AIA GROUP LIMITED
友邦保險控股有限公司
STOCK CODES
1299
81299
(HKD COUNTER)
(RMB COUNTER)
LEADING
OUR
INDUSTRY
ANNUAL
REPORT
2023
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.
In addition, AIA has a 24.99 per cent
shareholding in China Post Life Insurance
Co., Ltd.
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$286 billion as of
31 December 2023.
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 42 million individual
policies and over 18 million participating
members of group insurance schemes.
AIA Group Limited is listed on the Main
Board of The Stock Exchange of Hong
Kong Limited under the stock codes
“1299” for HKD counter and “81299” for
RMB counter with American Depositary
Receipts (Level 1) traded on the
over-the-counter market under the 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)
A LEADING
LIFE INSURER IN
THE WORLD
by market capitalisation(1)
PRESENT IN
18 MARKETS AND
100% FOCUSED
ON ASIA
NO.1
WORLDWIDE FOR
MDRT REGISTERED
MEMBERS
The only multinational
company to top the table for
NINE CONSECUTIVE
YEARS
Serving the holders of
more than
42 MILLION
individual policies and
over
18 MILLION
participating members of
group insurance schemes
Provides protection with total
sum assured of over
US$2 TRILLION
to people across Asia
Benefits and claims of
US$21 BILLION
in 2023, which is an
increase of US$2 billion
on a comparable basis(2)
Notes:
(1) As at 31 December 2023.
(2) The benefits and claims for 2023 included unit-linked contracts under IFRS 17. The benefits and claims for 2022 were US$19 billion on a comparable basis.
002
AIA GROUP LIMITED
“DIGITAL INSURER
OF THE YEAR”
by InsuranceAsia News for three
consecutive years
Received the
GALLUP EXCEPTIONAL
WORKPLACE AWARD
for two consecutive years
Named as one of the
2023 MOST
VALUABLE GLOBAL
BRANDS
by Kantar BrandZ
CONTENTS
OVERVIEW
010 Financial Highlights
012 Chairman’s Statement
015 Group Chief Executive and
President’s Report
FINANCIAL AND OPERATING
REVIEW
023 Group Chief Financial Officer’s Review
050 Business Review
067 Regulatory and International
Developments
069 Risk Management
076 Our People and Culture
CORPORATE GOVERNANCE
081 Statement of Directors’ Responsibilities
082 Board of Directors
092 Executive Committee
097 Report of the Directors
110 Corporate Governance Report
128 Remuneration Report
FINANCIAL STATEMENTS
149
Independent Auditor’s Report
156 Consolidated Income Statement
157 Consolidated Statement of
Comprehensive Income
158 Consolidated Statement of Financial
Position
160 Consolidated Statement of Changes in
Equity
162 Consolidated Statement of Cash Flows
164 Notes to the Consolidated Financial
Statements and Material Accounting
Policy Information
Independent Auditor’s Report on the
Supplementary Embedded Value
Information
325
329 Supplementary Embedded Value
Information
ADDITIONAL INFORMATION
356
Information for Shareholders
359 Corporate Information
360 Glossary
003
ANNUAL REPORT 2023 2023
HIGHLIGHTS
AIA LEADS
OUR INDUSTRY WITH…
004
AIA GROUP LIMITED MULTIPLE GROWTH ENGINES AND
UNMATCHED FINANCIAL FLEXIBILITY
MAINLAND CHINA
AIA China opened a new
provincial branch in Henan,
upgraded our Shijiazhuang
licence to cover all of Hebei
province and received
regulatory approvals to begin
preparations for expansion into
more cities in Hubei and
Sichuan. AIA China also opened
the AIA Grand Theatre and
acquired the AIA Financial
Centre in Shanghai, the largest
real estate acquisition under
the Group to date.
Henan Branch Opening
AIA Wealth Management Centre
HONG KONG
AIA Hong Kong launched the
AIA Wealth Management Centre
and AIA Alta Wellness Haven,
a first(1) for the Hong Kong
insurance industry, offering
integrated health and wealth
management services
alongside exclusive lifestyle
privileges and experiences for
our customers.
AIA Grand Theatre in the North Bund, Shanghai
AIA Alta Wellness Haven
ASEAN
AIA is ranked the number one
life and private health insurer in
ASEAN(2), a key growth engine
for the Group. Our largest
ASEAN business is in Thailand
where we celebrated our 85th
anniversary in the country and
launched the AIA East Gateway,
a real estate investment in
Bangkok.
