebound from the effects of the pandemic.
Growth rates and commentaries are provided on a constant exchange rate (CER) basis.
Mr. Garth Jones
Group Chief Financial Officer
026
AIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW SUMMARY AND KEY FINANCIAL HIGHLIGHTS
The Group delivered a robust VONB performance in 2022, as the Omicron outbreak affected consumer demand
and distributor activity across our markets in the first half of the year. As the effects of the initial wave subsided,
our strategic initiatives delivered strong new business momentum into the second half. As a result, while VONB of
US$3,092 million was lower by 5 per cent for the full year, in the second half VONB grew by 6 per cent, all five of
our largest operating segments delivered positive year-on-year growth, and we achieved double-digit growth in
our combined ASEAN business and Tata AIA Life in India.
EV grew by 5 per cent to US$74,694 million and EV Equity grew by 6 per cent to US$77,031 million before the
payment of shareholder dividends of US$2,259 million and an additional US$3,570 million return of capital to
shareholders during the year from our share buy-back programme.
EV operating profit was US$6,845 million, including US$243 million of positive EV operating variances.
Non-operating investment return variances were negative US$4,793 million in the first half following a significant
fall in major global asset markets as previously reported. Investment variances reduced significantly in the second
half to negative US$599 million. The effects of foreign exchange rate movements reduced EV by US$2,264 million
and were relatively unchanged from the first half, following the exceptional strength in the US dollar reporting
currency compared with our local markets. After total shareholder dividends and share buy-back of US$5,829
million, EV was US$68,865 million at 31 December 2022.
OPAT of US$6,370 million grew by 5 per cent per share. All reported segments delivered OPAT growth in 2022
except Thailand. In contrast to our other markets, many customers were treated for COVID-19 in private hospitals
during the outbreak of the initial Omicron wave in Thailand, as reported in the first half. As infections subsided,
OPAT for Thailand returned to positive growth in the second half. Growth in our overall in-force portfolio remains
the primary driver of higher OPAT, as successive cohorts of new business add to our in-force business and translate
into higher earnings over time.
Operating return on shareholders’ allocated equity (operating ROE) increased to 13.2 per cent, compared with
12.8 per cent in 2021. Operating margin remained strong and increased to 17.7 per cent reflecting our high-quality
sources of earnings and the proactive management of our growing in-force portfolio of business.
Shareholders’ allocated equity was US$50,634 million, before the payment of shareholder dividends of US$2,259
million and share buy-back of US$3,570 million. Shareholders’ allocated equity was US$44,805 million at 31
December 2022 after capital returns to shareholders of US$5,829 million in total.
The execution of AIA’s profitable growth strategy since IPO has delivered a substantial increase in free surplus
and, as a result, we launched a US$10 billion share buy-back programme in March 2022. 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. Our capital management framework enhances
shareholder returns while retaining the financial strength that allows AIA to continue investing capital in the
significant growth opportunities available to us. Over the first ten months of our share buy-back programme,
we repurchased 366 million shares for an aggregate value of US$3,570 million as at 31 December 2022. The
programme to date has reduced the outstanding share count by 3 per cent.
027
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION The Group’s financial position remained very strong with growth in free surplus to US$23,679 million, before a
deduction of US$5,829 million for shareholder dividends and share buy-back. Free surplus was US$17,850 million
at 31 December 2022 after capital returns to shareholders, compared with US$17,025 million at 31 December
2021.
Underlying free surplus generation (UFSG) was US$6,039 million, an increase of 7 per cent per share on a
comparable basis(1). The increase was driven by the continued growth of the in-force portfolio, partly offset by a
lower positive claims experience compared with 2021. Our very strong credit ratings and stable outlook have been
affirmed as unchanged by our rating agencies.
The Group’s Local Capital Summation Method (LCSM) cover ratio(2) was very strong at 283 per cent on the new
prescribed capital requirement (PCR) basis. The effect of the share buy-back programme was to reduce the
LCSM cover ratio by 13 pps over the year and therefore the ratio was 296 per cent before the return of capital to
shareholders. This compares with 291 per cent at 31 December 2021 on a pro forma basis.
The Group’s 2022 annual results have been calculated and reported before the adoption of International Financial
Reporting Standards (IFRS) 9 and 17 for the consolidated financial statements that will take effect from 1
January 2023. As previously reported, the adoption of these accounting standards has no effect on the underlying
economics of our business and therefore we expect no material changes to the Group’s VONB, EV, solvency levels,
capital position, UFSG or cash generation and dividend policy. IFRS OPAT and IFRS shareholders’ allocated equity
will remain the Group’s key IFRS financial performance metrics following the adoption of the new standards.
The preparation of the 2022 comparatives under IFRS 9 and IFRS 17 are progressing as planned. After the
adoption of IFRS 17, OPAT for 2022 is expected to be within 5 per cent of OPAT under the current IFRS 4 basis.
Under IFRS 17, shareholders’ allocated equity was US$51 billion at 1 January 2022, a reduction of 2 per cent
compared to IFRS 4, and is expected to exceed the IFRS 4 value at 31 December 2022. The transition to IFRS 9
had an immaterial effect on the Group’s financial position.
The Board of Directors (Board) has recommended a final dividend of 113.40 Hong Kong cents per share, subject
to shareholders’ approval at the Company’s forthcoming AGM. This brings the total dividend for 2022 to 153.68
Hong Kong cents per share, an increase of 5.3 per cent compared with the total dividend for 2021. This follows
AIA’s established prudent, sustainable and progressive dividend policy, allowing for future growth opportunities
and the financial flexibility of the Group.
We remain confident in the growth opportunities for AIA’s businesses across Asia, allowing us to continue to focus
on delivering profitable new business growth, leveraging our competitive advantages and financial strength to
invest capital where we see attractive opportunities, while maintaining our financial discipline.
Notes:
(1) Growth on a comparable basis for UFSG throughout the Financial and Operating Review excludes the effects on the growth rate of the early adoption of
the Hong Kong Risk-based Capital (HKRBC) regime from 1 January 2022 and the release of resilience margins held by the Group at 1 January 2022 under
the previous Hong Kong Insurance Ordinance (HKIO) basis. For clarity, the reported figures for UFSG are unadjusted.
(2) The Group LCSM cover ratio definition changed from (i) the ratio of the group available capital to the group minimum capital requirement (GMCR) at 31
December 2021, to (ii) the ratio of the group available capital to the group prescribed capital requirement (GPCR) from 1 January 2022 onwards.
028
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW NEW BUSINESS PERFORMANCE
VONB, ANP and Margin by Segment
US$ millions, unless otherwise stated
VONB
Mainland China
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
2022
VONB
Margin
69.5%
69.5%
89.1%
65.7%
69.9%
30.2%
916
787
585
349
308
420
3,365
61.5%
2021
VONB
Margin
VONB Change
YoY
CER
YoY
AER
ANP
ANP
VONB
1,319
1,078
655
531
440
1,384
5,407
1,108
78.9%
1,404
(15)%
(17)%
756
609
356
283
511
64.0%
90.0%
64.7%
57.3%
35.9%
1,106
677
549
491
4%
5%
1%
15%
4%
(4)%
(2)%
9%
1,420
(12)%
(18)%
3,623
63.2%
5,647
(4)%
(7)%
(52)
n/m
n/m
(57)
n/m
n/m
n/m
n/m
(192)
n/m
n/m
(167)
n/m
n/m
n/m
n/m
Non-controlling interests
(29)
n/m
n/m
(33)
n/m
n/m
Total
3,092
57.0%
5,407
3,366
59.3%
5,647
3,121
57.0%
5,407
3,399
59.3%
5,647
(5)%
n/m
(5)%
(8)%
n/m
(8)%
Six months ended
31 December 2022
Six months ended
31 December 2021
VONB Change
VONB
VONB
Margin
ANP
VONB
353
464
325
188
147
213
73.0%
69.6%
93.9%
65.5%
73.1%
31.3%
484
635
344
287
201
678
370
443
297
180
126
258
VONB
Margin
73.3%
69.6%
86.5%
66.3%
52.6%
40.7%
ANP
505
601
344
270
238
629
1,690
63.4%
2,629
1,674
63.6%
2,587
YoY
CER
3%
5%
19%
7%
26%
(8)%
7%
YoY
AER
(5)%
5%
9%
4%
17%
(17)%
1%
(27)
n/m
n/m
(26)
n/m
n/m
n/m
n/m
(93)
n/m
n/m
(79)
n/m
n/m
n/m
n/m
US$ millions, unless otherwise stated
Mainland China
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
(14)
n/m
n/m
(17)
n/m
n/m
Total
1,556
58.8%
2,629
1,552
59.6%
2,587
1,570
58.8%
2,629
1,569
59.6%
2,587
6%
n/m
6%
–
n/m
–
029
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION The Group delivered a robust VONB performance in 2022 with 6 per cent VONB growth in the second half of the
year. While VONB of US$3,092 million was lower by 5 per cent for the full year due to the effects of the initial
Omicron wave in the first half, our strategic initiatives delivered strong new business momentum into the second
half. All five of our largest operating segments delivered positive year-on-year growth in the second half and we
achieved double-digit growth in our combined ASEAN business and Tata AIA Life in India.
Annualised new premiums (ANP) also grew by 8 per cent in the second half of the year to end the year flat at
US$5,407 million. VONB margin on the full year basis reduced by 2.4 pps to 57.0 per cent, driven mainly by a more
balanced mix between protection-focused products and savings-oriented products for AIA China compared with
2021.
For clarity, VONB for 2022 has reflected both the HKRBC and China Risk-Oriented Solvency System phase II
(C-ROSS II) statutory reserving and capital bases; the effects on VONB were immaterial.
AIA China returned to positive growth in the second half of 2022 with VONB up by 3 per cent. VONB in the first
half was lower compared with the record result in 2021, as our business was impacted by pandemic containment
measures and full year VONB reduced by 15 per cent. We have seen new business momentum recover and return
to positive growth in the first two months of 2023.
AIA Hong Kong achieved 4 per cent VONB growth in 2022, supported by growth from our market-leading agency
force and a strong performance from partnership distribution, in particular through the intermediated channels
and our exclusive partnership with The Bank of East Asia, Limited (BEA). VONB from sales to Mainland Chinese
visitors tripled in 2022 and accounted for just over 10 per cent of total VONB for the year.
AIA Thailand delivered 5 per cent growth in VONB for the full year, supported by 19 per cent growth in the second
half of 2022. We saw higher sales activity levels in both agency and bancassurance channels as new business
momentum returned in the second half. Our agency remained the market leader in 2022 and we achieved an
excellent increase in number of new recruits, contributing to an increase in the number of active agents compared
to 2021.
AIA Singapore delivered higher VONB in 2022 as 7 per cent growth in the second half offset performance in the
first half. Agency channel remained the largest contributor to VONB with both an increase in the number of active
agents and productivity improvements in the second half. Our partnership channel achieved a strong performance
in 2022.
AIA Malaysia achieved 15 per cent VONB growth in 2022, with both agency and partnership channels delivering
double-digit growth. We continued to work closely with Public Bank Berhad (Public Bank) to further uplift the
activity and productivity of our insurance specialists through the implementation of enhanced digital tools.
Our Other Markets segment recorded a reduction in VONB in 2022 as strong double-digit growth in India, New
Zealand, the Philippines, Sri Lanka and Taiwan (China) in the second half was offset by a decline in Australia,
South Korea and Vietnam.
Further details are included in the Business Review section of this report.
030
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW EV EQUITY
EV MOVEMENT
EV grew by 5 per cent to US$74,694 million, before the return of capital to shareholders through dividends and
share buy-back.
The early adoption of the new HKRBC regime and the release of resilience margins increased EV by US$2,379
million and US$885 million respectively, as previously reported in our Interim Report 2022.
EV operating profit of US$6,845 million reflected lower VONB of US$3,092 million and expected return on EV of
US$3,869 million compared with 2021. The reduction in expected return on EV was from a lower unwind on the
value of in-force business from the early adoption of the HKRBC regime which accelerated the recognition of
future profits into free surplus as previously disclosed, a lower starting EV for the second half following negative
market movements in the first half of the year and an increase in capitalised unallocated expenses. Operating
return on EV (operating ROEV) was 9.4 per cent. Overall operating experience was better than assumed, delivering
US$243 million of positive EV operating variances. Cumulative operating variances have now added US$3.9 billion
to EV since our IPO in 2010, demonstrating our consistent strategic focus on writing high-quality business over
many years.
In 2022, global capital markets experienced a significant fall in asset prices from rapidly rising interest rates, lower
equity markets and widening corporate bond spreads that mostly affected the first half of the year. Investment
return variances were negative US$4,793 million in the first half as previously reported. Investment return
variances reduced significantly in the second half to negative US$599 million.
Changes to economic assumptions at the end of 2022 following the significant rise in interest rates over the year
reduced EV by US$300 million overall. Higher long-term investment return assumptions increased EV by US$1.5
billion, offset by a corresponding increase in risk discount rates which reduced EV by US$1.8 billion.
The effects of foreign exchange rate movements were relatively unchanged from the first half and reduced EV
by US$2,264 million, following the exceptional strength of our US dollar reporting currency relative to our local
markets.
EV was US$68,865 million at 31 December 2022 after shareholders dividends and share buy-back of US$5,829
million in total.
031
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION An analysis of the movement in EV is shown as follows:
US$ millions, unless otherwise stated
Opening EV
Purchase price(1)
Acquired EV(2)
Effect of acquisition
HKRBC early adoption
Release of resilience margins
HKRBC early adoption and release of resilience margins
Value of new business
Expected return on EV
Operating experience variances
Operating assumption changes
Finance costs
EV operating profit
EV before non-operating items
Investment return variances
Effect of changes in economic assumptions
Other non-operating variances
EV non-operating items
Total EV profit
Other capital movements
Effect of changes in exchange rates
EV before dividends and share buy-back
Dividends
Share buy-back
Closing EV
Closing EV per share (US dollars)
ANW
33,302
(283)
83
(200)
8,407
2,168
10,575
(159)
4,838
513
(331)
(359)
4,502
48,179
(5,893)
(15)
(1,530)
(7,438)
7,639
(12)
(1,149)
39,580
(2,259)
(3,570)
33,751
2022
VIF
EV
39,685
72,987
–
–
–
(6,028)
(1,283)
(7,311)
3,251
(969)
(214)
275
–
2,343
34,717
501
(285)
1,296
1,512
(3,456)
–
(1,115)
35,114
–
–
35,114
(283)
83
(200)
2,379
885
3,264
3,092
3,869
299
(56)
(359)
6,845
82,896
(5,392)
(300)
(234)
(5,926)
4,183
(12)
(2,264)
74,694
(2,259)
(3,570)
68,865
5.87
032
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW 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
EV before non-operating items
Investment return variances
Effect of changes in economic assumptions
Other non-operating variances
EV non-operating items
Total EV profit
Other capital movements
Effect of changes in exchange rates
EV before dividends
Dividends
Closing EV
Closing EV per share (US dollars)
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 dollars)
ANW
28,503
(397)
266
(131)
(258)
(810)
5,156
626
64
(309)
4,727
32,841
1,636
(26)
1,163
2,773
7,500
9
(174)
35,449
(2,147)
33,302
2021
VIF
EV
36,744
65,247
–
254
254
–
4,176
(754)
(175)
(78)
–
3,169
40,167
(343)
460
37
154
3,323
–
(636)
39,685
–
39,685
(397)
520
123
(258)
3,366
4,402
451
(14)
(309)
7,896
73,008
1,293
434
1,200
2,927
10,823
9
(810)
75,134
(2,147)
72,987
6.03
As at
31 December
2022
As at
31 December
2021
68,865
2,337
71,202
11,734
6.07
72,987
2,014
75,001
12,097
6.20
Notes:
(1) Purchase price of Blue Cross as per note 14 to the consolidated financial statements in Annual Report 2022.
Purchase price of AIA Everest as per note 5 to the consolidated financial statements in Annual Report 2021.
(2) Acquired EV from the acquisition of Blue Cross in 2022.
Acquired EV from the acquisition of AIA Everest in 2021.
(3) Refers to the consideration for the strategic bancassurance partnership with BEA as previously announced in 2021.
(4) Goodwill and other intangible assets are consistent with the figures in the IFRS consolidated financial statements and are shown net of: tax, amounts
attributable to participating funds, and non-controlling interests.
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)
2022
6,845
11,929
57.38
2021
7,896
12,066
65.44
YoY
CER
(10)%
n/a
(9)%
YoY
AER
(13)%
n/a
(12)%
033
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
EV Operating Earnings Per Share – Diluted
EV operating profit (US$ millions)
Weighted average number of ordinary shares on
diluted basis (millions)(1)
Diluted EV operating earnings per share (US cents)(1)
2022
6,845
11,938
57.34
2021
7,896
12,087
65.33
YoY
CER
YoY
AER
(10)%
(13)%
n/a
(9)%
n/a
(12)%
Note:
(1) Diluted EV operating earnings per share includes the dilutive effects, if any, of the awards under various share-based compensation plans as described in
note 39 to the consolidated financial statements.
EV AND VONB SENSITIVITIES
Sensitivities for EV and VONB to changes in equity price and interest rate movements, including management
actions, are shown below. The interest rate sensitivities apply a 50 basis points movement in current bond yield
curves, long-term investment return assumptions and risk discount rates, including the corresponding effect on
asset values.
EV sensitivities to interest rates at 31 December 2022 increased compared with 31 December 2021. This was
due to the effect of the sensitivities on the additional free surplus released from the early adoption of the HKRBC
regime as previously disclosed, and the reduced sensitivity of our business units outside of Hong Kong resulting
from a higher starting level of bond yields within the central value following the increases seen over 2022.
Overall, EV sensitivities to interest rates remained small and VONB sensitivities remained stable compared with
2021.
The direction of sensitivities to interest rates vary by market.
US$ millions, unless otherwise stated
Central value
Effect of equity price changes
10 per cent increase in equity prices
10 per cent decrease in equity prices
Effect 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
Effect of interest rate changes
50 basis points increase in interest rates
50 basis points decrease in interest rates
As at 31 December 2022
As at 31 December 2021
EV
% Change
EV
% Change
68,865
1,817
(1,821)
(1,246)
1,347
2.6%
(2.6)%
(1.8)%
2.0%
72,987
1,878
(1,871)
(330)
279
2.6%
(2.6)%
(0.5)%
0.4%
2022
2021
VONB
% Change
VONB
% Change
3,092
64
(81)
2.1%
(2.6)%
3,366
74
(108)
2.2%
(3.2)%
Please refer to Section 3 of the Supplementary Embedded Value Information for additional information.
034
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW IFRS PROFIT
OPAT(1) BY SEGMENT
US$ millions, unless otherwise stated
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Group Corporate Centre
Total
US$ millions, unless otherwise stated
OPAT
Weighted average number of ordinary shares (millions)
Basic OPAT per share (US cents)
Weighted average number of ordinary shares on
diluted basis (millions)(2)
Diluted OPAT per share (US cents)(2)
2022
1,425
2,226
782
742
393
804
(2)
6,370
2022
6,370
11,929
53.40
11,938
53.36
2021
1,371
2,143
960
723
392
784
36
6,409
2021
6,409
12,066
53.12
12,087
53.02
YoY
CER
8%
4%
YoY
AER
4%
4%
(10)%
(19)%
6%
6%
11%
n/m
3%
YoY
CER
3%
n/a
5%
n/a
5%
3%
–
3%
n/m
(1)%
YoY
AER
(1)%
n/a
1%
n/a
1%
Notes:
(1) Attributable to shareholders of the Company only, excluding non-controlling interests.
(2) Diluted OPAT per share includes the dilutive effects, if any, of the awards under various share-based compensation plans as described in note 39 to the
consolidated financial statements.
OPAT of US$6,370 million grew by 5 per cent per share. All reported segments delivered OPAT growth in 2022
except Thailand. In contrast to our other markets, many customers were treated for COVID-19 in private hospitals
during the outbreak of the initial Omicron wave in Thailand, as reported in the first half. As infections subsided,
OPAT for Thailand returned to positive growth in the second half. Growth in our overall in-force portfolio remains
the primary driver of higher OPAT, as successive cohorts of new business add to our in-force business and translate
into higher earnings over time.
Operating ROE increased to 13.2 per cent, compared with 12.8 per cent in 2021. Our operating margin remained
strong and increased to 17.7 per cent reflecting our high-quality sources of earnings and the proactive management
of our growing in-force portfolio of business.
Further details are included in the Business Review section of this report.
035
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION TWPI by Segment
US$ millions, unless otherwise stated
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
2022
7,592
11,237
4,166
3,577
2,464
7,140
2021
6,999
11,904
4,428
3,433
2,479
7,616
36,176
36,859
YoY
CER
12%
(6)%
3%
7%
6%
2%
2%
YoY
AER
8%
(6)%
(6)%
4%
(1)%
(6)%
(2)%
TWPI increased by 2 per cent to US$36,176 million compared with 2021. In Hong Kong, TWPI was lower as a
cohort of long-term participating policies reached the end of their premium payment terms, while continuing
to remain in-force and generate OPAT. All other reported segments delivered positive TWPI growth in 2022 on
a constant exchange rate basis. Total recurring premiums accounted for over 90 per cent of premiums received.
IFRS Operating Profit Investment Return
US$ millions, unless otherwise stated
Interest income
Expected long-term investment return for equities and
real estate
Total
2022
7,621
3,560
11,181
2021
7,536
3,095
10,631
YoY
CER
5%
18%
9%
YoY
AER
1%
15%
5%
Operating profit investment return increased by 9 per cent to US$11,181 million compared with 2021, primarily
driven by higher opening balances of equities and real estate assets.
Operating Expenses
US$ millions, unless otherwise stated
Operating expenses
2022
3,251
2021
3,031
YoY
CER
13%
YoY
AER
7%
Operating expenses grew by 13 per cent to US$3,251 million and the expense ratio was 9.0 per cent compared
with 8.2 per cent in 2021. Base salaries accounted for 4 per cent of the increase in operating expenses. Additional
projects and investments to accelerate the Group’s step change in the use of technology, digital and analytics as
previously reported were the main components of the remaining increase compared with 2021.
036
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW
IFRS NON-OPERATING MOVEMENT AND NET PROFIT(1)
In 2022, global capital markets experienced a significant reduction in asset prices from rapidly rising interest rates,
lower equity markets and widening corporate bond spreads compared with 2021. AIA’s IFRS 4 net profit definition
includes mark-to-market movements from equity and property investments. While OPAT was higher compared
with 2021, net profit was affected by negative short-term movements in these asset classes of US$2,314 million
compared with long-term assumptions.
The Group uses derivative financial instruments for risk management purposes. While we aim to hedge underlying
interest rate exposures on an economic basis, hedge accounting is not applied, resulting in an accounting mismatch
within IFRS net profit.
Under IFRS 4, mark-to-market movements on derivative financial instruments are reflected in net profit but these
are not fully offset by the corresponding change in the value of the liabilities. The adoption of IFRS 17 will eliminate
this non-economic accounting mismatch that is created between assets and liabilities in the Group’s consolidated
financial statements under IFRS 4.
Non-operating movements on derivative financial instruments for participating business was negative US$2,003
million in 2022 as shown below. For clarity, this figure would have been zero under IFRS 17. Including this effect,
net profit will be at least US$2 billion higher than net profit under IFRS 4.
Other non-operating investment return and other items of negative US$1,618 million was mainly from movements
in debt securities measured at fair value through profit or loss from increased bond yields and disposals of available
for sale debt securities.
US$ 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 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
Non-operating movements on derivative financial
2022
6,370
2021
6,409
(2,314)
(276)
(45)
(63)
(45)
(66)
(49)
(43)
instruments for participating business, net of tax(3)
(2,003)
207
YoY
CER
3%
n/m
n/m
n/m
n/m
n/m
YoY
AER
(1)%
n/m
n/m
n/m
n/m
n/m
Other non-operating investment return and
other items, net of tax
Net profit
(1,618)
282
1,245
7,427
n/m
(96)%
n/m
(96)%
Notes:
(1) Attributable to shareholders of the Company only, excluding non-controlling interests.
(2) Short-term fluctuations in investment return include the revaluation gains for property held for own use. This amount is then reclassified from net profit
to other comprehensive income to conform to IFRS measurement and presentation.
(3) Participating business refers to the participating funds and other participating business with distinct portfolios.
037
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
US$ millions, unless otherwise stated
Net profit
Weighted average number of ordinary shares (millions)
Basic earnings per share (US cents)
Weighted average number of ordinary shares on
diluted basis (millions)(1)
Diluted earnings per share (US cents)(1)
2022
282
11,929
2.36
11,938
2.36
2021
7,427
12,066
61.55
12,087
61.45
YoY
CER
(96)%
n/a
(96)%
n/a
(96)%
YoY
AER
(96)%
n/a
(96)%
n/a
(96)%
Note:
(1) Diluted earnings per share includes the dilutive effects, if any, of the awards under various share-based compensation plans as described in note 39 to
the consolidated financial statements.
MOVEMENT IN SHAREHOLDERS’ ALLOCATED EQUITY
Shareholders’ allocated equity is shown before fair value reserve as management believes this provides a clearer
reflection of the underlying movement in shareholders’ equity over the period, before the IFRS accounting
treatment of market value movements on available for sale debt securities.
US$ millions, unless otherwise stated
Opening shareholders’ allocated equity
Net profit
Dividends
Share buy-back
Foreign currency translation adjustments
Purchase of shares held by employee share-based trusts
Revaluation gains on property held for own use
Other capital movements
Total movement in shareholders’ allocated equity
Closing shareholders’ allocated equity
Closing shareholders’ allocated equity per share (US dollars)
Average shareholders’ allocated equity
2022
52,060
282
(2,259)
(3,570)
(1,745)
(103)
38
102
(7,255)
44,805
3.82
48,433
2021
48,030
7,427
(2,147)
–
(1,301)
(106)
42
115
4,030
52,060
4.30
50,045
Shareholders’ allocated equity was US$50,634 million, before the payment of shareholder dividends of US$2,259
million and US$3,570 million additional return of capital through the share buy-back programme. This compared
with US$52,060 million at 31 December 2021.
While we delivered OPAT growth in 2022, this positive contribution to shareholders’ allocated equity was offset
by IFRS non-operating movements driven by short-term movements in capital markets and other non-operating
items.
After deducting total shareholder dividends and share buy-back of US$5,829 million, shareholders’ allocated
equity was US$44,805 million at 31 December 2022.
Sensitivities to foreign exchange rate, interest rate and equity price movements are included in note 37 to the
consolidated financial statements.
038
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW Note:
(1) Before the reclassification for disposal group held for sale as described in note 45 to the consolidated financial statements.
IFRS BALANCE SHEET
Consolidated Statement of Financial Position
US$ 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 on assets
Dividends
Share buy-back
Foreign currency translation adjustments
Purchase of shares held by employee share-based trusts
Revaluation gains on property held for own use
Other capital movements
Total movement in shareholders’ equity
Closing shareholders’ equity
Number of ordinary shares (millions)
Closing shareholders’ equity per share (US dollars)
As at
31 December
2022
As at
31 December
2021
Change
AER
239,485
281,876
4,600
8,969
30,046
19,948
4,716
4,989
28,708
19,585
(15)%
(2)%
80%
5%
2%
303,048
339,874
(11)%
230,684
251,283
11,206
22,608
9,588
18,069
264,498
278,940
38,550
454
38,096
44,805
60,934
467
60,467
52,060
(8)%
17%
25%
(5)%
(37)%
(3)%
(37)%
(14)%
2021
63,200
7,427
(6,763)
(2,147)
–
(1,301)
(106)
42
115
2022
60,467
282
(15,116)
(2,259)
(3,570)
(1,745)
(103)
38
102
(22,371)
(2,733)
38,096
11,734
3.25
60,467
12,097
5.00
039
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Total Investments
US$ millions, unless otherwise stated
As at
31 December
2022
Percentage
of total
As at
31 December
2021
Percentage
of total
Total policyholder and shareholder
215,962
85%
253,585
86%
Total unit-linked contracts and consolidated
investment funds
Total investments
39,370
255,332
15%
100%
40,059
293,644
14%
100%
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 investments(1)
Cash and cash equivalents
Derivative financial instruments
Total unit-linked contracts and consolidated
investment funds
As at
31 December
2022
Percentage
of total
As at
31 December
2021
Percentage
of total
6,402
312
31,292
1,293
71
16%
1%
80%
3%
–
6,660
365
31,909
1,076
49
17%
1%
80%
2%
–
39,370
100%
40,059
100%
Note:
(1) Includes equity shares, interests in investment funds and exchangeable loan notes.
040
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
Fixed income investments
Equity investments(2)
Investment property and property held for own use
Cash and cash equivalents
Derivative financial instruments
As at
31 December
2022
Percentage
of total
As at
31 December
2021
Percentage
of total
12,086
10,078
42,892
2,600
67,656
22,635
1,100
2,018
233
5%
5%
20%
1%
31%
10%
1%
1%
–
11,092
11,372
55,697
2,699
80,860
29,185
1,081
1,317
1,190
Subtotal participating funds and other participating
business with distinct portfolios
93,642
43%
113,633
Other policyholder and shareholder
Government bonds
Other government and government agency bonds
Corporate bonds and structured securities
Loans and deposits
Fixed income investments
Equity investments(2)
Investment property and property held for own use
Cash and cash equivalents
Derivative financial instruments
Subtotal other policyholder and shareholder
Total policyholder and shareholder
42,175
17,360
34,950
5,732
100,217
10,341
5,778
5,658
326
122,320
215,962
19%
8%
16%
3%
46%
5%
3%
3%
–
57%
100%
44,901
19,345
51,013
6,247
121,506
9,923
5,698
2,596
229
139,952
253,585
4%
5%
22%
1%
32%
12%
–
1%
–
45%
18%
8%
20%
2%
48%
4%
2%
1%
–
55%
100%
Notes:
(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, representing Hong Kong participating business, are supported by segregated investment assets and
explicit provisions for future surplus distribution, although the division of surplus between policyholders and shareholders is not defined in regulation.
(2) Includes equity shares, interests in investment funds and exchangeable loan notes.
041
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
ASSETS
Total assets decreased by US$36,826 million to US$303,048 million at 31 December 2022 as positive net
investment cash inflows were offset by negative fair value movements on debt securities due to a significant
increase in government bond yields, widening of corporate bond spreads, and a fall in equity markets.
Fixed income investments, including debt securities, loans and term deposits held in respect of policyholders
and shareholders, totalled US$167,873 million at 31 December 2022 compared with US$202,366 million at 31
December 2021.
Government bonds and other government and government agency bonds decreased to US$81,699 million from
US$86,710 million due to a significant increase in government bond yields and represented 49 per cent of fixed
income investments at 31 December 2022, compared with 43 per cent at 31 December 2021.
Corporate bonds and structured securities reduced to US$77,842 million from US$106,710 million accounting for
46 per cent of fixed income investments at 31 December 2022, compared with 53 per cent at 31 December 2021
following a significant increase in government bond yields and widening of corporate bond spreads.
The average credit rating of the fixed income portfolio excluding government bonds remained stable at A- compared
with the position at 31 December 2021. The corporate bond portfolio is well diversified with over 1,900 issuers and
an average holding size of US$40 million.
At 31 December 2022, 2 per cent of the total bond portfolio was rated below investment grade or not rated,
representing approximately US$3 billion in value. Approximately US$360 million of bonds, representing 0.2 per
cent of our total bond portfolio, were downgraded to below investment grade in 2022 and there were no material
impairments in the year, reflecting AIA’s overall high-quality investment portfolio.
Equity investments held in respect of policyholders and shareholders totalled US$32,976 million at 31 December
2022, compared with US$39,108 million at 31 December 2021. The decrease was mainly due to negative
mark-to-market movements offsetting new investments during the year.
In the second half of the year, the Group invested in GLP Capital Partners Limited with AIA’s shareholders’ interest
of US$1.8 billion at 31 December 2022 as part of the Group’s investment strategy in private market opportunities.
Cash and cash equivalents increased by US$3,980 million to US$8,969 million at 31 December 2022 compared
with US$4,989 million at 31 December 2021.
Other assets were broadly stable at US$19,948 million at 31 December 2022 compared with US$19,585 million
at 31 December 2021.
042
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW LIABILITIES
Total liabilities reduced to US$264,498 million at 31 December 2022 from US$278,940 million at 31 December
2021.
Insurance and investment contract liabilities reduced to US$230,684 million at 31 December 2022 compared with
US$251,283 million at 31 December 2021 in line with the negative mark-to-market movements in equity assets
backing unit-linked and participating policies.
Borrowings increased to US$11,206 million at 31 December 2022, due to net proceeds of the issuance and
redemption of medium-term notes and securities totalling US$1,653 million.
The leverage ratio, which is defined as total borrowings expressed as a percentage of the sum of total borrowings
and total equity, was 22.5 per cent at 31 December 2022, compared with 13.6 per cent at 31 December 2021. The
increase has been largely driven by the reduction in total equity as shown in the following section. On transition
to IFRS 17, the leverage ratio will be defined as total borrowings expressed as a percentage of the sum of total
borrowings, total equity and contractual service margin net of reinsurance and net of taxes. On this revised basis,
the leverage ratio at 1 January 2022 was 8.6 per cent, down from 13.6 per cent under IFRS 4 and is expected to
reduce by at least 5 pps at 31 December 2022 compared to IFRS 4.
Details of commitments and contingencies are included in note 42 to the consolidated financial statements.
EQUITY
Total equity attributable to shareholders includes a fair value reserve of negative US$6,709 million, which mainly
reflects unrealised market movements on debt securities held as available for sale. Under IFRS 4, falls in bond
asset values are not fully offset by falls in insurance contract liabilities, as the liabilities are determined based on
long-term investment return assumptions locked in at the point of sale. This creates an accounting mismatch that
leads to volatility in reported total equity.
The adoption of IFRS 9 and IFRS 17 which will take effect from 1 January 2023 will resolve a large part of the
non-economic accounting mismatches that are created between assets and liabilities in the Group’s consolidated
financial statements under IFRS 4.
Shareholders’ allocated equity is shown before fair value reserve as management believes this provides a clearer
reflection of the underlying movement in shareholders’ equity over the period, before the IFRS accounting
treatment of market value movements on available for sale debt securities. Shareholders’ allocated equity was
US$44,805 million at 31 December 2022.
In 2022, the significant increase in both government bond yields and corporate bond spreads led to a reduction
in fair value reserve of US$15,116 million. Total equity attributable to shareholders was US$38,096 million at 31
December 2022 after total shareholder dividends of US$2,259 million and the US$3,570 million additional return
of capital through the share buy-back programme.
On transition to IFRS 17, shareholders’ allocated equity and shareholders’ equity will be US$51 billion and US$56
billion, a reduction of 2 per cent and 7 per cent respectively compared to IFRS 4. Shareholders’ allocated equity
and shareholders’ equity at 31 December 2022 are expected to be higher under IFRS 17 compared to IFRS 4. The
transition from IAS 39 to IFRS 9 had an immaterial effect on the Group’s financial position.
043
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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. Free surplus
enables the Group to invest in organic new business growth, take full advantage of inorganic growth opportunities
and absorb the effects of capital market stress conditions.
The Group’s financial position remained very strong with free surplus increasing to US$23,679 million before total
shareholder dividends and share buy-back of US$5,829 million.
As free surplus is the assets held in excess of statutory liabilities and capital requirements, lower bond values from
rising interest rates are not offset by a corresponding reduction in statutory liabilities and capital requirements.
The overall effect from investment return variances and other items was a reduction in free surplus of US$5,093
million, reflecting higher bond yields and lower equity markets.
Free surplus was US$17,850 million at 31 December 2022 after capital returns to shareholders.
The following table summarises the change in free surplus:
US$ millions, unless otherwise stated
Opening free surplus
Effect of acquisitions(1)
BEA Upfront Payment(2)
Investment in China Post Life
Release of resilience margins
HKRBC early adoption
UFSG
Free surplus used to fund new business
Unallocated Group Office expenses
Finance costs and other capital movements
Free surplus before investment return variances, dividends and share buy-back
Investment return variances and other items
Free surplus before dividends and share buy-back
Dividends
Share buy-back
Closing free surplus
2022
17,025
(200)
–
–
3,400
4,403
6,039
(1,274)
(250)
(371)
28,772
(5,093)
23,679
(2,259)
(3,570)
17,850
2021
13,473
(312)
(258)
(1,860)
–
–
6,451
(1,712)
(273)
(300)
15,209
3,963
19,172
(2,147)
–
17,025
Notes:
(1) Purchase price of Blue Cross of US$283 million as per note 14 to the consolidated financial statements in Annual Report 2022, less acquired free surplus
of US$83 million.
Purchase price of AIA Everest of US$397 million as per note 5 to the consolidated financial statements in Annual Report 2021, less acquired free surplus
of US$85 million.
(2) Refers to the consideration for the strategic bancassurance partnership with BEA as previously announced in 2021.
044
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW
UNDERLYING FREE SURPLUS GENERATION (UFSG)
UFSG is a financial operating metric that measures the expected amount of free surplus generated from in-force
business over the year before investment in new business, unallocated Group Office expenses, finance costs,
investment return variances and other non-operating items.
UFSG was US$6,039 million, an increase of 7 per cent per share on a comparable basis, before the effects of the
early adoption of the HKRBC regime and the release of resilience margins held by the Group under the previous
HKIO basis. These increased free surplus by US$4,403 million and US$3,400 million respectively, as reported in
our Interim Report 2022. The accelerated recognition of future free surplus upon early adoption of the HKRBC
regime correspondingly reduced UFSG by US$468 million in 2022.
The increase in UFSG on a comparable basis was driven by the continued growth of the in-force portfolio, partly
offset by a lower positive claims experience compared with 2021. Free surplus invested in writing new business
of US$1,274 million decreased by 22 per cent, mainly as a result of the greater capital efficiency of new products
sold in Hong Kong under the HKRBC regime.
Underlying Free Surplus Generation
US$ millions, unless otherwise stated
2022
2021
UFSG on a comparable basis before the
effects of HKRBC early adoption and
Per share basis
YoY
CER
YoY
AER
YoY
CER
YoY
AER
release of resilience margins
6,507
6,451
6%
1%
7%
2%
HKRBC early adoption and release of
resilience margins
UFSG
(468)
6,039
–
6,451
n/m
(2)%
n/m
(6)%
n/m
(1)%
n/m
(5)%
Underlying Free Surplus Generation Per Share
US$ millions, unless otherwise stated
UFSG
Weighted average number of ordinary shares (millions)
Basic UFSG per share (US cents)
Weighted average number of ordinary shares on
diluted basis (millions)
Diluted UFSG per share (US cents)
2022
6,039
11,929
50.62
11,938
50.59
2021
6,451
12,066
53.46
12,087
53.37
YoY
CER
(2)%
n/a
(1)%
n/a
(1)%
YoY
AER
(6)%
n/a
(5)%
n/a
(5)%
045
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
GROUP LCSM SOLVENCY POSITION
The group-wide supervision (GWS) Capital Rules set out the capital requirements and overall solvency position
for the Group under the GWS framework. These requirements are based on a “summation approach” and are
referred to as the Local Capital Summation Method (LCSM). Under the LCSM, the group available capital and group
required capital are calculated as the sum of the available capital and required capital for each entity within the
Group according to the respective local regulatory requirements, subject to any variation considered necessary by
the Hong Kong Insurance Authority (HKIA).
Prior to 1 January 2022, the Group LCSM surplus and cover ratio were based on minimum capital requirements
(MCR basis). The group minimum capital requirement (GMCR) is the sum of the minimum capital requirement of
each entity within the Group. The Group LCSM surplus was defined as the excess of the group available capital
over the GMCR. The Group LCSM cover ratio was calculated as the ratio of the group available capital to the GMCR.
Applying the changes in disclosure requirements from the HKIA, the Group LCSM surplus and the Group LCSM
cover ratio are now based on prescribed capital requirements (PCR basis).
The group prescribed capital requirement (GPCR) is the sum of the prescribed capital requirement of each entity
within the Group, and represents the level below which the HKIA may intervene on grounds of capital adequacy.
The Group LCSM surplus is now defined as the excess of the group available capital over the GPCR and the Group
LCSM cover ratio is calculated as the ratio of the group available capital to the GPCR. The use of GPCR in these
revised definitions is more relevant for shareholders when assessing the capital position of the Group and brings
the LCSM capital requirements more in line with the capital requirements currently used within the EV.
The Group available capital increased from US$67,611 million at 31 December 2021 to US$70,698 million at
31 December 2022. The positive effects from the early adoption of the HKRBC regime, the release of resilience
margins held by the Group and the adoption of C-ROSS II were partially offset by the effects of movements in
capital markets and capital returns to shareholders.
The GMCR decreased from US$16,948 million at 31 December 2021 to US$12,810 million at 31 December 2022
mainly due to the adoption of C-ROSS II during the year.
046
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW GROUP LCSM COVER RATIO
On the new PCR basis as at 31 December 2021, the pro forma Group LCSM cover ratio was 291 per cent compared
with 399 per cent on the MCR basis reflecting higher capital requirements under the new PCR basis.
On the new PCR basis as at 31 December 2022, the Group LCSM cover ratio remained very strong at 283 per cent
despite significant capital market volatility and the effect of the share buy-back which reduced the ratio by 13 pps.
The table shows a summary of the Group LCSM solvency position as at 31 December 2022.
US$ millions, unless otherwise stated
Group LCSM cover ratio (PCR basis)(1)
Group LCSM cover ratio (MCR basis)(1)
Group available capital
Tier 1 capital(2)
Other Than Tier 1 capital
Group prescribed capital requirement (GPCR)
Group minimum capital requirement (GMCR)
Group LCSM surplus (PCR basis)(3)
Group LCSM surplus (MCR basis)(3)
Senior notes approved as contributing to group available capital(4)
As at
31 December
2022
As at
31 December
2021
283%
552%
70,698
45,508
25,190
24,989
12,810
45,709
n/a
5,653
291%
399%
67,611
n/a
n/a
n/a
16,948
n/a
50,663
5,820
Notes:
(1) The Group LCSM cover ratio definition changed from (i) the ratio of the group available capital to the GMCR at 31 December 2021 (MCR basis), to (ii) the
ratio of the group available capital to the GPCR from 1 January 2022 onwards (PCR basis).
The Group LCSM cover ratio (PCR basis) as at 31 December 2021 is shown on a pro forma basis.
The Group LCSM cover ratio (MCR basis) is included in the table for reference.
(2) Group Tier 1 capital is maintained in excess of GMCR. Group Tier 1 capital to GMCR ratio was 355 per cent at 31 December 2022.
(3) The Group LCSM surplus definition changed from group available capital less GMCR at 31 December 2021 to group available capital less GPCR from 1
January 2022 onwards.
(4) The amounts shown represent the carrying value of medium-term notes and securities contributing to group available capital. These are counted as Other
Than Tier 1 capital under the GWS Capital Rules.
(5) The Group LCSM cover ratio (PCR basis) and Group Tier 1 capital to GMCR ratio refer to eligible group capital resources coverage ratio and tier 1 group
capital coverage ratio as defined in D.S/10 of Guideline on Group Supervision (GL32) respectively.
At 31 December 2022, the group available capital includes the following items, which are not included within
Group Tier 1 capital:
(i) US$3,726 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$5,653 million(1) of senior notes issued before designation that have been approved by the HKIA as capital.
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.
Note:
(1) The amounts represent the carrying value of medium-term notes and securities contributing to group available capital. These are counted as Other Than
Tier 1 capital under the GWS Capital Rules.
047
ANNUAL REPORT 2022OVERVIEWFINANCIAL 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.
Interest rate sensitivities apply a 50 basis points movement in current bond yield curves and the corresponding
movement in 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.
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
2022
283%
4 pps
(5) pps
(6) pps
5 pps
RECONCILIATION BETWEEN GROUP LCSM SURPLUS AND FREE SURPLUS
AIA considers free surplus on consolidated basis a more representative view of the capital position of the Group
from a shareholder perspective. The table below shows a reconciliation between the Group LCSM surplus and free
surplus on consolidated basis.
The main reason for the movements in reconciliation adjustments compared with the prior year were the move
from using the MCR basis to the PCR basis and the effects of early adoption of the HKRBC regime and introduction
of C-ROSS II regime.
US$ millions, unless otherwise stated
Group LCSM surplus(1)
Adjustments for:
Eligible Other Than Tier 1 debt capital
Different capital requirements under EV for AIA China(2)
Reflecting shareholders’ view of capital(3)
Free surplus on a business unit basis
Adjustment to reflect consolidated reserving and capital requirements
Free surplus on consolidated basis
As at
31 December
2022
As at
31 December
2021
45,709
50,663
(9,379)
(5,622)
(7,353)
23,355
(5,505)
17,850
(9,588)
(7,733)
(9,902)
23,440
(6,415)
17,025
Notes:
(1) Group LCSM surplus definition changed from group available capital less GMCR at 31 December 2021 to group available capital less GPCR from 1 January
2022 onwards.
(2) Adjustment from C-ROSS solvency basis to China Association of Actuaries (CAA) EV basis in line with local requirements.
(3) Reflects change from GPCR to EV required capital and the removal of participating fund surplus as at 31 December 2022.
Reflects change from GMCR to EV required capital and the removal of participating fund surplus as at 31 December 2021.
048
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 2022.
The changes in local solvency requirements are summarised as follows:
Hong Kong
The HKIA is in the process of developing amendments to the HKIO to cater for the new HKRBC regime with an
expected effective date of 1 January 2024. In a letter dated 8 April 2022, the HKIA approved the request to early
adopt the HKRBC regime for AIA International, our principal operating entity in Hong Kong, with an effective date
of 1 January 2022. The effects of early adoption are shown throughout this report where relevant.
For clarity, the other operating entities in Hong Kong, including AIA Co. and AIA Everest, did not request to early
adopt the HKRBC regime. These entities remain subject to the current HKIO basis and will only adopt the HKRBC
regime when the regulation becomes effective.
Mainland China
On 30 December 2021, the China Banking and Insurance Regulatory Commission issued updates, referred to as
C-ROSS II, to the existing solvency regime effective from the first quarter of 2022. The impacts were not significant
and were reflected in the financial metrics in this report where applicable.
South Korea
The Financial Supervisory Service (FSS) has announced that the new capital adequacy framework (Korean
Insurance Capital Standard (K-ICS)) for Korean insurers will be effective from 1 January 2023. K-ICS is expected to
have a positive effect on EV and free surplus but has not been reflected in the financial metrics as at 31 December
2022 in this report.
HOLDING COMPANY FINANCIAL RESOURCES
At 31 December 2022, holding company financial resources increased to US$16,497 million, before total
shareholder dividends of US$2,259 million and the US$3,570 million additional return of capital through the
share buy-back programme.
Net capital flows to the holding company of US$1,862 million included US$4,341 million of capital flows from
subsidiaries offset by US$2,479 million of corporate activity including acquisitions. Capital flows from subsidiaries
included US$1,436 million from a one-off remittance of excess surplus held in AIA Co. to the holding company. Net
proceeds of the issuance and redemption of medium-term notes and securities totalled US$1,653 million.
Investment income and mark-to-market movements caused a US$780 million reduction in holding company
financial resources, mainly due to fair value movements on debt securities from increased bond yields and a fall
in equity markets.
After capital returns to shareholders of US$5,829 million, holding company financial resources was US$10,668
million at 31 December 2022.
049
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION The movements in holding company financial resources are summarised as follows:
US$ 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)
Decrease in intercompany loans receivable
Interest payments on borrowings(1)
Investment income, mark-to-market movements in debt securities and others
Closing holding company financial resources before dividends and share buy-back
Dividends
Share buy-back
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
2022
13,136
4,341
(2,479)
1,862
1,653
985
(359)
(780)
16,497
(2,259)
(3,570)
10,668
2021
12,388
3,976
(1,860)
2,116
1,077
–
(322)
24
15,283
(2,147)
–
13,136
As at
31 December
2022
As at
31 December
2021
57
(600)
(69)
103
(167)
(46)
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 2022, loans to/amounts due from subsidiaries was US$886 million (2021: US$1,917 million). US$57 million was recoverable within
the 12 months after the year ended 31 December 2022 (2021: US$103 million).
(3) As at 31 December 2022, medium-term notes and securities placed to the market was US$11,206 million (2021: US$9,588 million). US$500 million was
repayable within the 12 months after the year ended 31 December 2022 (2021: US$167 million). Details of the medium-term notes and securities placed
to the market are included in note 29 to the consolidated financial statements.
050
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW GLOBAL MEDIUM-TERM NOTE AND SECURITIES PROGRAMME
Under our Global Medium-term Note (GMTN) and Securities Programme, the Company issued two unlisted Hong
Kong dollar-denominated fixed rate medium-term notes and one listed fixed rate medium-term notes.
On 29 March 2022, the Company issued unlisted Hong Kong dollar-denominated fixed rate medium-term notes,
which consisted of HK$6,500 million of 1.99-year notes at an annual rate of 2.25 per cent. The US dollar-equivalent
issued was approximately US$830 million.
On 24 October 2022, the Company issued unlisted Hong Kong dollar-denominated fixed rate medium-term notes,
which consisted of HK$1,200 million of 2.99-year notes at an annual rate of 5.04 per cent. The US dollar-equivalent
issued was approximately US$153 million.
On 25 October 2022, the Company issued listed fixed rate medium-term notes, which consisted of US$850 million
of 5-year notes at an annual rate of 5.625 per cent.
At 31 December 2022, the aggregate carrying amount of the debt issued to the market under the GMTN and
Securities Programme was US$11,206 million compared with US$9,588 million at 31 December 2021.
CREDIT RATINGS
At 31 December 2022, 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 2022, 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 113.40 Hong Kong cents per share, subject to shareholders’
approval at the Company’s forthcoming AGM. This brings the total dividend for 2022 to 153.68 Hong Kong cents
per share, an increase of 5.3 per cent compared with the total dividend for 2021. This follows AIA’s established
prudent, sustainable and progressive dividend policy, allowing for future growth opportunities and the financial
flexibility of the Group.
SHARE BUY-BACK PROGRAMME
The Group announced in March 2022 a share buy-back programme of up to US$10 billion over a period of three
years. As at 31 December 2022, 366 million shares have been repurchased for an aggregate value of US$3,570
million. Of those shares, 319 million shares were cancelled in 2022, and the remaining 47 million shares have
subsequently been cancelled.
051
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION BUSINESS REVIEW
SUMMARY AND KEY BUSINESS HIGHLIGHTS
AIA delivered 6 per cent VONB growth in the second half of 2022. While VONB was 5 per cent lower for the full
year, the continued execution of our strategic priorities supported the strong return of new business momentum
as the effects of the initial Omicron wave eased in the second half. Our results highlight the breadth and diversity
of our markets, our high-quality distribution channels and our comprehensive product range to meet the evolving
needs of our customers across the region.
DISTRIBUTION
Our agency channel delivered 8 per cent VONB growth in the second half of 2022, demonstrating our continued
commitment to enhancing the quality of our professional agency distribution. The initial outbreak of Omicron
restricted in person meetings in the first half of the year, leading to a decline in VONB of 4 per cent for the full year.
Our differentiated Premier Agency strategy helped drive double-digit growth in the number of agency leaders and
new recruits along with an increase in new recruits’ productivity. AIA was once again the number one Million Dollar
Round Table (MDRT) multinational company in the world, marking our eighth consecutive year of achieving the
largest number of registered members worldwide.
VONB for our partnership channel grew by 2 per cent in 2022. Our long-term strategic partnerships with leading
banks remain a key competitive advantage for AIA, and delivered 10 per cent VONB growth in 2022. VONB from
our direct telemarketing channel in South Korea was affected by an industry-wide regulatory change implemented
at the start of the year, as previously highlighted. Our intermediated channels, including IFAs and brokers,
delivered positive VONB growth in 2022, with very strong performances in Hong Kong and Taiwan (China). In
India, partnership distribution delivered excellent VONB growth, driven by our partnership with six leading banks
as well as close collaboration with our brokers.
GEOGRAPHICAL MARKETS
AIA China returned to positive growth in the second half of 2022 with VONB up by 3 per cent. VONB in the first
half was lower compared with the record result in 2021, as our business was impacted by pandemic containment
measures and full year VONB reduced by 15 per cent. We have seen new business momentum recover and return
to positive growth in the first two months of 2023.
AIA Hong Kong achieved 4 per cent VONB growth in 2022, supported by growth from our market-leading agency
force and a strong performance from partnership distribution, in particular through the intermediated channels
and our exclusive partnership with The Bank of East Asia, Limited (BEA). VONB from sales to Mainland Chinese
visitors tripled in 2022 and accounted for just over 10 per cent of total VONB for the year.
AIA Thailand delivered 5 per cent growth in VONB for the full year, supported by 19 per cent growth in the second
half of 2022. We saw higher sales activity levels in both agency and bancassurance channels as new business
momentum returned in the second half. Our agency remained the market leader in 2022 and we achieved an
excellent increase in number of new recruits, contributing to an increase in the number of active agents compared
to 2021.
AIA Singapore delivered higher VONB in 2022 as 7 per cent growth in the second half offset performance in the
first half. Agency channel remained the largest contributor to VONB with both an increase in the number of active
agents and productivity improvements in the second half. Our partnership channel achieved a strong performance
in 2022.
AIA Malaysia achieved 15 per cent VONB growth in 2022, with both agency and partnership channels delivering
double-digit growth. We continued to work closely with Public Bank Berhad (Public Bank) to further uplift the
activity and productivity of our insurance specialists through the implementation of enhanced digital tools.
Our Other Markets segment recorded a reduction in VONB in 2022 as strong double-digit growth in India, New
Zealand, the Philippines, Sri Lanka and Taiwan (China) in the second half was offset by a decline in Australia,
South Korea and Vietnam.
052
AIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW UNRIVALLED DISTRIBUTION
AGENCY
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
2022
2,659
73.2%
3,632
2021
2,875
74.3%
3,872
YoY CER
(4)%
(1.1)pps
(3)%
YoY AER
(8)%
(1.1)pps
(6)%
1H 2022
YoY CER
(15)%
(5.4)pps
(8)%
2H 2022
YoY CER
8%
3.7pps
3%
AIA’s unparalleled, proprietary Premier Agency is a core competitive advantage and holds market-leading positions
across the region. Our professional agency sits at the heart of our relationship with our customers, enabling us
to meet the diverse and rapidly growing needs of millions of people across Asia through personalised advice and
service.
The quality and scale of our agency platform has enabled AIA to deliver a resilient performance in 2022 with 8
per cent VONB growth in the second half of the year. While VONB of US$2,659 million was lower by 4 per cent for
the full year due to the effects of the initial Omicron wave, our agency business delivered strong momentum in the
second half with the majority of our markets achieving positive year-on-year growth. In particular, our businesses
in India and ASEAN markets both delivered double-digit VONB increases compared with the second half of 2021.
Overall, agency accounted for 80 per cent of the Group’s total VONB in 2022.
The professionalism and resilience of our agents has ensured that our Premier Agency is well-positioned to capture
the immense growth opportunities ahead as our markets rebound from the effects of the pandemic.
Next-generation agency leaders are critical to the successful execution of our Premier Agency strategy to ensure
high-quality recruitment, training and management as we prioritise growth in professional agents across our
markets. In 2022, our agency leadership programmes successfully generated 11 per cent growth in the number
of leaders compared with 2021.
Quality recruitment remains a key strategic priority for AIA. Growth in agency leaders helped generate an increase
in new recruits by 13 per cent in 2022 along with a strong growth in their productivity. We continued to support
our agency force with new and enhanced digital tools that cover agency recruitment and onboarding, activity
management and new leads generation. In 2022, over 80 per cent of new agents were onboarded through iRecruit,
our digital recruitment platform. Overall, the total number of agents were up compared with 2021 and finished the
year above the pre-pandemic levels as at the end of 2019.
In 2022, AIA was once again the number one MDRT multinational company in the world, marking our eighth
consecutive year of achieving the largest number of registered members worldwide. AIA China became the MDRT
company with the most members globally, followed by AIA Thailand and AIA Hong Kong. Our continued leadership
in MDRT demonstrates the effectiveness of our differentiated Premier Agency strategy.
053
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION PARTNERSHIPS
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
2022
668
37.8%
1,771
2021
697
39.2%
1,775
YoY CER
2%
(1.4)pps
6%
YoY AER
(4)%
(1.4)pps
0%
1H 2022
YoY CER
0%
1.8pps
(4)%
2H 2022
YoY CER
4%
(5.5)pps
19%
AIA’s partnership business extends our market reach and broadens our access to hundreds of millions of potential
customers across the region. We continue to strengthen our collaboration with our long-term strategic partners
through providing personalised solutions and advice for their customers, while continuing to expand our high
quality network. Our partnership business contributes a growing source of new business for AIA.
In 2022, our partnership channel delivered positive VONB growth, including a strong performance from
bancassurance. Partnership distribution accounted for 20 per cent of the Group’s total VONB.
BANCASSURANCE, INTERMEDIATED CHANNELS AND DIRECT MARKETING
Our long-term strategic partnerships with leading banks are a key competitive advantage for AIA. Bancassurance
VONB grew by 10 per cent in 2022, from growth in Public Bank in Malaysia, PT Bank Central Asia Tbk (BCA)
in Indonesia and ASB Bank Limited (ASB) in New Zealand. BEA in Hong Kong and Mainland China delivered
excellent VONB growth and is a material contributor to our overall bancassurance results in 2022. AIA China also
began sales through Postal Savings Bank of China Co., Ltd. in the second quarter of 2022.
Our successful bancassurance model has achieved a strong track record of new business from in-branch referrals
through bank relationship managers to insurance specialists. Our digitally-led approach complements this model
with data-driven marketing and analytical models for targeting of in-branch customers and provides broader
access to previously untapped online and credit card customers. This has supported increased productivity for our
insurance specialists, particularly in Malaysia and the Philippines. As digital banking continues to evolve, we offer
our customers more choice of how to purchase from fully online to face-to-face advice.
Our intermediated channels, including IFAs and brokers, delivered positive VONB growth in 2022, with very strong
performances in Hong Kong and Taiwan (China). VONB from our direct telemarketing channel in South Korea was
affected by an industry-wide regulatory change implemented at the start of the year, as previously highlighted.
In India, Tata AIA Life Insurance Company Limited (Tata AIA Life) has partnerships with six leading banks that
together have more than 150 million existing customers. We have continued to transform the customer onboarding
experience and expand our protection product offerings, supporting an increased share of wallet with our bank
and other partners, leading to excellent VONB growth compared with 2021. Our partnership with PolicyBazaar has
increased sales by 3 times compared with the previous year.
DIGITAL PLATFORMS
AIA’s next-generation partnerships with technology companies bring access to hundreds of millions of users and
new customer segments. Our engagements through these platforms use digital insurance propositions and new
analytical models to identify suitable customers for referral to our distribution channels for more comprehensive
advice and product solutions. In 2022, we brought in over one million customers via these platforms and continued
to expand our digital propositions and partnerships to address the various lifestyle needs of consumers across the
region.
054
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW GEOGRAPHICAL MARKET HIGHLIGHTS
MAINLAND CHINA
AIA China
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2022
916
69.5%
1,319
7,592
1,425
2021
1,108
78.9%
1,404
6,999
1,371
YoY CER
(15)%
(9.6)pps
(4)%
12%
8%
YoY AER
(17)%
(9.4)pps
(6)%
8%
4%
1H 2022
YoY CER
(24)%
(14.8)pps
(7)%
14%
4%
2H 2022
YoY CER
3%
(0.1)pps
3%
10%
12%
AIA China’s high-quality professional agency force and differentiated business model delivered a return to
positive growth in the second half of 2022, with VONB up by 3 per cent. VONB in the first half of 2022 was
lower compared with the record result in 2021, as most of our geographies were subject to stringent pandemic
movement restrictions, leading to a reduction in full year VONB of 15 per cent to US$916 million. Our remote
digital capabilities enabled our agents to continue generating new business over this period and, as restrictions
eased, in person sales rebounded.
VONB in the second half recovered strongly and delivered double-digit year-on-year growth to the end of November,
before a rapid wave of COVID-19 infections disrupted new business sales in December. Following the reopening
of Mainland China, we have seen new business momentum recover and returned to positive VONB growth in the
first two months of 2023.
Full year OPAT of US$1,425 million increased by 8 per cent, with 12 per cent growth in the second half, from our
growing in-force portfolio and favourable claims experience.
AIA China’s Premier Agency remains a clear competitive advantage and ensures we are in a very strong position
to capture the increased demand for high-quality products and services backed by professional advice. We have
continued to focus on our Premier Agency strategy during the pandemic, which has translated to a broadly stable
level of total agents as of December 2022 compared to the pre-pandemic level. AIA China was named the number
one MDRT company in the world for the first time ever in July 2022, demonstrating our commitment to growing
AIA’s professional agency distribution through quality recruitment, best-in-class training and advanced leadership
development programmes.
We continue to launch new customer propositions with integrated value-added services that are tailored to
evolving consumer needs. In November, we successfully launched an innovative critical illness product, Ru Yi
You Xiang. Traditional protection products remained the largest contributor to VONB for AIA China in 2022. As
we broaden our long-term savings propositions and further upgrade our retirement concierge services, we have
continued to deepen our share of wallet from existing customers.
We have continued to broaden our distribution reach in the bancassurance channel. In 2022, we began sales
through Postal Savings Bank of China Co., Ltd., as well as delivered growth through our exclusive partnership with
BEA. We will continue to deepen cooperation with our strategic bancassurance partners to bring our compelling
propositions to more potential customers.
Mainland China offers significant potential for AIA as we deepen our presence within existing regions and replicate
our scalable model in new provinces. We are expanding our geographical footprint and successfully launched
our operations in Wuhan, Hubei. In 2022, we were granted approval by the regulator to upgrade our operations
in Tianjin and Shijiazhuang. We are also at an advanced stage in establishing our new branch operation in
Zhengzhou, Henan, after receiving regulatory approval to begin preparations, which will give us access to the
third most populous province in Mainland China with close to 100 million people.
China Post Life
In January, we completed our 24.99 per cent equity investment in China Post Life Insurance Co., Ltd. (China
Post Life), the leading bank-affiliated life insurer in Mainland China. VONB in 2022 was 3.8 times the previously
disclosed 2020 full-year result. For clarity, AIA China’s reported results and the above table do not include any
contribution from China Post Life. AIA’s investment in China Post Life enables us to capture the significant value
available from additional distribution channels and customer segments that are highly complementary to AIA
China’s strategy.
055
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION HONG KONG
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2022
787
69.5%
1,078
11,237
2,226
2021
756
64.0%
1,106
11,904
2,143
YoY CER
4%
5.5pps
(3)%
(6)%
4%
YoY AER
4%
5.5pps
(3)%
(6)%
4%
1H 2022
YoY CER
3%
11.8pps
(12)%
(6)%
7%
2H 2022
YoY CER
5%
0.0pps
6%
(5)%
1%
AIA Hong Kong recorded 4 per cent growth in VONB in 2022 to US$787 million with increases from both agency
and partnership distribution channels. ANP was lower by 3 per cent, with stronger growth in the second half of 6
per cent. VONB margin improved by 5.5 pps compared to 2021, driven by enhanced profitability of our participating
products. VONB from sales to Mainland Chinese visitors tripled in 2022, accounting for just over 10 per cent of
VONB for the year, and strong momentum has continued into the first two months of 2023.
AIA’s Premier Agency is the clear market leader in Hong Kong and outperformed the industry in the first nine
months of 2022, based on latest available data. Agency saw positive year-on-year VONB growth in the second
half of the year. Our Hong Kong business also delivered strong double-digit VONB growth from our partnership
channel in 2022, driven by very strong performances in the IFA and broker channels and our exclusive partnership
with BEA.
OPAT increased by 4 per cent from growth in our in-force portfolio, with lower growth in the second half due to
reduced operating investment returns from lower asset values and unfavourable claims experience.
THAILAND
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2022
585
89.1%
655
4,166
782
2021
609
90.0%
677
4,428
960
YoY CER
5%
(0.9)pps
6%
3%
(10)%
YoY AER
(4)%
(0.9)pps
(3)%
(6)%
(19)%
1H 2022
YoY CER
(9)%
(9.8)pps
2%
4%
(22)%
2H 2022
YoY CER
19%
7.4pps
10%
2%
2%
AIA Thailand delivered 5 per cent growth in VONB for the full year to US$585 million, supported by 19 per cent
growth in the second half of 2022. Full year ANP growth of 6 per cent was supported by continued growth in
unit-linked sales where AIA remains the market leader. VONB margin remained stable at 89.1 per cent.
In agency, we delivered positive VONB growth in 2022, driven by a very strong performance in the second half
of the year. We continued to accelerate the use of powerful digital tools which supported an improvement in
the productivity of our agents. Quality recruitment remains a key priority and we saw an excellent year-on-year
increase in the number of new recruits. Our agency force remained the market leader in 2022 and total number
of active agents increased compared to 2021. We have the highest number of MDRT members in Thailand. We
continued to drive an increase in the productivity of insurance specialists in our strategic partnership with Bangkok
Bank Public Company Limited.
OPAT reduced by 10 per cent, primarily due to higher medical claims from customers seeking treatment for
COVID-19 in private hospitals in the first half of the year, as previously reported. As the initial Omicron wave
subsided, OPAT returned to growth in the second half of 2022, driven by improvements in lapse experience and
higher investment returns. COVID-19 related medical claims also reduced compared with the first half.
056
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW SINGAPORE
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2022
349
65.7%
531
3,577
742
2021
356
64.7%
549
3,433
723
YoY CER
1%
0.8pps
(1)%
7%
6%
YoY AER
(2)%
1.0pps
(3)%
4%
3%
1H 2022
YoY CER
(6)%
2.7pps
(11)%
7%
13%
2H 2022
YoY CER
7%
(1.1)pps
9%
7%
1%
AIA Singapore delivered 7 per cent VONB growth in the second half of the year following the lifting of
pandemic-related restrictions that affected the first half. Overall VONB was up by 1 per cent over the full year to
US$349 million, ANP reduced slightly to US$531 million and VONB margin remained strong at 65.7 per cent.
Our Premier Agency strategy delivered growth in the number of active agents and productivity improvements
in the second half of the year compared with the same period in 2021. We continued to enhance our digital
tools to support our agents, with our social media integrated leads management platform offering a powerful
way to generate new customer leads. This remained an important contributor to new business sales in Singapore.
Our partnership channel recorded a strong performance in 2022, as Citibank, N.A.’s performance benefited from
improved new business sales processes and easing of border controls.
OPAT increased by 6 per cent in 2022, driven by growth in our in-force portfolio, increased operating investment
returns and favourable claims experience in the first half. Growth in the second half was moderated by increased
medical claims compared with the same period last year.
MALAYSIA
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2022
308
69.9%
440
2,464
393
2021
283
57.3%
491
2,479
392
YoY CER
15%
12.4pps
(5)%
6%
6%
YoY AER
9%
12.6pps
(10)%
(1)%
0%
1H 2022
YoY CER
7%
5.4pps
(2)%
8%
8%
2H 2022
YoY CER
26%
20.3pps
(9)%
3%
4%
AIA Malaysia achieved strong VONB growth of 15 per cent in 2022 to US$308 million, with year-on-year growth
of 26 per cent in the second half of the year. VONB margin improved by 12.4 pps to 69.9 per cent supported by a
higher mix of protection products.
Agency delivered double-digit growth in VONB as we continued to focus on the increased adoption of our digital
tools. Our partnership channel also delivered strong VONB growth as we worked closely with Public Bank to
increase the activity and productivity of our insurance specialists through enhanced digital tools with a structured
leads referral process.
Full year OPAT grew by 6 per cent from an increase in our in-force portfolio and positive claims experience in
the first half, although second half growth was lower when compared with the exceptionally favourable medical
claims experience over the same period in 2021.
057
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION OTHER MARKETS
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2022
420
30.2%
1,384
7,140
804
2021
511
35.9%
1,420
7,616
784
YoY CER
(12)%
(5.6)pps
5%
2%
11%
YoY AER
(18)%
(5.7)pps
(3)%
(6)%
3%
1H 2022
YoY CER
(15)%
(3.1)pps
(6)%
3%
4%
2H 2022
YoY CER
(8)%
(9.3)pps
19%
1%
18%
Overview
VONB for our Other Markets segment reduced by 12 per cent in 2022 to US$420 million as strong double-digit
growth in India, New Zealand, the Philippines, Sri Lanka and Taiwan (China) in the second half was offset by a
decline in Australia, South Korea and Vietnam.
ANP recovered strongly in the second half, increasing by 19 per cent as the effects of the initial Omicron wave
eased across our markets leading to an overall increase of 5 per cent in the full year. VONB margin increased by
2.2 pps compared to the first half of 2022.
OPAT recovered strongly in the second half and grew by 11 per cent for full year 2022. The increase was mainly
due to positive claims experience in the second half compared with higher levels of mortality claims in 2021, as
previously disclosed.
Geographical Market Highlights
Australia: AIA Australia’s OPAT grew strongly in 2022 from improved claims experience and higher operating
investment returns. VONB was lower as sales through our retail IFA channel reduced significantly leading to an
increase in acquisition expense overruns.
Cambodia: AIA Cambodia continued to execute our multi-channel distribution strategy, delivering double-digit
ANP growth in 2022. Our focus on quality recruitment and training has delivered growth in the number of active
agents as well as their productivity.
India: Tata AIA Life achieved excellent VONB growth across all distribution channels and is ranked the third largest
private life insurer in India, based on individual weighted new business premiums, as at end of December 2022.
Our differentiated Premier Agency grew very strongly and we deepened our geographical reach by continuing to
expand the number of digitally-enabled branches. We delivered very strong growth from our broker channel as
well as in bancassurance, where we have further enhanced our digital tools to drive productivity management.
We have continued to expand our suite of protection propositions and maintained our position as the number one
private insurer in the retail protection market in 2022.
Indonesia: AIA Indonesia’s VONB was impacted by Omicron in the first half of 2022, which led to a small decline
in VONB for the full year despite a sequential improvement in the second half. Our strategic bancassurance
partnership with BCA delivered positive VONB growth for 2022, driven by increased sales of protection products.
Myanmar: AIA Myanmar delivered excellent ANP growth in 2022. We have continued to build a strong foundation
for our business in this market and grew the number of active agents as well as expanded our bank branch
coverage over the year.
New Zealand: AIA New Zealand delivered strong double-digit VONB growth in the second half of 2022, offsetting
the reduction in the first half to deliver positive VONB growth for the full year. Our strategic partnership with ASB
delivered excellent VONB growth, supported by an increase in the number of insurance specialists as well as
higher productivity.
058
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW Philippines: AIA Philippines delivered positive VONB growth for the full year, with double-digit VONB growth in the
second half. Both agency and our partnership with Bank of Philippine Islands (BPI) saw a sequential improvement
in VONB growth in the second half. Our focus on quality recruitment delivered excellent growth in number of new
recruits as well as increased productivity.
South Korea: AIA Korea was affected by an industry-wide regulatory change implemented at the start of 2022 that
impacted the recruitment of sales representatives for our direct telemarketing channel, as previously highlighted.
Our bancassurance business delivered excellent VONB growth as we continued to enhance our product offerings.
Sri Lanka: AIA Sri Lanka delivered double-digit VONB growth in 2022 across all distribution channels. We
continued to support our agency force and insurance specialists to drive improvements in productivity compared
with last year.
Taiwan (China): AIA Taiwan delivered very strong double-digit VONB growth in 2022, driven by excellent
performances from both our intermediated and direct marketing channels.
Vietnam: AIA Vietnam’s VONB declined in 2022 as our agency channel was impacted by the disruption due to
COVID-19 infections in the first half of the year. Double-digit ANP growth in the second half of 2022 was more than
offset by lower VONB margin due to higher expenses. We have continued to support our agents by driving adoption
of our powerful digital tools, with the majority of our agents now onboarded through our digital recruitment and
training platforms.
059
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION TECHNOLOGY, DIGITAL AND ANALYTICS
AIA’s ongoing investment in technology, digital and analytics (TDA) is a key enabler of our strategic priorities,
supporting increased productivity and enhanced customer experience while creating access to new growth
opportunities. Our shift to a scalable and efficient world-class technology infrastructure has accelerated the
deployment of our digital tools, contributing to a year-on-year improvement of 12 pps in end-to-end straight-through
processing (STP) to 70 per cent in December 2022 for the Group. We believe that providing simplified customer
journeys with faster turnaround times will lead to better outcomes, including improved customer satisfaction,
retention and profitability.
AIA’s increased use of artificial intelligence (AI) and analytics is delivering significant benefits to our customers,
distributors and partners. We generated nearly 30 per cent more leads through our digital tools in 2022 compared
to 2021, while at the same time enhancing the quality of leads provided to both our agency and bancassurance
channels to improve sales conversion rates.
Our TDA transformation has been recognised externally through numerous awards, including: the IDC Future
Enterprise Awards 2022 Thailand – Best in Future of Customer Experience for AIA Thailand; InsuranceAsia News –
Digital Insurer of the Year in 2022 for the Group; and Forrester’s 2022 Asia Pacific Technology Awards – Enterprise
Architecture Award for the Group.
WORLD-CLASS TECHNOLOGY
AIA’s adoption of cloud technology continued to outpace the financial services and insurance industry averages
globally. By the end of 2022, 86 per cent of our information technology infrastructure was hosted in the public
cloud, compared with 39 per cent in December 2020. We are making excellent progress towards our ambition
of 90 per cent cloud adoption. Our utilisation of cloud technology provides the foundational capability for TDA
initiatives at increased scale, doubling the Group’s technology capacity while delivering cost efficiency compared
with our legacy infrastructure platform.
DIGITAL ENABLEMENT
We continued to enhance our agency digital tools in 2022, implementing more than 180 new features and
improvements which support increased interactions and greater customer insights. In 2022, 76 per cent of AIA’s
active agents were using our proprietary social media integrated leads management platform to share marketing
content with prospective customers. By leveraging this platform, our agents delivered more than US$280 million
of ANP from digitally-generated customer sales leads in 2022. In-app ratings for our agency digital tools averaged
4.7 out of 5 from more than 950,000 responses.
Working closely with our bancassurance partners, we have deployed digital and data-driven solutions that
enhance their ability to engage with customers, offering greater choice of completing sales journeys digitally,
assisted remotely or face-to-face. Digital and analytics generated over 4.6 million sales leads for our strategic
bank partners in 2022, enabling us to reach previously untapped customers.
Across the Group’s customer apps and portals, more than 15 million existing and prospective customers are
engaging with us digitally, benefiting from high-quality digital experience. AIA service app’s average app store
ratings were 4.0 or higher across seven markets in December 2022.
060
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW We are changing the way we engage with existing and prospective customers through the introduction of
innovative, market-leading super apps. These elevate the digital experience through an expanded and integrated
range of new services, including self-service and claim capabilities, enabled by a broad ecosystem of partners, in
addition to AIA Vitality. We launched the first of our super apps, AIA+, in Mainland China at the end of 2021. AIA+
has increased customer repurchase rates of additional products to three times the level when compared with
customers who do not use the super app. We launched our second AIA+ super app in Thailand in October 2022
with plans for further launches in 2023.
ANALYTICS POWERING EVERYTHING WE DO
We continue to deepen and industrialise our use of AI and analytics across the Group with a total of 235 high-impact
use cases implemented since the launch of our TDA strategy, including 111 deployed in 2022.
Analytics power every part of our agency value chain, with AI-assisted recruitment now deployed in six markets.
In 2022, 80 per cent of our new agents in Hong Kong were recruited through AI-driven agent aptitude tests and
interviews. Propensity models help us identify high-potential agency leader candidates from within our agency
force and accelerate their development. The use of intelligent behavioural nudges drives enhanced agent activity
and automatic matching of customers to the most suitable agents, leading to increases in the conversion of sales
leads.
Data-driven pre-approved offers simplify the underwriting process and significantly enhance the purchasing
experience for customers while intelligent product recommendations drive higher repurchase rates of additional
products. For example, these initiatives supported a 40 per cent increase in conversion rates of our existing
customer marketing campaigns in Singapore.
AIA’s Responsible Use of Artificial Intelligence Standard was introduced in 2021 to set out our principles for
developing and implementing AI in both internally developed or externally sourced solutions to safeguard the use
of AI in our businesses. This ensures that our AI applications put humans at the centre of our decision-making
with effective oversight and controls that adhere to regulatory requirements including data privacy and protection
principles across all our markets, so that AIA stays at the forefront of responsible use of AI in Asia.
CYBERSECURITY
In 2022, AIA maintained International Organization for Standardization (ISO) 27001 certification covering
identity access management, cybersecurity and cloud security operations. An independent assessment of our
cybersecurity maturity against the standards of the United States’ National Institute of Standards and Technology
(NIST) also demonstrated that we remain well positioned among our insurance peers.
We will continue to invest in information technology safeguards, including in the areas of cloud security, cyber
defence automation and zero trust security, to ensure sufficient and robust operational controls which meet our
information security objectives.
061
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION COMPELLING PROPOSITIONS
AIA’s compelling propositions are designed to link our financial success to the health and well-being of our
customers and to deliver our Purpose of helping people live Healthier, Longer, Better Lives.
Our products are designed with deep customer insights gained from our proprietary customer segmentation
models. These insights are supplemented with quantitative and qualitative research, including customer panels
which enable us to identify and react to emerging customer trends. As a result, we can better tailor products for
our existing customers and identify greater opportunities to reach new customers and segments.
A critical component in the success of our tailored, relevant and compelling propositions is our unrivalled and
high-quality distribution network. We are supporting our distributors with enhanced tools and training, enabling
them to identify customer needs more effectively and advise on the best solutions in more engaging ways.
Customers form a trusted advisory relationship with our Premier Agents and the professional sales teams of our
distribution partners; this is a critical success factor underpinning our long track record of delivery.
Our aim is to reward our customers for taking actions that positively impact their health and well-being, help them
access the most appropriate medical treatment, and support them in saving more effectively to meet their financial
needs through different life stages. Additional value-added services such as our wellness programmes, AIA Vitality
and our wellness programme in AIA China, and our range of Stewardship funds directly address customer needs
and further differentiate AIA’s propositions in the market.
HEALTH AND WELLNESS
The pandemic has raised awareness of the need for medical insurance and broader health coverage, which makes
it the right time for AIA to develop solutions that make healthcare more accessible, more affordable and more
effective for our customers. By 2030, annual healthcare expenditure is expected to exceed US$4 trillion across
AIA’s markets. With high out-of-pocket spend, much of these costs will fall to individuals, driving the tremendous
need for AIA’s insurance propositions and services. AIA is a leading private health insurer in the region with the
scale, reach, and unique capabilities to make a difference.
AIA’s Integrated Health Strategy, introduced in 2022, goes beyond fragmented partnerships and ecosystems to
deliver simpler customer journeys including how people buy health insurance and navigate the healthcare system.
Our personalised health insurance solutions replace standardised benefits with innovative solutions to cater to
customers’ individual requirements based on their life stage or specific healthcare needs, providing simple and
affordable protection products.
AIA’s Integrated Health Strategy is powered by Amplify Health, our joint venture with Discovery Limited which
was launched in February 2022. By collaborating with our local businesses, Amplify Health is critical to AIA in
delivering personalised propositions through its broad range of data-driven Health InsurTech assets, processes
and analytics.