AIA East Gateway
INDIA
Our joint venture Tata AIA Life is
the third largest private life
insurer(3) and the number one
retail protection player(4) in
India.
SUPERIOR SHAREHOLDER RETURNS
AIA has returned US$7.2 billion(5) to shareholders through our ongoing share buy-back programme of up
to US$10 billion. Our active approach to capital management has enabled us to return excess capital to
shareholders through our share buy-back programme, while maintaining a prudent, sustainable and
progressive dividend policy. AIA’s sound financial discipline, honed over many years, ensures that today,
we retain the flexibility to capture the full economics of growth in the region.
Notes:
(1) As at 1 August 2023, compared with services provided by Hong Kong major insurance companies.
(2)
In aggregate across six markets (Thailand, Singapore, Malaysia, Vietnam, Indonesia and the Philippines) by
annualised new premiums based on latest available regulatory data.
(3)
Individual weighted new business premiums of private life insurers for 2023 (January to December 2023).
(4) Among private life insurers, based on retail sum assured for 2023 (January to December 2023).
(5) As at 31 December 2023.
005
ANNUAL REPORT 2023 2023 HIGHLIGHTS
UNRIVALLED DISTRIBUTION AND WORLD-CLASS
TECHNOLOGY, DIGITAL AND ANALYTICS
PREMIER AGENCY
AIA’s differentiated
Premier Agency is a
core competitive
advantage. AIA was named the
number one MDRT
multinational company globally
for the ninth consecutive year in
2023 and we were also number
one in Mainland China, Hong
Kong, ASEAN and India.
STRATEGIC
PARTNERSHIPS
AIA’s extensive network of
market-leading strategic
distribution partners extends our
reach to engage hundreds of
millions of potential customers
across Asia. Our long-term
strategic partnerships with
leading banks are a key
competitive advantage for AIA:
MORE THAN
60 MILLION
BANK CUSTOMERS IN ASEAN
MORE THAN
2 MILLION
BANK CUSTOMERS IN HONG KONG
MORE THAN
5 MILLION
AFFLUENT AND HIGH NET WORTH CUSTOMERS
IN MAINLAND CHINA
MORE THAN
200 MILLION
BANK CUSTOMERS IN INDIA
TECHNOLOGY, DIGITAL
AND ANALYTICS
AIA has made significant,
targeted investments over the
past three years to accelerate
our transformation into a
customer-driven, world-class
and digitally-enabled insurer:
90%
CLOUD ADOPTION(1), WELL AHEAD OF GLOBAL
FINANCIAL SERVICES AND INSURANCE
INDUSTRY AVERAGE LEVELS
85%
END-TO-END STRAIGHT-THROUGH PROCESSING
WITH NO HUMAN INTERVENTION(1)
MORE THAN
20 MILLION
EXISTING AND PROSPECTIVE CUSTOMERS
ENGAGE WITH AIA DIGITALLY
94%
CUSTOMER SUBMISSIONS WERE DIGITAL(1)
HIGH-
PERFORMING
PEOPLE
AIA appointed three new
Independent Non-executive
Directors, including Ms. Mari
Elka Pangestu, Mr. Ong Chong
Tee and Ms. Nor Shamsiah
Mohd Yunus, bringing a wealth
of international experience
across a range of subjects to
the Board of AIA Group Limited.
AIA also appointed Dr. Kelvin
Loh as Group Chief Healthcare
Officer for the execution of
AIA’s Integrated Health Strategy
as well as AIA’s health-related
businesses.
In 2023, AIA received the Gallup
Exceptional Workplace Award
for the second year, an accolade
that celebrates companies that
have a highly engaged
workforce and a performance-
oriented culture.
Note:
(1)
In December 2023.
006
AIA GROUP LIMITED ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG)
AIA published our first Climate
Transition Plan, which sets out
a clear implementation
roadmap to achieve our near-
term climate targets and
integrate climate considerations
into our core business,
supporting our path towards
net-zero emissions by 2050.
AIA also became the first
pan-Asian life and health
insurer to have our near-term
emissions reduction targets
validated by the Science Based
Targets initiative, a global body
enabling businesses to set
ambitious emissions reduction
targets in line with the latest
climate science.
AIA’s global ESG leadership and
efforts earned positive
recognition in 2023, including
being “ESG Industry Top Rated”
and “ESG Regional Top Rated”
for three consecutive years by
Sustainalytics, a global leader
in ESG and Corporate
Governance research and
ratings.