In 2022, we completed the acquisition of Blue Cross (Asia-Pacific) Insurance Limited and Blue Care JV (BVI)
Holdings Limited in Hong Kong, and also announced the acquisition of MediCard Philippines, Inc. in the
Philippines. These acquisitions will enhance and broaden our health and wellness solutions in these two markets
with significant growth opportunities.
062
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW Our strategy significantly enhances our core business and health insurance becomes more accessible, more
affordable and more effective for our customers. Our Premier Agents and partners will benefit from a broader
product suite, access to new customer segments and increased interactions. For AIA, this means more engaged
customers, more productive distribution, more protection sales and sustainable growth.
INTEGRATED SOLUTIONS TO MEET CUSTOMER NEEDS
Our long-term savings solutions combine our investment capabilities with tailored protection to help customers
save for their long-term goals while protecting against uncertain events.
AIA’s Stewardship funds hosted on our Regional Funds Platform provide access for our customers with unit-linked
products to a diversified risk-based portfolio of assets managed by top global fund managers, some of which are
unavailable to retail investors. AIA oversees both asset allocation and fund manager performance with the aim
of delivering superior long-term returns for customers. Currently available in six markets, our three key global
Stewardship funds (US dollar) have achieved first quartile peer group performance in the fourth quarter of 2022
and are above benchmark since they were launched in 2019.
AIA Singapore’s range of goal-based propositions combine AIA’s Stewardship funds with insurance coverage to
ensure our customers can meet their goals, such as funding education, retirement planning and legacy planning.
Leveraging the Stewardship funds, we launched a new retirement solution that offers a long-term capital guarantee
at an affordable cost in 2022.
AIA China further expanded its range of retirement propositions, which are designed to address comprehensive
retirement needs including healthcare, driving significant growth in number of pre-retirement customers through
the bundling of medical coverages with long-term savings plans. Through our Family Insurance Consulting service
application and data-driven integrated customer platform, One Experience, agents can provide targeted and
tailored recommendations based on the customer’s individual needs for long-term savings and protection.
AIA Vitality embodies our concept of shared-value insurance, supporting and rewarding customers to stay healthy
while enhancing their policy through premium discounts or additional benefits. Over 2022 we launched the
programme in India and added more than 40 new integrated products across the 10 existing AIA Vitality markets.
More than 60 per cent of our new customers in 2022 added AIA Vitality to their policies when given the option to
do so and we now have 2.6 million members of AIA Vitality and our wellness programme in Mainland China.
AIA Malaysia’s Total Health and Total Wealth solutions are leading examples of integrating solutions to meet
customer needs, combining both AIA Vitality and Stewardship funds. With over 40 per cent VONB growth from AIA
Vitality integrated products in 2022 as well as higher customer and agent engagement in AIA Vitality in Malaysia,
the success is already significant.
063
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION LEADING CUSTOMER EXPERIENCE
Delivering seamless omnichannel customer experience with best-in-class engagement is an important strategic
priority for AIA. We believe that personalised experience and simplified customer journeys will create a range
of customer and business benefits, including significant improvements in customer satisfaction, sales leads
generation and conversion, as well as productivity gains for our distribution.
TRANSFORMING CUSTOMER JOURNEYS
In 2022, we are on track to achieve our ambition of 90 per cent end-to-end STP across our buy, service and claims
customer journeys. In December 2022, AIA’s end-to-end STP reached 70 per cent, up 12 pps from a year ago.
In our end-to-end new business processes, we are simplifying underwriting rules and eliminating unnecessary
requirements from customers, supported by AI-decision-making capabilities. In Mainland China, 75 per cent
of new business applications were underwritten automatically by our AI-powered systems. In Hong Kong, our
simplified medical underwriting and enhanced interactive Point of Sale (iPoS) have supported an increase of
11 pps in STP rates.
Our enhanced agent and customer self-servicing capabilities have driven digital servicing submissions to 85 per
cent of all submissions for the Group in December 2022. Overall service STP has reached 79 per cent across the
Group with eight markets achieving service STP rates of 70 per cent or higher.
AIA’s re-designed claims processes resulted in faster and more cashless settlements. In December 2022, 63 per
cent of claims were settled within same day and 93 per cent of claims payments were digital across the Group.
Our initiatives to increase adoption of digital platforms have resulted in digital e-submission rates increasing
to 87 per cent and overall electronic communications with customers increasing to 92 per cent across our buy,
service and claims processes.
With higher levels of online self-service and many routine tasks handled by chatbots, we are redeploying our
call centre staff to higher-value customer engagement. Supported by our investments in customer relationship
management (CRM) tools, we now have 13 markets achieving first contact resolution rates of 90 per cent or
higher, without the need for additional follow-ups.
All of these initiatives have resulted in our Net Promoter Score (NPS) increasing significantly. AIA was acknowledged
as top three in nine markets in our latest customer relationship surveys. With all markets deploying real-time
customer surveys for key moments of truth when customers form an impression of our brand and products, we are
tracking an overall Customer Satisfaction Score (CSAT) for call centres of 96 per cent.
064
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW LEVERAGING OUR TRUSTED RELATIONSHIP WITH CUSTOMERS
Across the Group, our existing customers are a significant source of additional new business. Our advanced digital
platforms and customer analytics are driving greater understanding of existing customer needs and their coverage
gaps while enabling us to develop more personalised and needs-based marketing strategies.
We analyse the drivers of our successful marketing campaigns in our local markets and then deploy them more
widely across the Group. In 2022, a total of 45 of these thematic customer campaigns were expanded to Mainland
China, Hong Kong, Thailand, Singapore and Malaysia, delivering more than US$690 million VONB.
Our customer engagement initiatives delivered strong outcomes in improving cross-selling and increasing
conversion rates. In Mainland China, our customer super app, AIA+, generated twice the number of new digital leads
compared with 2021. The cross-sell rate of the registered customers on AIA+ were three times higher compared
with non-registered customers. Through a digital engagement programme that targeted long-term customers with
significant protection needs, AIA Malaysia achieved three times the conversion rate and more than two times the
VONB compared with other outreach campaigns that employed less effective targeting strategies.
065
ANNUAL REPORT 2022OVERVIEWFINANCIAL 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 with
accountability. We started our journey to transform AIA into a simpler, faster, more connected organisation in the
second half of 2020 to support the delivery of our strategic priorities.
In 2022, several of our local markets introduced new organisational designs which have reduced the number
of organisational layers by around 30 per cent, putting people closer to the decision-making process, leading to
better outcomes and a more empowered organisation. We continued to implement cross-functional agile operating
models and, in seven of our markets, we have set up agile teams to work on some of our most important strategic
priorities. These new ways of working are helping us to realise value more rapidly, focus on customer needs and
innovate at pace.
Our investment in developing technology, digital and analytics capabilities has resulted in an increase of 63 per
cent in our overall number of employees with these skill sets between 1 July 2020 and 31 December 2022. This
material and ongoing investment marks a step-change in our capabilities and underpins our ability to execute our
overall growth strategy.
BUILDING A FUTURE READY WORKFORCE
In 2022, we launched several new programmes to foster new capabilities in core lines of business and upskill
employees. This includes our new AIA Agile Academy which builds internal capabilities to drive business
transformation and AIA Analytics Academy which builds data analytics and business analysis capabilities across
the organisation.
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 the AIA Learning Hub, an online platform which
provides access to thousands of digital learning courses.
AIA AS AN EMPLOYER OF CHOICE
Employee engagement remains a top priority for AIA as we progress through the journey of transforming our
organisation. We regularly monitor employee engagement levels to ensure that AIA is an employer of choice
across our markets.
In 2022, 97 per cent of our employees responded to our annual Gallup engagement survey and the Group’s
employee engagement scores improved further to place AIA in the 94th percentile of Gallup’s global finance and
insurance industry benchmark.
We are proud that our employee engagement levels place us in the top quartile of this benchmark for the sixth
consecutive year, and in the top 10th percentile for the second year running. In 2022, we also received the Gallup
Exceptional Workplace Award, an accolade that celebrates companies that have a highly-engaged workforce and
a performance-oriented culture.
Additional details about our people-related strategies and initiatives supporting our Organisation of the Future are
covered in the Our People section on page 74.
Notes:
(1) Growth rates and commentaries are provided on a constant exchange rate (CER) basis.
(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 China’s financial results do not include any contribution from our 24.99 per cent shareholding in China Post Life Insurance Co., Ltd. (China Post Life).
(4) ASEAN markets include the combined results of Thailand, Singapore, Malaysia, Vietnam, Indonesia, the Philippines, Cambodia, Myanmar and Brunei.
(5) 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 do not include any contribution from our 24.99 per cent shareholding in China Post Life. The IFRS results of Tata AIA Life and China Post Life
are accounted for using the equity method in Other Markets and Group Corporate Centre, respectively. For clarity, TWPI does not include any contribution
from Tata AIA Life and China Post Life.
(6) The results of Tata AIA Life are reported on a one-quarter-lag basis. The results of Tata AIA Life are accounted for using the twelve-month period ended
30 September 2022 and the twelve-month period ended 30 September 2021 in AIA’s consolidated results for the twelve-month period ended 31
December 2022 and the twelve-month period ended 31 December 2021, respectively.
(7) Overall number of employees 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, and employees of our associate, China Post Life.
066
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 supports safeguarding their interests and our ability to meet policyholders’
reasonable expectations. 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 reviews its risk management policy annually and in 2022, an updated RMF was
approved by the Board. While there are no changes to the risk management approach, some updates were made
for simplicity and clarity.
The Group’s RMF consists of the following key components:
• Risk Governance;
• Risk Culture;
• Risk Strategy and Appetite;
• Risk Management Process; and
• Risk Reporting, Systems and Tools.
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.
067
ANNUAL REPORT 2022OVERVIEWFINANCIAL 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 Risk Tolerances 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 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.
068
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 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 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... and the Right Results will come”.
RISK STRATEGY AND APPETITE
Risk Strategy describes the types of risks, and how and to what extent they are taken in order to pursue the Group’s
strategic and business objectives. The Group Risk Appetite Framework (RAF) establishes the quantum and nature of
risks the Group is prepared to take to achieve its strategic and business objectives.
1. The Risk Appetite Statement (RAS) is an overarching statement on the enterprise’s attitude to risk;
2. Risk Principles and Risk Tolerances are qualitative statements and quantitative metrics that expand and validate
the RAS; and
3. 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 for a pan-Asian life and health insurance group.”
069
ANNUAL REPORT 2022OVERVIEWFINANCIAL 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
Data 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.
l
a
p
i
c
n
i
r
P
s
k
s
i
R
s
k
s
i
R
g
n
i
y
l
r
e
d
n
U
070
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 MANAGEMENT PROCESS
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.
RISK IDENTIFICATION AND ASSESSMENT
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 Group’s Risk Landscape enables a consistent identification and classification of existing and emerging
risks inherent in business activities.
Quantification of risk is important in establishing the level of exposure and in determining the appropriate management
actions within the Group’s Risk Tolerances. Specific approaches to quantifying risk are applied depending upon the
nature of the risk, including regular capital assessments, and stress and scenario testing.
MANAGEMENT AND RESPONSE
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 Tolerances. They are also responsible for
the timely escalation of material risk developments.
071
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION RISK MONITORING
Risks are evaluated against approved Risk Tolerances and Risk Limits to ensure implications for both the current and
forward-looking risk profile are understood and appropriately considered in decision-making.
RISK CONTROLS
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 REPORTING, SYSTEMS AND TOOLS
Risk reporting represents the internal and external Risk and Compliance reporting processes which support an
ongoing evaluation of the Group’s Risk Profile. Information is gathered from underlying systems and provided to the
Board, respective Risk Committees and other executive management to inform key decision-making, such as via the
annual Own Risk and Solvency Assessment (ORSA) report.
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 Risk Tolerances, the Group has embedded a
robust approach to internal control as part of its ORCF.
072
RISK MANAGEMENTAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW FINANCIAL AND OPERATING REVIEW
REGULATORY AND INTERNATIONAL
DEVELOPMENTS
GROUP-WIDE SUPERVISION
The Company was designated a “designated insurance holding company” under the HKIA’s group-wide supervision
(GWS) framework on 14 May 2021. The GWS framework was developed to align with international standards and
practices to supervise Hong Kong-domiciled Internationally Active Insurance Groups (IAIGs) and is reflective of the
requirements of ComFrame, the Common Framework for the Supervision of IAIGs. Under the GWS framework, the
HKIA has established group capital adequacy requirements, requirements for a group internal economic capital
assessment (GIECA), for a group own risk and solvency assessment (ORSA), for a group recovery plan and for a
group-wide risk and governance framework and controls. The HKIA also 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.
COMFRAME AND INSURANCE CAPITAL STANDARD
Since 2019, the International Association of Insurance Supervisors (IAIS) has applied ComFrame. 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 Insurance Capital Standard (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 a group prescribed capital requirement. 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.
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.
In 2021, the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) published draft model rules to give
effect to Pillar Two of BEPS 2.0, which imposes a global minimum effective tax rate on large multinational enterprise
groups. The Inclusive Framework originally agreed that participating jurisdictions should enact these rules into law
in 2022, with the majority of the rules to be effective from 2023.
On 22 February 2023, it was announced in the Hong Kong Budget that Hong Kong will defer the application of Pillar
Two, and also the introduction of a domestic minimum top-up tax, to start from 2025 onwards. This announcement
follows similar deferrals in other jurisdictions (e.g., the European Union, the United Kingdom, South Korea and
Switzerland, which have deferred until 2024, and Singapore, which has also deferred until 2025) and recognises
the fact that the original target timeframe of 2023 would have been very difficult and costly for large multinational
enterprise groups to comply with. Based on currently available information, BEPS 2.0 will apply to AIA from 2024
onwards and is likely to adversely impact AIA’s effective tax rate, however a number of material areas remain unclear.
073
ANNUAL REPORT 2022OVERVIEWFINANCIAL 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.
Nurturing our culture, building leaders and workforce capability, and supporting and developing our people so that they
can achieve their potential are key organisational and people priorities for AIA. Our organisation and people strategy
enables us to attract, retain and develop outstanding people, making AIA an employer of choice across our markets.
NURTURING OUR CULTURE
With our unparalleled history of operations in Asia and as the region emerges from the challenges of the global
pandemic, we are mindful that our culture brings us together and sets us apart from our competitors.
Our people matter, and we have built an inclusive and engaging environment to support our employees and provide
a foundation that helps them thrive, both professionally and personally.
At AIA, we are guided by our Operating Philosophy of “Doing the Right Thing, in the Right Way, with the Right
People… and the Right Results will come”. By acting with our deep-rooted Leadership Essentials of Clarity, Courage
and Humanity, we demand and champion a better way.
Our Purpose of helping millions of people live Healthier, Longer, Better Lives guides the decisions and actions that
our people make every day and inspires us to support and protect the well-being of those we serve.
Our operating model of empowerment within a framework, together with the principles that underpin our culture,
create an engaging environment for our employees to deliver on our people proposition of Believe in Better.
EMPLOYEE ENGAGEMENT
Offering a collaborative and inclusive workplace that prioritises employee engagement is a key priority. At AIA,
everyone is expected to act like an owner, to have a voice, to take decisions and make an impact.
We monitor levels of engagement across our business units and functions each year through the Gallup Q12
employee engagement survey. This exercise provides meaningful inputs that enable us to continue building on our
strong levels of engagement through the development of targeted and impactful strategies.
In 2022, 97 per cent of our people responded to the survey and the Group’s employee engagement scores placed
AIA at the 94th 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 sixth consecutive year, and in the
top 10th percentile for the second consecutive year. We are also proud to have received the Gallup Exceptional
Workplace Award this year, in recognition of our highly engaged workforce and performance-oriented culture.
BUILDING FUTURE LEADERS
Our leaders play a key role in strengthening our culture and sustaining employee engagement. AIA is committed
to developing strong internal leadership capability, with a succession pipeline that drives personal growth for our
people, shapes our organisation, and ultimately supports sustainable business growth.
LEADERSHIP DEVELOPMENT
We provide leading talent development programmes through the AIA Leadership Centre (ALC), our world-class
learning facility in Bangkok, Thailand, both in person and virtually. The ALC collaborates with world-renowned
business schools and consulting firms to deliver customised programmes focused on AIA’s strategic priorities to our
senior leaders, top agency leaders and key partner executives.
074
AIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW We continue to strengthen our approach to leadership development and, consequently, our talent pipeline through
our four signature programmes. These programmes develop our leaders at different stages of their careers from
experienced, seasoned leaders to new managers. Our “SPARK” and “Leading Across Boundaries” programmes
support the development of future senior leaders in our business units and senior Group Office leadership roles. We
also support the development of existing and aspiring senior leaders through our “Voyage” and “ASPIRE” programmes.
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 is evidenced by the many examples of internal key leadership role appointments across the Group.
We also 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.
BUILDING A FUTURE READY WORKFORCE
Building workforce capability and developing our people so they can achieve their potential is a key focus for AIA.
We continue to invest in attracting talent and incubating capabilities in core business lines, strengthening our
approach to capability building and designing new training programmes to reskill and upskill employees.
Between 1 July 2020 and 31 December 2022, we invested in technology, digital and analytics capabilities, resulting
in an increase of 63 per cent(2) in our overall number of employees with these skill sets. This material and ongoing
investment marks a step-change in our capabilities and underpins our ability to execute our overall growth strategy.
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 ensure our people can upskill,
reskill, 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, supported by mentoring and coaching.
We 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.
To ensure that we continue to develop talent for the future, we continuously research the skills and knowledge
requirements of our industry and review feedback from our employees, to design the programmes that address
these needs. In addition, our people are required to regularly complete mandatory training on a range of technical,
governance and conduct-related topics.
We have launched, and are in the process of designing, additional programmes to incubate new talent capabilities
and upskill employees in core lines of business across the Group including:
• The AIA Analytics Academy which focuses on building data analytics and business analysis capability across all
levels in AIA. The “Converge” learning journey is a bespoke 10-month reskilling programme with apprenticeship
opportunities for employees. We also upskill senior leaders with a stronger understanding of the power of
analytics through the “Analytics for Leaders” programme.
Notes:
(1) As at 31 December 2022, AIA had a total of 25,405 employees, which includes full-time and part-time employees on permanent and fixed-term contracts,
and excludes interns, agents of the Group, employees of our joint venture Tata AIA Life, and employees of our associate China Post Life.
(2) Includes full-time and part-time employees on permanent and fixed-term contracts, and excludes interns, agents of the Group, employees of our joint
venture Tata AIA Life, and employees of our associate China Post Life.
075
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION • The AIA Agile Academy which currently provides two reskilling programmes, the “Agile Practitioner” and the
“Agile Team Lead”, to help AIA build internal capability to drive business transformation.
• The AIA Distribution Leadership Programme which provides a platform for our most senior distribution leaders to
further develop their distribution skill sets.
Digital content and delivery methods play an important role in shaping a culture of continuous learning at AIA. All our
business units provide employees with access to the AIA Learning Hub, an online platform which provides access to
thousands of digital learning courses.
EMPLOYEE COACHING AND INTERNSHIPS
Our leadership programmes include a module on employee coaching and we encourage our employees to expand
their networks, seek guidance and foster communication across different departments and seniorities.
Across our business units, we also offer development opportunities for internships. 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. These programmes also enable us to identify future talent for our business.
RECOGNISING AND REWARDING OUR PEOPLE
AIA is committed to supporting our employees in their ongoing performance development as well as providing fair
and equitable performance evaluation to recognise their contribution and achievement of results.
Our performance management framework encourages robust dialogues on individual and team progress throughout
the year. Our people managers assess performance impact and behaviours of their teams and recommend
development activities that will assist with their professional development and growth. We focus on What employees
have accomplished and, just as importantly, How they achieved their goals.
We also aim to reward all employees competitively and fairly, irrespective of gender, ethnicity, age, disability or other
non-performance related factors to attract, engage and retain our diverse talent. We believe that our existing reward
programmes are well-received by employees for their clarity, transparency and market alignment.
In addition, our Employee Share Purchase Plan provides our employees with an 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. We
encourage employees to stay active, understand their health profile and take steps to safeguard their well-being.
We provide our employees with access to WorkWell with AIA, a holistic employee well-being offering for our corporate
customers, designed to support the physical, mental, social and financial health of employees through a range of
initiatives, employee benefits and tools. Internally we call this WellBeing@AIA, and the programme is tailored to the
needs of each business unit, which may include well-being learning sessions, on-site and virtual health activities.
SUPPORTING A DIVERSE AND INCLUSIVE CULTURE
AIA’s diversity, which encompasses talented people from a range of backgrounds, is one of our strengths. We foster
an inclusive workplace that fully embraces and celebrates differences, and encourages open, constructive dialogues.
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.
076
AIA GROUP LIMITEDOUR PEOPLEFINANCIAL AND OPERATING REVIEW As part of their onboarding, all employees joining AIA are required to complete training on AIA’s Code of Conduct,
which includes our approach to inclusion and non-discrimination. In addition, we have an anti-harassment policy and
e-learning module on unconscious bias and anti-harassment 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
harassment, or discrimination in any form, including on the basis of race, colour, religion, gender, nationality, age,
disability, military service, marital status or sexual orientation.
We aim to create an inclusive workplace for all and are proud to be an employer of choice for women across the
region. Women represented 58 per cent of our employee population(3) and 42 per cent of our senior leaders across
the Group as at 31 December 2022. AIA was also recently included in the 2023 Bloomberg Gender-Equality Index,
demonstrating our commitment to a diverse and inclusive workplace.
We recognise the importance of understanding different generational needs when shaping policies and practices and
also aim to create an inclusive workplace for all age groups. As at 31 December 2022, 68 per cent of our employees
were Gen Y and Gen Z(4).
We continue to facilitate professional and personal development and support an inclusive and engaging workplace
through local employee-led and executive-sponsored networks to bring people together. We held numerous
initiatives at Group level and across our markets this year to elevate employee awareness about diversity, equity and
inclusion. In multiple markets, colleagues were invited to come together to support the LGBTQ community and allies
during Pride Month.
The diversity of cultural and national backgrounds of our employees enriches AIA’s social fabric with over 75
nationalities represented across AIA as at 31 December 2022. AIA also values diverse perspectives for effective
governance and decision-making. At a senior level, having diverse perspectives on our Board through the range of
nationalities and backgrounds represented reflects our different communities and improves our governance and
decision-making processes.
RECOGNISED AS AN EMPLOYER OF CHOICE
In 2022, our continued focus on our people has resulted in several local and global accolades, including:
• AIA received the “Gallup Exceptional Workplace Award” from Gallup.
• AIA China was awarded the “Top Employer China” by Top Employers Institute.
• AIA Hong Kong was recognised in “Best Companies to Work for in Asia” by HR Asia.
• AIA Malaysia was the insurance sector winner in “Malaysia’s 100 Leading Graduate Employers” awards by GTI
Media and “Champion” for 5 consecutive years in the insurance sector of “Graduate’s Choice Award” by Talentbank.
• AIA Singapore was recognised as one of “Singapore’s 100 Leading Graduate Employers” by GTI Media.
• AIA Thailand was certified as a “Best Place to Work” by Best Places to Work.
• AIA Vietnam was certified as a “Great Place To Work” by Great Place to Work.
• AIA Vietnam, AIA Taiwan and AIA Cambodia were awarded “Best Companies to Work for in Asia” by HR Asia.
• AIA Sri Lanka was recognised in “Best Workplaces in Sri Lanka” and “Best Workplaces for Women in Sri Lanka”
by Great Place to Work.
Additional details about our People and Culture initiatives are contained in our Environmental, Social and Governance
Report 2022 which can be found on www.aia.com.
Notes:
(3) Includes full-time and part-time employees on permanent and fixed-term contracts, and excludes interns, agents of the Group, employees of our joint
venture Tata AIA Life, and employees of our associate China Post 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.
077
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE
079 Statement of Directors’ Responsibilities
080 Board of Directors
088 Executive Committee
093 Report of the Directors
106 Corporate Governance Report
122 Remuneration Report
078
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 judgements and estimates that are reasonable and prudent;
• state whether the consolidated financial statements have been prepared in accordance with 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 93 to 121 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 regard 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.
079
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION BOARD OF DIRECTORS
MR. JOHN BARRIE
HARRISON
MS. SUN JIE
(JANE)
DR. NARONGCHAI
AKRASANEE
MR. JACK
CHAK-KWONG SO
MR. EDMUND
SZE-WING TSE
MR. LEE YUAN
SIONG
080
AIA GROUP LIMITEDCORPORATE GOVERNANCE MR. CHUNG-KONG
CHOW
MS. SWEE-LIAN
TEO
PROFESSOR LAWRENCE
JUEN-YEE LAU
MR. CESAR VELASQUEZ
PURISIMA
MR. GEORGE
YONG-BOON YEO
081
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION INDEPENDENT NON-EXECUTIVE CHAIRMAN AND INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. Edmund Sze-Wing TSE
Aged 85, 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 the period for over 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 57, 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 of 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).
082
AIA GROUP LIMITEDCORPORATE GOVERNANCEBOARD OF DIRECTORS INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. Jack Chak-Kwong SO
Aged 77, is an Independent Non-executive Director of the Company. He was appointed as 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. Mr. So was previously
an independent senior advisor to Credit Suisse, Greater China from January 2008 to October 2022, a non-official
member of the Chief Executive’s Council of Advisers on Innovation and Strategic Development from March 2018
to June 2022 and 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 72, 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
as the Chairman of the Advisory Committee on Admission of Quality Migrants and Professionals of the HKSAR from
1 July 2016, 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. He is also an independent non-executive representative of EYG Global
Governance Council. 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 also a non-official member of the Executive Council of the HKSAR from 2012 to 2022,
a member of the Financial Leaders Forum set up by the HKSAR Government from 2017 to 2022, 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.
083
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Mr. John Barrie HARRISON
Aged 66, 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
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 Grosvenor Asia Pacific Limited from
2017 to 2022; 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 68, 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 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 and a member of the International Advisory Committee of Mitsubishi Corporation from 2014 to 2022. 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.
084
AIA GROUP LIMITEDCORPORATE GOVERNANCEBOARD OF DIRECTORS Professor Lawrence Juen-Yee LAU
Aged 78, 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 the Shanghai 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; and previously listed on the New York 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, a non-official member of Candidate Eligibility Review Committee of the HKSAR and a non-official member of
the board of directors of Hong Kong Investment Corporation Limited. In addition, he serves as 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; a 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.
085
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Ms. Swee-Lian TEO
Aged 63, 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 77, 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.
086
AIA GROUP LIMITEDCORPORATE GOVERNANCEBOARD OF DIRECTORS Mr. Cesar Velasquez PURISIMA
Aged 62, 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 Corporation, 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
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 has served on the board of trustees of the World
Wildlife Fund – Philippines and De La Salle University until October 2022 and December 2022 respectively. 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 54, is an Independent Non-executive Director of the Company, having been appointed on 1 June 2021. She is also
a member of the Audit Committee, the Nomination Committee and the Remuneration 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 companies that operates
the sub-brands Trip.com, Ctrip, Skyscanner and Qunar. She is also a director of Tripadvisor, Inc. and MakeMyTrip,
both listed on the Nasdaq Global Select Market. Ms. Sun was previously 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.
087
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION EXECUTIVE COMMITTEE
DR. MARK KONYN
MS. CARA ANG
MR. MITCHELL NEW
MR. LEO GREPIN
MR. JACKY CHAN
MR. LEE YUAN SIONG
088
AIA GROUP LIMITEDCORPORATE GOVERNANCE MR. GARTH JONES
MR. TAN HAK LEH
MR. STUART A. SPENCER
MS. JAYNE PLUNKETT
MR. BISWA MISRA
089
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Mr. LEE Yuan Siong
Mr. Lee’s biography is set out above.
Mr. Garth Brian JONES
Aged 60, 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 also responsible for the Group’s
business operating in India. He is a director of various companies within the Group, including Tata AIA Life, 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 his 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.
Mr. Jones is also a member of the IFRS Advisory Council of the IASB.
Mr. Wing-Shing CHAN (Jacky)
Aged 59, is the Regional Chief Executive and Group Chief Distribution Officer responsible for the Group’s businesses
operating in Mainland China, Hong Kong SAR, Macau SAR, South Korea, Taiwan (China), as well as the Group’s agency
distribution, partnership distribution, corporate solutions and digital platform partnerships. 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 35 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).
Mr. TAN Hak Leh
Aged 57, is the Regional Chief Executive responsible for the Group’s businesses operating in Thailand, Singapore,
Brunei, Malaysia, Cambodia, Myanmar, Vietnam and Sri Lanka. 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.
090
AIA GROUP LIMITEDCORPORATE GOVERNANCEEXECUTIVE COMMITTEE Mr. Leo Michel GREPIN
Aged 47, is the Regional Chief Executive and Group Chief Strategy Officer responsible for the Group’s businesses
operating in Australia, New Zealand, Indonesia and the Philippines 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 59, 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 practised 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 61, 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.
Ms. Pek-San ANG (Cara)
Aged 54, 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.
091
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Mr. Biswa Prakash MISRA
Aged 45, is the Group Chief Technology and Life Operations Officer responsible for providing leadership to the
Group’s technology, digital and analytics areas as well as Group Operations and Operations Shared Services. 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 57, is the Group Chief Marketing Officer and oversees customer engagement, propositions, branding, AIA
Vitality, communications, sponsorships, events, and marketing digitalisation – as well as AIA’s Integrated Health
Strategy, supporting AIA’s ambition to make healthcare more accessible, more affordable and more effective for its
customers. He is a director of various companies within the Group and serves as Chairman of Amplify Health Asia
Pte. Limited, AIA’s Health InsurTech business in partnership with Discovery Limited. Mr. Spencer occupied numerous
leadership roles at AIG and AIA from 1996 to 2009, in the United States, Latin America and in Asia where he served
as global President of Accident & Health Worldwide for the AIG Life Companies. Mr. Spencer re-joined AIA in May
2017 from Zurich Insurance Group, where he was CEO, General Insurance, Asia Pacific. 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 53, is the Group Chief Risk Officer responsible for the Group’s risk and compliance functions. She is a director
of various companies within the Group, including Tata AIA Life, 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 (FCAS) and a member of the American Academy of Actuaries (MAAA).
092
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 2022.
PRINCIPAL ACTIVITIES
The Group is a life insurance based financial services provider operating in 18 markets throughout Asia. 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 43 to the
consolidated financial statements.
RESULTS
The results of the Group for the year ended 31 December 2022 and the state of the Group’s affairs at that date are set
out in the consolidated financial statements on pages 149 to 263 of this Annual Report.
BUSINESS REVIEW
The review of the business of the Group for the year ended 31 December 2022, 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 19 to 24), Group
Chief Financial Officer’s Review (pages 26 to 51), Business Review (pages 52 to 66), Risk Management (pages 67
to 72) and Our People (pages 74 to 77) sections in this Annual Report, and note 42 and note 44 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 2022.
The Group became a signatory to the Principles for Sustainable Insurance in 2021 (Principles), 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 initiatives 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 (GHG) emissions by 2050. AIA has also committed to the Science Based Targets initiative (SBTi), a global body
enabling businesses to set ambitious emissions reduction targets in line with the latest climate science. AIA’s Science
Based Targets (SBT) will be in line with the latest climate science necessary to meet the goals of the Paris Agreement.
These five-to-ten-year targets will be reviewed every five years. We are currently working towards baselining our
operational and investment emissions to submit to the SBTi by December 2023. The Group Environmental Procedures
provide guidance and outline initiatives to reduce our environmental footprint.
093
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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. With respect to ESG for the investment function,
ESG considerations have been structurally embedded through our Investment Standards on ESG, research process,
and proxy voting. An internal ESG scoring methodology has also been devised for assessing third-party investment
managers and third-party managed funds. The Group also achieved the complete 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.
Customer privacy and data protection are of paramount importance to the Group. In 2022, AIA continued to maintain
ISO 27001 certification for our identity access management cybersecurity and cloud security controls. 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 fourth and fifth wave
of the COVID-19 pandemic, we continued to prioritise the needs of our customers, supporting them with extended
coverage, digital health solutions, 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. We have also committed to assess our Tier 1 suppliers on their ESG performance this year.
To understand more about our progress on ESG initiatives, please refer to our ESG Report 2022, which has been
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 has
monitored during the year ended 31 December 2022 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 36 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 2022 are set out in note 44
to the consolidated financial statements.
094
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS DIVIDENDS
An interim dividend of 40.28 Hong Kong cents per share for the six-month period ended 30 June 2022 (2021: 38.00
Hong Kong cents per share) was paid on 29 September 2022. The Board has recommended an increase of 5 per
cent in the payment of a final dividend to 113.40 Hong Kong cents per share for the year ended 31 December 2022
(2021: 108.00 Hong Kong cents per share), consistent with AIA’s established prudent, sustainable and progressive
dividend policy.
Under the respective trust deeds of the Company’s restricted share unit schemes, employee share purchase plans
and agency share purchase plans, Shares are held in trust by the trustee of each of these schemes or plans. These
Shares are held against the future entitlements of scheme/plan participants. Provided the Shares 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 13 September 2022 (being the record date of the 2022 interim dividend), the trustee held 73,759,701 Shares
under the Company’s restricted share unit schemes, employee share purchase plans and agency share purchase
plans. The amount of interim dividend payments waived was approximately US$1.49 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 AGM to be held by the Company, the final dividend will be payable on
Friday, 9 June 2023 to Shareholders whose names appear on the register of members of the Company at the
close of business on Wednesday, 24 May 2023, 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)
In accordance with Article 100 of the Company’s Articles of Association, Mr. Edmund Sze-Wing Tse, Mr. Jack Chak-
Kwong So and Professor Lawrence Juen-Yee Lau will retire from office by rotation and, being eligible, offer themselves
for re-election at the AGM.
095
ANNUAL REPORT 2022OVERVIEWFINANCIAL 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 Listing
Rules are set out below:
Name of Directors
Mr. LEE Yuan Siong
Details of Changes
• His three-year term Group Chief Executive and President service contract
with the Company has expired in February 2023 and renewed with an
open-ended term
Mr. Jack Chak-Kwong SO
• Ceased to be an independent senior advisor to Credit Suisse, Greater China
with effect from 28 October 2022
Mr. George Yong-Boon YEO
• Ceased to be a member of the International Advisory Committee of Mitsubishi
Corporation with effect from 1 August 2022
Professor Lawrence Juen-Yee LAU
• Ceased to be the vice chairman of Our Hong Kong Foundation with effect
from 3 October 2022
• Appointed as a non-official member of the board of directors of Hong Kong
Investment Corporation Limited with effect from 15 February 2023
Mr. Cesar Velasquez PURISIMA
• Ceased to be a member of the board of trustees of the World Wildlife Fund –
Philippines with effect from 28 October 2022
• Ceased to be a member of the board of trustees of De La Salle University with
effect from 13 December 2022
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 during business hours.
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.
096
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS DIRECTORS’ AND THE CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES AND
UNDERLYING SHARES
As at 31 December 2022, 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 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 are as follows:
Interests and short positions in the Shares and underlying Shares:
Name of Directors
Mr. LEE Yuan Siong
Mr. Edmund Sze-Wing TSE
Number of
Shares or
underlying
Shares
Long Position (L)
951,973(L)
2,589,789(L)
2,321,918(L)
1,901(L)
(2)
(3)
(4)
(5)
3,330,400(L)
230,000(L)
(2)
(2)
Percentage
of the total
number of
Class
Shares in issue (1)
Capacity
Ordinary
Ordinary
<0.01
0.02
0.01
<0.01
0.02
<0.01
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Interest of controlled
corporation(6)
Mr. Jack Chak-Kwong SO
130,000(L)(2)
Ordinary
< 0.01
Interest of controlled
Mr. Chung-Kong CHOW
126,000(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 11,780,868,713 Shares in issue as at 31 December 2022.
(2) The interests were in the Shares.
< 0.01
< 0.01
< 0.01
< 0.01
corporation(7)
Beneficial owner
Interests held jointly
with another person(8)
Beneficial owner
Interest of spouse(9)
(3) The interests were in RSUs granted to Mr. Lee Yuan Siong under the restricted share unit schemes adopted by the Company from time to time, of which
1,153,153 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’s announcement dated 22 November 2019.
(4) The interests were in 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 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.
Save as disclosed above, as at 31 December 2022, 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.
097
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF PERSONS OTHER
THAN THE DIRECTORS OR THE CHIEF EXECUTIVE
As at 31 December 2022, 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 as recorded in the register required to be kept
under Section 336 of the SFO:
Name of Shareholders
The Bank of New York Mellon Corporation
JPMorgan Chase & Co.
Number of Shares
or underlying Shares
(Note 1)
Long Position(L)
Short Position(S)
Lending Pool(P)
1,199,818,058(L)
342,695,292(S)
799,982,215(P)
1,029,333,365(L)
24,237,913(S)
661,124,544(P)
Class
Ordinary
Ordinary
The Capital Group Companies, Inc.
844,813,989(L)
Ordinary
BlackRock, Inc.
Citigroup Inc.
Brown Brothers Harriman & Co.
706,094,186(L)
350,400(S)
Ordinary
664,334,527(L)
15,955,632(S)
644,349,603(P)
605,177,810(L)
597,387,808(P)
Ordinary
Ordinary
Notes:
(1) The interests or short positions include underlying Shares as follows:
Percentage of
the total number
of Shares in issue
(Note 2)
10.18
2.90
6.79
8.73
0.20
5.61
7.17
5.99
<0.01
5.63
0.13
5.46
5.13
5.07
Capacity
Note 3
Note 4
Interest of
controlled
corporations
Interest of
controlled
corporations
Note 5
Note 6
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
6,116,876
–
–
–
–
–
342,695,292
–
Name of
Shareholder
The Bank of New
York Mellon
Corporation
JPMorgan Chase
3,682,000
39,840
112,700
7,330,174
5,245,000
2,305,480
3,208,557
1,145,912
& Co.
The Capital Group
Companies, Inc.
BlackRock, Inc.
–
–
Citigroup Inc.
4,711,568
Brown Brothers
Harriman & Co.
–
–
25,193,864
–
–
–
–
–
1,298,800
489,958
3,595,229
1,282,000
–
–
–
–
–
–
–
–
–
–
–
–
350,400
8,459,708
4,553,605
–
–
(2) Based on 11,780,868,713 Shares in issue as at 31 December 2022.
098
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
1,199,818,058
342,695,292
(4) JPMorgan Chase & Co. held the interests and short positions in the following capacities:
Capacity
Interest of controlled corporations
Investment manager
Person having a security interest in Shares
Trustee
Approved lending agent
(5) Citigroup Inc. held the interests and short positions in the following capacities:
Capacity
Interest of controlled corporations
Approved lending agent
Number of Shares or
underlying Shares
(Long Position)
22,181,728
340,372,828
4,369,364
1,284,901
661,124,544
Number of Shares or
underlying Shares
(Long Position)
19,984,924
644,349,603
(6) 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)
24,237,913
–
–
–
–
Number of Shares or
underlying Shares
(Short Position)
15,955,632
–
Number of Shares or
underlying Shares
(Short Position)
–
–
Save as disclosed above, as at 31 December 2022, 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 as
recorded in the register required to be kept under Section 336 of the SFO.
099
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES
Under the 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. Details of the incentive awards of Mr. Lee Yuan Siong are set out in the Remuneration Report in this
Annual 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 2022 or at any time during the year under review.
RESERVES
As at 31 December 2022, the aggregate amount of reserves available for distribution to Shareholders, as calculated
under the provisions of Part 6 of the Hong Kong Companies Ordinance, was US$6,990 million (31 December 2021:
US$9,519 million).
CHARITABLE DONATIONS
Charitable donations made by the Group during the year ended 31 December 2022 amounted to approximately
US$11.8 million (2021: US$9.4 million).
MAJOR CUSTOMERS AND SUPPLIERS
During the year ended 31 December 2022, 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 2022 are set out in note 34 to the consolidated
financial statements.
100
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS DEBENTURES ISSUED
Details of the debentures issued during the year ended 31 December 2022 are set out in notes 29 and 37 to the
consolidated financial statements.
EQUITY-LINKED AGREEMENTS
During the year ended 31 December 2022, 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 2022, save for
the outstanding awards made to employees and agents under the 2010 SO Scheme, the 2020 SO Scheme, the 2010
RSU Scheme, the 2020 RSU Scheme, the 2011 ESPP, the 2020 ESPP, the 2012 ASPP and the 2021 ASPP, each
described below and in the Remuneration Report and note 39 to the consolidated financial statements.
The purpose of these share incentive schemes of the Company is to align senior employees with the Group’s
long-term strategic goals and ambitions and stakeholders’ interests, as well as to provide employees and agents with
a share investment opportunity with matching share grants to facilitate and encourage long-term share ownership.
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 the 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 (2020 SO Scheme Adoption Date). The 2020 SO Scheme is also effective for a period of
10 years from the 2020 SO Scheme Adoption Date.
The maximum number of Shares in respect of which SOs may be granted under the 2020 SO Scheme, together with
all SOs to be granted under any other share option scheme(s) of the Company (that is, the 2010 SO Scheme) 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 SOs 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 2020
SO Scheme Adoption Date, being 302,264,978 Shares. 4,368,678 SOs had been granted under the 2020 SO Scheme
since its adoption till 31 December 2022.
No consideration is payable for the SOs granted under the SO Schemes upon acceptance by the grantees, who may
subscribe for the Shares upon exercise of the SOs at the price set out in the relevant grant letter.
During the year ended 31 December 2022, the Company awarded 2,519,456 SOs under the 2020 SO Scheme,
while 1,895,760 SOs were exercised under the 2010 SO Scheme and the Company issued 1,895,760 new Shares
accordingly. The proceeds received amounted to approximately US$9.78 million.
Further information, including a summary of the terms, of the 2020 SO Scheme is set out in the Remuneration Report
and note 39 to the consolidated financial statements.
101
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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 Scheme Adoption Date) in place of and under substantially the same terms as the 2010 RSU
Scheme. The 2020 RSU Scheme is also effective for a period of 10 years from the 2020 RSU Scheme Adoption Date.
No award under the 2020 RSU Scheme (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 Scheme 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 (that is, the 2010 RSU Scheme) will exceed in total 2.5 per cent of the number of Shares
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).
The RSU Awards granted pursuant to the 2020 RSU Scheme may be satisfied through the issuance of new Shares
or the on-market purchase of Shares by the scheme trustee upon vesting. The Company shall rely on any general
mandate or specific mandate obtained from the Shareholders at any general meetings of the Company in accordance
with the Listing Rules to issue and allot Shares underlying any RSU Awards to the grantees as and when the RSU
Awards vest. No consideration shall be payable by the grantees on acceptance or vesting of any RSU Award.
During the year ended 31 December 2022, the Company awarded 12,535,139 restricted share units under the 2020
RSU Scheme. No new Shares have been issued upon vesting of the awards under both the 2010 RSU Scheme and
the 2020 RSU Scheme since their adoption.
Further information, including a summary of the terms, of the 2020 RSU Scheme is set out in the Remuneration
Report and note 39 to the consolidated financial statements.
EMPLOYEE SHARE PURCHASE PLAN
The 2011 ESPP adopted by the Company on 25 July 2011 with a term of 10 years from the date of adoption was
terminated with effect from 31 October 2020. The 2020 ESPP, with substantially the same terms as the 2011 ESPP,
was adopted by the Company on 1 August 2020 (2020 ESPP Adoption Date). The 2020 ESPP is also effective for a
period of 10 years from the 2020 ESPP Adoption Date.
Under the 2020 ESPP, eligible employees of the Group may elect to purchase the 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, which is usually of a 3-year duration. Each eligible employee’s participation level is capped at the lower of 10
per cent of the base salary or HK$12,500 (or local currency equivalent) per calendar month. The matching Shares
can either be awarded through the issuance of new Shares by the Company or the on-market purchase of Shares by
the plan trustee.
102
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS The aggregate number of Shares which can be issued by the Company pursuant to the 2020 ESPP and any other
employee share purchase plan (that is, the 2011 ESPP) shall not exceed 2.5 per cent of the number of Shares in issue
as at 29 May 2020.
During the year ended 31 December 2022, no matching RSPUs were granted and 1,113,355 matching RSPUs
vested under the 2011 ESPP, while 1,912,225 matching RSPUs were granted and 44,338 matching RSPUs vested
under the 2020 ESPP. No new Shares have been issued upon vesting of the matching RSPUs under both the 2011
ESPP and the 2020 ESPP since their adoption.
Further information, including a summary of the terms, of the 2020 ESPP is set out in the Remuneration Report and
note 39 to the consolidated financial statements.
AGENCY SHARE PURCHASE PLAN
The 2012 ASPP, adopted by the Company on 23 February 2012 with a term of 10 years from the date of adoption,
was terminated with effect from 31 March 2021. The 2021 ASPP was adopted by the Company on 1 February 2021
(2021 ASPP Adoption Date) and has substantially the same terms as the 2012 ASPP. The 2021 ASPP is also effective
for a period of 10 years from the 2021 ASPP Adoption Date.
Under the 2021 ASPP, certain agents and agency leaders of the Group are selected to participate in the plan and
may elect to purchase the 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 RSSUs. Each eligible agent’s participation
level is capped at HK$12,500 (or local currency equivalent) per calendar month. The matching Shares are awarded
through the issuance of new Shares by the Company.
The aggregate number of new Shares which may be issued under the 2021 ASPP during the 10-year period shall not
exceed 2.5 per cent of the number of Shares in issue as at 29 May 2020. Since the 2021 ASPP Adoption Date and up
till 31 December 2022, no new Shares were issued under the 2021 ASPP.
During the year ended 31 December 2022, no matching RSSUs were granted, 1,119,763 matching RSSUs vested,
and 1,119,763 new Shares (Awarded Shares) were issued for RSSUs vested pursuant to the 2012 ASPP. During
the same period, 1,030,886 matching RSSUs were granted, no matching RSSUs were vested, and no new Shares
were issued accordingly 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 Shares on the date of vesting
of the Awarded Shares (that is, 29 April 2022) was HK$77.75. The proceeds received amounted to approximately
US$1.12 million which were used to fund the administration expenses of the 2012 ASPP and as general working
capital of the Company.
Further information, including a summary of the terms, of the 2021 ASPP is set out in note 39 to the consolidated
financial statements.
103
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION NON-EXEMPT CONNECTED TRANSACTIONS
During the year ended 31 December 2022, 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 2022 in the
ordinary course of business are set out in note 41 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
During the year ended 31 December 2022, the Company bought back a total of 366,267,400 Shares on the Hong Kong
Stock Exchange with the aggregate consideration paid (before expenses) amounting to approximately HK$27,908
million (equivalent to approximately US$3,562 million). All the Shares bought back were subsequently cancelled.
As at 31 December 2022, the total number of Shares in issue was 11,780,868,713. Particulars of the Shares bought
back are as follows:
Price paid per Share
Aggregate
consideration
Number of Shares
bought back
(Average)
(HK$)
(Highest)
(HK$)
(Lowest)
(HK$)
(before expenses)
(HK$ million)
16,832,000
36,729,800
38,567,600
40,362,600
31,212,600
9,244,600
52,689,400
49,374,400
44,137,200
47,117,200
366,267,400
81.63
79.74
76.41
80.61
83.14
77.05
70.94
64.89
71.88
84.52
76.20
84.20
84.40
81.30
85.60
86.30
79.25
75.30
70.45
78.20
88.85
78.40
74.10
71.60
76.65
78.70
74.85
64.10
57.30
59.80
79.35
1,374
2,929
2,947
3,254
2,595
712
3,738
3,204
3,172
3,983
27,908
Month
March 2022
April 2022
May 2022
June 2022
July 2022
August 2022
September 2022
October 2022
November 2022
December 2022
Total
In addition, the Company had also purchased 9,933,820 Shares under the 2020 RSU Scheme and the 2020 ESPP for
a total consideration of approximately HK$804.67 million (equivalent to approximately US$102.76 million) during
the year ended 31 December 2022. These purchases were made by the trustees of these share incentive schemes on
the Hong Kong Stock Exchange. These Shares are held on trust for the participants of relevant schemes and therefore
were not cancelled. Please refer to note 39 to the consolidated financial statements for details.
Save as disclosed above, during the year ended 31 December 2022, neither the Company nor any of its subsidiaries
purchased, sold or redeemed any of the Company’s listed securities.
104
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS 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 permitted under the Listing Rules as at the date of this report.
AUDITOR
PricewaterhouseCoopers was re-appointed auditor of the Company in 2022.
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
10 March 2023
105
ANNUAL REPORT 2022OVERVIEWFINANCIAL 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 2022, with the exception of Code Provision C.6.3, the Company applied
the principles and complied with all applicable code provisions of the 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.
CORPORATE CULTURE AND STRATEGY
The Company’s corporate culture is guided by its Operating Philosophy of “Doing the Right Thing, in the Right Way,
with the Right People… and the Right Results will come”. This philosophy permeates all levels of the Group, from the
Board and senior management and throughout all operating levels of the organisation. It is embedded in AIA’s Code
of Conduct, which sets the framework for a culture of professionalism, ethics, respect, diversity and inclusion; all in
support of helping the Company deliver on its Purpose of helping people live Healthier, Longer, Better Lives.
106
AIA GROUP LIMITEDCORPORATE GOVERNANCE 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.
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. 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 2022.
107
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION BOARD EVALUATION
The Board regularly undertakes 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 under review, 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 2023.
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, to facilitate
greater interactions among the Board members and senior management, as well as to enhance the Board processes
and governance practices.
BOARD COMPOSITION
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 82 to 87 of this Annual Report.
APPOINTMENT AND RE-ELECTION OF DIRECTORS
The Company has put in place a formal and transparent process for the appointment of Directors. When a need
is identified, the Nomination Committee engages in a robust search process to identify suitably qualified Director
candidates, including the use of independent executive search firms. Prospective candidates will then be shortlisted
through a comprehensive evaluation process that includes consideration of a candidate’s ability and willingness to
devote sufficient time to the duties required. Following meetings with candidates by each member, the Nomination
Committee will deliberate prior to recommending an appropriate candidate to the Board for approval.
The focus of the Nomination Committee has always been to identify individuals best qualified to serve the interests
of the Shareholders and policyholders. Within this broader mandate, the Committee also has regard to ensuring
that the Board is appropriately representative of the communities that the Company serves. To promote greater
transparency, 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.
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.
108
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT BOARD INDEPENDENCE
The Company recognises that Board independence is key to good corporate governance. Ten of the eleven Board
members are Independent Non-executive Directors, which far exceeds the independence requirements under the
Listing Rules.
The Board has put in place robust mechanisms to ensure a strong independent element on the Board, which include
process to facilitate active participation and constructive discussions by Board members on matters material to the
Company. The Company has also established formal and informal channels whereby Independent Non-executive
Directors can provide their independent views and input in an open and candid manner, including formal and
informal meeting sessions with the Board Chairman and the management. To facilitate effective discharge of their
duties, Board members (including the Independent Non-executive Directors) are empowered to request further
information from management and obtain, at the Company’s expense, external independent professional advice
when necessary. The Board assesses the implementation and effectiveness of such Board process on an annual
basis through the regular Board effectiveness reviews.
Each of the four committees established by the Board (described more fully below), 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.
In assessing the independence of any candidate for Board membership, the Company takes into account the
criteria 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.
The Nomination Committee has the responsibility to assess annually the independence of all 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. It assesses independence with regard to the full range of relevant factors concerned rather than
focusing exclusively on the length of service of an individual.
109
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Where an Independent Non-executive Director has served on the Board for over nine years, the Nomination Committee
will consider and satisfy itself that the length of his/her tenure has not affected his/her independence having regard
to his/her actual contributions, continuing impartiality and ability to continue to demonstrate effective oversight of
the Company’s management.
At a meeting held in March 2023, the Nomination Committee affirmed that for the year ended 31 December 2022,
each of the Independent Non-executive Directors of the Company continued to be independent. While Board
Chairman, Mr. Tse remains a director of AIA Foundation (a subsidiary of the Company), the Company has satisfied
itself that he is independent pursuant to Rule 3.13 of the Listing Rules on the basis that his directorship with AIA
Foundation does not require his performance of any executive or management role or function.
BOARD REFRESHMENT AND SUCCESSION
Board succession 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. It considers prospective
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, strategy and ambitions
for the future. It also reviews Board composition in light of the annual Board assessment results and recommends
any changes as appropriate.
The Nomination Committee remains focused on ensuring that the Board is composed of appropriately experienced
and capable individuals who are representative of the communities in which the Group operates. To the extent that
needs are identified for additions to the Board, diversity, including in regard to gender, will remain a priority.
The structure, size and composition of the Board is reviewed at least annually by the Nomination Committee. This
review includes consideration of the existing composition (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. The Company does not have mandatory retirement ages or term limits for its directorship.
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. Senior
management also provide regular updates to the Board with respect to the Group’s business activities and the
progress of the Group against its business objectivies.
During the year under review, there were six scheduled Board meetings, all of which were convened in accordance
with the Articles of Association of the Company.
110
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 2022 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)
Number of Meetings Attended / Number of Meetings Held
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Risk
Committee
2022
AGM
6/6
6/6
5/6
6/6
6/6
6/6
5/6
6/6
6/6
6/6
6/6
–
–
5/5
–
5/5
5/5
–
–
5/5
5/5
3/3
3/3
3/3
4/4
1/1
–
2/3
3/3
3/3
3/3
3/3
3/3
3/3
3/3
3/3
–
4/4
1/1
3/3
–
–
3/3
–
–
–
–
2/3
–
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
1/1
Note:
Ms. Sun Jie (Jane) was appointed as a member of the Audit Committee and the Remuneration Committee on 1 June 2022.
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 and receive adequate and reliable
information in a timely manner.
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 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.
111
ANNUAL REPORT 2022OVERVIEWFINANCIAL 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. In addition to being updated on the Group’s business, the Directors also receive regular
updates on material developments to the Listing Rules and other applicable statutory requirements to ensure
continuing compliance and appropriate oversight.
During the year under review, the Company organised a Board Strategy Day and provided a number of briefings to
the Directors on potential business opportunities, changes in major accounting standards, progress on ESG strategy
and the Group’s business resilience.
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:
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
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
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)
112
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, the Executive Committee, the Group Operational Risk Committee, the Group Financial Risk Committee and
the ESG Committee.
AUDIT COMMITTEE
The Audit Committee consists of six 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, Dr. Narongchai and
Ms. Sun. Ms. Sun was appointed as a member of the Audit Committee on 1 June 2022.
The Audit Committee is delegated with authority from the Board to oversee the Group’s financial reporting system,
the internal control systems, 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 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 whistleblowing programme; and monitoring
the adequacy of resources for and effectiveness of the internal audit function.
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 five meetings during the year ended 31 December 2022. The attendance records of the
Audit Committee members are set out on page 111 of this Annual Report.
113
ANNUAL REPORT 2022OVERVIEWFINANCIAL 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.
The Nomination Committee is delegated with authority from the Board to review the Board’s composition and
diversity, formulate and implement the Directors’ Nomination Policy, make recommendations 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 annually ensuring independent views and input are available to the Board.
The Nomination Committee held three meetings during the year ended 31 December 2022. The attendance records
of the Nomination Committee members are set out on page 111 of this Annual Report. 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 (including the appointment of Ms. Sun to the Audit Committee
and the Remuneration Committee of the Company).
To ensure ongoing transparency in respect of its deliberations, 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 as 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 any candidate
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
qualified candidates. It may consider referrals from existing Directors, and use external advisers to facilitate the
search based on 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, with the relevant procedures therefor
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 Director, the Nomination Committee will review the prior contributions of the Director, 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 of a retiring Independent Non-executive Director who has served
on the Board for more than nine years, the Nomination Committee shall take into consideration all relevant
factors in assessing their continuing independence.
114
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT Furthermore, the Board Diversity Policy of the Company (first adopted by the Board in 2013 and revised in 2021)
ensures consideration of diversity in the Board’s composition across all measures, including in relation to race,
gender, religion and national origin, as well as diversity of experience from both the private and public sectors. While
the Policy does not enumerate specific targets across any specific aspect of diversity, the depth and diversity of
experience represented on the Board, including experience in all of the Group’s major markets as well as a broad
base of public sector and private company experience, allows the Board to bring a diversity of perspectives to the
governance of the Group and its operations. The Board will review the implementation and effectiveness of the Board
Diversity Policy on an annual basis.
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 who 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 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 Board’s diversity;
and
• The measurable objectives on board diversity under the Board Diversity Policy include (a) to select candidates
for nomination as a Director 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. All of the measurable
objectives have been achieved for each new appointment to the Board.
The Company strives to create an inclusive workplace and is proud to be an employer of choice for women. The
Company is committed to achieving a gender-balanced workforce with at least 40 per cent female representation
overall as well as a target of at least 40 per cent women in its senior leadership positions. To continue building
the Company’s pipeline of female leaders, a target of at least 45 per cent female participation in its leadership
programmes by the end of 2026 has also been mandated. Further details on the progress for workforce diversity in
2022 are disclosed in the Company’s ESG Report 2022.
115
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION REMUNERATION COMMITTEE
The Remuneration Committee consists of four members, all of whom are Independent Non-executive Directors. They
are Mr. Yeo, who serves as chairman of the Remuneration Committee, Mr. Tse, Mr. So and Ms. Sun. Ms. Sun was
appointed as a member of the Remuneration Committee on 1 June 2022.
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 personnel of the Company.
The Remuneration Committee held three meetings during the year ended 31 December 2022. The attendance
records of the Remuneration Committee members are set out on page 111 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.
The Risk Committee is delegated with 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 (RMF) 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 the Company’s
annual report, 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 2022. The attendance records of the
Risk Committee members are set out on page 111 of this Annual 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.
116
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT 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 2022, the total estimated remuneration payable by the Group to
PricewaterhouseCoopers was US$36.8 million (2021: US$27.7 million), an analysis of which is set out below:
US$ millions
Audit services
Non-audit services, including:
Audit-related services(1)
Tax services
Other services
Total
2022
22.7
13.7
0.3
0.1
36.8
2021
21.2
4.7
0.7
1.1
27.7
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 141 to 148 of this Annual Report.
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.
117
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION The Board has, through the Risk Committee and the 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, financial reporting functions, as well as those relating to the Group’s ESG performance
and reporting;
• 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 under review
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 conducted by an internal risk
management, compliance and internal controls framework certification process performed by management (at both
the Company’s and subsidiaries’ levels) and the Risk & Compliance function, supported by the Internal Audit function
which confirmed the adequacy and effectiveness of internal control environment.
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 2022.
The AIA Group Compliance Policy governs the Group’s compliance in areas such as whistleblowing, anti-corruption
and anti-bribery, anti-fraud, as well as anti-money laundering and counter-financing of terrorism.
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.
118
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT 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
appropriate 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, the Company Secretary 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 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 key dates for Shareholders is set out on
page 295 of this Annual Report.
The Investor Relations function oversees the Company’s engagement with investors. The 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. Investors’ 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 which is reviewed on an annual basis to ensure
its effectiveness. The Shareholders’ Communication Policy sets out, among other things, the Company’s means of
communication with the Shareholders with the aim of ensuring that both individual and institutional Shareholders
are given timely access to accurate, clear and balanced information to enable them to exercise their rights in
an informed manner and to engage actively with the Company. It also sets out the Company’s contact details to
enable Shareholders to provide their comments or direct their questions to the Company. During the year ended
31 December 2022, the Board has reviewed the implementation of the Shareholders’ Communication Policy. Having
considered the active engagement by the Company with the Shareholders via the different means in accordance
with the Policy, the Board is satisfied that the Shareholders’ Communication Policy continues to be effective. The
Shareholders’ Communication Policy is available on the Company’s website (www.aia.com).
119
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 2022 ANNUAL GENERAL MEETING
The 2022 annual general meeting (2022 AGM) of the Company was held at the Grand Ballroom 3&5, Level B, Hong
Kong Ocean Park Marriott Hotel, 180 Wong Chuk Hang Road, Aberdeen, Hong Kong on 19 May 2022. The Chairman
and all other members of the Board at that time, together with the Group’s senior management and external auditor,
attended the 2022 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 2022 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 2021;
• Declaration of a final dividend of 108.00 Hong Kong cents per share for the year ended 31 December 2021;
• By way of separate ordinary resolutions, the re-election of Ms. Sun, Mr. Yeo, Ms. Teo and Dr. Narongchai 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, not exceeding 10 per cent of the
aggregate number of Shares in issue on the date of the 2022 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, not exceeding 10 per cent of the
aggregate number of Shares in issue on the date of the 2022 AGM.
The forthcoming annual general meeting of the Company will be held on Thursday, 18 May 2023. Further details will
be set out in the Company’s circular to be issued to the Shareholders for the AGM.
SHAREHOLDERS’ RIGHTS
GENERAL MEETING
Shareholder(s) representing at least 5 per cent of the total voting rights of all the Shareholders 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)
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) 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) representing at least 2.5 per cent of the total voting rights of all the Shareholders 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 who have a right to vote on the resolution at the annual general meeting to which the
request relates.
120
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) 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
10 March 2023
121
ANNUAL REPORT 2022OVERVIEWFINANCIAL 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 year ended
31 December 2022.
The Remuneration Committee oversees the Group’s remuneration framework and its application across AIA
ensuring that our policies and practices are rewarding our employees for their contribution and for value creation
to our stakeholders.
AIA’s remuneration approach across the Group and in particular for our senior executives strives for a balance between
rewarding for impact and behaviours demonstrated and positioning compensation competitively to attract and retain
our talents. Remuneration is aligned to the Group’s strategy whilst taking into account our business priorities, AIA’s
risk management framework as well as applicable regulatory landscape, relevant market practices and the interests
of our stakeholders.
Similar to previous years, the Remuneration Committee worked closely with its independent advisor to ensure that
AIA’s remuneration framework remains compliant and adheres to the principles of good corporate governance whilst
considering applicable remuneration trends in our key markets and globally. In-depth analyses were conducted
with regard to (1) the remuneration trends of comparable companies in the industry, (2) the growing emphasis
on Environmental, Social, and Governance matters and (3) the high inflationary pressures on remuneration and
governance practices across the globe. A review of the Group’s Long-term Incentive Plan was conducted to ensure
that the framework supports the Group’s value proposition and is aligned with market practices. With the changes to
the Hong Kong Stock Exchange Listing Rules relating to equity schemes coming into effect, the equity schemes will
be assessed to ensure necessary changes are implemented to comply with the new requirements whilst continuing
to be aligned with stakeholders’ interests.
The overall remuneration framework for senior executives and employees remains unchanged in 2022 and will
continue to apply in 2023 focusing on encouraging behaviours, which create a positive impact and sustainable value
for all our stakeholders in alignment with our risk management framework.
The Remuneration Committee continues to monitor the Group’s remuneration framework, in particular considering
the dynamic environment whilst taking into consideration the evolving regulatory landscape and the Group’s strategy
and corporate and risk culture. The emphasis of a balanced approach between risk and rewards, providing for
competitive remuneration with robust safeguards in place continues to be our key focus to ensure AIA can attract,
motivate and retain the talent required to deliver on the Group’s strategy.
The Remuneration Committee remains confident that the Group’s remuneration framework is well aligned and
continues to support our Group’s values and strategic priorities in the long run.
George Yong-Boon Yeo
Chairman, Remuneration Committee
10 March 2023
122
AIA GROUP LIMITEDCORPORATE GOVERNANCE REMUNERATION GOVERNANCE
ROLE OF THE REMUNERATION COMMITTEE
The Remuneration Committee is responsible for establishing and overseeing the implementation of the Group’s
overall 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 align with the strategy and 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 2022, the Remuneration Committee consisted of four Independent Non-executive Directors,
being Mr. George Yong-Boon Yeo, who is the Chairman of the Remuneration Committee, Mr. Edmund Sze-Wing Tse,
Mr. Jack Chak-Kwong So and Ms. Sun Jie (Jane). Ms. Sun Jie (Jane) was appointed as a member of the Remuneration
Committee on 1 June 2022.
The Remuneration Committee held three meetings during the year ended 31 December 2022. The attendance
records of the Remuneration Committee members are set out on page 111 of this Annual Report.
123
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION KEY ACTIVITIES OF THE REMUNERATION COMMITTEE
The Remuneration Committee performed the following key activities in 2022.
Area
Summary of activities
Remuneration decisions for
the Group Chief Executive
and President and Key
Management Personnel
• Reviewed and approved the 2022 remuneration for the Group Chief Executive and
President and the Key Management Personnel at the start of the year
• Recommended the 2022 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 terms and arrangements for the departed Group Executive
Committee member
• Reviewed and approved the new contractual arrangement for the Group Chief
Executive and President
• Reviewed the executive benchmarking results ahead of the 2022/23 annual review
cycle
Design and operation
of the Group’s
incentive schemes
• Reviewed the achievement of relevant performance levels and approved the 2021
short-term incentive plan awards and the vesting of the 2019 long-term incentive
grants for all plan participants including the Group Chief Executive and President and
the Key Management Personnel
Remuneration governance
and disclosure
• 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
2022 to 2024 performance period
• Approved a one-off 2022 grant in the form of time-vesting RSUs under the RSU
Scheme rules, granted to selected individuals. No one-off 2022 grant was made to the
Group Chief Executive and President
• Reviewed and approved the performance measures and targets for the 2023 short-
term incentive plan, and the 2023 long-term incentive plan for the 2023 to 2025
performance period
• Reviewed and approved the Group’s long-term incentive plan for greater alignment
with the Group’s value proposition
• Reviewed and approved the 2021 Remuneration Report
• 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 and Mainland China
• 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
Environmental, Social and Governance and global inflationary trends
In conducting its business, the Remuneration Committee is advised by an independent advisor appointed by
the Remuneration Committee, who provides independent advice for any remuneration topics requested by the
Remuneration Committee, including reviewing the remuneration framework and executive remuneration terms
and arrangements.
124
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE 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 2022 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 are fully aligned to Group Office
results to avoid potential conflict of interests and to ensure their independence.
125
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION REMUNERATION FRAMEWORK
REMUNERATION POLICY
AIA is committed to responsible remuneration practices to attract, motivate and retain employees at all levels across
the Group. Our remuneration programmes aim 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 performance and rewards approach supports the achievement of AIA’s business strategy, which includes
rewarding for the achievement of strategic objectives by 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.
Our remuneration policy serves to support the above objectives through appropriate governance, design,
implementation and monitoring of AIA’s remuneration and risk management framework. This framework applies
across the Group and is implemented consistently across our 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 2022.
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.
126
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE 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 the 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 annually.
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.
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 the 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.
127
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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.
2022 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 year ended 31 December 2022.
Performance Measures And Weightings
For 2022, 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 2022 is US$8,770,473.
The short-term incentive amounts for the year ended 31 December 2022 are included in note 40 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.
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.
128
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE 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, when 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
incentives and risk. For time-vesting SOs, these are made to drive long-term focus and shareholder value creation
with no performance conditions attached. The value of the SOs is linked to the future share price of the Company,
which in turn depends on the performance of the Company. Together, performance-vesting RSUs and time-vesting
SOs support attraction, motivation and retention of key talents.
The 2010 RSU Scheme and the 2010 SO Scheme both 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 grants 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 2020 RSU Scheme, the 2020 SO Scheme, the 2020 ESPP and the 2021 ASPP are set out below and
in note 39 to the consolidated financial statements.
RESTRICTED SHARE UNIT SCHEMES
The 2020 RSU Scheme was adopted on 1 August 2020 and has a remaining life of approximately seven years. The
purpose of the 2020 RSU Scheme is to align the participants’ interests with those of the Group through ownership of
the shares of the Company (Shares) and/or the increase in value of the Shares. Under the RSU Scheme, the Company
may grant RSUs (RSU Awards) to employees, directors (excluding independent non-executive directors) or officers
of any member of the Group.
The aggregate number of Shares available for issue underlying the RSU Awards granted under the 2020 RSU Scheme
(and the 2010 RSU Scheme) during the scheme period is limited to 2.5 per cent of the numbler of Shares in issue
on the reference date (RSU Reference Date, i.e. 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), representing
2.59 per cent of the number of Shares in issue as at the date of this report.
No consideration shall be payable by the participant on acceptance or vesting of any RSU Award granted under the
2020 RSU Scheme and there is no limit on the maximum entitlement of each participant under the Scheme.
The vesting of an RSU Award is conditional upon the participant remaining in employment with the Group at the time
of vesting of such RSU Award. The period between the date of the acceptance and the date of the vesting of the RSU
Awards shall not be shorter than six months and the usual vesting period for the RSU Awards granted under the 2020
RSU Scheme is three years.
129
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Consistent with prior years, the vesting of performance-vesting RSUs is contingent on service requirements and the
extent of achievement of the 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 2022, the Company granted 12,535,139 RSUs under the 2020 RSU Scheme.
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.
During the year ended 31 December 2022, 5,178,037 RSUs vested under the 2010 RSU Scheme, while 734,802
vested under the 2020 RSU Scheme. Having assessed the pre-determined performance targets for the VONB,
EV Equity and relative TSR measures over the three-year period from 1 January 2019 to 31 December 2021, the
Remuneration Committee approved the vesting of the RSU Awards granted in 2019 at 111.22 per cent of target.
Since the 2020 RSU Scheme Adoption Date and up to 31 December 2022, a cumulative total of 11,955,041 RSUs
vested under the 2010 RSU Scheme and the 2020 RSU Scheme, underlying Shares of which represent 0.099
per cent of the number of Shares in issue as at the RSU Reference Date. During the same period, no new Shares
have been issued upon vesting of the RSU Awards under the 2010 RSU Scheme and the 2020 RSU Scheme. As at
31 December 2022, there were a total of 29,603,948 RSUs outstanding under the 2010 RSU Scheme and the 2020
RSU Scheme, representing 0.251 per cent of the number of Shares in issue as at 31 December 2022.
130
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE n/a
n/a
n/a
Weighted
average
closing price
of Shares
immediately
before the
dates on
which RSUs
vested
(HK$)
RSU Movements During the Year Ended 31 December 2022
The table below summarises the movements in RSUs under the 2010 RSU Scheme and the 2020 RSU Scheme
during the year ended 31 December 2022.
Date of
grant
(day /
month /
year) (1)
Date of
vesting
(day /
month /
year) (2)
RSUs
outstanding
as at
1 January
2022
RSUs
granted
during the
year ended
31 December
2022
RSUs
vested
during the
year ended
31 December
2022
RSUs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2022
RSUs
outstanding
as at
31 December
2022 (18)
Weighted
average
closing price
of Shares
immediately
before the
dates on
which RSUs
vested
(HK$)
Group Chief Executive
and President
Mr. LEE Yuan Siong
2010 RSU Scheme
13/3/2020
25/3/2020
2020 RSU Scheme
24/3/2021
17/3/2022
See Note (3)
1,468,714
– (315,561)
–
1,153,153
88.00
25/3/2023 (4)
420,426
24/3/2024 (4)
429,546
–
–
–
–
420,426
–
–
429,546
17/3/2025 (5)
–
586,664
–
–
586,664
All eligible employees
and participants
Five highest-paid
individuals
Other eligible
employees and
participants(6)
Date of
grant
(day /
month /
year) (1)
Date of
vesting
(day /
month /
year) (2)
RSUs
outstanding
as at
1 January
2022
RSUs
granted
during the
year ended
31 December
2022
RSUs
vested
during the
year ended
31 December
2022
RSUs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2022
RSUs
outstanding
as at
31 December
2022 (18)
2010 RSU Scheme
27/3/2019
27/3/2022 (4)
347,076
–
(193,010)
(154,066)
30/12/2019
30/12/2022 (7)
395,826
–
(395,826)
See Note (3)
1,468,714
–
(315,561)
–
–
80.20
81.35
1,153,153
88.00
–
–
25/3/2023 (4)
781,828
–
(59,983)
(59,983)
661,862
77.60
24/3/2022 (8)
36,203
–
(36,203)
–
–
83.25
24/3/2024 (4)
820,034
–
(70,504)
(70,504)
679,026
77.60
See note (9)
–
141,441
(47,147)
–
94,294
73.50
17/3/2025 (5)
–
2,086,592
(91,998)
(91,998)
1,902,596
77.60
17/3/2025 (10)
–
33,355
(11,464)
–
21,891
77.60
27/3/2022 (4)
7,503,402
–
(4,101,659)
(3,401,743)
1/5/2022 (4)
43,662
–
(24,282)
(19,380)
30/12/2019
30/12/2022 (7)
49,482
–
(49,482)
–
–
–
–
80.20
77.75
85.10
25/3/2023 (4)
8,806,127
–
(38,234)
(603,778)
8,164,115
75.03
10/6/2023 (4)
31,142
–
–
–
31,142
n/a
24/3/2022 (8)
426,023
–
(420,546)
(5,477)
–
83.24
24/3/2024 (4)
7,393,861
–
(14,566)
(550,876)
6,828,419
73.47
24/3/2024 (11)
24/3/2022 (8)
2/6/2024 (4)
2/6/2024 (12)
77,480
–
–
40,223
–
(40,223)
82,624
–
4,484
–
–
–
(15,014)
–
–
–
77,480
n/a
–
83.25
67,610
4,484
51,994
58,773
n/a
n/a
n/a
n/a
–
–
–
–
30/9/2021
30/9/2024 (4)
51,994
–
17/12/2021
17/12/2024 (13)
58,773
–
13/3/2020
25/3/2020
2020 RSU Scheme
24/3/2021
24/3/2021
14/3/2022
17/3/2022
17/3/2022
2010 RSU Scheme
27/3/2019
15/5/2019
25/3/2020
10/6/2020
2020 RSU Scheme
24/3/2021
24/3/2021
24/3/2021
30/3/2021
2/6/2021
2/6/2021
17/3/2022
17/3/2022
28/3/2022
19/5/2022
19/5/2022
15/9/2022
2010 RSU Scheme
2020 RSU Scheme
Total
17/3/2025 (5)
17/3/2025 (10)
17/3/2025 (14)
17/3/2025 (15)
19/5/2025 (16)
15/9/2025 (17)
–
–
–
–
–
–
10,135,148
(2,151)
(464,491)
9,668,506
70.14
60,449
12,030
9,002
20,374
36,748
–
–
–
–
–
–
–
–
–
–
60,449
12,030
9,002
20,374
36,748
n/a
n/a
n/a
n/a
n/a
19,427,259
–
(5,178,037)
(4,238,950)
10,010,272
80.73
8,991,699
12,535,139
(734,802)
(1,198,360)
19,593,676
81.05
28,418,958
12,535,139
(5,912,839)
(5,437,310)
29,603,948
80.77
Grand Total
131
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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 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. The measurement dates 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.
The measurement dates for grants made during the year ended 31 December 2022 were determined to be 14 March 2022, 17 March 2022, 28 March
2022, 19 May 2022 and 15 September 2022. These measurement dates were determined in accordance with IFRS 2.
(2) The date of vesting is subject to applicable dealing restrictions.
(3) 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 three tranches of 315,561 RSUs each had
vested on 13 September 2020, 21 February 2021 and 21 February 2022 respectively. Subject to continued employment, the remaining tranches of
315,561 RSUs each are scheduled to vest on 21 February 2023 and 21 February 2024 respectively and 522,031 RSUs are scheduled to vest on
21 February 2025.
(4) The vesting of these RSUs is subject to service requirements and the achievement of performance measures shown on page 130 of this Annual Report.
(5) The closing price of the Shares immediately before the date on which RSUs were granted was HK$75.00. The fair value of the RSUs at the date of grant
was determined to be HK$64.11. The vesting of these RSUs is subject to service requirements and the achievement of performance measures shown
on page 130 of this Annual Report.
(6) Includes the RSUs of the retired Group Chief Executive and President, Mr. Ng Keng Hooi, that were outstanding as at 1 January 2022.
(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 vested on 30 December 2022.
(8) The vesting of these RSUs is service-based only (i.e., there are no further performance conditions attached except for continued employment). All
RSUs vested on 24 March 2022.
(9) The closing price of the Shares immediately before the date on which RSUs were granted was HK$77.25. The vesting of these RSUs is service-based
only (i.e., there are no further performance conditions attached except for continued employment). The first traches of 47,147 RSUs had vested on 14
September 2022 (fair value was determined to be HK$76.89). Subject to continued employment, the remaining two tranches of 47,147 RSUs each are
scheduled to vest on 14 March 2023 (fair value was determined to be HK$76.24) and 14 March 2024 (fair value was determined to be HK$74.96)
respectively.
(10) The closing price of the Shares immediately before the date on which RSUs were granted was HK$75.00. The fair value of the RSUs at the date of grant
was determined to be HK$75.88. 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 March 2025.
(11) 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.
(12) 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.
(13) 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.
(14) The closing price of the Shares immediately before the date on which RSUs were granted was HK$80.20. The fair value of the RSUs at the date of grant
was determined to be HK$63.35. The vesting of these RSUs is subject to service requirements and the achievement of performance measures shown
on page 130 of this Annual Report.
(15) The closing price of the Shares immediately before the date on which RSUs were granted was HK$78.10. The fair value of the RSUs at the date of grant
was determined to be HK$66.29. The vesting of these RSUs is subject to service requirements and the achievement of performance measures shown
on page 130 of this Annual Report.
(16) The closing price of the Shares immediately before the date on which RSUs were granted was HK$78.10. The fair value of the RSUs at the date of grant
was determined to be HK$66.15. The vesting of these RSUs is subject to service requirements and the achievement of performance measures shown
on page 130 of this Annual Report.
(17) The closing price of the Shares immediately before the date on which RSUs were granted was HK$71.50. The fair value of the RSUs at the date of grant
was determined to be HK$55.80. The vesting of these RSUs is subject to service requirements and the achievement of performance measures shown
on page 130 of this Annual Report.
(18) Includes RSUs outstanding as at 31 December 2022 that, in accordance with the 2010 RSU Scheme rules and 2020 RSU Scheme rules, will lapse on
or before the respective vesting date. No consideration shall be payable by the participant on acceptance of any RSU Award granted.
132
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE SHARE OPTION SCHEMES
The 2020 SO Scheme was adopted on 29 May 2020 and has a remaining life of approximately seven years. The
purpose of the SO Scheme is to align the participants’ interests with those of the Group through ownership of Shares
and/or the increase in value of Shares. Under the 2020 SO Scheme, the Company may grant SOs to employees,
directors (excluding independent non-executive directors) or officers of any member of the Group.
The aggregate number of Shares available for issue 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 the adoption date of the 2020 SO
Scheme, being 302,264,978 shares (representing 2.59 per cent of the number of Shares in issue as at the date of this
report). The maximum number of Shares underlying the SOs that may be granted to any participant in any 12-month
period is 0.25 per cent (or 0.1 per cent for a substantial shareholder of the Company) of the number of Shares in
issue as at the date of the relevant grant. No SOs have been granted to substantial shareholders or in excess of the
individual limit pursuant to the SO Schemes since their adoption.
No consideration is payable by the participant on acceptance of any SO granted under the 2020 SO Scheme. Each
SO entitles the participant to subscribe for one ordinary share of the Company. 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.
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. The SOs are generally exercisable three years after the date of grant and remain exercisable
for another seven years.