AND
SCALABLE AND
POSITIVE IMPACT
ON COMMUNITIES...
007
ANNUAL REPORT 2023 PURPOSE
IN ACTION
As the largest pan-Asian life and health insurer, we recognise the scale of
the positive impact we can make to create a healthier, more sustainable
future for Asia. In 2023, we delivered our Purpose through a range of
community activities across 18 markets to inspire, educate and engage
people to live Healthier, Longer,
Better Lives.
AIA VITALITY
is a science-backed wellness
programme that provides
participants with the knowledge,
tools and motivation to help them
achieve their personal health
goals.
AROUND
60%
OF OUR NEW CUSTOMERS ARE ADDING
AIA VITALITY TO THEIR POLICIES WHEN
GIVEN THE OPTION TO DO SO
AVAILABLE IN
12 MARKETS
LAUNCHED IN VIETNAM IN 2023
CELEBRATED
10th
ANNIVERSARY IN SINGAPORE
AIA ONE BILLION
is our bold ambition to engage one
billion people to live Healthier,
Longer, Better Lives by 2030.
ROLLED OUT IN
18 MARKETS
OVER
4 in 10
ASIANS SURVEYED WERE INSPIRED BY AIA
INITIATIVES TO IMPROVE HEALTHY LIVING(1)
ENGAGED
387 MILLION
PEOPLE BY THE END OF 2023
AIA VOICES
is a platform for thought leaders to
educate, motivate and inspire people
to make positive behavioural
changes on their health and
wellness journey.
33 MILLION
ENGAGEMENTS IN TOTAL BY THE END OF 2023
008
Note:
(1) Based on Kantar Brand Power Monitor Research for the period of July to December 2023.
AIA GROUP LIMITED AIA HEALTHIEST
SCHOOLS
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.
AIA’S
PARTNERSHIP
WITH
TOTTENHAM
HOTSPUR
has been a powerful vehicle to
deepen engagement with
communities across the region.
LAUNCHED IN
4 MARKETS
IN 2022/23 – AUSTRALIA,
HONG KONG, THAILAND AND VIETNAM
EXPANDED TO
6 MARKETS
IN 2023/24, ADDING MALAYSIA AND
INDONESIA IN THE SECOND YEAR
744
SCHOOLS PARTICIPATED
IN THE PROGRAMME
MORE THAN
110
ENTRIES RECEIVED FOR OUR
LOCAL AND REGIONAL COMPETITIONS
IN THE FIRST YEAR
OVER
26,000
CHILDREN AND ADULTS ATTENDED SESSIONS
CONDUCTED BY OUR SPURS COACHES IN 2023
OVER
63,000
LEADS GENERATED FROM SPURS ACTIVITIES
IN 2023
AIA SCHOLARSHIPS
supported 100 university students
in Hong Kong for the third year as part of our
US$100 MILLION
scholarship pledge in 2020.
009
ANNUAL REPORT 2023 OVERVIEW
2023 RESULTS AT-A-GLANCE
VALUE OF NEW BUSINESS(1)
ANNUALISED NEW PREMIUMS(2)
US$ MILLIONS
US$ MILLIONS
7,650
6,585
5,219
5,647
5,407
4,154
4,034
3,366
3,092
2,765
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
OPERATING PROFIT AFTER TAX(3)(7)
TOTAL WEIGHTED PREMIUM INCOME(4)
US$ MILLIONS
US$ MILLIONS
34,002
35,408
36,859
36,176
37,939
5,689
5,942
6,409
6,421
6,213
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
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
EV EQUITY(5)
US$ MILLIONS
TOTAL ASSETS AND TOTAL LIABILITIES(7)
US$ BILLIONS
75,001
71,202
70,153
67,185
63,905
340
326
284
229
262
279
270
286
245
225
350
300
250
200
150
100
50
0
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
TOTAL ASSETS TOTAL LIABILITIES
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
010
AIA GROUP LIMITED OVERVIEW
2023 BREAKDOWN BY MARKET SEGMENT
VALUE OF NEW BUSINESS(1)(6)
ANNUALISED NEW PREMIUMS(2)
7%
9%
17%
10%
24%
18%
26%
6%
8%
33%
10%
32%
OPERATING PROFIT AFTER TAX(3)
TOTAL WEIGHTED PREMIUM INCOME(4)
9%
5%
25%
11%
15%
35%
18%
23%
7%
10%
30%
12%
MAINLAND CHINA HONG KONG THAILAND SINGAPORE MALAYSIA OTHER MARKETS(8)
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.