During the year ended 31 December 2022, the Company granted 2,519,456 SOs under the 2020 SO Scheme and
1,895,760 new Shares were issued upon exercise of the SOs granted under the 2010 SO Scheme. As at 31 December
2022, there are a total of 23,973,304 SOs outstanding under the 2010 SO Scheme and the 2020 SO Scheme,
representing 0.023 per cent of the number of Shares in issue as at 31 December 2022.
Since the 2020 SO Scheme Adoption Date and up to 31 December 2022, a cumulative total of 7,107,674 new Shares
were issued under the 2010 SO Scheme, representing approximately 0.059 per cent of the number of 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 are available for issue underlying the SOs granted
under the 2020 SO Scheme and 2010 SO Scheme is 295,033,671 Shares, representing approximately 2.53 per cent
of the number of Shares in issue. There are 273,693,293 and 271,184,000 SOs available for grant under the scheme
mandate of the 2020 SO Scheme as at 1 January 2022 and 31 December 2022, respectively.
133
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION SO Movements During the Year Ended 31 December 2022
The table below summarises the movements in SOs under the 2010 SO Scheme and the 2020 SO Scheme during the
year ended 31 December 2022.
Group Chief Executive
and President
and other eligible
employees and
participants
Date of
grant
(day /
month /
year) (2)
Period during
which SOs
are exercisable
(day / month / year)
SOs
outstanding
as at
1 January
2022
SOs
granted
during the
year ended
31 December
2022
SOs
vested
during the
year ended
31 December
2022
Group Chief
Executive and
President
Mr. LEE Yuan Siong
Other eligible
employees and
participants (1)
2010 SO Scheme
25/3/2020
25/3/2023 - 24/3/2030 (3)
1,197,133
2020 SO Scheme
24/3/2021
24/3/2024 - 23/3/2031 (4)
464,526
–
–
17/3/2022
17/3/2025 - 16/3/2032 (5)
–
660,259
2010 SO Scheme
15/3/2012
15/3/2015 - 14/3/2022 (6)
11/3/2013
11/3/2016 - 10/3/2023 (7)
5/3/2014
5/3/2017 - 4/3/2024 (8)
237,858
515,473
808,536
12/3/2015
12/3/2018 - 11/3/2025 (9)
1,499,612
9/3/2016
9/3/2019 - 8/3/2026 (10)
1,820,181
10/3/2017
10/3/2020 - 9/3/2027 (11)
3,604,194
31/7/2017
1/6/2020 - 30/7/2027 (12)
830,436
15/3/2018
15/3/2021 - 14/3/2028 (13)
3,771,706
27/3/2019
27/3/2022 - 26/3/2029 (14)
3,347,437
15/5/2019
1/5/2022 - 14/5/2029 (15)
82,221
25/3/2020
25/3/2023 - 24/3/2030 (3)
3,805,191
2020 SO Scheme
24/3/2021
24/3/2024 - 23/3/2031 (4)
1,375,267
–
–
–
–
–
–
–
–
–
–
–
–
17/3/2022
17/3/2025 - 16/3/2032 (5)
–
1,859,197
–
–
–
–
–
–
–
–
–
–
–
3,300,258
82,221
341,592
152,491
207,077
SOs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2022
SOs
exercised
during the
year ended
31 December
2022
SOs
outstanding
as at
31 December
2022 (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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(10,163)
–
–
–
–
(237,858)
(478,207)
(459,621)
(413,243)
(182,234)
–
–
(45,213)
(47,179)
–
(32,205)
–
–
97.33
79.85
28.40
34.35
37.56
47.73
41.90
50.30
61.55
67.15
76.38
78.70
68.10
97.33
79.85
464,526
660,259
–
37,266
348,915
1,086,369
1,637,947
3,604,194
830,436
3,726,493
3,300,258
82,221
3,772,986
1,365,104
1,859,197
(1,895,760)
19,624,218
n/a
n/a
78.86
67.80
84.33
86.23
83.66
n/a
n/a
79.75
79.75
n/a
79.75
n/a
n/a
79.52
n/a
79.52
Grand Total
2010 SO Scheme
2020 SO Scheme
Total
21,519,978
– 3,724,071
1,839,793
2,519,456 359,568 (10,163)
–
4,349,086
23,359,771 2,519,456 4,083,639 (10,163)
(1,895,760)
23,973,304
Notes:
(1) Includes 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
2022.
(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 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 grant made during the year ended 31 December 2020 was
determined to be 25 March 2020. The measurement date for grants made during the year ended 31 December 2021 was determined to be 24 March
2021. The measurement date for grants made during the year ended 31 December 2022 was determined to be 17 March 2022. 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. Subject to continued employment, all SOs will vest on 24 March 2024.
(5) The closing price of the Shares immediately before the date on which SOs were granted was HK$75.00. The fair value of the SOs at the date of grant
was determined to be HK$21.00. The vesting of SOs is service-based only. Subject to continued employment, all SOs will vest on 17 March 2025.
(6) The vesting of SOs is service-based only. All SOs vested on 15 March 2015.
(7) The vesting of SOs is service-based only. All SOs vested on 11 March 2016.
(8) The vesting of SOs is service-based only. All SOs vested on 5 March 2017.
(9) The vesting of SOs is service-based only. All SOs vested on 12 March 2018.
(10) The vesting of SOs is service-based only. All SOs vested on 9 March 2019.
134
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE
(11) The vesting of SOs is service-based only. All SOs vested on 10 March 2020.
(12) The vesting of SOs is service-based only. All SOs vested on 1 June 2020.
(13) The vesting of SOs is service-based only. All SOs vested on 15 March 2021.
(14) The vesting of SOs is service-based only. All SOs vested on 27 March 2022.
(15) The vesting of SOs is service-based only. All SOs vested on 1 May 2022.
(16) Includes SOs outstanding as at 31 December 2022 that, in accordance with the 2010 SO Scheme rules and 2020 SO Scheme rules, will lapse on or
before the end of the respective periods during which the SOs are exercisable.
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 to strengthen employees’ sense of belonging and encourage retention. Under the
ESPPs, the Company may grant restricted stock purchase units (RSPUs) to the participants (being permanent
employees of the Group) to match their Share purchases.
The 2011 ESPP, adopted by the Company on 25 July 2011 with a term of 10 years from the date of adoption, was
terminated with effect from 31 October 2020. 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.
The 2020 ESPP, with substantially the same terms as the 2011 ESPP, was adopted by the Company on 1 August
2020 (2020 ESPP Adoption Date). It is effective for a period of 10 years from the 2020 ESPP Adoption Date and has
a remaining life of approximately seven years.
Under the 2020 ESPP, eligible employees of the Group may elect to purchase Shares and, through the grant of
matching RSPUs, receive one matching Share for every two Shares purchased that are held until the vesting of
the matching RSPUs, which is usually three years from the first day of Share purchase in a plan year. Each eligible
employee’s participation level is capped at the lower of 10 per cent of the monthly base salary or HK$12,500 (or local
currency equivalent) per calendar month. The matching Shares can either be awarded through the issuance of new
Shares or the purchases of existing Shares on market by the plan trustee.
The Company shall not issue any new Shares for the purpose of the vesting of the RSPUs if this would result in the
aggregate number of Shares issued pursuant to the ESPPs during the 10-year period commencing on the 2020
ESPP Adoption Date, exceeding 2.5 per cent of the number of Shares in issue as at 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), representing 2.59 per cent of the number of Shares in issue as at the date of this report). As at
31 December 2022, there were a total of 3,279,679 RSPUs outstanding under the 2011 ESPP and the 2020 ESPP,
representing 0.028 per cent of the number of Shares in issue as at 31 December 2022. Since the 2020 ESPP Adoption
Date, no new Shares were issued for RSPUs.
No performance targets and clawback provisions are attached to RSPUs under the ESPPs as the primary
purpose of the ESPPs is to strengthen employees’ sense of belonging and engagement by holding an equity stake
in the Company.
135
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION During the year ended 31 December 2022, no matching RSPUs were granted, 1,113,355 matching RSPUs vested
and no new Shares were issued under the 2011 ESPP. During the same period, 1,912,225 matching RSPUs were
granted, 44,338 matching RSPUs vested and no new Shares were issued under the 2020 ESPP. Since the 2020 ESPP
Adoption Date and up to 31 December 2022, a cumulative total of 3,298,512 matching RSPUs vested under the
ESPPs and no new Shares were issued under either the 2011 ESPP or the 2020 ESPP.
The table below summarises the movements in RSPUs under the 2011 ESPP and the 2020 ESPP during the year
ended 31 December 2022.
RSPUs
outstanding
as at
1 January
2022
459
936
RSPUs
granted
during the
year ended
31 December
2022 (3)
965
RSPUs
vested
during the
year ended
31 December
2022
(459)
ESPP
2011 ESPP (1)
2020 ESPP (2)
RSPUs
outstanding
as at
1 January
2022
2,771
3,746
1,218,536
1,691,589
1,221,307
1,695,335
2,916,642
RSPUs
granted
during the
year ended
31 December
2022 (3)
–
3,203
–
1,909,022
RSPUs
vested
during the
year ended
31 December
2022
(2,771)
(1,245)
(1,110,584)
(43,093)
–
(1,113,355)
1,912,225
1,912,225
(44,338)
(1,157,693)
ESPP
2011 ESPP (1)
2020 ESPP (2)
2011 ESPP (1)
2020 ESPP (2)
2011 ESPP
2020 ESPP
Total
RSPUs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2022
–
–
RSPUs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2022
–
–
(107,952)
(283,543)
(107,952)
(283,543)
(391,495)
Weighted
average
closing price
of Shares
immediately
before the
dates on
which RSPUs
vested
(HK$)
75.70
–
Weighted
average
closing price
of Shares
immediately
before the
dates on
which RSPUs
vested
(HK$)
76.23
77.60
75.73
76.51
75.73
76.54
75.77
RSPUs
outstanding
as at
31 December
2022 (4)
–
1,901
RSPUs
outstanding
as at
31 December
2022 (4)
–
5,704
–
3,273,975
–
3,279,679
3,279,679
Group Chief Executive
and President
Mr. LEE Yuan Siong
Five highest-paid individuals
Other eligible employees
and participants
Grand Total
Notes:
(1) The 2011 ESPP includes 2019 ESPP plan year with monthly purchase on every 15th of the month (or, if such day is not a business day, the next
succeeding business day) from November 2019 to October 2020, and date of vesting on 15 November 2022.
(2) The 2020 ESPP includes a) 2020 ESPP plan year with monthly purchase on every 15th of the month (or, if such day is not a business day, the next
succeeding business day) from November 2020 to October 2021, and date of vesting on 16 November 2023; b) 2021 ESPP plan year with monthly
purchase on every 15th of the month (or, if such day is not a business day, the next succeeding business day) from November 2021 to October 2022,
and date of vesting on 15 November 2024; c) 2022 ESPP plan year with monthly purchase on every 15th of the month (or, if such day is not a business
day, the next succeeding business day) from November 2022 to October 2023, and date of vesting on 15 November 2025.
(3) RSPUs were purchased and granted every 15th of the month, (or, if such day is not a business day, the next succeeding business day). For details of
closing price of Shares immediately before the dates on which RSPUs were granted, please refer to share price on www.aia.com. For the fair value, they
were determined to be HK$68.88 on 17 January 2022, HK$68.08 on 15 February 2022, HK$68.26 on 15 March 2022, HK$68.12 on 19 April 2022,
HK$68.59 on 16 May 2022, HK$68.23 on 15 June 2022, HK$66.41 on 15 July 2022, HK$64.10 on 15 August 2022, HK$62.33 on 15 September 2022,
HK$73.51 on 17 October 2022, HK$77.05 on 15 November 2022 and HK$78.86 on 15 December 2022.
(4) No consideration is payable by participants on the grant of RSPUs.
For further information on the ESPPs, please refer to note 39 to the consolidated financial statements.
The number of Shares that may be issued in respect of share options and awards granted under all schemes during
the year ended 31 December 2022 divided by the weighted average number of Shares in issue for the year ended 31
December 2022 is 0.0298 per cent.
136
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE
DIRECTORS AND KEY MANAGEMENT PERSONNEL EMOLUMENTS
KEY MANAGEMENT PERSONNEL
The total remuneration cost charged to the consolidated income statement for the Key Management Personnel
during year ended 31 December 2022 was US$46,690,944.
Details of remuneration provided during the year ended 31 December 2022 are included in note 40 to the consolidated
financial statements.
EXECUTIVE DIRECTOR
Mr. Lee Yuan Siong received remuneration exclusively for his role as Group Chief Executive and President and received
no separate fees for his role as a Board Director or for acting as a director of any subsidiary companies.
The table below provides details of annualised target level of remuneration, excluding benefits and allowances, for
the Group Chief Executive and President.
US$ thousands
Base Salary (2)
Target short-term incentive
Target long-term incentive
Total Annualised Target Pay Opportunity
Annualised Target Pay Opportunity (1)
2022
Mr. Lee Yuan Siong
2021
Mr. Lee Yuan Siong
1,140
2,350
4,400
7,890
1,111
2,200
3,960
7,271
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 2021 and 2022.
(2) Mr. Lee Yuan Siong’s base salary represents the annualised amount as of 1 March (being the annual review salary effective date) for each of the years
2021 and 2022. 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 2022 in
relation to the Group Chief Executive and President are included in note 40 to the consolidated financial statements.
During the year ended 31 December 2022, the Remuneration Committee reviewed and approved the contractual
arrangement for the Group Chief Executive and President, Mr. Lee Yuan Siong. Starting from the first quarter of 2023,
Mr. Lee will be employed under an open-ended contract.
NON-EXECUTIVE DIRECTORS
Remuneration for the Non-executive Directors was paid during the year ended 31 December 2022 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
2022 are included in note 40 to the consolidated financial statements.
Board Chairman
The Board Chairman Basic Fees, inclusive of Board Membership fee, was US$750,000 per annum for the year ended
31 December 2022.
137
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Non-executive Directors
Board Membership fees for the Non-executive Directors were US$220,000 per annum effective 1 January 2022,
which is similar to market rates provided by our global insurance peers.
Additional annual fees for Committee Membership and Chair positions are also provided to the Non-executive
Directors as follows:
Audit Committee
Nomination Committee
Remuneration Committee
Risk Committee
Chair
US$75,000
US$30,000
US$65,000
US$65,000
Member
US$50,000
US$20,000
US$40,000
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$20,000.
ADDITIONAL DISCLOSURES
AGENCY SHARE PURCHASE PLANS
The 2012 ASPP and the 2021 ASPP (together, ASPPs) are designed to facilitate and encourage long-term AIA share
ownership by selected agency leaders and agents of the Group. Under the ASPPs, the Company may grant restricted
stock subscription units (RSSUs) to the participants to match their Share purchases.
The 2012 ASPP, adopted by the Company on 23 February 2012, was terminated with effect from 31 March 2021.
Upon the termination of the 2012 ASPP, no further RSSUs can be granted thereunder. However, the 2012 ASPP shall
remain in full force and effect for all RSSUs granted prior to its termination, and the vesting of such RSSUs shall be
subject to the terms on which they were granted under the 2012 ASPP.
The 2021 ASPP, with substantially the same terms as the 2012 ASPP, was adopted by the Company on 1 February
2021 (2021 ASPP Adoption Date). It is effective for a period of 10 years from the 2021 ASPP Adoption Date and has
a remaining life of approximately eight years.
Under the 2021 ASPP, the participants may elect to purchase the Shares and, through the grant of matching RSSUs,
receive one matching Share for every two Shares purchased that are held until the vesting of the matching RSSUs,
which usually takes place three years from the first day of Share purchase in a plan year. Each eligible agent’s
participation level is capped at HK$12,500 (or local currency equivalent) per calendar month. The participants have
to pay, no later than 15 business days after the vesting date, a subscription price of US$1.00 each for all the vested
matching RSSUs, following which the Company will issue new Shares to Computershare Hong Kong Trustees Limited
(being the plan trustee) to be allocated to the participants.
138
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE The Company shall not issue any new Shares for the purpose of the vesting of the RSSUs if this would result in
the aggregate number of Shares issued pursuant to the ASPPs during the 10-year period commencing on the
2021 ASPP Adoption Date, exceeds 2.5 per cent of the number of Shares as at 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), representing 2.59 per cent of the number of Shares in issue as at the date of this report).
298,271,404 and 297,341,560 RSSUs are available for grant under the mandate of the 2021 ASPP as at 1 January
2022 and 31 December 2022, respectively. As at 31 December 2022, there were a total of 2,611,300 RSSUs
outstanding under the 2012 ASPP and the 2021 ASPP, representing 0.022 per cent of the number of Shares in issue
as at 31 December 2022.
No performance targets and clawback provisions are attached to RSSUs under the ASPPs as the primary purpose of
the ASPP is to strengthen the agents sense of belonging and engagement by holding an equity stake in the Company.
During the year ended 31 December 2022, no matching RSSUs were granted, 1,119,763 matching RSSUs vested and
1,119,763 new Shares were issued under the 2012 ASPP. During the same period, 1,030,885 matching RSSUs were
granted, no matching RSSUs vested and no new Shares were issued under the 2021 ASPP.
Since the 2021 ASPP Adoption Date and up to 31 December 2022, a cumulative total of 2,312,118 matching RSSUs
vested under the ASPPs and 2,312,118 new Shares were issued under either the 2012 ASPP or the 2021 ASPP.
The table below summarises the movements in RSSUs under 2012 ASPP and 2021 ASPP during the year ended
31 December 2022 for the eligible participants.
RSSUs
outstanding
as at
1 January
2022
2,177,338
623,881
2,801,219
RSSUs
granted
during the
year ended
31 December
2022 (3)
RSSUs
vested
during the
year ended
31 December
2022
–
(1,119,763)
1,030,885
1,030,885
–
(1,119,763)
ASPP
2012 ASPP (1)
2021 ASPP (2)
Total
RSSUs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2022
(52,337)
(48,705)
(101,042)
RSSUs
outstanding
as at
31 December
2022
1,005,238
1,606,062
2,611,300
Weighted
average
closing price
of Shares
immediately
before the
dates on
which RSSUs
vested
(HK$)
77.90
n/a
77.90
Eligible participants
Notes:
(1) The 2012 ASPP includes a) 2019 ASPP plan year with monthly purchase on every 27th of the month, (or, if such day is not a business day, the next
succeeding business day) from April 2019 to March 2020, and date of vesting on 29 April 2022; b) 2020 ASPP plan year with monthly purchase on
every 27th of the month (or, if such day is not a business day, the next succeeding business day) from April 2020 to March 2021, and date of vesting
on 27 April 2023.
(2) The 2021 ASPP includes a) 2021 ASPP plan year with monthly purchase on every 27th of the month (or, if such day is not a business day, the next
succeeding business day) from May 2021 to April 2022, and date of vesting on 27 May 2024; b) 2022 ASPP plan year with monthly purchase on
every 27th of the month (or, if such day is not a business day, the next succeeding business day) from May 2022 to April 2023, and date of vesting on
27 May 2025.
(3) The allocation date of the RSSUs is on every 27th of the month, (or, if such day is not a business day, the next succeeding business day). For details
of closing price of Shares immediately before the dates on which RSSUs were allocated to the participants, please refer to the share price on
www.aia.com. The fair value of the RSSUs granted during the year was measured to be HK$58.32 on 28 March 2022, being the last date of the
enrolment period of the 2022 ASPP, under IFRS 2 Share-based Payment. Further details of the methodology and assumptions used to calculate the
fair value of the RSSUs granted under IFRS 2 Share-based Payment is disclosed in note 39 to the consolidated financial statements.
(4) The subscription price of RSSUs is US$1.00 per share.
For further information on the ASPPs, please refer to note 39 to the consolidated financial statements.
139
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 25. Cash and cash equivalents
26. Insurance contract liabilities
27. Investment contract liabilities
28. Effect of changes in assumptions and estimates
29. Borrowings
30. Obligations under repurchase agreements
31. Offsetting of financial assets and
financial liabilities
32. Provisions
33. Other liabilities
34. Share capital and reserves
35. Non-controlling interests
36. Group capital structure
37. Risk management
38. Employee benefits
39. Share-based compensation
40. Remuneration of directors and
key management personnel
41. Related party transactions
42. Commitments and contingencies
43. Subsidiaries
44. Events after the reporting period
45. Disposal group held for sale
46. Statement of financial position of the Company
47. Statement of changes in equity of the Company
264 Independent Auditor’s Report on
the Supplementary Embedded
Value Information
268 Supplementary Embedded
Value Information
FINANCIAL STATEMENTS
141 Independent Auditor’s Report
149 Consolidated Income Statement
150 Consolidated Statement of
Comprehensive Income
151 Consolidated Statement of
Financial Position
153 Consolidated Statement of
Changes in Equity
155 Consolidated Statement of
Cash Flows
157 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. Premiums and fee income
6. Operating profit after tax
7. Total weighted premium income and
annualised new premiums
8. Segment information
9. Revenue
10. Expenses
11. Income tax
12. Earnings per share
13. Dividends
14. Intangible assets
15. Investments in associates and joint ventures
16. Property, plant and equipment
17. Investment property
18. Reinsurance assets
19. Deferred acquisition and origination costs
20. Financial investments
21. Derivative financial instruments
22. Fair value measurement
23. Other assets
24. Impairment of financial assets
140
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 149 to 263, comprise:
•
•
•
•
•
•
the consolidated statement of financial position as at 31 December 2022;
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, including material accounting policy
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 2022, 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.
141
ANNUAL REPORT 2022FINANCIAL STATEMENTSINDEPENDENT AUDITOR’S REPORTOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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 26, Note 28
and Note 2.1(c) for the result of the combined effect of the adoption of IFRS 9 and IFRS 17 as
at 1 January 2022.
As at 31 December 2022, the Group has
insurance contract liabilities of US$220,713
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
impact of material
reasonableness and
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:
o Obtaining an understanding of, and
testing, the controls in place to determine
the assumptions;
o Examining
the approach used by
management to derive the assumptions
by applying our industry knowledge and
experience;
involves
liabilities
The Director’s valuation of these insurance
contract
significant
judgement about uncertain future outcomes,
including mortality, morbidity, persistency,
expense, investment return, valuation interest
rates and provision for adverse deviation, as
well as complex valuation methodologies.
Therefore, these liabilities are subject to
significant estimation uncertainty and the
associated
is considered
significant.
inherent
risk
policies with
The liabilities for traditional participating life
assurance
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.
142
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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).
o 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.
143
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONINDEPENDENT AUDITOR’S REPORT Key Audit Matters (continued)
Key audit matter
How our audit addressed the key audit matter
a) Valuation of insurance contract liabilities (continued)
We performed the following procedures over the
Group’s disclosures regarding the effect of the
adoption of IFRS 17:
• Obtained an understanding of the new
accounting policies including management’s
judgements in determining the approach for
transition, the level of aggregation of groups
of insurance contracts and the measurement
of FCF to evaluate whether management
had developed appropriate policies;
• Obtained an understanding of the valuation
methodologies
and models
selected
deployed by management for transition and
industry knowledge and
applied our
experience
the
methodologies and models are appropriate;
to evaluate whether
• Tested, on a sample basis,
that
is
the models
the
implementation of
in
accordance with model documentation by
obtaining an understanding of and testing
the key controls in place over the set up of
models including the Economic Scenario
Generation (“ESG”) process and validation
of models; and
involved
judgements
• Evaluated and challenged, on a sample
basis, the
in the
selection of assumptions in relation to the
measurement of FCF and the application of
the fair value approach at transition with
reference to past experience and market
observable data (as applicable).
Based upon the work performed, we found the
methodologies and assumptions used by
management to prepare the relevant disclosure
to be appropriate.
Furthermore, the Group disclosed that the
combined effect of the adoption of IFRS 9 and
IFRS 17 as at 1 January 2022 (the transition
date) would reduce the shareholders’ equity
and shareholders’ allocated equity measured
under IFRS 9 and IFRS 17 of the Group as
disclosed in Note 2.1(c).
in
IFRS 17 is a complex accounting standard
which requires considerable judgements and
interpretations
implementation of
its
transition requirements. This includes the
approach to transition setting of actuarial
assumptions and selection of valuation
methodologies, and the models deployed in
the measurement of fulfilment cash flows
(“FCF”). Upon transition, the Group applied
the fair value approach for certain groups of
insurance contracts. This involves additional
the
judgements
determination of the fair value of the insurance
contract liabilities for these groups.
estimates
and
in
Given the complexity of the application of
IFRS 17 and the significance of the information
disclosed, the quantitative disclosures are
subject to significant estimation uncertainty
and the associated inherent risk is considered
significant.
As part of our audit, we focused on the
significant judgements and estimates applied
on the adoption of IFRS 17.
144
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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 10 and Note 19.
As at 31 December 2022, the Group has
reported DAC of US$29,743 million.
We tested how management made the estimate
and performed audit procedures including the
following:
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.
policies
involves
The amortisation of DAC for universal life and
greater
unit-linked
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 revised regularly
and significant judgement is exercised in
making 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
As part of our audit we have focused on DAC
life and unit-linked
related to universal
policies where
are
reassessed at each reporting date.
assumptions
the
and
policy
accounting
• Reviewed and challenged the basis of
amortisation of DAC in the context of the
Group’s
the
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.
145
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONINDEPENDENT AUDITOR’S REPORT 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 2022 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 10 March 2023.
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.
146
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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.
147
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONINDEPENDENT AUDITOR’S REPORT 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
10 March 2023
148
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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$)
Basic
Diluted
Notes
Year ended
31 December
2022
Year ended
31 December
2021
5
9
9
36,519
(2,607)
33,912
(15,156)
354
19,110
12,158
(2,194)
9,964
4,016
3,251
394
962
37,123
(2,679)
34,444
12,748
333
47,525
32,381
(2,326)
30,055
4,597
3,031
357
1,006
10
18,587
39,046
523
(32)
491
(171)
320
282
38
0.02
0.02
8,479
(11)
8,468
(991)
7,477
7,427
50
0.62
0.61
11
12
12
149
ANNUAL REPORT 2022CONSOLIDATED INCOME STATEMENTFINANCIAL STATEMENTSOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION US$m
Net profit
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Fair value losses on available for sale financial assets
(net of tax of: 2022: US$1,775m; 2021: US$726m)(2)
Fair value losses/(gains) on available for sale financial assets transferred to profit or loss
upon disposal and impairment (net of tax of: 2022: US$(42)m; 2021: US$76m)(2)
Foreign currency translation adjustments
Cash flow hedges
Share of other comprehensive (expense)/income from associates and joint ventures
Subtotal
Items that will not be reclassified subsequently to profit or loss:
Revaluation gains on property held for own use
(net of tax of: 2022: US$(2)m; 2021: US$1m)
Effect of remeasurement of net liability of defined benefit schemes
(net of tax of: 2022: US$(6)m; 2021: US$(4)m)
Subtotal
Total other comprehensive expense
Total comprehensive expense
Total comprehensive expense attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Year ended
31 December
2022
Year ended
31 December
2021
320
7,477
(15,625)
(4,509)
725
(1,564)
(1)
(435)
(2,329)
(1,304)
(1)
43
(16,900)
(8,100)
36
25
61
43
25
68
(16,839)
(16,519)
(8,032)
(555)
(16,517)
(2)
(571)
16
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$29,630m (2021: US$7,755m) relates to the fair
value losses on available for sale financial assets and US$767m relates to the fair value losses (2021: US$2,405m relates to the fair value gains)
on available for sale financial assets transferred to profit or loss upon disposal and impairment during the year.
150
AIA GROUP LIMITEDCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFINANCIAL STATEMENTS
US$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 and exchangeable loan notes
Derivative financial instruments
Deferred tax assets
Current tax recoverable
Other assets
Cash and cash equivalents
Assets in disposal group held for sale
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
Liabilities in disposal group held for sale
Total liabilities
Notes
14
15
16
17
18, 45
19
20, 22, 45
21, 45
11, 45
23, 45
25, 45
45
26, 45
27, 45
29
30
21, 45
32
11, 45
33, 45
45
As at
31 December
2022
As at
31 December
2021
3,277
2,092
2,844
4,600
5,122
2,914
679
2,744
4,716
4,991
30,046
28,708
8,593
9,311
129,281
161,087
35,794
23,378
38,577
568
38,993
30,822
40,195
1,468
236,191
281,876
141
117
6,217
8,020
4,381
50
120
8,087
4,989
–
303,048
339,874
219,570
7,077
11,206
1,748
8,638
160
3,563
464
7,838
4,234
239,423
11,860
9,588
1,588
1,392
194
5,982
389
8,524
–
264,498
278,940
151
ANNUAL REPORT 2022CONSOLIDATED STATEMENT OF FINANCIAL POSITIONFINANCIAL STATEMENTSOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
US$m
EQUITY
Share capital
Employee share-based trusts
Other reserves
Retained earnings
Fair value reserve
Foreign currency translation reserve
Property revaluation reserve
Others
Amounts reflected in other comprehensive income
Total equity attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Total equity
Total liabilities and equity
Approved and authorised for issue by the Board of Directors on 10 March 2023.
Notes
As at
31 December
2022
As at
31 December
2021
34
34
34
34
34
34
35
14,171
(290)
(11,812)
44,437
(6,709)
(2,813)
1,107
5
(8,410)
38,096
454
38,550
303,048
14,160
(225)
(11,841)
49,984
8,407
(1,068)
1,069
(19)
8,389
60,467
467
60,934
339,874
Lee Yuan Siong
Director
Edmund Sze-Wing Tse
Director
152
AIA GROUP LIMITEDFINANCIAL STATEMENTS Note
Share
capital
Employee
share-
based
trusts
Other
reserves
Retained
earnings
Other comprehensive income
Fair
value
reserve
Foreign
currency
translation
reserve
Property
revaluation
reserve
Non-
controlling
interests
Others
Total
equity
US$m
Balance at 1 January 2022
14,160
(225)
(11,841)
49,984
8,407
(1,068)
1,069
(19)
467
60,934
Net profit
Fair value losses on available
for sale financial assets(2)
Fair value losses on available
for sale financial assets
transferred to profit or loss
upon disposal and
impairment(2)
Foreign currency translation
adjustments
Cash flow hedges
Share of other comprehensive
(expense)/income 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
Share buy-back
13
Shares issued under share
option scheme and agency
share purchase plan
Increase in non-controlling
interests
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
–
–
–
–
–
–
–
–
–
–
–
11
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13)
–
80
(103)
–
38
(38)
282
–
–
(15,605)
–
–
–
(1,544)
–
725
–
–
(236)
(201)
–
–
–
–
–
–
–
–
–
–
282
(15,116)
(1,745)
(2,259)
(3,570)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
36
–
38
–
–
–
–
–
–
–
–
Balance at 31 December 2022
14,171
(290)
(11,812)
44,437
(6,709)
(2,813)
1,107
–
–
–
–
(1)
–
–
25
24
–
–
–
–
–
–
–
–
5
38
320
(20)
(15,625)
–
725
(20)
(1,564)
–
–
–
–
(1)
(435)
36
25
(2)
(16,519)
(20)
(2,279)
–
–
13
(4)
–
–
–
(3,570)
11
–
(4)
80
(103)
–
454
38,550
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$29,630m relates to the fair value losses on available
for sale financial assets and US$767m relates to the fair value losses on available for sale financial assets transferred to profit or loss upon disposal
and impairment during the year ended 31 December 2022.
153
ANNUAL REPORT 2022CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFINANCIAL STATEMENTSOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Note
Share
capital
Employee
share-
based
trusts
Other
reserves
Retained
earnings
Other comprehensive income
Fair
value
reserve
Foreign
currency
translation
reserve
Property
revaluation
reserve
Non-
controlling
interests
Others
Total
equity
US$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 profit or loss
upon 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
13
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(106)
–
–
–
–
–
–
–
–
–
–
–
–
86
–
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$2,405m relates to the fair value gains on available for sale financial assets transferred to profit or loss upon
disposal during the year ended 31 December 2021.
154
AIA GROUP LIMITEDFINANCIAL STATEMENTS
US$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
Other non-cash operating items, including investment income and
the effect of exchange rate changes on certain operating items
Year ended
31 December
2022
Year ended
31 December
2021
Notes
491
8,468
14,024
(22,637)
30
(4,252)
186
17,953
(102)
(8,440)
(7,434)
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 an associate
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 contribution from non-controlling interests
Payments for lease liabilities(1)
Interest paid on medium-term notes and securities
Dividends paid during the year
Share buy-back
14
15
23
16, 17
16, 17
29
29
29
29
Purchase of shares held by employee share-based trusts
Shares issued under share option scheme and agency share purchase plan
Net cash used in financing activities
Net increase/(decrease) 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
Note:
(1) The total cash outflow for leases for the year ended 31 December 2022 was US$170m (2021: US$176m).
7,381
1,204
(47)
(680)
9,867
(386)
1
(11)
–
7
(157)
(271)
(817)
1,818
(165)
1,364
(1,364)
–
(168)
(330)
(2,279)
(3,570)
(103)
11
7,410
1,129
(47)
(831)
3,909
(640)
–
(27)
(1,865)
5
(238)
(16)
(2,781)
2,079
(1,002)
1,959
(1,959)
11
(170)
(303)
(2,175)
–
(106)
5
(4,786)
(1,661)
4,264
4,695
(193)
8,766
(533)
5,393
(165)
4,695
155
ANNUAL REPORT 2022CONSOLIDATED STATEMENT OF CASH FLOWSFINANCIAL STATEMENTSOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Cash and cash equivalents in the above consolidated statement of cash flows can be further analysed as follows:
US$m
Notes
As at
31 December
2022
As at
31 December
2021
Cash and cash equivalents in the consolidated statement of financial position
25, 45
Bank overdrafts
Cash and cash equivalents in the consolidated statement of cash flows
8,969
(203)
8,766
4,989
(294)
4,695
156
AIA GROUP LIMITEDFINANCIAL STATEMENTS
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 10 March 2023.
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 dollar (US$m) unless otherwise stated.
The accounting policies adopted are consistent with those of the previous financial year, except as described as follows.
The following relevant new amendments to standards have been adopted for the first time for the financial year ended
31 December 2022 and have no material impact to the Group:
• Amendments to IAS 16, Property, Plant and Equipment: Proceeds before Intended Use;
• Amendments to IAS 37, Onerous Contracts – Cost of Fulfilling a Contract;
• Amendment to IAS 41, Taxation in Fair Value Measurements;
• Amendments to IFRS 3, Reference to the Conceptual Framework; and
• Amendment to IFRS 16, Covid-19-Related Rent Concessions beyond 30 June 2021.
157
ANNUAL REPORT 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONFINANCIAL STATEMENTSOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.1 Basis of preparation and statement of compliance (continued)
With effect from 2023, the Group will apply IFRS 9 and IFRS 17. These standards will have a material impact on the
consolidated financial statements. Further information on these standards is given below:
(a) IFRS 9, Financial Instruments, addresses the classification, measurement and recognition of financial assets and
financial liabilities. IFRS 9 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
has elected to apply the temporary exemption described further below:
•
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. 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 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. The ECL
model requires an ongoing measurement of credit risk associated with a financial asset and therefore recognises
credit losses earlier than under IAS 39. The new impairment model applies to financial assets measured at amortised
cost and debt securities at FVOCI. 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.
• 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
adoption 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 adoption 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 adoption 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
adoption of IFRS 9.
158
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.1 Basis of preparation and statement of compliance (continued)
(a) IFRS 9, Financial Instruments, addresses the classification, measurement and recognition of financial assets and
financial liabilities. IFRS 9 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
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 2022
Change in fair value for the year ended
31 December 2022
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
159,861
6,082
165,943
(32,154)
(729)
(32,883)
Other financial assets
15,064(1) 58,407(2)
73,471
95
(19,560)
(19,465)
Total(3)
174,925
64,489
239,414
(32,059)
(20,289)
(52,348)
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)
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, interests in investment funds and exchangeable loan notes, 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$6,970m (2021: US$6,384m) 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 20.
159
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.1 Basis of preparation and statement of compliance (continued)
(a) IFRS 9, Financial Instruments, addresses the classification, measurement and recognition of financial assets and
financial liabilities. IFRS 9 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
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.
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) IFRS 17, Insurance Contracts (previously IFRS 4 Phase II) will replace the current IFRS 4, Insurance Contracts. IFRS 17
has been issued but is not effective for the financial year ended 31 December 2022 and has not been early adopted:
•
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.
(c) The impact of initial adoption of IFRS 9 and IFRS 17 includes the following:
• Changes in accounting policies resulting from the adoption of IFRS 9 shall be applied retrospectively, except that
the Group has elected to restate the comparatives and apply classification overlay in the comparative period
presented as permitted under IFRS 17. The classification overlay shall be applied to all financial assets that had
been derecognised before 1 January 2023 based on how those assets are expected to be classified on initial
adoption of IFRS 9. In applying the classification overlay to financial assets derecognised during the comparative
period, the Group has applied the impairment requirements of IFRS 9.
• Financial investments will be reclassified from current consolidated statement of financial position line items to the
corresponding IFRS 9 classifications, which in some cases may include changes in the measurement basis (for
example, from available for sale debt securities to debt securities at FVTPL).
• Changes in accounting policies resulting from the adoption of IFRS 17 shall apply full retrospective approach to the
extent practicable. The Group adopts both the modified retrospective approach and the fair value approach when it
is impracticable to use a full retrospective approach in determining transition amounts at the IFRS 17 transition
date.
•
Insurance contract balances will be remeasured under IFRS 17 principles, derecognising the related liabilities and
previously reported balances that would not have existed if IFRS 17 had always been applied. These included
among others, deferred acquisition costs for insurance contracts, insurance receivables and payables, policy loans
and its accrued interest revenue and provisions that are attributable to existing insurance contracts. Under IFRS 17,
these are included in the measurement of the insurance contracts.
• The combined effect on the Group’s consolidated statement of financial position on transition to IFRS 9 and IFRS 17
as at 1 January 2022 is to reduce shareholders’ equity and shareholders’ allocated equity measured under IFRS 9
and IFRS 17 by 7% to US$56b and 2% to US$51b respectively. The preparation of the 2022 comparatives under
IFRS 9 and IFRS 17 is progressing as planned. Determining the combined effect of the initial adoption of IFRS 9 and
IFRS 17 involves the use of judgements and assumptions. This includes the approach to transition setting of
actuarial assumptions and selection of valuation methodologies, and the models deployed in the measurement of
fulfilment cash flows, as well as the adoption of the fair value approach for certain groups of insurance contracts.
160
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.1 Basis of preparation and statement of compliance (continued)
The following relevant new amendments to standards have been issued but are not effective for the financial year ended
31 December 2022 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 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 1, Classification of Liabilities as Current or Non-Current (2024);
• Amendments to IAS 1, Non-current Liabilities with Covenants (2024); and
• Amendments to IFRS 16, Lease Liability in a Sale and Leaseback (2024).
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.
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.
161
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
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.
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.
162
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance and investment contracts (continued)
Product classification (continued)
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.
163
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 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.
164
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
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).
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.
165
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 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 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.
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.
166
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
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) (continued)
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.
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.
167
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance and investment contracts (continued)
2.3.2 Investment contracts (continued)
Investment contract fee revenue (continued)
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.
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.
168
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance and investment contracts (continued)
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.
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.
169
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance and investment contracts (continued)
2.3.3 Insurance and investment contracts (continued)
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.
170
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
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.
171
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 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 20 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 22.
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.
172
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
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.
173
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 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 are 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.
174
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
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.
175
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 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, 26 and 28.
176
AIA GROUP LIMITEDFINANCIAL STATEMENTS 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
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 19.
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.
177
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 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 22 and 37.
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
22.
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 14.
178
AIA GROUP LIMITEDFINANCIAL STATEMENTS 4. EXCHANGE RATES
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 dollar 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
2022
Year ended
31 December
2021
6.73
7.83
35.02
1.38
4.40
6.45
7.77
31.97
1.34
4.14
US dollar exchange rates
As at
31 December
2022
As at
31 December
2021
6.95
7.80
34.54
1.34
4.41
6.37
7.80
33.26
1.35
4.17
179
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 5. PREMIUMS AND FEE INCOME
Included in premium and fee income of US$109m (2021: US$178m) is fee income for investment contracts without DPF
that refers to fees charged for the provision of investment management services for investment contracts without DPF,
which usually vary with the amounts being managed, and the release of deferred fee income. For the investment
management service fee charged, revenue is recognised as services are provided and the fees are deducted from the
customers’ account balances.
Generally, a customer can cancel an investment contract without DPF at any time after contract inception, subject to a
surrender charge which is not a significant component of revenue.
6. OPERATING PROFIT AFTER TAX
Operating profit after tax may be reconciled to net profit as follows:
US$m
Year ended
31 December
2022
Year ended
31 December
2021
Note
Operating profit after tax
8
6,409
6,455
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 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
Subtotal(2)
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
(2,314)
(273)
(45)
(63)
(45)
(3,622)(3)
(6,089)
320
6,370
39
282
38
(66)
(49)
(43)
1,453
1,022
7,477
6,409
46
7,427
50
Notes:
(1) Short-term fluctuations in investment return include the revaluation gains for property held for own use. This amount is then reclassified out of net
profit to conform to IFRS measurement and presentation.
(2) The amount is net of tax of US$519m (2021: US$40m). The gross amount before tax is US$(6,608)m (2021: US$982m).
(3) Includes net fair value movement on derivatives (net of tax and policyholders’ participation) of US$(1,964)m.
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 (EV) and are disclosed in
the Supplementary Embedded Value Information.
180
AIA GROUP LIMITEDFINANCIAL STATEMENTS 7. 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 8.
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$m
TWPI by geography
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
First year premiums by geography
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
Single premiums by geography
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
Year ended
31 December
2022
Year ended
31 December
2021
7,592
11,237
4,166
3,577
2,464
7,140
6,999
11,904
4,428
3,433
2,479
7,616
36,176
36,859
1,259
1,355
885
613
358
363
863
771
596
374
421
988
4,341
4,505
280
1,813
203
1,272
274
892
4,734
236
3,069
538
1,419
319
960
6,541
181
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 7. TOTAL WEIGHTED PREMIUM INCOME AND ANNUALISED NEW PREMIUMS (continued)
Year ended
31 December
2022
Year ended
31 December
2021
6,305
10,171
3,533
3,092
2,074
6,187
5,620
10,826
3,778
2,917
2,026
6,533
31,362
31,700
Year ended
31 December
2022
Year ended
31 December
2021
1,319
1,078
655
531
440
1,384
5,407
1,404
1,106
677
549
491
1,420
5,647
TWPI (continued)
US$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
182
AIA GROUP LIMITEDFINANCIAL STATEMENTS 8. 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, India, Indonesia, Myanmar, New Zealand, the Philippines, South
Korea, Sri Lanka, Taiwan (China) and Vietnam. The activities of the Group Corporate Centre segment consist of the Group’s
corporate functions, shared services and eliminations of intra-group transactions.
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.
183
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 8. SEGMENT INFORMATION (continued)
US$m
China Hong Kong
Thailand
Singapore
Malaysia
Mainland
Other
Markets
Group
Corporate
Centre
Total
1,319
7,592
1,078
655
531
440
11,237
4,166
3,577
2,464
7,423
1,427
8,850
12,103
4,570
16,673
3,848
1,097
4,945
3,808
1,454
5,262
2,006
554
2,560
1,384
7,140
4,956
1,286
6,242
–
–
5,407
36,176
126
793
919
34,270
11,181
45,451
6,048
12,147
2,920
3,848
1,585
3,262
122
29,932
471
571
49
1,370
565
184
738
270
53
337
256
36
229
229
17
843
1,060
86
Total expenses
7,139
14,266
3,981
4,477
2,060
5,251
Share of losses from associates
and joint ventures
–
(1)
Operating profit before tax
1,711
2,406
Tax on operating profit before tax
(286)
(167)
1,425
2,239
–
964
(182)
782
–
785
(43)
742
–
500
(93)
407
5
996
(175)
821
Year ended 31 December 2022
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’
1,425
2,226
–
13
782
–
742
–
393
14
804
17
(2)
(5)
6,370
39
7.5%
5.0%
6.5%
7.2%
9.3%
14.8%
18.8%
19.9%
18.8%
20.7%
16.5%
11.5%
allocated equity
30.6%
17.7%
11.5%
17.8%
18.4%
9.3%
Operating profit before tax includes:
Finance costs
Depreciation and amortisation
22
108
29
107
1
23
8
29
1
24
6
94
319
32
386
417
184
28
300
394
844
(36)
39
(46)
(7)
4,016
3,251
819
38,018
(32)
7,401
(992)
6,409
–
–
–
9.0%
17.7%
13.2%
AIA GROUP LIMITEDFINANCIAL STATEMENTS 8. SEGMENT INFORMATION (continued)
US$m
China Hong Kong
Thailand
Singapore
Malaysia
Mainland
Other
Markets
Group
Corporate
Centre
Total
31 December 2022
Total assets
Total liabilities
Total equity
Shareholders’ allocated equity
Total assets include:
Investments in associates and
joint ventures
44,541 105,413
30,943
42,584
16,983
44,198
18,386 303,048
38,472
99,606
24,814
39,207
14,768
37,235
10,396 264,498
6,069
4,617
5,807
10,196
6,129
7,011
3,377
4,143
2,215
2,162
6,963
8,477
7,990
8,199
38,550
44,805
–
1
–
–
–
612
1,479
2,092
Segment information may be reconciled to the consolidated income statement as shown below:
Short-term
fluctuations in
investment
return related
to equities and
real estate
Segment
information
Other
non-operating
items(1)
Consolidated
income
statement
(4)
34,266
Net premiums, fee income
and other operating
revenue
(18,282)
(18,286)
(15,156)
Investment return
19,110
Total revenue
–
(8,055)
(8,055)
(5,318)
(14,650)
9,964
Net insurance and
investment contract
benefits
–
537
8,623 Other expenses
(5,318)
(14,113)
18,587
Total expenses
–
–
(32)
Share of losses
from associates and
joint ventures
(2,737)
(4,173)
491 Profit before tax
34,270
11,181
45,451
29,932
8,086
38,018
(32)
7,401
US$m
Year ended 31 December 2022
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.
185
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
8. SEGMENT INFORMATION (continued)
US$m
China Hong Kong
Thailand
Singapore
Malaysia
Mainland
Other
Markets
Group
Corporate
Centre
Total
Year ended 31 December 2021
ANP
TWPI
Net premiums, fee income and
other operating revenue
(net of reinsurance ceded)
Investment return
Total revenue
Net insurance and investment
contract benefits
Commission and other
acquisition expenses
Operating expenses
Finance costs and other expenses
1,404
6,999
1,106
11,904
677
4,428
549
3,433
491
2,479
1,420
7,616
–
–
5,647
36,859
6,799
1,359
8,158
13,004
4,178
17,182
4,109
1,181
5,290
3,613
1,453
5,066
2,010
596
2,606
5,155
1,210
6,365
80
654
734
34,770
10,631
45,401
5,422
12,633
2,976
3,606
1,584
3,143
78
29,442
464
545
59
1,568
454
192
806
277
55
418
234
42
274
228
18
1,052
1,031
90
Total expenses
6,490
14,847
4,114
4,300
2,104
5,316
Share of losses from associates
and joint ventures
Operating profit before tax
Tax on operating profit before tax
Operating profit after tax
Operating profit after tax
attributable to:
–
1,668
(297)
1,371
(1)
2,334
(178)
2,156
–
1,176
(216)
960
Shareholders of AIA Group Limited
1,371
2,143
Non-controlling interests
–
13
960
–
–
766
(43)
723
723
–
–
502
(99)
403
392
11
(10)
1,039
(233)
806
784
22
Key operating ratios:
Expense ratio
Operating margin
Operating return on
7.8%
19.6%
3.8%
18.1%
6.3%
21.7%
6.8%
21.1%
9.2%
16.3%
13.5%
10.6%
shareholders’ allocated equity
30.1%
15.9%
14.7%
17.9%
18.8%
8.8%
15
262
299
654
–
80
4,597
3,031
755
37,825
(11)
7,565
(44)
(1,110)
36
6,455
36
–
–
–
–
6,409
46
8.2%
17.5%
12.8%
Operating profit before tax includes:
Finance costs
Depreciation and amortisation
34
106
29
95
1
23
2
30
2
23
8
101
274
29
350
407
186
AIA GROUP LIMITEDFINANCIAL STATEMENTS 8. SEGMENT INFORMATION (continued)
US$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
revenue
34,777
12,748
Investment return
47,525
Total revenue
Net insurance and
investment contract
benefits
30,055
8,991 Other expenses
39,046
Total expenses
Share of losses from
associates and
joint ventures
(11)
8,468 Profit before tax
US$m
Year ended 31 December 2021
Net premiums, fee income
and other operating
revenue
Investment return
Total revenue
Net insurance and
investment contract
benefits
Other expenses
Total expenses
Share of losses from
associates and joint
ventures
Operating profit before tax
Note:
(1) Include unit-linked contracts.
187
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 9. REVENUE
Investment return
US$m
Interest income
Dividend income
Rental income(1)
Investment income
Available for sale
Net realised (losses)/gains from debt securities
Net (losses)/gains of available for sale financial assets reflected
in the consolidated income statement
At fair value through profit or loss
Net losses of debt securities
Net (losses)/gains of equity shares, interests in investment funds and
exchangeable loan notes
Net fair value movement on derivatives
Net (losses)/gains in respect of financial instruments at fair value through profit or loss
Net fair value movement of investment property
Net foreign exchange (losses)/gains
Other net realised losses
Investment experience
Investment return
Year ended
31 December
2022
Year ended
31 December
2021
7,452
1,167
161
8,780
7,344
1,150
166
8,660
(767)
2,405
(767)
2,405
(3,016)
(960)
(10,065)
(9,495)
(22,576)
70
(657)
(6)
(23,936)
(15,156)
2,028
28
1,096
65
579
(57)
4,088
12,748
Note:
(1) Represents rental income from operating lease contracts in which the Group acts as a lessor.
Foreign currency movements resulted in the following (losses)/gains recognised in the consolidated income statement
(other than gains and losses arising on items measured at fair value through profit or loss):
US$m
Foreign exchange (losses)/gains
Year ended
31 December
2022
Year ended
31 December
2021
(24)
524
Other operating revenue
The balance of other operating revenue largely consists of asset management fees, administrative fees and membership
fees.
188
AIA GROUP LIMITEDFINANCIAL STATEMENTS 10. EXPENSES
US$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
2022
Year ended
31 December
2021
16,916
(3,633)
(1,125)
12,158
(2,194)
9,964
5,229
(1,213)
4,016
1,986
250
121
894
16,194
15,750
437
32,381
(2,326)
30,055
5,687
(1,090)
4,597
1,899
268
93
771
3,251
3,031
603
33
360
(34)
962
394
18,587
621
33
338
14
1,006
357
39,046
Other operating expenses include auditors’ remuneration of US$37m (2021: US$28m), an analysis of which is set out
below:
US$m
Audit services
Non-audit services, including:
Audit-related services
Tax services
Other services
Total
Year ended
31 December
2022
Year ended
31 December
2021
23
14
–
–
37
21
5
1
1
28
Notes:
(1) Includes payments for short-term leases of US$2m (2021: US$6m).
(2) Restructuring costs represent costs related to restructuring programmes and are primarily comprised of redundancy and contract termination
costs. Other non-operating costs primarily consist of corporate transaction related costs, implementation costs for new accounting standards and
other items that are not expected to be recurring in nature.
189
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION Year ended
31 December
2022
Year ended
31 December
2021
83
166
1
250
88
180
–
268
Year ended
31 December
2022
Year ended
31 December
2021
22
337
22
13
394
34
301
8
14
357
Year ended
31 December
2022
Year ended
31 December
2021
1,633
1,548
66
128
10
149
80
121
11
139
1,986
1,899
10. EXPENSES (continued)
Depreciation consists of:
US$m
Computer hardware, fixtures and fittings and others
Right-of-use assets
Property held for own use
Computer hardware
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
190
AIA GROUP LIMITEDFINANCIAL STATEMENTS 11. 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
2022
Year ended
31 December
2021
153
624
(606)
171
173
808
10
991
Corporate income tax
Taxation 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
2022
Year ended
31 December
2021
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 2022, changes in the corporate income tax rates have been enacted in Myanmar, Sri Lanka and South Korea. For
Myanmar, the corporate income tax rate changed from 25 per cent to 22 per cent effective from 1 October 2021. For Sri
Lanka, the corporate income tax rate changed from 24 per cent to 30 per cent effective from 1 October 2022. For South
Korea, the corporate income tax rate will further change to 23.2 per cent effective from 1 January 2023.
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.
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.
191
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 11. 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
Adjustments in respect of prior years
Change in tax rate and law
Others
Increase in tax payable from:
Life insurance tax(1)
Withholding taxes
Disallowed expenses
Unrecognised deferred tax assets
Provisions for uncertain tax positions(2)
Others
Total income tax expense
Year ended
31 December
2022
Year ended
31 December
2021
491
89
–
(134)
(43)
(18)
–
(195)
169
39
8
51
2
8
277
171
8,468
1,559
(192)
(501)
(2)
(37)
(2)
(734)
–
132
12
18
4
–
166
991
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.
192
AIA GROUP LIMITEDFINANCIAL STATEMENTS 11. INCOME TAX (continued)
The movement in net deferred tax liabilities in the year may be analysed as set out below:
US$m
Revaluation of financial
instruments
Deferred acquisition costs
Insurance and investment
contract liabilities
Withholding taxes
Provision for expenses
Losses available for offset
against future taxable income
Life surplus(1)
Others
Total
Net deferred
tax asset/
(liability) at
1 January
2022
(1,880)
(3,657)
986
(273)
139
245
(956)
(536)
(5,932)
Credited/(charged) to other
comprehensive income
Acquisition
of a
subsidiary
Credited/
(charged) to
the income
statement
Fair value
reserve(2)
Foreign
currency
translation
reserve
Net deferred
tax asset/
(liability) at
31 December
2022
Others
–
–
–
–
–
–
–
–
–
231
(223)
193
8
(15)
(32)
264
180
606
1,737
–
–
–
–
–
–
–
1,737
59
214
(77)
20
(8)
(12)
20
(13)
203
–
–
–
–
(6)
–
–
(1)
(7)
147
(3,666)
1,102
(245)
110
201
(672)
(370)
(3,393)
Net deferred
tax asset/
(liability) at
1 January
2021
Acquisition
of a
subsidiary(3)
Credited/
(charged) to
the income
statement
Foreign
currency
translation
reserve
Fair value
reserve(2)
Net deferred
tax asset/
(liability) at
31 December
2021
Others
Credited/(charged) to other
comprehensive income
(2,473)
(3,608)
304
(202)
144
249
(929)
(364)
(12)
–
43
–
–
3
–
–
(6,879)
34
(172)
(171)
664
(84)
4
–
(53)
(198)
(10)
779
–
–
–
–
–
–
–
779
(2)
122
(25)
13
(5)
(7)
33
26
155
–
–
–
–
(4)
–
(7)
–
(1,880)
(3,657)
986
(273)
139
245
(956)
(536)
(11)
(5,932)
US$m
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) Include tax credit of US$1,779m (2021: tax credit of US$703m) relates to fair value losses on available for sale financial assets and tax charge of
US$42m (2021: tax credit of US$76m) relates to fair value losses or gains on available for sale financial assets transferred to profit or loss upon
disposal and impairment.
(3) The amount of US$34m represents a one-time adjustment in respect of the acquisition of AIA Everest.
193
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 11. 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$85m (2021: US$56m) 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 taxable profits will be available.
The Group has not provided deferred tax liabilities of US$143m (2021: US$277m) in respect of unremitted earnings of
operations in jurisdictions from which a withholding tax charge would be incurred upon distribution as the Group does not
consider it probable that this portion of accumulated earnings will be remitted in the foreseeable future.
The Group has unused income tax losses carried forward in Mainland China, Hong Kong, Thailand, Singapore, Malaysia,
Australia, Brunei, Cambodia, Macau, Myanmar, New Zealand, the Philippines, South Korea, Sri Lanka and Taiwan (China).
The tax losses in Hong Kong, Singapore, Australia and New Zealand can be carried forward indefinitely. The tax losses of
remaining branches and subsidiaries are due to expire within the periods ending 2023 (Mainland China), 2025 (Macau and
Myanmar), 2027 (Cambodia, the Philippines and Thailand), 2028 (Brunei and Sri Lanka), 2031 (Malaysia) and 2032 (South
Korea and Taiwan (China)).
194
AIA GROUP LIMITEDFINANCIAL STATEMENTS 12. EARNINGS PER SHARE
Basic
Basic earnings per share is calculated by dividing the net profit attributable to shareholders of AIA Group Limited by the
weighted average number of ordinary shares outstanding during the year. The shares held by employee share-based trusts
and shares that have been repurchased are not considered to be outstanding from the date of the purchase for the purposes
of computing basic and diluted earnings per share.
Net profit attributable to shareholders of AIA Group Limited (US$m)
Weighted average number of ordinary shares outstanding (million)
Basic earnings per share (US cents)
Year ended
31 December
2022
Year ended
31 December
2021
282
11,929
2.36
7,427
12,066
61.55
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. The dilutive instruments 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 39.
Net profit attributable to shareholders of AIA Group Limited (US$m)
Weighted average number of ordinary shares outstanding (million)
Adjustment for share options, restricted share units, restricted stock purchase units
and restricted stock subscription units granted under share-based compensation plans
(million)
Weighted average number of ordinary shares for diluted earnings per share (million)
Diluted earnings per share (US cents)
Year ended
31 December
2022
Year ended
31 December
2021
282
11,929
9
11,938
2.36
7,427
12,066
21
12,087
61.45
At 31 December 2022, 4,431,307 share options (2021: 1,839,793) were excluded from the diluted weighted average
number of ordinary shares calculation as they have no effect to the dilutive earnings per share.
Operating profit after tax per share
Operating profit after tax (see note 6) per share is calculated by dividing the operating profit after tax attributable to
shareholders of AIA Group Limited by the weighted average number of ordinary shares outstanding during the year. The
dilutive instruments are the share options, restricted share units, restricted stock purchase units and restricted stock
subscription units granted to eligible directors, officers, employees and agents under various share-based compensation
plans as described in note 39.
Basic operating profit after tax per share (US cents)
Diluted operating profit after tax per share (US cents)
Year ended
31 December
2022
Year ended
31 December
2021
53.40
53.36
53.12
53.02
195
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 13. DIVIDENDS
Dividends to shareholders of the Company attributable to the year:
US$m
Interim dividend declared and paid of 40.28 Hong Kong cents per share
(2021: 38.00 Hong Kong cents per share)
Final dividend proposed after the reporting date of 113.40 Hong Kong cents per share
(2021: 108.00 Hong Kong cents per share)(1)
Total
Year ended
31 December
2022
Year ended
31 December
2021
609
1,702
2,311
589
1,671
2,260
Notes:
(1) Based upon shares outstanding at 31 December 2022 and 2021 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 10 March 2023 subject to shareholders’ approval at the AGM to be
held on 18 May 2023 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$m
Final dividend in respect of the previous financial year, approved and
paid during the year of 108.00 Hong Kong cents per share
(2021: 100.30 Hong Kong cents per share)
Year ended
31 December
2022
Year ended
31 December
2021
1,650
1,558
196
AIA GROUP LIMITEDFINANCIAL STATEMENTS 14. INTANGIBLE ASSETS
US$m
Cost
At 1 January 2021
Additions
Acquisition of a subsidiary
Disposals and derecognition
Foreign exchange movements
At 31 December 2021
Additions
Acquisition of subsidiaries
Disposals
Foreign exchange movements
At 31 December 2022
Accumulated amortisation and impairment
At 1 January 2021
Amortisation charge for the year
Disposals and derecognition
Foreign exchange movements
At 31 December 2021
Amortisation charge for the year
Disposals
Impairment loss
Foreign exchange movements
At 31 December 2022
Net book value
At 31 December 2021
At 31 December 2022
Goodwill
Computer
software
Distribution
and other
rights
823
144
1
(23)
(22)
923
364
3
(19)
(49)
911
311
–
(309)
(10)
903
296
–
(28)
(27)
1,222
1,144
(512)
(93)
20
16
(569)
(121)
11
–
27
(243)
(46)
86
10
(193)
(46)
20
–
6
Total
3,393
455
275
(332)
(111)
3,680
660
210
(47)
(181)
4,322
(759)
(139)
106
26
(766)
(167)
31
(176)
33
(652)
(213)
(1,045)
354
570
710
931
2,914
3,277
1,659
–
274
–
(79)
1,854
–
207
–
(105)
1,956
(4)
–
–
–
(4)
–
–
(176)
–
(180)
1,850
1,776
Intangible assets in this note exclude deferred acquisition and origination costs, which are separately disclosed with
further details provided in note 19.
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.
197
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 14. 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$666m (2021: US$704m), Hong
Kong of US$481m (2021: US$274m), Australia of US$406m (2021: US$609m), and New Zealand of US$153m (2021:
US$164m).
On 26 August 2022, the Group paid in cash a total gross consideration of HK$2,225m (approximately US$283m) and
acquired 100 per cent of the voting equity of Blue Cross (Asia-Pacific) Insurance Limited (Blue Cross).
A goodwill of US$207m was recognised on the excess of cash consideration paid over the net identifiable assets acquired
for Blue Cross and Blue Care JV (BVI) Holdings Limited.
During the year ended 31 December 2022, the Group recognised an impairment loss of US$176m primarily related to our
businesses in Australia including Australian Savings and Investments (S&I) business.
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 14 per cent (2021: 7 per cent to 16 per cent) and the perpetual growth rates for future new
business cash flows of 3 per cent (2021: 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.
198
AIA GROUP LIMITEDFINANCIAL STATEMENTS 15. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
US$m
Group
Investments in associates
Investments in joint ventures
Total
As at
31 December
2022
As at
31 December
2021
2,062
30
2,092
646
33
679
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.
On 11 January 2022, the Group completed its investment in an associate, China Post Life Insurance Co., Ltd., through an
investment of RMB12,033m (approximately US$1,860m) for a 24.99 per cent equity stake.
Investments in associates and joint ventures are accounted for using the equity method of accounting. Due to timing of the
information provided by China Post Life Insurance Co., Ltd. and Tata AIA Life Insurance Company Limited, these investments
are reported on a one-quarter-lag-basis.
Goodwill arising on associates and joint ventures is included within the carrying value of those investments. These are held
for their long-term contribution to the Group’s performance, therefore all amounts are expected to be realised more than
12 months after the end of the reporting period.
The Group’s interests in its principal associates and joint ventures are as follows:
Place of
incorporation
Principal
activity
Type of
shares held
Group’s interests %
As at
31 December
2022
As at
31 December
2021
China Post Life Insurance Co., Ltd.
Mainland China Insurance
Ordinary
Tata AIA Life Insurance Company Limited
India
Insurance
Ordinary
24.99%
49%
–
49%
All associates and joint ventures are unlisted.
Aggregated financial information of associates and joint ventures
The investments in the associates and joint ventures are measured using the equity method. The following table analyses,
in aggregate, the carrying amount and share of losses and other comprehensive (expense)/income of these associates and
joint ventures.
US$m
Carrying amount in the statement of financial position
Losses from continuing operations
Other comprehensive (expense)/income
Total comprehensive (expense)/income
Year ended
31 December
2022
Year ended
31 December
2021
2,092
(32)
(435)
(467)
679
(11)
43
32
199
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 16. PROPERTY, PLANT AND EQUIPMENT
US$m
Cost or revaluation
At 1 January 2021
Additions
Disposals
Net transfer from investment property
Increase from valuation
Foreign exchange movements
At 31 December 2021
Additions
Acquisition of subsidiaries
Disposals
Net transfers from investment property
Increase from valuation
Foreign exchange movements
At 31 December 2022
Accumulated depreciation
At 1 January 2021
Depreciation charge for the year
Disposals
Revaluation adjustment
Foreign exchange movements
At 31 December 2021
Depreciation charge for the year
Disposals
Impairment loss
Revaluation adjustment
Foreign exchange movements
At 31 December 2022
Net book value
At 31 December 2021
At 31 December 2022
Property held
for own use
Computer
hardware
Fixtures and
fittings and
others
2,753
196
(94)
15
76
(47)
2,899
167
–
(202)
157
53
(69)
3,005
(291)
(213)
80
31
3
(390)
(199)
170
–
32
25
(362)
2,509
2,643
249
28
(15)
–
–
(8)
254
31
1
(12)
–
–
(12)
262
(203)
(27)
14
–
7
(209)
(28)
9
–
–
11
(217)
45
45
Total
3,622
269
(136)
15
76
(72)
3,774
239
1
(255)
157
53
(107)
3,862
(900)
(301)
118
31
22
(1,030)
(283)
215
(9)
32
57
620
45
(27)
–
–
(17)
621
41
–
(41)
–
–
(26)
595
(406)
(61)
24
–
12
(431)
(56)
36
(9)
–
21
(439)
(1,018)
190
156
2,744
2,844
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 17 and 33). The depreciation charge for right-of-use assets, by class of underlying asset, and finance
cost on lease liabilities are disclosed in note 10. 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 37.
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.
200
AIA GROUP LIMITEDFINANCIAL STATEMENTS 16. 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
Computer hardware
Fixtures and fittings and others
Total
As at
31 December
2022
As at
31 December
2021
1,408
1,473
2
2
–
3
1,412
1,476
Additions to right-of-use assets for the year ended 31 December 2022 were US$148m (2021: US$171m).
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 22. 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$68m expenditure (2021: US$46m) 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$85m (2021: US$107m)
were taken to other comprehensive income, of which US$35m (2021: US$66m) was related to right-of-use assets.
If property held for own use (excluding right-of-use assets) were stated on a historical cost basis, the carrying value would
be US$375m (2021: US$357m). Similarly, stated on a historical basis the carrying value of the right-of-use assets related
to the Group’s interests in leasehold land and land use rights associated with property held for own use would be US$868m
(2021: US$876m). The Group holds property, plant and equipment for its long-term use and, accordingly, the annual
depreciation charge approximates to the amount expected to be recovered through consumption within 12 months after
the end of the reporting period.
201
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 17. INVESTMENT PROPERTY
US$m
Fair value
At 1 January 2021
Additions and capitalised subsequent expenditures
Disposals
Net transfers to property, plant and equipment
Fair value gains
Foreign exchange movements
At 31 December 2021
Additions and capitalised subsequent expenditures
Disposals
Net transfers to property, plant and equipment
Fair value gains
Foreign exchange movements
At 31 December 2022
4,639
139
(4)
(15)
65
(108)
4,716
68
(5)
(157)
70
(92)
4,600
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 22.
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$161m (2021: US$166m). Direct operating expenses
(including repair and maintenance) on investment property that generates rental income amounted to US$33m (2021:
US$32m).
The Group owns investment property in the form of freehold land outside Hong Kong and leasehold land. Leasehold land
which is held for long-term rental or capital appreciation or both that is not occupied by the Group is classified as investment
property. They are leased out under operating leases and are initially recognised as right-of-use assets at cost, with
changes in fair values in subsequent periods recognised in the consolidated income statement. The Group does not hold
freehold land in Hong Kong.
The future undiscounted lease payments under operating leases that the Group expects to receive in future periods may
be analysed as follows:
US$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
2022
As at
31 December
2021
124
110
56
24
16
12
342
132
97
75
28
10
17
359
202
AIA GROUP LIMITEDFINANCIAL STATEMENTS 18. REINSURANCE ASSETS
US$m
Amounts recoverable from reinsurers
Ceded insurance and investment contract liabilities
Total(1)
Note
26
As at
31 December
2022
As at
31 December
2021
1,270
3,872
5,142
992
3,999
4,991
Note:
(1) Including US$1,929m (2021: US$1,641m) which is expected to be recovered within 12 months after the end of the reporting period.
19. DEFERRED ACQUISITION AND ORIGINATION COSTS
US$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
2022
As at
31 December
2021
29,743
28,385
205
355
(257)
30,046
229
387
(293)
28,708
Year ended
31 December
2022
Year ended
31 December
2021
28,708
1,116
(1,036)
97
1,161
30,046
27,915
1,142
(822)
(52)
525
28,708
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.
203
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 20. 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, 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, interests in investment funds and exchangeable loan notes 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.
204
AIA GROUP LIMITEDFINANCIAL STATEMENTS 20. 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$m
FVTPL
AFS
FVTPL
AFS
Subtotal
FVTPL
FVTPL
Total
31 December 2022
Government bonds(2)
Thailand
Mainland China
South Korea
Singapore
Philippines
Malaysia
Indonesia
Other
Subtotal
–
5,938
–
4,329
–
1,463
–
356
12,086
–
–
–
–
–
–
–
–
–
–
12,153
12,153
17,500
23,438
5,917
1,426
1,633
806
435
5,917
5,755
1,633
2,269
636
1,402
2,460
–
–
–
–
–
201
702
903
–
70
253
690
236
90
102
42
41,272
54,261
1,483
–
–
–
–
–
–
–
–
–
12,153
23,508
6,170
6,445
1,869
2,359
738
2,502
55,744
Notes:
(1) Investment funds in which the Group has interests and power to direct their relevant activities that affect the return of the funds are consolidated
in the financial statements. Consolidated investment funds reflect 100 per cent of assets and liabilities held by such funds.
(2) Government bonds include bonds issued in local or foreign currencies by the government of the country where respective business unit operates.
The Group’s credit risk assessment framework does not apply credit risk limits on these government bonds, therefore credit ratings are not shown
in the table. Of the total balance as at 31 December 2022, 99 per cent are rated as investment grade.
205
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 20. FINANCIAL INVESTMENTS (continued)
Debt securities (continued)
Debt securities by type comprise the following: (continued)
Policyholder and shareholder
Participating funds and
other participating
business with distinct
portfolios
Other policyholder and
shareholder
Consolidated
investment
Unit-linked
funds(1)
US$m
FVTPL
AFS
FVTPL
AFS
Subtotal
FVTPL
FVTPL
Total
31 December 2022
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)
2,547
271
490
980
3,004
1,267
636
5
–
862
16
–
184
109
–
36
11
–
6,226
2,676
5,476
2,397
245
–
9,447
4,036
9,747
3,931
277
–
210
90
146
69
5
–
257
285
54
–
–
–
9,914
4,411
9,947
4,000
282
–
6,463
3,615
340
17,020
27,438
520
596
28,554
8
482
339
2,488
4,138
15,519
4,301
14,783
450
–
111
5
–
9
269
759
2,229
5,065
44
14,051
33,752
125
329
15
14,654
33,863
1,472
2,362
1
21
12
13
260
557
147
234
–
771
329
5,407
1,374
35,386
463
112
60
34,883
2,621
315
9,236
33,388
522
32,676
75,822
1,223
2,338
79,383
31
83
83
58
–
13
268
–
–
–
–
–
–
–
80
–
–
72
54
236
442
35
160
524
591
–
–
146
243
607
721
54
249
46
–
38
19
–
–
–
–
–
72
67
–
192
243
645
812
121
249
1,310
2,020
103
139
2,262
28,053
37,003
2,207
92,278 159,541
3,329
3,073 165,943
Notes:
(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.
(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$9,885m 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$128,864m
with 98 per cent rated as investment grade.
206
AIA GROUP LIMITEDFINANCIAL STATEMENTS 20. FINANCIAL INVESTMENTS (continued)
Debt securities (continued)
Debt securities by type comprise the following: (continued)
Policyholder and shareholder
Participating funds and
other participating
business with distinct
portfolios
Other policyholder and
shareholder
Consolidated
investment
Unit-linked
funds(1)
US$m
FVTPL
AFS
FVTPL
AFS
Subtotal
FVTPL
FVTPL
Total
31 December 2021
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
–
5,819
–
3,716
–
1,161
–
396
11,092
2,682
284
3,375
589
26
–
–
–
–
–
–
–
–
–
–
689
1,272
1,580
852
23
–
6,956
4,416
–
–
–
–
–
–
176
1,016
1,192
7
20
3
50
13
–
93
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
1,632
3,044
–
55
283
718
132
123
128
88
43,709
55,993
1,527
2,948
3,455
8,694
3,840
315
–
6,326
5,031
13,652
5,331
377
–
194
120
155
37
5
29
–
–
–
–
–
–
–
–
–
288
315
105
–
–
24
13,857
21,788
7,554
5,983
2,226
2,107
873
3,132
57,520
6,808
5,466
13,912
5,368
382
53
19,252
30,717
540
732
31,989
Notes:
(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.
(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.
(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.
207
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 20. 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
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)
11
335
4,746
4,624
400
–
633
3,218
20,235
20,988
223
–
–
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) 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.
(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$160,465m
with 98 per cent rated as investment grade.
The Group’s debt securities classified at fair value through profit or loss are all designated at fair value through profit or
loss.
208
AIA GROUP LIMITEDFINANCIAL STATEMENTS 20. FINANCIAL INVESTMENTS (continued)
Equity shares and interests in investment funds and exchangeable loan notes
Equity shares, interests in investment funds and exchangeable loan notes comprise the following:
Policyholder and shareholder
Participating
funds and other
participating
business
with distinct
portfolios
Other
policyholder
and
shareholder
Unit-linked
US$m
FVTPL
FVTPL
Subtotal
FVTPL
Consolidated
investment
funds(1)
FVTPL
Total
31 December 2022
Equity shares
Interests in investment funds and
exchangeable loan notes
Total
12,460
4,736
17,196
6,357
2,138
25,691
10,175
22,635
5,605
10,341
15,780
32,976
16,925
23,282
5,872
8,010
38,577
64,268
Policyholder and shareholder
Participating
funds and other
participating
business
with distinct
portfolios
Other
policyholder
and
shareholder
Unit-linked
US$m
FVTPL
FVTPL
Subtotal
FVTPL
Consolidated
investment
funds(1)
FVTPL
Total
31 December 2021
Equity shares
Interests in investment funds and
exchangeable loan notes
Total
15,718
5,096
20,814
7,258
2,750
30,822
13,467
29,185
4,827
9,923
18,294
39,108
20,605
27,863
1,296
4,046
40,195
71,017
Note:
(1) Investment funds in which the Group has interests and power to direct their relevant activities that affect the return of the funds are consolidated
in the financial statements. Consolidated investment funds reflect 100 per cent of assets and liabilities held by such funds.
209
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 20. FINANCIAL INVESTMENTS (continued)
Interests in structured entities
The Group has determined that the investment funds and structured securities, such as collateralised debt obligations,
mortgage-backed securities and other asset-backed securities that the Group has interests are structured entities.
The Group has consolidated certain investment funds for which the Group provides guarantee on capital or rate of return
to the investors and deemed to have control based on an analysis of the guidance in IFRS 10. For these investment funds,
the Group has the ability to reduce the guaranteed rates of return, subject to obtaining approvals of applicable regulators.
The Group has an obligation to absorb losses in the event that the returns of the funds are insufficient to cover the capital
or rate of return guarantee provided to the investors.
The following table summarises the Group’s interests in unconsolidated structured entities:
US$m
As at 31 December 2022
As at 31 December 2021
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
1,864(2)
551(2)
37,327
39,742
1,310
952
–
2,262
2,818(2)
709(2)
40,195
43,722
1,348
823
–
2,171
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.
210
AIA GROUP LIMITEDFINANCIAL STATEMENTS 20. FINANCIAL INVESTMENTS (continued)
Loans and deposits
Loans and deposits by type comprise the following:
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
2022
As at
31 December
2021
3,823
3,625
469
2
360
(10)
4,644
2,509
1,491
8,644
525
44
732
(13)
4,913
2,850
1,548
9,311
Certain term deposits with financial institutions and promissory notes are restricted due to local regulatory requirements
or other pledge restrictions. At 31 December 2022, the restricted balance held within term deposits and promissory notes
was US$381m (2021: US$1,905m).
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. Reverse repos are initially recorded at the cost of the
loan or collateral advanced. At 31 December 2022, the carrying value of such receivables was US$261m (2021: US$407m).
At 31 December 2022, there was no material debt collateral received in respect of reverse repo.
211
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 21. DERIVATIVE FINANCIAL INSTRUMENTS
The Group’s derivative exposure was as follows:
US$m
Notional amount
Assets
Liabilities
Fair value
31 December 2022
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 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
6,994
6,025
48
13,067
8,500
1,344
37,995
2,051
(48)
62,909
7,191
3,726
73
10,990
9,174
200
35,233
1,492
(73)
57,016
220
56
-
276
240
27
74
13
-
(295)
(86)
-
(381)
(283)
(1)
(8,056)
(18)
-
630
(8,739)
79
72
–
151
326
2
973
16
–
(401)
(10)
–
(411)
(223)
(1)
(754)
(3)
–
1,468
(1,392)
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$32m (2021: US$23m) 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.
212
AIA GROUP LIMITEDFINANCIAL STATEMENTS 21. 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
satisfies the netting criteria under IFRS.
Collateral under derivative transactions
At 31 December 2022, the Group had posted cash collateral of US$309m (2021: US$322m) and pledged debt securities
with carrying value of US$9,656m (2021: US$664m) for liabilities, and held cash collateral of US$231m (2021: US$642m)
and debt securities collateral with carrying value of US$55m (2021: US$21m) for assets in respect of derivative
transactions. The Group did not sell or repledge the debt collateral received. These transactions are conducted under terms
that are usual and customary to collateralised transactions including, where relevant, standard repurchase agreements.
213
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 22. FAIR VALUE MEASUREMENT
Fair value of financial instruments
The Group classifies all financial assets as either at fair value through profit or loss, or as available for sale, which are
carried at fair value, or as loans and receivables, which are carried at amortised cost. Financial liabilities are classified as
either at fair value through profit or loss or at amortised cost, except for investment contracts with DPF which are accounted
for under IFRS 4.
The following tables present the fair values of the Group’s financial assets and financial liabilities:
US$m
31 December 2022
Financial investments
Loans and deposits
Debt securities
Equity shares, interests in investment
funds and exchangeable loan notes
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
20
21
18
23
23
25
–
–
8,644
8,644
8,739
36,662
129,281
64,268
630
–
–
–
–
–
–
–
–
–
–
–
–
–
1,270
3,468
1,836
8,969
165,943
165,943
64,268
64,268
630
1,270
3,468
1,836
8,969
630
1,270
3,468
1,836
8,969
101,560
129,281
24,187
255,028
255,123
Fair value
through
profit or loss
Cost/
amortised
cost
Total
carrying
value
Total
fair value
Notes
27
29
30
21
33
9,211
–
–
8,739
865
18,815
530
11,206
1,748
–
7,046
20,530
9,741
11,206
1,748
8,739
7,911
9,741
9,837
1,748
8,739
7,911
39,345
37,976
214
AIA GROUP LIMITEDFINANCIAL STATEMENTS 22. FAIR VALUE MEASUREMENT (continued)
Fair value of financial instruments (continued)
US$m
31 December 2021
Financial investments
Loans and deposits
Debt securities
Equity shares, interests
in investment funds and
exchangeable loan notes
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
20
21
18
23
23
25
–
–
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
27
29
30
21
33
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
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 37 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.
215
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 22. 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 2022 and 2021.
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, interests in investment funds and exchangeable loan notes
The fair values of equity shares, interests in investment funds and exchangeable loan notes 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 investments 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.
216
AIA GROUP LIMITEDFINANCIAL STATEMENTS 22. 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.
217
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 22. 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 26. 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.
218
AIA GROUP LIMITEDFINANCIAL STATEMENTS 22. 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 2022
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, interests in investment funds and
exchangeable loan notes
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
–
–
–
–
1
16
–
15,102
25,396
4,915
–
–
17
–
–
1,235
4,600
1,235
4,600
36,996
90,413
6
1,866
37,002
92,279
26,566
6,247
1,810
1,201
609
1,488
276
240
56
1,486
139
397
6,332
5,287
3,938
–
–
41
28,053
6,402
2,207
22,635
31,292
10,341
276
240
114
45,447
19.2%
165,902
70.1%
25,327
10.7%
236,676
100.0%
–
–
–
14
–
14
0.1%
8,863
348
9,211
381
283
8,061
865
18,453
98.1%
–
–
–
–
381
283
8,075
865
348
1.8%
18,815
100.0%
219
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 22. FAIR VALUE MEASUREMENT (continued)
Fair value hierarchy for fair value measurement on a recurring basis (continued)
Fair value hierarchy
US$m
Level 1
Level 2
Level 3
Total
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, interests in investment funds and
exchangeable loan notes
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
–
–
–
–
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
60,007
21.6%
201,290
72.3%
17,021
6.1%
278,318
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%
220
AIA GROUP LIMITEDFINANCIAL STATEMENTS 22. 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 2022, the Group transferred US$103m (2021: US$184m) 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$28m of assets (2021: US$15m) from Level 2 to Level 1 during the
year ended 31 December 2022.
The Group’s Level 2 financial instruments include debt securities, equity shares and interests in investment funds, derivative
financial instruments, investment contract liabilities and other liabilities. The fair values of Level 2 financial instruments
are estimated using values obtained from private pricing services and brokers corroborated with internal review as
necessary. When the quotes from private pricing services and brokers are not available, internal valuation techniques and
inputs will be used to derive the fair value for the financial instruments.
The tables below set out a summary of changes in the Group’s Level 3 assets and liabilities measured at fair value on a
recurring basis for the year ended 31 December 2022 and 2021. The tables reflect gains and losses, including gains and
losses on assets and liabilities categorised as Level 3 as at 31 December 2022 and 2021.
Level 3 assets and liabilities
US$m
Property
held for
own use
Investment
property
Debt
securities
Equity
shares,
interests in
investment
funds and
exchangeable
loan notes
At 1 January 2022
1,037
4,716
2,796
8,472
–
–
–
–
Derivative
financial
assets/
(liabilities)
Investment
contracts
–
–
(300)
(48)
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 out of Level 3
At 31 December 2022
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
(17)
70
(54)
26
41
35
157
23
–
–
–
(92)
(157)
68
(5)
–
–
(279)
(189)
–
1,908
(202)
(229)
(46)
–
7,904
(637)
(4)
(15)
–
–
–
–
–
–
–
–
–
–
–
–
–
1,235
4,600
3,894
15,557
41
(348)
(17)
70
(87)
(131)
41
–
221
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 22. 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,
interests in
investment
funds and
exchangeable
loan notes
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(1)
(300)
–
Note:
(1) Of the total investment contract liabilities reported, US$11,719m have been valued based on quoted prices of the underlying investments hence
they were classified as Level 2.
Movements in investment contract liabilities at fair value are offset by movements in the underlying portfolio of matching
assets. Details of the movement in investment contract liabilities are provided in note 27.
Assets transferred out of Level 3 mainly relate to corporate debt instruments and equity shares and interests in investment
funds of which market-observable inputs became available during the period and were used in determining the fair value.
There are not any differences between the fair values on initial recognition and the amounts determined using valuation
techniques since the models adopted are calibrated using initial transaction prices.
222
AIA GROUP LIMITEDFINANCIAL STATEMENTS 22. FAIR VALUE MEASUREMENT (continued)
Significant unobservable inputs for Level 3 fair value measurements
As at 31 December 2022 and 2021, the valuation techniques and applicable unobservable inputs used to measure the
Group’s Level 3 financial instruments are summarised as follows:
Description
Fair value at
31 December 2022 (US$m) Valuation techniques
Unobservable inputs
Range
Debt securities
1,790
Discounted cash flows Risk adjusted discount rate 3.30% - 30.09%
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%
For certain equity shares, interests in investment funds and exchangeable loan notes held by the Group, management
obtains values from independent professional valuers who use valuation techniques, such as the market approach, to
determine the fair value. Under the market approach, the most relevant valuation multiples based on a number of factors,
such as enterprise value to sales, or enterprise value to EBITDA (earnings before interest, taxes, depreciation and
amortisation), are used to determine the fair value of the financial assets.
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.
223
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 22. 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 2022 and 2021 is given below.
Fair value hierarchy
Level 1
Level 2
Level 3
Total
2,078
–
53
24
8,969
11,124
–
8,286
–
449
8,735
722
1,270
3,267
1,812
–
7,071
–
1,551
1,748
6,541
9,840
5,939
–
148
–
–
8,739
1,270
3,468
1,836
8,969
6,087
24,282
530
–
–
56
586
530
9,837
1,748
7,046
19,161
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
US$m
31 December 2022
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$m
31 December 2021
Assets for which the fair value is disclosed
Financial assets
Loans and deposits
Reinsurance receivables
Other receivables
Accrued investment income
Cash and cash equivalents
Total assets for which the fair value is disclosed
Liabilities for which the fair value is disclosed
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Other liabilities
Total liabilities for which the fair value is disclosed
224
AIA GROUP LIMITEDFINANCIAL STATEMENTS 23. OTHER ASSETS
US$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
2022
As at
31 December
2021
1,836
1,837
56
1,711
-
2,671
6,274
48
1,628
1,865
2,709
8,087
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) in 2021. The
investment was completed on 11 January 2022, upon receiving all necessary regulatory approvals.
(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.
24. IMPAIRMENT OF FINANCIAL ASSETS
In accordance with the Group’s accounting policies, impairment reviews were performed for available for sale debt
securities and loans and receivables.
Available for sale debt securities
No material impairment loss was recognised in respect of available for sale debt securities during the year ended 31
December 2022 and 31 December 2021.
The carrying amounts of available for sale debt securities that are individually determined to be impaired at 31 December
2022 was US$21m (2021: 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 20 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 2022 was
US$11m (2021: US$20m). The Group has a portfolio of residential and commercial mortgage loans which it originates. To
the extent that any such loans are past their due dates specific allowance is made, together with a collective allowance,
based on historical delinquency. Insurance receivables are short-term in nature and cover is not provided if consideration
is not received. An ageing of accounts receivable is not provided as all amounts are due within one year and cover is
cancelled if consideration is not received.
225
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 25. CASH AND CASH EQUIVALENTS
US$m
Cash
Cash equivalents
Total(1)
As at
31 December
2022
As at
31 December
2021
3,367
5,602
8,969
2,868
2,121
4,989
Note:
(1) US$926m (2021: US$892m) are held to back unit-linked contracts and US$367m (2021: US$184m) are held by consolidated investment funds.
Cash comprises cash at bank and cash in hand. Cash equivalents comprise bank deposits and highly liquid short-term
investments with maturities at acquisition of three months or less and money market funds that are convertible into known
amounts of cash and subject to insignificant risk of changes in value. Accordingly, all such amounts are expected to be
realised within 12 months after the end of the reporting period.
26. INSURANCE CONTRACT LIABILITIES
The movements of insurance contract liabilities (including liabilities in respect of investment contracts with DPF) and
ceded insurance contract liabilities (see note 18) are shown as follows:
US$m
Gross
Reinsurance
Net
At 1 January 2021
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
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 2022
223,071
37,599
(25,634)
(2,652)
6,742
1,306
3,687
(5,126)
430
239,423
34,767
(25,758)
(2,610)
7,162
(27,243)
(6,308)
1,280
220,713
(3,889)
(2,258)
2,088
–
(37)
–
(1)
98
–
(3,999)
(2,148)
2,047
-
(36)
-
270
(6)
219,182
35,341
(23,546)
(2,652)
6,705
1,306
3,686
(5,028)
430
235,424
32,619
(23,711)
(2,610)
7,126
(27,243)
(6,038)
1,274
(3,872)
216,841
226
AIA GROUP LIMITEDFINANCIAL STATEMENTS 26. 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
2022
As at
31 December
2021
31,721
3,061
6,467
179,464
220,713
28,893
2,042
31,269
177,219
239,423
227
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 26. 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
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)
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
Note:
(1) Other than the Group Corporate Centre segment.
228
AIA GROUP LIMITEDFINANCIAL STATEMENTS 26. 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.
Type of contract
Traditional
participating
life
Market and credit risks
Direct exposure
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 credit spread risk, interest rate
risk, credit risk and equity 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.
229
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 26. 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 2022 and 2021, 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
27. 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
2022
As at
31 December
2021
2.75% – 7.00%
2.75% – 7.00%
3.00% – 7.50%
1.80% – 7.50%
2.14% – 9.00%
2.14% – 9.00%
2.00% – 7.00%
2.00% – 7.00%
3.00% – 5.78%
3.00% – 5.43%
3.15% – 5.11%
0.22% – 3.84%
2.50% – 6.15%
2.30% – 6.15%
3.02% – 8.61%
3.02% – 8.61%
2.20% – 9.20%
2.20% – 9.20%
2.01% – 6.50%
2.01% – 6.50%
8.78% – 14.60%
7.87% – 9.67%
1.75% – 6.50%
1.75% – 6.50%
4.44% – 11.48%
4.44% – 11.48%
Year ended
31 December
2022
Year ended
31 December
2021
11,860
(1,125)
(60)
(375)
(329)
9,971
12,881
437
(80)
(1,091)
(287)
11,860
Note:
(1) Of investment contract liabilities, US$230m (2021:US$265m) represents deferred fee income. Movement of deferred fee income of US$35m
(2021:US$47m) represents revenue recognised as a result of performance obligations satisfied during the year.
230
AIA GROUP LIMITEDFINANCIAL STATEMENTS 28. EFFECT OF CHANGES IN ASSUMPTIONS AND ESTIMATES
The table below sets out the sensitivities of the assumptions in respect of insurance and investment contracts with DPF to
key variables. This disclosure only allows for the impact on liabilities and related assets, such as reinsurance, and deferred
acquisition costs and does not allow for offsetting movements in the fair value of financial assets backing those liabilities.
US$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
2022
As at
31 December
2021
94
(113)
(58)
(102)
(82)
126
(144)
(51)
(89)
(80)
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$224m
increase (2021: US$21m increase) in profit.
231
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 29. BORROWINGS
US$m
Medium-term notes and securities
Senior notes
Subordinated securities
Total
As at
31 December
2022
As at
31 December
2021
7,480
3,726
11,206
5,820
3,768
9,588
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 10. Further information relating to interest rates and the maturity profile
of borrowings is presented in note 37.
The following table summarises the Company’s outstanding medium-term notes and securities placed to the market at 31
December 2022:
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
9 April 2019(1)
7 April 2020(1)
24 June 2020
29 March 2022
24 October 2022
25 October 2022(1)
Subordinated securities
Issue date
16 September 2020(1)
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$1,100m
US$1,000m
US$1,000m
A$90m
HK$6,500m
HK$1,200m
US$850m
3.125%
4.875%
3.200%
4.500%
4.470%
3.900%
3.680%
3.600%
3.375%
2.950%
2.250%
5.040%
5.625%
10 years
30 years
10 years
30 years
30 years
10 years
12 years
10 years
10 years
10 years
1.99 years
2.99 years
13 March 2023
11 March 2044
11 March 2025
16 March 2046
23 May 2047
6 April 2028
16 January 2031
9 April 2029
7 April 2030
24 June 2030
28 March 2024
17 October 2025
5 years
25 October 2027
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. 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, subject to regulatory approval. 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 2022 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 credit facility expiring in 2024 and a US$2,190m 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
2022 and 2021.
232
AIA GROUP LIMITEDFINANCIAL STATEMENTS 30. 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 2022, the obligations under repurchase agreements were
US$1,748m (2021: US$1,588m).
The securities sold under repurchase agreements continue to be recognised within the appropriate financial asset
classification. A liability is established for the consideration received. During the term of the repurchase agreements, the
Group is restricted from selling or pledging the transferred debt securities. The following table specifies the amounts
included within financial investments subject to repurchase agreements which do not qualify for de-recognition at each
year end:
US$m
Debt securities – AFS
Repurchase agreements
Debt securities – FVTPL
Repurchase agreements
Total
As at
31 December
2022
As at
31 December
2021
1,810
1,511
71
1,881
92
1,603
Collateral under repurchase agreements
At 31 December 2022 and 31 December 2021, there was no material collateral in respect of repurchase agreements.
233
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 31. 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
630
261
891
–
–
–
630
261
891
(55)
(261)
(316)
(231)
–
(231)
344
–
344
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
US$m
31 December 2022
Financial assets:
Derivative assets
Reverse repurchase agreements
Total
US$m
31 December 2021
Financial assets:
Derivative assets
Reverse repurchase agreements
Total
234
AIA GROUP LIMITEDFINANCIAL STATEMENTS 31. 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
8,739
1,748
10,487
–
–
–
8,739
1,748
(9,656)
(1,748)
(309)
(1,226)
–
–
10,487
(11,404)
(309)
(1,226)
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
US$m
31 December 2022
Financial liabilities:
Derivative liabilities
Repurchase agreements
Total
US$m
31 December 2021
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.
235
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 32. PROVISIONS
US$m
At 1 January 2021
Charged to the consolidated income statement
Charged to other comprehensive income
Exchange differences
Released during the year
Utilised during the year
Other movements
At 31 December 2021
Charged to the consolidated income statement
Credited to other comprehensive income
Exchange differences
Released during the year
Utilised during the year
Other movements
At 31 December 2022
Employee benefits
Other
195
11
(20)
(14)
–
(13)
(1)
158
10
(21)
(5)
–
(10)
1
133
35
24
–
(1)
(5)
(17)
–
36
–
–
(1)
(1)
(7)
–
27
Total
230
35
(20)
(15)
(5)
(30)
(1)
194
10
(21)
(6)
(1)
(17)
1
160
Other provisions
Other provisions comprise provisions in respect of regulatory matters, litigation, reorganisation and restructuring. In view
of the diverse nature of the matters provided for and the contingent nature of the matters to which they relate, the Group
is unable to provide an accurate assessment of the term over which provisions are expected to be utilised.
33. OTHER LIABILITIES
US$m
Trade and other payables
Lease liabilities
Third-party interests in consolidated investment funds
Reinsurance-related payables
Total
As at
31 December
2022
As at
31 December
2021
4,947
395
865
1,704
7,911
5,617
475
925
1,507
8,524
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$379m (2021: US$427m) are expected to be settled more than 12 months after the
end of the reporting period.
236
AIA GROUP LIMITEDFINANCIAL STATEMENTS 34. SHARE CAPITAL AND RESERVES
Share capital
Ordinary shares(1), issued and fully paid
At beginning of the financial year
Shares issued under share option scheme and
agency share purchase plan
Shares cancelled after repurchase under the share
buy-back programme(2)
At end of the financial year, issued and fully paid
Shares not yet cancelled after repurchase
under the share buy-back programme(2)
At end of the financial year, outstanding
As at 31 December 2022
As at 31 December 2021
Million shares
US$m
Million shares
US$m
12,097
14,160
12,095
14,155
3
(319)
11,781
11
–
2
–
5
–
14,171
12,097
14,160
(47)
–
–
–
11,734
14,171
12,097
14,160
Notes:
(1) Ordinary shares have no nominal value and there is no obligation to transfer cash or other assets to the holders of ordinary shares.
(2) The Company acquired a total of 366,267,400 ordinary shares on the Hong Kong Stock Exchange with the aggregate cost amounting to
approximately HK$27,969m (equivalent to approximately US$3,570m). Of these shares, 319,150,200 shares were cancelled during the year and
47,117,200 shares were in the process of share cancellation as at 31 December 2022 and were cancelled subsequent to the reporting date on 9
January 2023.
The Company issued 1,895,760 shares under share option scheme (2021: 871,896 shares) and 1,119,763 shares under
agency share purchase plan (2021: 1,192,355 shares) during the year ended 31 December 2022.
During the year ended 31 December 2022, the employee share-based trusts purchased 9,933,820 shares (year ended 31
December 2021: 8,277,353 shares) and sold nil shares (year ended 31 December 2021: nil). 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 2022, 6,884,726 shares (2021: 6,714,317 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 2022, 33,360,398 shares (2021: 30,311,301 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.
237
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 35. NON-CONTROLLING INTERESTS
US$m
Equity shares in subsidiaries
Share of earnings
Share of other reserves
Total
As at
31 December
2022
As at
31 December
2021
89
409
(44)
454
80
391
(4)
467
36. 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
The Group supervisor is the Hong Kong Insurance Authority (HKIA) and the Group is in compliance with its group capital
adequacy requirements.
The Insurance (Group Capital) Rules (GWS Capital Rules) set out the capital requirements and overall solvency position for
the Group under the Group-wide Supervision (GWS) framework. These requirements are based on a “summation approach”
and are referred to as the Local Capital Summation Method (LCSM). Under the LCSM, the group available capital and group
required capital are calculated as the sum of the available capital and required capital for each entity within the Group
according to the respective local regulatory requirements, subject to any variation considered necessary by the HKIA.
Prior to 1 January 2022, the Group LCSM surplus and cover ratio were based on minimum capital requirements (MCR
basis). The group minimum capital requirement (GMCR) is the sum of the minimum capital requirement of each entity
within the Group. The Group LCSM surplus was defined as the excess of the group available capital over the GMCR. The
Group LCSM cover ratio was calculated as the ratio of the group available capital to the GMCR.
Applying the changes in disclosure requirements from the HKIA, the Group LCSM surplus and the Group LCSM cover ratio
are now based on prescribed capital requirements (PCR basis).
The group prescribed capital requirement (GPCR) is the sum of the prescribed capital requirement of each entity within
the Group, and represents the level below which the HKIA may intervene on grounds of capital adequacy.
The Group LCSM surplus is now defined as the excess of the group available capital over the GPCR and the Group LCSM
cover ratio is calculated as the ratio of the group available capital to the GPCR. The use of GPCR in these revised definitions
is more relevant for shareholders when assessing the capital position of the Group and brings the LCSM required capital
requirements more in line with the capital requirements currently used within the EV.
On the new PCR basis as at 31 December 2021, the pro forma Group LCSM cover ratio was 291 per cent compared with
399 per cent on the MCR basis reflecting higher capital requirements under the new PCR basis.
On the new PCR basis as at 31 December 2022, the Group LCSM cover ratio was 283 per cent.
238
AIA GROUP LIMITEDFINANCIAL STATEMENTS 36. GROUP CAPITAL STRUCTURE (continued)
Group-wide Supervision Framework and the Local Capital Summation Method (continued)
The table shows a summary of the Group LCSM solvency position and includes the effects of early adoption of the HKRBC
regime, the introduction of C-ROSS II regime and the move to the PCR basis as of 31 December 2022.
US$m
Group LCSM cover ratio (PCR basis)(1)
Group LCSM cover ratio (MCR basis)(1)
Group available capital
Tier 1 capital(2)
Other Than Tier 1 capital
Group prescribed capital requirement (GPCR)
Group minimum capital requirement (GMCR)
Group LCSM surplus (PCR basis)(3)
Group LCSM surplus (MCR basis)(3)
Senior notes approved as contributing to group available capital(4)
As at
31 December
2022
As at
31 December
2021
283%
552%
70,698
45,508
25,190
24,989
12,810
45,709
n/a
5,653
n/a
399%
67,611
n/a
n/a
n/a
16,948
n/a
50,663
5,820
Notes:
(1) The Group LCSM cover ratio definition changed from: (i) the ratio of group available capital to the GMCR at 31 December 2021 (MCR basis), to (ii)
the ratio of the group available capital to the GPCR from 1 January 2022 onwards (PCR basis).
(2) Group Tier 1 capital is maintained in excess of GMCR. Group Tier 1 capital to GMCR ratio is 355 per cent at 31 December 2022.
(3) The Group LCSM surplus definition changed from group available capital less GMCR at 31 December 2021 to group available capital less GPCR
from 1 January 2022 onwards.
(4) The amounts shown represent the carrying value of medium-term notes and securities contributing to group available capital. These are counted
as Other Than Tier 1 capital under the GWS Capital Rules.
At 31 December 2022, the group available capital includes the following items, which are not included within Group Tier 1
capital:
(i) US$3,726m(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$5,653m(1) of senior notes issued before designation that have been approved by the HKIA as capital. 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.
Note:
(1) The amounts represent the carrying value of medium-term notes and securities contributing to group available capital. These are counted as Other
Than Tier 1 capital under the GWS Capital Rules.
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 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 Hong Kong solvency requirements. During the year ended 31 December
2022 and 31 December 2021, 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.
239
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 37. 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, business expenses, and 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 that policies lapse, on average, differently to that 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. Lapse risk is assessed as part of the
product development process and monitored through regular experience studies.
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 2022 and 2021, there were no significant insurance
concentration risks.
240
AIA GROUP LIMITEDFINANCIAL STATEMENTS 37. 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 asset allocation with consideration of the characteristics of the liabilities and related risks, capital
and other requirements on both 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 earnings. Asset-liability management actions include product pricing and product design, reviews
of policyholder dividends, asset allocation, hedging using derivatives, reinsurance, and the management of discretionary
policyholder benefits. The asset-liability risks for the Group are credit risk, interest rate risk, foreign exchange rate risk, and
liquidity risk summarised in the later subsections.
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. AIA’s credit risk management adheres 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.
241
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 37. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Credit spread risk
Credit spread movements affect both the value of assets and liabilities. Credit spread risk is in a large part, managed
through the strategic asset allocation process, whereby the two drivers of spread risk – credit rating and spread duration
– are managed for capital efficiency, taking into account both the economic risk and the local solvency capital considerations.
Interest rate 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.
AIA manages interest rate risk primarily on an economic basis. Interest rate risk on the local solvency basis is also taken
into consideration for business units where local solvency regimes deviate from the economic basis. Furthermore, for
products with discretionary benefits, additional modelling of interest rate risk is performed to guide the 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 2022
Financial assets
Loans and deposits
Other receivables
Debt securities
Equity shares, interests in investment funds and
exchangeable loan notes
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
1,857
185
15,591
–
–
–
4,700
–
6,784
1
150,352
3
3,148
–
8,644
3,334
165,943
1,250
63,018
64,268
–
–
–
–
1,270
1,836
4,269
630
1,270
1,836
8,969
630
22,333
158,387
74,174
254,894
–
–
1,748
84
–
–
11,206
–
400
–
1,832
11,606
9,741
–
–
7,427
8,739
25,907
9,741
11,206
1,748
7,911
8,739
39,345
242
AIA GROUP LIMITEDFINANCIAL STATEMENTS
37. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Exposure to interest rate risk (continued)
US$m
31 December 2021
Financial assets
Loans and deposits
Other receivables
Debt securities
Equity shares, interests in investment funds and
exchangeable loan notes
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
1,329
312
13,170
–
–
–
4,227
–
7,307
2
186,910
–
–
–
–
–
675
2,701
9,311
3,015
–
200,080
71,017
71,017
992
1,837
762
1,468
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
Equity risk
Equity risk arises from changes in the market value of equity shares, interests in investment funds and exchangeable loan
notes. Investments in equity shares, interests in investment funds and exchangeable loan notes on a long-term basis are
expected to align with 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 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.
243
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
37. 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) was
approximately 1 per cent (2021: less than 1 per cent) of the total equity and debt investments as at 31 December 2022.
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 28. 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, total equity and allocated 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, total equity and allocated 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 2022
31 December 2021
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 risk
10 per cent increase in equity prices
1,494
1,494
1,494
1,608
1,608
1,608
10 per cent decrease in equity prices
(1,494)
(1,494)
(1,494)
(1,608)
(1,608)
(1,608)
Interest rate risk
+ 50 basis points shift in yield curves
– 50 basis points shift in yield curves
(816)
855
(6,372)
7,099
(816)
855
(1,152)
(8,585)
(1,152)
1,193
9,539
1,193
244
AIA GROUP LIMITEDFINANCIAL STATEMENTS 37. 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 the 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 and other non-fixed income assets denominated in currencies other than the functional
currency. Bonds denominated in currencies other than the functional currency are largely hedged with cross-currency
swaps or foreign exchange forward contracts.
Foreign exchange rate net exposure
US$m
31 December 2022
Equity analysed by original currency
Net positions of currency derivatives
Currency exposure
5% strengthening of original currency
Impact on profit before tax
Impact on other comprehensive income
Impact on total equity
5% strengthening of the US dollar
Impact on profit before tax
Impact on other comprehensive income
Impact on total equity
United States
Dollar
China
Renminbi
Hong Kong
Dollar
Thai
Baht
Singapore
Dollar
Malaysian
Ringgit
14,595
11,650
(6,055)
–
839
325
8,540
11,650
1,164
3,905
1,996
5,901
(3,806)
3,875
69
2,433
210
2,643
201
(219)
(18)
201
(219)
(18)
142
346
488
(136)
(352)
(488)
(78)
71
(7)
109
(102)
7
(4)
298
294
6
(300)
(294)
(17)
22
5
33
(38)
(5)
–
133
133
–
(133)
(133)
US$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)
245
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 37. 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 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.
246
AIA GROUP LIMITEDFINANCIAL STATEMENTS 37. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Liquidity risk (continued)
US$m
31 December 2022
Financial assets (Policyholder and
shareholder investments)
Loans and deposits
Other receivables
Debt securities
Equity shares, interests in investment funds and
exchangeable loan notes
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
Due after
one year
through
five years
Due after
five years
through
ten years
Total
Due after
ten years
No fixed
maturity(2)
8,332
3,235
159,541
32,976
1,270
1,734
7,676
559
1,874
3,136
7,496
–
1,270
1,724
7,676
82
655
47
442
5
1,532
3,829
9
20,341
17,468
114,236
–
–
2
–
–
–
–
–
–
–
–
–
163
168
146
38
–
32,976
–
8
–
–
215,323
23,258
21,208
18,083
115,923
36,851
39,571
–
–
–
–
39,571(3)
254,894
23,258
21,208
18,083
115,923
76,422
164,999
4,299
15,372
16,506
128,822
–
11,206
1,748
6,349
413
8,658
500
1,748
5,154
140
1,335
2,575(1)
2,684
4,329
1,118
–
226
249
6,972
–
133
23
82
–
123
1
269
–
713
–
–
193,373
13,176
25,394
19,428
133,544
1,831
33,003
–
–
–
–
33,003
226,376
13,176
25,394
19,428
133,544
34,834
Note:
(1) Including US$1,745m which fall due after 2 years through 5 years.
247
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
37. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Liquidity risk (continued)
US$m
31 December 2021
Financial assets (Policyholder and
shareholder investments)
Loans and deposits
Other receivables
Debt securities
Equity shares, interests in investment funds and
exchangeable loan notes
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)
8,946
2,694
193,420
39,108
992
1,764
3,913
1,419
2,477
2,598
4,234
–
992
1,754
3,913
51
754
47
458
6
1,623
3,634
7
21,155
28,484
139,547
–
–
2
–
–
–
–
–
–
–
–
–
1,037
97
234
36
–
39,108
–
8
–
–
252,256
16,019
22,995
29,045
141,411
42,786
40,453
–
–
–
–
40,453(3)
292,709
16,019
22,995
29,045
141,411
83,239
182,484
9,588
1,588
6,811
502
1,369
4,857
167
1,588
5,330
174
356
17,564
18,621
141,442
–
1,247(4)
2,686
4,374
1,114
–
213
303
659
–
141
24
131
–
154
1
223
–
973
–
–
202,342
12,472
19,986
21,603
146,194
2,087
37,109
–
–
–
–
239,451
12,472
19,986
21,603
146,194
37,109
39,196
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$724m (2021: US$626m) due in one year or less, US$2,667m (2021: US$2,753m) due after 1 year through 5 years,
US$1,716m (2021: US$2,019m) due after 5 years through 10 years and US$1,295m (2021: US$1,262m) due after 10 years, in accordance with
the contractual terms of the financial investments.
(4) Including US$748m which fall due after 2 years through 5 years.
248
AIA GROUP LIMITEDFINANCIAL STATEMENTS
37. 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 year ended 31 December 2022, material intra-group transactions are 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.
38. 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, Thailand, Singapore, Malaysia, Cambodia, Indonesia, the Philippines, South Korea, Sri Lanka, Taiwan
(China) and Vietnam. The latest independent actuarial valuation of the plans was at 31 December 2022 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 56 per cent
(2021: 46 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$94m (2021: US$96m). The total expenses relating to these plans recognised in the consolidated
income statement was US$10m (2021: US$11m).
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$128m (2021:
US$121m). Employees and the employer are required to make monthly contributions equal to 1 per cent to 22 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.
249
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 39. 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 2022 and 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 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 2022 and 31 December 2021, the Group made new grants of RSSUs to eligible agents
under the 2021 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.
250
AIA GROUP LIMITEDFINANCIAL STATEMENTS 39. 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
2022
Year ended
31 December
2021
28,418,958
31,787,067
12,535,139
9,484,581
(5,437,310)
(7,157,591)
(5,912,839)
(5,695,099)
29,603,948
28,418,958
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.
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 2022
Year ended
31 December 2021
Number of
share options
Weighted
average
exercise price
(HK$)
Number of
share options
Weighted
average
exercise price
(HK$)
23,359,771
2,519,456
(1,895,760)
(10,163)
23,973,304
15,355,259
62.94
79.85
40.43
97.33
66.48
60.61
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
At the respective dates on which the SOs were exercised, the weighted average share price of the Company was HK$80.70
for the year ended 31 December 2022 (2021: HK$92.01).
251
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 39. 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 2022 and 2021 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
Over HK$86
Outstanding at end of financial year
Year ended
31 December 2022
Year ended
31 December 2021
Number of
share options
outstanding
Weighted
average
remaining
contractual life
(years)
Number of
share options
outstanding
Weighted
average
remaining
contractual life
(years)
37,266
1,986,862
4,690,563
830,436
8,696,612
5,901,935
1,829,630
23,973,304
0.19
2.83
3.72
4.58
6.36
7.50
8.23
5.90
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
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 2022, eligible employees paid US$38m (2021: US$38m)
to purchase 3,815,201 ordinary shares (2021: 3,172,021 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 2022, eligible agents paid US$20m (2021: US$20m) to purchase 2,061,772 ordinary
shares (2021: 1,717,835 ordinary shares) of the Company under the ASPPs.
252
AIA GROUP LIMITEDFINANCIAL STATEMENTS 39. SHARE-BASED COMPENSATION (continued)
Valuation methodology
The Group utilises a binomial lattice model to calculate the fair value of the SO grants, involving a few significant
assumptions such as the expected volatility, expected dividend yield and risk-free interest rate. The expected volatility of
the Company’s shares is estimated based on an analysis of historical data since they are traded in the HKSE. The expected
dividend yield is estimated based on an analysis of historical dividend relative to historical share price. The risk-free interest
rate is estimated based on implied yield of the Government Bonds and Exchange Fund Notes issued by the Hong Kong
Monetary Authority as at the grant date. The analysis period for expected volatility and risk-free interest rate is consistent
with the expected life of the SOs, which 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 Group utilises 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 value of
expected dividends during the vesting period is estimated based on an analysis of historical dividend relative to historical
share price. The estimate of market condition for performance-based RSUs is based on historical data preceding the grant date.
Forfeitures prior to vesting are not allowed for in the valuation of the grants.
The fair values calculated for the grants are inherently subjective due to the assumptions made and the limitations of the
models utilised.
Year ended 31 December 2022
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.
1.93% 1.57% – 3.55%* 0.84% – 4.27%
26%
26% – 28%
n/a
1.70% 1.60% – 1.70% 1.60% – 1.70%
n/a
n/a
n/a
n/a
n/a
n/a
79.85
10
7.45
21.00
97.33
10
7.82
22.26
64.26
73.00
58.32
Year ended 31 December 2021
Share options
Restricted
share units
ESPP Restricted
stock purchase
units
ASPP Restricted
stock subscription
units
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
66.28
72.39
71.39
2.12%
n/a
1.70%
n/a
n/a
n/a
0.37%
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 2022 is HK$79.85
(2021: HK$92.75). The total fair value of SO granted during the year ended 31 December 2022 is US$7m (2021: US$5m).
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 2022 is US$80m (2021: US$86m).
253
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 40. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL
Directors’ remuneration
The Executive Director receives compensation in the form of salaries, bonuses, contributions to pension schemes, long-
term incentives, housing and other allowances, and benefits in kind subject to applicable laws, rules and regulations.
Bonuses and long-term incentives represent the variable components in the Executive Director’s compensation and are
linked to the performance of the Group and the Executive Director. Details of share-based payment schemes are described
in note 39.
US$
Year ended 31 December 2022
Executive Director
Mr. Lee Yuan Siong(4)
Total
US$
Year ended 31 December 2021
Executive Director
Mr. Lee Yuan Siong(4)
Total
Salaries,
allowances
and benefits
in kind(1)
Director’s
fees
Bonuses
Share-based
payments(2)
Pension
scheme
contributions
Other
benefits
Other
payments(3)
Total
–
–
1,680,096
2,820,000
5,272,695
1,680,096
2,820,000
5,272,695
67,829
67,829
–
–
3,673,130
13,513,750
3,673,130
13,513,750
Salaries,
allowances
and benefits
in kind(1)
Director’s
fees
Share-
based
payments(2)
Pension
scheme
contributions
Bonuses
Other
benefits
Other
payments(3)
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
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) 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.
(4) 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.
254
AIA GROUP LIMITEDFINANCIAL STATEMENTS 40. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL (continued)
Directors’ remuneration (continued)
The remuneration of Independent Non-executive Directors of the Company at 31 December 2022 and 2021 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 2022
Independent Non-executive
Directors
Mr. Edmund Sze-Wing Tse
860,000
152,016
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(3)
Mr. Cesar Velasquez Purisima
Ms. Sun Jie (Jane)
Total
330,000
280,000
350,000
355,000
280,000
325,000
390,000
355,000
292,767
–
–
–
–
–
–
–
–
–
3,817,767
152,016
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,012,016
330,000
280,000
350,000
355,000
280,000
325,000
390,000
355,000
292,767
3,969,783
255
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 40. 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 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(3)
Mr. Cesar Velasquez Purisima
Ms. Sun Jie (Jane)(4)
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
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) US$100,000 (2021:US$100,000) represented remuneration to Dr. Narongchai Akrasanee in respect of his services as Chairman of Advisory Board
of AIA Thailand for the year ended 31 December 2022 included in his fees stated above.
(4) Ms. Sun Jie (Jane) was appointed as Independent Non-executive Director of the Company on 1 June 2021.
Remuneration of five highest-paid individuals
The aggregate remuneration of the five highest-paid individuals employed by the Group in the year ended 31 December
2022 and 2021 is presented in the table below.
US$
Salaries,
allowances
and benefits
in kind(1)
Director’s
fees
Bonuses
Share-based
payments(2)
Year ended 31 December 2022
– 5,377,073 4,982,273 12,275,886
Year ended 31 December 2021
– 5,959,080
9,318,940
9,187,513
Pension
scheme
contributions
317,109
383,982
Other
benefits
Other
payments(3)
Total
–
–
6,623,926 29,576,267
6,377,470 31,226,985
Notes:
(1) 2022 and 2021 benefits include housing, medical and life insurance, 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) Includes termination payments or benefits for the five highest-paid individuals and 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.
256
AIA GROUP LIMITEDFINANCIAL STATEMENTS 40. 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$
25,000,001 to 25,500,000
26,000,001 to 26,500,000
27,500,001 to 28,000,000
28,000,001 to 28,500,000
31,000,001 to 31,500,000
31,500,001 to 32,000,000
35,000,001 to 35,500,000
41,000,001 to 41,500,000
105,500,001 to 106,000,000
122,000,001 to 122,500,000
Year ended
31 December
2022
Year ended
31 December
2021
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 payments or benefits
Total
Year ended
31 December
2022
Year ended
31 December
2021
22,150,292
30,355,005
623,561
701,749
20,966,295
18,422,129
2,950,796
–
46,690,944
49,478,883
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
5,000,001 to 6,000,000
Over 10,000,000
Year ended
31 December
2022
Year ended
31 December
2021
–
–
7
2
1
1
1
–
–
7
3
1
–
1
257
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 41. RELATED PARTY TRANSACTIONS
Remuneration of Directors and key management personnel is disclosed in note 40.
42. COMMITMENTS AND CONTINGENCIES
Investment and capital commitments
US$m
Not later than one year
Later than one and not later than five years
Total
As at
31 December
2022
As at
31 December
2021
14,962
105
15,067
7,830
130
7,960
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.
258
AIA GROUP LIMITEDFINANCIAL STATEMENTS 43. 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
operation
Principal activity Issued share capital
interests %
interests %
interests %
interests %
Place of
incorporation and
As at
As at
31 December 2022
31 December 2021
Group’s
NCI’s
Group’s
NCI’s
AIA Company Limited(1)
Hong Kong
Insurance
2,596,049,861 ordinary shares
100%
AIA Australia Limited
Australia
Insurance
AIA Bhd.
Malaysia
Insurance
of US$11,390,584,182
issued 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
China
Insurance
Registered share capital of
100%
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
67,349,329 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%
AIA Everest Life Company Limited
(formerly known as BEA Life
Limited)(2)
Hong Kong
Insurance
of S$1 each
500,000,000 ordinary shares of
HK$2,496,291,000 issued
share capital
100%
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
VND8,724,420,000,000
-
-
-
-
-
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 of
100%
US$1 each
Notes:
(1) The Company’s subsidiary.
(2) This company was acquired in 2021.
(3) All of the above subsidiaries are audited by PricewaterhouseCoopers.
All subsidiaries are unlisted.
-
-
-
100%
100%
100%
-
-
-
259
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
44. EVENTS AFTER THE REPORTING PERIOD
On 10 March 2023, a Committee appointed by the Board of Directors proposed a final dividend of 113.40 Hong Kong cents
per share (2021: final dividend of 108.00 Hong Kong cents per share).
260
AIA GROUP LIMITEDFINANCIAL STATEMENTS 45. DISPOSAL GROUP HELD FOR SALE
On 24 February 2022, the Group announced it had entered into an agreement to sell its Australian S&I business to
Resolution Life Australasia Limited. The Australian S&I business is a constituent part of the businesses that transferred to
AIA Australia following the acquisition of The Colonial Mutual Life Assurance Society Limited from Commonwealth Bank
of Australia. Subject to regulatory approvals, the Group expects the transaction will be completed in 2023. The assets and
liabilities of the Australian S&I business have been classified as assets in disposal group held for sale and liabilities in
disposal group held for sale in the Consolidated Statement of Financial Position, contributed by the Australia operating
segment.
At 31 December 2022, the assets and liabilities in disposal group held for sale were stated at the lower of its carrying
amount and fair value less costs to sell. The assets and liabilities in disposal group held for sale are summarised below.
US$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 and exchangeable loan notes
Derivative financial instruments
Deferred tax assets
Current tax recoverable
Other assets
Cash and cash equivalents
Assets in disposal group held for sale
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
Liabilities in disposal group held for sale
Total liabilities
Notes
14
15
16
17
18
19
20, 22
21
11
23
25
26
27
29
30
21
32
11
33
As at
31 December
2022
(Excluding
disposal group)
Assets and
liabilities in
disposal group
As at
31 December
2022
(Including
disposal group)
3,277
2,092
2,844
4,600
5,122
30,046
8,593
129,281
35,794
23,378
38,577
568
236,191
141
117
6,217
8,020
4,381
303,048
219,570
7,077
11,206
1,748
8,638
160
3,563
464
7,838
4,234
264,498
–
–
–
–
20
–
51
–
868
2,313
–
62
3,294
52
9
57
949
(4,381)
–
1,143
2,894
–
–
101
–
23
–
73
(4,234)
–
3,277
2,092
2,844
4,600
5,142
30,046
8,644
129,281
36,662
25,691
38,577
630
239,485
193
126
6,274
8,969
–
303,048
220,713
9,971
11,206
1,748
8,739
160
3,586
464
7,911
–
264,498
261
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
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)
Derivative financial instruments
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
2022
As at
31 December
2021
21,580
19,062
7,151
7,024
–
–
2,156
1
9,308
886
40
63
1,298
33,175
11,799
–
1
109
11,909
14,171
(290)
351
6,990
44
21,266
33,175
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
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$833m (2021: US$2,359m) 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$4,914m (2021: US$1,589m) and China Government bonds of US$2,237m (2021: US$4,262m)
as at 31 December 2022.
(4) The promissory notes from subsidiaries are repayable on demand.
Approved and authorised for issue by the Board of Directors on 10 March 2023.
Lee Yuan Siong
Director
Edmund Sze-Wing Tse
Director
262
AIA GROUP LIMITEDFINANCIAL STATEMENTS
47. STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
US$m
Share capital
Employee
share-based
trusts
Other
reserves
Retained
earnings
Amounts
reflected in other
comprehensive
income
Total equity
Balance at 1 January 2022
14,160
(225)
309
Net profit
Fair value losses on debt securities at fair
value through other comprehensive
income
Fair value losses on debt securities at fair
value through other comprehensive
income transferred to profit or loss on
disposal
Dividends
Share buy-back
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
–
–
–
–
–
11
–
–
–
Balance at 31 December 2022
14,171
–
–
–
–
–
–
–
(103)
38
(290)
–
–
–
–
–
–
80
–
(38)
351
9,519
3,300
125
–
23,888
3,300
–
–
(2,259)
(3,570)
–
–
–
–
(222)
(222)
141
–
–
–
–
–
–
141
(2,259)
(3,570)
11
80
(103)
–
6,990
44
21,266
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
263
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
INDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY EMBEDDED VALUE
INFORMATION AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2022
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 268 to 294,
comprises:
•
•
the consolidated EV results as at and for the year ended 31 December 2022;
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 2022 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.
264
AIA GROUP LIMITEDINDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY EMBEDDED VALUE INFORMATIONFINANCIAL STATEMENTS Other Matter
The Group has prepared a separate set of consolidated financial statements for the year ended 31
December 2022 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 10 March 2023.
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.
265
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONINDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY EMBEDDED VALUE INFORMATION 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.
266
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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
10 March 2023
267
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONINDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY EMBEDDED VALUE INFORMATION 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.
268
AIA GROUP LIMITEDSUPPLEMENTARY EMBEDDED VALUE INFORMATIONFINANCIAL STATEMENTS 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.
Following the announcement of the share buy-back programme reported in the Company’s Annual Report 2021, the Group
has commenced the repurchase of shares over a three-year period starting from March 2022. The effects of this programme
on the Group’s EV results are shown in Sections 2.6 and 2.8 of this report.
On 26 August 2022, the Group paid in cash a total gross consideration of HK$2,225 million (approximately US$283 million)
and acquired 100 per cent of the voting equity of Blue Cross (Asia-Pacific) Insurance Limited (Blue Cross). A goodwill of
US$200 million was recognised on the excess of cash consideration paid over the net identifiable assets acquired in
relation to Blue Cross. The acquisition has been reflected in the Group’s results for the year ended 31 December 2022 from
the date of acquisition. See Sections 2 and 4 of this report and note 14 to the IFRS consolidated financial statements for
more details of the acquisition of Blue Cross.
See note 2 to the IFRS consolidated financial statements regarding the Group’s preparation for the adoption of IFRS 9 and
IFRS 17, effective from 1 January 2023. Based on the Group’s latest assessment, the adoption of IFRS 9 and IFRS 17 does
not have a material impact on the Group’s EV and VONB as at and for the year ended 31 December 2022.
Unless otherwise stated, the growth rates provided in the commentaries are shown on a constant exchange rate (CER)
basis, and the per-share information provided in the tables is based on the basic number of ordinary shares outstanding as
at the specified point in time, as disclosed in the IFRS consolidated financial statements.
269
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 1. HIGHLIGHTS (continued)
Summary of Key Metrics(1) (US$ millions)
EV Equity
EV Equity per share (US dollars)
EV
EV per share (US dollars)
Free surplus
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)
UFSG on a comparable basis(2)
As at
31 December
2022
As at
31 December
2021
Change
CER
Change
AER
71,202
6.07
68,865
5.87
17,850
33,751
35,114
75,001
6.20
72,987
6.03
17,025
33,302
39,685
Year ended
31 December
2022
Year ended
31 December
2021
3,092
5,407
57.0%
6,845
9.4%
6,039
6,507
3,366
5,647
59.3%
7,896
12.1%
6,451
6,451
(2)%
1%
(3)%
–
7%
4%
(5)%
(2)%
(6)%
(3)%
5%
1%
(9)%
(12)%
YoY
CER
(5)%
–
YoY
AER
(8)%
(4)%
(2.4) pps
(2.3) pps
(10)%
(13)%
(2.4) pps
(2.7) pps
(2)%
6%
(6)%
1%
Notes:
(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.
(2) The UFSG growth rate of 6 per cent represents the UFSG growth on a comparable basis before the effects of the early adoption of the HKRBC
regime from 1 January 2022 and the release of resilience margins held by the Group at 1 January 2022 under the previous Hong Kong Insurance
Ordinance basis.
270
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. EMBEDDED VALUE RESULTS
2.1 Embedded Value by Business Unit
The EV as at 31 December 2022 is presented consistently with the segment information in the IFRS consolidated financial
statements.
Summary of EV by Business Unit (US$ millions)
Business Unit
AIA China(2)
AIA Hong Kong(3)
AIA Thailand
AIA Singapore
AIA Malaysia
Other Markets
Group Corporate Centre
Subtotal
Adjustment to reflect consolidated
reserving and capital requirements(4)
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(4)
After-tax value of unallocated Group
Office expenses
Total (before non-controlling interests)
Non-controlling interests
Total
As at 31 December 2022
ANW(1)
VIF before
CoC
4,485
12,659
4,804
2,842
1,184
3,564
7,324
8,664
13,913
4,528
4,942
2,338
5,381
–
CoC
60
984
853
575
211
1,228
–
VIF after
CoC
8,604
12,929
3,675
4,367
2,127
4,153
–
EV
13,089
25,588
8,479
7,209
3,311
7,717
7,324
36,862
39,766
3,911
35,855
72,717
(2,758)
1,480
446
1,034
(1,724)
–
34,104
(353)
33,751
(1,603)
39,643
(182)
39,461
–
4,357
(10)
4,347
(1,603)
35,286
(172)
35,114
(1,603)
69,390
(525)
68,865
As at 31 December 2021
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
–
EV
13,237
27,048
7,785
7,014
3,274
8,946
10,602
77,906
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
Notes:
(1) ANW by Business Unit is after net capital flows between Business Units and Group Corporate Centre.
(2) Includes the effects of the change in solvency regime to C-ROSS II effective from 1 January 2022.
(3) Includes the effects of the early adoption of the HKRBC regime effective from 1 January 2022.
(4) Adjustment reflects the consolidated reserving and capital requirements as described in Section 4.4 of this report.
271
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 2. EMBEDDED VALUE RESULTS (continued)
2.2 Reconciliation of ANW from IFRS Equity
Derivation of the Consolidated ANW from IFRS Equity (US$ millions)
IFRS shareholders’ allocated equity
Fair value reserve
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(1)
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
2022
As at
31 December
2021
44,805
(6,709)
38,096
(30,046)
52,060
8,407
60,467
(28,708)
28,831
4,365
(1,215)
(24,343)
112
(3,277)
2,692
101
36,509
(2,758)
33,751
282
(2,914)
3,423
110
37,025
(3,723)
33,302
Note:
(1) Includes the effects of the early adoption of the HKRBC regime and the change in solvency regime in Mainland China to C-ROSS II effective from
1 January 2022.
2.3 Reconciliation of Free Surplus from ANW
The reconciliation of free surplus from ANW for the Group is set out below:
Derivation of Free Surplus from ANW (US$ millions)
As at 31 December 2022
As at 31 December 2021
Business Unit
Consolidated
Business Unit
Consolidated
ANW
36,509
33,751
37,025
33,302
Adjustment for certain assets not eligible for
regulatory capital purposes
Less: Required capital
Free surplus(1)
(1,482)
11,672
23,355
(1,482)
14,419
17,850
(1,860)
11,725
23,440
(1,860)
14,417
17,025
Note:
(1) The free surplus is defined as the ANW in excess of the required capital adjusted for certain assets that are not eligible for regulatory capital
purposes. The free surplus on consolidated basis is further adjusted for the consolidated reserving and capital requirements.
272
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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 2022
Undiscounted
Discounted
22,629
20,362
19,432
16,887
184,885
264,195
18,674
11,249
7,269
4,277
8,064
49,533
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
The profile of distributable earnings is shown on an undiscounted and discounted basis. The discounted value of after-tax
distributable earnings of US$49,533 million (2021: US$54,102 million) plus the free surplus of US$17,850 million (2021:
US$17,025 million) and the non-eligible assets excluded in the free surplus calculation of US$1,482 million (2021:
US$1,860 million) as shown in Section 2.3 of this report is equal to the EV of US$68,865 million (2021: US$72,987 million)
shown in Section 2.1 of this report. The emergence of future distributable earnings as at 31 December 2022 includes the
effects of the early adoption of the HKRBC regime, which has accelerated future profits into free surplus.
273
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 2. EMBEDDED VALUE RESULTS (continued)
2.5 Value of New Business
The VONB for the Group for the year ended 31 December 2022 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 2022 was US$3,092 million, a decrease of US$274 million, or 5 per cent,
from US$3,366 million for the year ended 31 December 2021.
Summary of VONB by Business Unit (US$ millions)
Business Unit
AIA China(1)
AIA Hong Kong(2)
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
(Consolidated)
After-tax value of unallocated Group Office
Year ended 31 December 2022
Year ended 31 December 2021
VONB
before
CoC
977
849
627
364
327
530
VONB
after
CoC
916
787
585
349
308
420
VONB
before
CoC
1,173
806
645
369
306
611
VONB
after
CoC
1,108
756
609
356
283
511
CoC
65
50
36
13
23
100
CoC
61
62
42
15
19
110
3,674
309
3,365
3,910
287
3,623
(46)
6
(52)
(49)
8
(57)
3,628
315
3,313
3,861
295
3,566
expenses
(192)
–
(192)
(167)
–
(167)
Total before non-controlling interests
(Consolidated)
Non-controlling interests
Total
3,436
(30)
3,406
315
(1)
314
3,121
(29)
3,092
3,694
(33)
3,661
295
–
295
3,399
(33)
3,366
Notes:
(1) The VONB for the year ended 31 December 2022 has reflected the change in solvency regime to C-ROSS II effective from 1 January 2022.
(2) The VONB for the year ended 31 December 2022 has reflected the early adoption of the HKRBC regime effective from 1 January 2022.
274
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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 2022.
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 2022 was 57.0 per cent compared with 59.3 per cent for the year
ended 31 December 2021. The Group PVNBP margin for the year ended 31 December 2022 was 10 per cent compared
with 10 per cent for the year ended 31 December 2021.
Breakdown of VONB, ANP, VONB Margin and PVNBP Margin (US$ millions)
VONB
after CoC
ANP
VONB
margin
PVNBP
margin
Year
Values for 2022
Twelve months ended 31 December 2022
3,092
5,407
57.0%
Values for 2021
Twelve months ended 31 December 2021
3,366
5,647
59.3%
Quarter
Values for 2022
Three months ended 31 March 2022
Three months ended 30 June 2022
Three months ended 30 September 2022
Three months ended 31 December 2022
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
853
683
741
815
1,052
762
735
817
1,567
1,211
1,271
1,358
1,703
1,357
1,249
1,338
54.4%
56.2%
58.1%
59.5%
61.6%
55.7%
58.5%
60.6%
10%
10%
10%
10%
10%
10%
10%
9%
9%
10%
275
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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(2)
AIA Thailand
AIA Singapore
AIA Malaysia
Other Markets
Total before unallocated Group Office
expenses (Business Unit)
Adjustment to reflect consolidated reserving
Year ended 31 December 2022
Year ended 31 December 2021
VONB
excluding
pension
916
749
585
349
307
418
VONB
margin
69.5%
69.5%
89.1%
65.7%
69.9%
30.2%
VONB
excluding
pension
1,108
708
609
356
282
509
ANP
1,319
1,078
655
531
440
1,384
ANP
1,404
1,106
677
549
491
1,420
VONB
margin
78.9%
64.0%
90.0%
64.7%
57.3%
35.9%
3,324
5,407
61.5%
3,572
5,647
63.2%
and capital requirements
(52)
–
(58)
–
Total before unallocated Group Office
expenses (Consolidated)
After-tax value of unallocated Group Office
expenses
Total
3,272
5,407
60.5%
3,514
5,647
62.2%
(192)
3,080
–
5,407
57.0%
(167)
3,347
–
5,647
59.3%
Notes:
(1) The VONB for the year ended 31 December 2022 has reflected the change in solvency regime to C-ROSS II effective from 1 January 2022.
(2) The VONB for the year ended 31 December 2022 has reflected the early adoption of the HKRBC regime effective from 1 January 2022.
276
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. EMBEDDED VALUE RESULTS (continued)
2.6 Analysis of EV Movement
Analysis of Movement in EV (US$ millions)
Year ended 31 December 2022
Year ended 31 December 2021
YoY AER
ANW
VIF
EV
ANW
VIF
EV
EV
Opening EV
Purchase price(2)
Acquired EV(3)
Effect of acquisition
BEA Upfront Payment(4)
Release of resilience margins
Impact of HKRBC early adoption
VONB
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
Share buy-back
Other capital movements
Effect of changes in exchange
rates
Closing EV
Opening EV per share
(US dollars)
Closing EV per share
(US dollars)
33,302
39,685
72,987
28,503
36,744
65,247
(283)
83
(200)
–
2,168
8,407
(159)
4,838
513
(331)
(359)
4,502
(5,893)
(15)
(1,530)
7,639
(2,259)
(3,570)
(12)
–
–
–
–
(1,283)
(6,028)
3,251
(969)
(214)
275
–
2,343
501
(285)
1,296
(3,456)
–
–
–
(283)
83
(200)
–
885
2,379
3,092
3,869
299
(56)
(359)
6,845
(5,392)
(300)
(234)
4,183
(2,259)
(3,570)
(12)
(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
–
–
–
(2,147)
–
9
(1,149)
(1,115)
(2,264)
(174)
(636)
(810)
33,751
35,114
68,865
33,302
39,685
72,987
12%
n/m(1)
n/m
n/m
n/m
n/m
n/m
(8)%
(12)%
(34)%
n/m
16%
(13)%
n/m
n/m
n/m
5%
n/m
n/m
n/m
(6)%
3,323
10,823
(61)%
6.03
5.87
5.39
12%
6.03
(3)%
Notes:
(1) Not meaningful (n/m).
(2) The purchase price in 2022 refers to the consideration for acquiring Blue Cross as per note 14 to the IFRS consolidated financial statements, and
the purchase price in 2021 refers to the cost of acquiring AIA Everest as per note 5 to the IFRS consolidated financial statements in the Company’s
Annual Report 2021.
(3) The acquired EV in 2022 is from the acquisition of Blue Cross, and the acquired EV in 2021 is from the acquisition of AIA Everest.
(4) Refers to the consideration for the strategic bancassurance partnership with The Bank of East Asia, Limited (BEA).
277
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION
2. EMBEDDED VALUE RESULTS (continued)
2.6 Analysis of EV Movement (continued)
The opening EV was US$72,987 million at 31 December 2021.
The release of resilience margins and the effects of the early adoption of the HKRBC regime increased EV by US$3,264
million.
EV operating profit was US$6,845 million (2021: US$7,896 million), reflecting VONB of US$3,092 million (2021: US$3,366
million), an expected return on EV of US$3,869 million (2021: US$4,402 million), operating experience variances and
operating assumption changes which were again positive and amounted to US$243 million (2021: US$437 million), net of
finance costs of US$359 million (2021: US$309 million).
The VONB 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 2022. 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$299 million (2021: increased by US$451 million),
driven by:
• Expense variances of US$(27) million (2021: US$(18) million) and development costs of US$12 million (2021: US$9
million);
• Mortality and morbidity claims variances of US$115 million (2021: US$221 million); and
• Persistency and other variances of US$223 million (2021: US$257 million) which included persistency variances of
US$73 million (2021: US$(6) million) and other variances including management actions of US$150 million (2021:
US$263 million).
The effect of changes in operating assumptions during the year was a decrease in EV of US$56 million (2021: a decrease
in EV of US$14 million).
The EV profit of US$4,183 million (2021: US$10,823 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 decreased EV by US$5,392 million (2021: an increase in EV of US$1,293 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 a decrease in EV of US$300 million (2021: an increase in EV of
US$434 million).
Other non-operating variances decreased EV by US$234 million (2021: increased EV by US$1,200 million) which
comprised negative impacts from non-operating expenses, partly offset by positive impacts from model-related
enhancements and adjustments to capital requirements on consolidation. The effect of the implementation of C-ROSS II is
not material.
The Group paid total shareholder dividends of US$2,259 million (2021: US$2,147 million). The capital deployed for the
share buy-back programme, under which 366 million shares(1) (2021: nil) have been repurchased in the year of 2022, was
US$3,570 million (2021: nil). Other capital movements decreased EV by US$12 million (2021: increased EV by US$9
million).
Foreign exchange movements decreased EV by US$2,264 million (2021: decreased EV by US$810 million).
The closing EV was US$68,865 million at 31 December 2022.
Note:
(1) Of these shares, 319 million shares were cancelled in 2022, and the remaining 47 million shares have subsequently been cancelled as per note 34
to the IFRS consolidated financial statements.
278
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. EMBEDDED VALUE RESULTS (continued)
2.6 Analysis of EV Movement (continued)
Operating ROEV (US$ millions)
Operating return on EV (operating ROEV) is calculated as EV operating profit expressed as a percentage of the opening EV
and was 9.4 per cent (2021: 12.1 per cent) for the year ended 31 December 2022.
EV operating profit
Opening EV
Operating ROEV
EV operating earnings per share (US cents)(1)
Year ended
31 December
2022
Year ended
31 December
2021
6,845
72,987
9.4%
57.38
7,896
65,247
12.1%
65.44
YoY
CER
(10)%
13%
YoY
AER
(13)%
12%
(2.4) pps
(2.7) pps
(9)%
(12)%
Note:
(1) Based on weighted average number of ordinary shares during the respective period.
2.7 EV Equity
EV Equity dropped to US$71,202 million as at 31 December 2022, a decrease of 2 per cent from US$75,001 million as at
31 December 2021.
Derivation of EV Equity from EV (US$ millions)
EV
Goodwill and other intangible assets(1)
EV Equity(2)
EV Equity per share (US dollars)
As at
31 December
2022
As at
31 December
2021
Change
CER
Change
AER
68,865
2,337
71,202
6.07
72,987
2,014
75,001
6.20
(3)%
22%
(2)%
1%
(6)%
16%
(5)%
(2)%
Notes:
(1) Consistent with the IFRS consolidated financial statements, shown net of tax, amounts attributable to participating funds and non-controlling
interests.
(2) Includes the EV Equity for Australian Savings and Investments (S&I) business held for sale as per note 45 to the IFRS consolidated financial
statements.
279
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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
Release of resilience margins
Impact of HKRBC early adoption
UFSG
Free surplus used to fund new business
Investment return variances and other items
Unallocated Group Office expenses
Dividends
Share buy-back
Finance costs and other capital movements
Year ended
31 December
2022
Year ended
31 December
2021
17,025
(200)
–
–
3,400
4,403
6,039
(1,274)
(5,093)
(250)
(2,259)
(3,570)
(371)
13,473
(312)
(258)
(1,860)
–
–
6,451
(1,712)
3,963
(273)
(2,147)
–
(300)
Closing free surplus
17,850
17,025
YoY
CER
19%
n/m(2)
n/m
n/m
n/m
n/m
(2)%
(22)%
n/m
(8)%
5%
n/m
n/m
7%
YoY
AER
26%
n/m
n/m
n/m
n/m
n/m
(6)%
(26)%
n/m
(8)%
5%
n/m
n/m
5%
Free surplus increased by US$825 million (2021: increased by US$3,552 million) to US$17,850 million (2021: US$17,025
million) as of 31 December 2022, after reflecting the impact of HKRBC early adoption of US$4,403 million, the impact of
release of resilience margins of US$3,400 million and the impact of share buy-back of US$(3,570) million.
UFSG, as defined in Section 4.8, decreased by 2 per cent, to US$6,039 million (2021: US$6,451 million). On a comparable
basis(4), UFSG increased by 6 per cent. Investment in writing new business was US$1,274 million (2021: US$1,712 million).
Investment return variances and other items amounted to US$(5,093) million (2021: US$3,963 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$250 million (2021: US$273 million).
Notes:
(1) The effect of acquisition in 2022 refers to the consideration for acquiring Blue Cross of US$283 million as per note 14 to the IFRS consolidated
financial statements, less the acquired free surplus of US$83 million. 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 in the Company’s Annual Report 2021, less the acquired free surplus
of US$85 million.
(2) Not meaningful (n/m).
(3) Refers to the consideration for the strategic bancassurance partnership with BEA.
(4) Comparable basis refers to the growth rate of UFSG before the effects of the early adoption of the HKRBC regime from 1 January 2022 and the
release of resilience margins held by the Group at 1 January 2022 under the previous Hong Kong Insurance Ordinance basis.
280
AIA GROUP LIMITEDFINANCIAL STATEMENTS 3. SENSITIVITY ANALYSIS
The EV as at 31 December 2022 and the VONB for the year ended 31 December 2022 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 2022 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 2022); and
• Equity prices decreased proportionally by 10 per cent (i.e. 90 per cent of the prices at 31 December 2022).
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 2022
and the values of debt instruments and derivatives held at 31 December 2022 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 2022 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 2022 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.
281
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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%
282
As at 31 December 2022
As at 31 December 2021
EV
% Change
EV
% Change
68,865
72,987
(8,133)
(11.8)%
(9,806)
(13.4)%
13,036
1,817
(1,821)
(1,246)
1,347
2,047
(2,059)
2,059
(1,532)
1,693
(4,659)
4,514
862
941
18.9%
2.6%
(2.6)%
(1.8)%
2.0%
3.0%
(3.0)%
3.0%
(2.2)%
2.5%
(6.8)%
6.6%
1.3%
1.4%
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%
Year ended 31 December 2022
Year ended 31 December 2021
VONB
% Change
VONB
% Change
3,092
(634)
(20.5)%
944
64
(81)
333
(129)
129
(191)
242
(408)
436
98
72
30.5%
2.1%
(2.6)%
10.8%
(4.2)%
4.2%
(6.2)%
7.8%
(13.2)%
14.1%
3.2%
2.3%
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%
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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.;
• 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 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.;
– AIA Everest Life Company Limited, a subsidiary of AIA Co. acquired from The Bank of East Asia, Limited (BEA); and
– AIA Holdings (Hong Kong) Limited, a wholly-owned subsidiary of the Company and also the holding company of
Blue Cross (Asia-Pacific) Insurance Limited (Blue Cross) as it acquired Blue Cross on 26 August 2022;
• 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 New Zealand Limited, a subsidiary of AIA Sovereign Limited, which in turn is a subsidiary
of AIA International;
• 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 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.
283
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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 22 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.
284
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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.
285
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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(1)
100% of regulatory capital adequacy requirement
100% of required capital following the China Association of Actuaries (CAA) EV
assessment guidance, updated to reflect C-ROSS II
AIA Hong Kong(2)
100% of regulatory Risk-Based Capital requirement
AIA Indonesia
AIA Korea
AIA Malaysia
AIA New Zealand
AIA Philippines(3)
AIA Singapore
AIA Sri Lanka
AIA Taiwan
AIA Thailand
AIA Vietnam
Tata AIA Life
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
125% 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
100% of required minimum solvency margin
175% of required minimum solvency margin
Notes:
(1) With effect from 1 January 2022, the capital requirement is updated to C-ROSS II following the update issued by the China Banking and Insurance
Regulatory Commission on 30 December 2021.
(2) With effect from 1 January 2022, the capital requirement for the Hong Kong branch of AIA International is updated following the HKRBC early
adoption as approved by HKIA in a letter dated 8 April 2022. For clarity, AIA Everest Life Company Limited, which is a closed block of business
acquired from The Bank of East Asia, Limited under AIA Co., and the Hong Kong business written by AIA Co., are still evaluated based on 150 per
cent of required minimum solvency margin under existing Hong Kong Insurance Ordinance (HKIO) requirements, and the Macau branch of AIA
International is subject to 150 per cent of Macau statutory requirement.
(3) The capital requirement ratio is updated to 125 per cent at the year end of 31 December 2022 following the group prescribed capital requirement
(GPCR) under the Local Capital Summation Method (LCSM).
Capital Requirements on Consolidation
The Company’s subsidiaries, AIA Company Limited (AIA Co.) and AIA International, are both subject to the HKIA reserving
and capital requirements. Following the approval by HKIA to early adopt the new HKRBC regime for AIA International,
starting from 1 January 2022, AIA International is subject to the capital requirement under the new HKRBC regime, while
AIA Co. continues to be subject to the existing HKIO requirements. The non-Hong Kong branches of AIA Co. and AIA
International hold required capital of no less than 100 per cent of the HKIO solvency margin requirement and the HKRBC
capital requirement respectively.
In addition, AIA International, which is incorporated in Bermuda, is subject to the Bermuda Monetary Authority (BMA)
reserving and capital requirements. AIA International and its subsidiaries hold required capital of no less than 100 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.
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 Group’s published group available capital, group minimum capital
requirement (GMCR) and group prescribed capital requirement (GPCR) are calculated as the sum of the available capital,
minimum capital requirements and prescribed capital requirements 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.
286
AIA GROUP LIMITEDFINANCIAL STATEMENTS 4. METHODOLOGY (continued)
4.7 Foreign Exchange
The EV as at 31 December 2022 and 31 December 2021 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 adjustment for certain assets not eligible for regulatory capital purposes. 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 2022 and the VONB
for the year ended 31 December 2022 and highlights certain differences in assumptions between the EV as at 31 December
2021 and the EV as at 31 December 2022.
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.
287
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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
2022
As at
31 December
2021
4.05
2.84
3.87
6.94
3.74
4.09
4.47
6.99
3.09
26.18
1.28
2.64
4.90
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
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.
288
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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 2022 reflect the weighted average of the risk margins of the in-force business at the start of 2022, and
those of the new business written during 2022 which are determined at a product level 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 (%)
As at
31 Dec
2022
As at
30 Jun
2022
(Unaudited)
7.43
9.69
7.46
6.42
9.70
6.96
As at
31 Dec
2021
6.41
9.72
6.98
13.09
13.03
12.98
8.91
8.92
7.43
12.10
7.27
21.00
7.67
8.09
9.57
8.10
8.49
6.48
11.80
6.59
20.00
7.20
7.65
9.11
8.10
8.56
6.53
11.80
6.59
14.70
7.25
7.69
9.16
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
Long-term investment returns assumed in EV calculations (%)
10-year government bonds
Local equities
As at
31 Dec
2022
As at
30 Jun
2022
(Unaudited)
As at
31 Dec
2021
As at
31 Dec
2022
As at
30 Jun
2022
(Unaudited)
3.30
3.70
3.00
7.50
3.00
4.50
3.30
5.80
2.90
10.00
1.50
3.20
4.00
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
9.00
1.00
2.70
3.50
As at
31 Dec
2021
6.60
9.30
7.00
7.60
9.30
7.50
6.60
9.30
7.00
12.00
12.00
12.00
7.30
9.10
7.80
10.80
7.40
12.00
6.10
8.20
9.30
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
11.00
5.60
7.70
8.80
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. Starting from 31 Dec 2022, local equities assumption shown is that of US dollar-denominated equities. The
local equities assumptions as at 30 Jun 2022 and 31 Dec 2021 shown above are those of HK dollar-denominated equities.
289
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION
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 2022. 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.
290
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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
2022
As at
31 December
2021
2.25
2.00
2.00
3.50
3.50
3.00
2.00
3.50
2.00
6.50
1.20
2.00
4.00
7.05
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
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.
291
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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.
292
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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 is 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
AIA Korea(1)
AIA Malaysia
AIA New Zealand
AIA Philippines
AIA Singapore
AIA Sri Lanka(2)
AIA Taiwan
AIA Thailand
AIA Vietnam
Tata AIA Life
As at
31 December
2022
As at
31 December
2021
30.0
25.0
16.5
22.0
26.5
24.0
28.0
25.0
17.0
30.0
20.0
20.0
20.0
14.6
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
Notes:
(1) AIA Korea is subject to an assumed corporate income tax of 26.5 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 change to 23.2 per cent
effective from 1 January 2023.
(2) During the reporting period, a change in corporate income tax rate has been enacted in Sri Lanka from 24 per cent to 30 per cent, and this was
effective from 1 October 2022.
293
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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
The Financial Supervisory Service (FSS) has announced that the new capital adequacy framework (Korean Insurance
Capital Standard (K-ICS)) for Korean insurers will be effective from 1 January 2023. This new K-ICS has not been applied
to the Group EV reporting as of 31 December 2022.
On 10 March 2023, a Committee appointed by the Board of Directors proposed a final dividend of 113.40 Hong Kong cents
per share (2021: final dividend of 108.00 Hong Kong cents per share).
294
AIA GROUP LIMITEDFINANCIAL STATEMENTS ANNUAL GENERAL MEETING
The AGM will be held at 11:00 a.m. (Hong Kong time) on Thursday, 18 May 2023. 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.
The register of members of the Company will be closed from Monday, 15 May 2023 to Thursday, 18 May 2023 (both days
inclusive) for determining the eligibility to attend and vote at 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, 18 May 2023 after the AGM.
FINAL DIVIDEND
The Board has recommended an increase of 5 per cent in the payment of a final dividend to 113.40 Hong Kong cents per
share for the year ended 31 December 2022 (2021: 108.00 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, 9 June 2023 to shareholders
whose names appear on the register of members of the Company at the close of business on Wednesday, 24 May 2023,
being the record date for determining the entitlements to the final dividend.
RELEVANT DATES FOR THE FINAL DIVIDEND
Tuesday, 23 May 2023
Ex-dividend date
Record date
Payment date
Wednesday, 24 May 2023
Friday, 9 June 2023
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.
295
ANNUAL REPORT 2022ADDITIONAL INFORMATIONINFORMATION FOR SHAREHOLDERSOVERVIEWFINANCIAL 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
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 English and Chinese 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
Ismar Tuzovic
Rachel Poon
+852 2832 1398
+852 2832 1633
+852 2832 4704
+852 2832 1777
+852 2832 4792
News Media
Cecilia Ma Zecha
Duke Malan
Kitty Liu
+852 2832 5666
+852 2832 4726
+852 2832 1742
296
AIA GROUP LIMITEDADDITIONAL INFORMATION 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.
297
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONINFORMATION FOR SHAREHOLDERS 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
Ms. SUN Jie (Jane)
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
Ms. SUN Jie (Jane)
Mr. Edmund Sze-Wing TSE
298
AIA GROUP LIMITEDADDITIONAL INFORMATIONCORPORATE INFORMATION 1H
Six-month period ended 30 June.
2010 RSU Scheme
2010 SO Scheme
2011 ESPP
2012 ASPP
2020 ESPP
2020 RSU Scheme
2020 SO Scheme
2021 ASPP
2H
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.
Six-month period ended 31 December.
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.
299
ANNUAL REPORT 2022ADDITIONAL INFORMATIONGLOSSARYOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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.
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.
2023 Annual General Meeting of the Company to be held at 11:00 a.m. (Hong
Kong time) on Thursday, 18 May 2023.
adjusted net worth or ANW
AER
AGM
AIA or the Group
AIA Group Limited and its subsidiaries.
AIA Co.
AIA Everest
AIA International
AIA Vitality
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.
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.
ALC
The AIA Leadership Centre located in Bangkok, Thailand.
amortised cost
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.
300
AIA GROUP LIMITEDADDITIONAL INFORMATION annualised new premiums or ANP
ASEAN businesses
Asia
available capital
available for sale (AFS) financial assets
bancassurance
BEA
BEPS 2.0
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.
ASEAN, officially the Association of Southeast Asian Nations, businesses refers
to AIA’s operations in Thailand, Singapore, Malaysia, Vietnam, Indonesia, the
Philippines, Cambodia, Myanmar and Brunei.
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.
For a regulated entity, available capital refers to the resources and financial
instruments eligible to be counted towards satisfying the prescribed capital
requirement according to the respective regulatory requirements. For a non-
regulated entity, available capital refers to IFRS equity less intangible assets,
plus eligible financial instruments, including subordinated securities as well as
senior notes approved for inclusion.
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.
The distribution of insurance products through banks or other financial
institutions.
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”.
best estimate liabilities or BEL
IFRS 17 BEL is the present value of best estimate future cashflows discounted
at the IFRS 17 discount rates.
Blue Cross
Blue Cross (Asia-Pacific) Insurance Limited.
Board
CBIRC
The board of Directors.
The China Banking and Insurance Regulatory Commission.
301
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONGLOSSARY CER
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.
Company
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. These are consolidated in
the financial statements.
contractual service margin or CSM
A component of the carrying amount of the asset or liability for a group of
insurance contracts representing the unearned profit the entity will recognise
as it provides insurance contract services under the insurance contracts in the
group.
Corporate Governance Code
Corporate Governance Code set out in Appendix 14 to the Listing Rules, as
amended from time to time.
cost of capital or CoC
COVID-19
C-ROSS
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 is the disease caused by the coronavirus called SARS-CoV-2.
China Risk-Oriented Solvency System.
Dealing Policy
Directors’ and Chief Executives’ Dealing Policy of the Company.
deferred acquisition costs or DAC
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.
302
AIA GROUP LIMITEDADDITIONAL INFORMATION deferred origination costs or DOC
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
value basis or EV Equity
EV Equity is the total of embedded value, goodwill and other intangible assets
attributable to shareholders of the Company, after allowing for taxes.
ExCo
The Executive Committee of the Group.
fair value through profit or
loss or FVTPL
first year premiums
free surplus
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 adjusted for certain assets that are not
eligible for regulatory capital purposes. Free surplus for AIA is stated after
adjustment to reflect consolidated reserving and capital requirements.
group available capital
The sum of the available capital of each entity within the Group.
group minimum capital requirement
or GMCR
The sum of the minimum capital requirements of each entity within the Group.
303
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONGLOSSARY
Group Office
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.
group prescribed capital
requirement or GPCR
The sum of the prescribed capital requirements of each entity within the Group.
It represents the level below which the HKIA may intervene on grounds of
capital adequacy.
GWS
Group-wide Supervision.
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 People’s Republic of
China (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
IAS
IASB
IFA
IFRS
304
Internationally Active Insurance Group.
International Association of Insurance Supervisors.
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).
AIA GROUP LIMITEDADDITIONAL INFORMATION
Insurance Capital Standard or ICS
A risk-based global insurance capital standard applicable to IAIGs being
developed by the IAIS.
insurance finance reserve
Insurance finance reserve comprises the cumulative insurance finance income
or expenses recognised in other comprehensive income.
interactive Point of Sale or iPoS
iPoS is a secure, mobile point-of-sale technology that features a paperless sales
process from the completion of the customer’s financial-needs analysis to
proposal generation with electronic biometric signature
insurance
applications on tablet devices.
life
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.
leverage ratio under IAS 39
and IFRS 4
Leverage ratio under IAS 39 and IFRS 4 is total borrowings expressed as a
percentage of the sum of total borrowings and total equity.
leverage ratio under IFRS 9
and IFRS 17
Leverage ratio under IFRS 9 and IFRS 17 is total borrowings expressed as a
percentage of the sum of total borrowings, total equity and net CSM.
Listing Rules
The Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited, as amended from time to time.
Local Capital Summation Model
or LCSM
LCSM is the method used by the HKIA as a measure of group capital under the
new Group-wide Supervision (GWS) framework.
Under the LCSM, AIA’s published group available capital, group minimum
capital requirement (GMCR) and group prescribed capital requirement (GPCR)
are calculated as the sum of the available capital, minimum capital requirements
and prescribed capital requirements according to the respective regulatory
requirements for each entity within the Group, subject to any variation
considered necessary by the HKIA. Adjustments are made to eliminate double
counting. From 1 January 2022 onwards, Group LCSM surplus is the excess of
the group available capital over the GPCR, and the Group LCSM cover ratio is the
ratio of the group available capital to the GPCR. Prior to 1 January 2022, the
Group LCSM surplus and the Group LCSM cover ratio are calculated by replacing
the GPCR with the GMCR.
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.
minimum capital requirement or MCR
The level at which, if not maintained by the regulated entity, may result in the
severest penalty, the most extreme intervention measures, or the withdrawal of
authorisation to carry on the whole or any part of its business, being imposed on
or taken against the regulated entity under the laws relating to regulatory
capital in the jurisdiction in which the entity is authorised. (For details, please
refer to the Insurance (Group Capital) Rules, Rule 4 from the HKIA).
305
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONGLOSSARY Model Code
n/a
n/m
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.
net contractual service margin
or net CSM
Net contractual service margin is the contractual service margin after allowing
for reinsurance and taxes.
operating profit after tax or OPAT
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
Percentage points.
306
AIA GROUP LIMITEDADDITIONAL INFORMATION
prescribed capital requirement
or PCR
PVNBP margin
The level at which, if maintained by the regulated entity, would not give rise to a
power to impose any penalty, sanction or intervention measures against, or
withdrawal of authorisation of, the regulated entity under the laws relating to
regulatory capital in the jurisdiction in which the entity is authorised. (For
details, please refer to the Insurance (Group Capital) Rules, Rule 5 from the
HKIA).
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.
reverse repos
Reverse repurchase agreements.
risk adjustment or RA
The compensation an entity requires for bearing the uncertainty about the
amount and timing of the cash flows that arises from non-financial risk as the
entity fulfils insurance contracts.
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.
shareholders’ allocated equity
measured under IFRS 9 and IFRS 17
Shareholders’ allocated equity measured under IFRS 9 and IFRS 17 is total
equity attributable to shareholders of the Company less fair value reserve and
insurance finance reserve.
shareholders’ equity
Shareholders’ equity is total equity attributable to shareholders of the Company.
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
The ability of an insurance company to satisfy its policyholder benefits and
claims obligations.
307
ANNUAL REPORT 2022OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONGLOSSARY SOs
Share options.
Tata AIA Life
Tata AIA Life Insurance Company Limited.
total weighted premium income
or TWPI
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
or UFSG
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.
unit-linked investments
Financial investments held to back unit-linked contracts.
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.
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.
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.
unit-linked products
value of in-force business or VIF
value of new business or VONB
VONB margin
308
AIA GROUP LIMITEDADDITIONAL INFORMATION OUR PURPOSE
IS TO HELP
PEOPLE LIVE
HEALTHIER, LONGER,
BETTER LIVES.
AIA GROUP LIMITED
友邦保險控股有限公司
STOCK CODE 1299
INVESTING IN
A HEALTHY ASIA
ANNUAL REPORT 2022
A
I
A
G
R
O
U
P
L
I
M
I
T
E
D
友
邦
保
險
控
股
有
限
公
司
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
AIA.COM