(7) From 2022 onwards, the financial information is presented after the
adoption of IFRS 9 and IFRS 17, and amendment to IAS 16, unless
otherwise stated. The financial information for 2021 and prior
periods are presented before the above-mentioned change.
(8) 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 Insurance Co., Ltd.
(China Post Life). 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.
011
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CHAIRMAN’S STATEMENT
Mr. Edmund Sze-Wing Tse
Independent Non-executive
Chairman
It gives me great pleasure to report that 2023 was a very successful year of
growth and progress at AIA. The consistent execution of our strategy by our
leading pan-Asian businesses has delivered a return to very strong profitable
new business growth and substantial capital returns to shareholders. AIA’s
unparalleled competitive advantages, scale and diversity across the region
give me great confidence in our ability to create value for all our stakeholders
well into the future.
012
AIA GROUP LIMITEDOVERVIEW The significant investments we have made over the last few years to reinforce our technology, capabilities and
business strengths while executing our growth strategy, resulted in another very strong operating performance.
Value of new business (VONB) increased by 33 per cent to US$4,034 million with double-digit growth across 10
of our markets and all distribution channels.
Profitable new business growth also helped drive an increase in EV operating profit of 37 per cent per share. EV
Equity grew by 7 per cent to US$76,083 million before the payment of shareholder dividends of US$2,293 million
and the additional US$3,637 million return of capital to shareholders through our share buy-back programme. Net
of these items, EV Equity was US$70,153 million, up by 2 per cent on a per share basis.
Our consistent financial discipline and focus on growing AIA’s high-quality in-force business supported an
increase in both underlying free surplus generation (UFSG) and operating profit after tax (OPAT) per share. The
Group’s financial position remained robust as free surplus grew by 25 per cent to US$22,259 million, before the
deduction of US$5,930 million for shareholder dividends and share buy-back. Net of these items, free surplus was
US$16,329 million.
AIA’s share buy-back programme of up to US$10 billion is ongoing and strong free surplus generation has enabled
us to also increase returns to shareholders through progressive dividends. The board of Directors (Board) has
recommended a final dividend of 119.07 Hong Kong cents per share, which is an increase of 5 per cent, reflecting
the strength of our financial performance and the Board’s continued confidence in the future prospects of the
Group. This brings the total dividend for 2023 to 161.36 Hong Kong cents per share, following AIA’s established
prudent, sustainable and progressive dividend policy, allowing for future growth opportunities and the financial
flexibility of the Group.
The Board is confident about the significant long-term potential for AIA’s growth in Asia. The fundamental
drivers for the life and health insurance industry in the region are underpinned by powerful social, economic
and demographic trends that not only create increasing wealth but, importantly, underscore a persistent need to
preserve and protect incomes to withstand uncertain times. At the same time, rapid growth in health expenditure
in AIA’s markets is generating an urgent demand for more effective healthcare services that improve customer
outcomes.
AIA has the right strategy and talent to address these evolving consumer demands. Powered by the transformation
of our technology, digital and analytics capabilities, our integrated product ecosystems offer greater relevance in
meeting an individual’s unique life goals. We continue to enhance the professionalism and reach of our distribution
across our markets to leverage these capabilities, so that we can provide the high-quality advice and service
needed to help our customers navigate both good times and life’s complexities. It is AIA’s ability to combine all
of our competitive advantages for the benefit of all our stakeholders that continues to differentiate us from our
competitors.
I am enormously proud of the many achievements by our industry-leading businesses as they ensure we stay
well positioned to deliver our strategy. All credit for AIA’s success goes to our dedicated employees, agents and
partners. Our colleagues across the organisation have demonstrated unwavering professionalism as well as care
for our communities. I am extremely grateful to every one of them.
013
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CHAIRMAN’S STATEMENT
It is also a great pleasure to collaborate with each of the distinguished individuals that comprise our Board. We
share a deep commitment to promoting the highest standards of corporate governance and risk management. In
2023, we were pleased to welcome Ms. Mari Elka Pangestu, Mr. Ong Chong Tee and Ms. Nor Shamsiah Mohd Yunus
as new independent non-executive directors. I would also like to express our appreciation for Ms. Swee-Lian Teo
who retired from the AIA Group Limited Board after eight years. We remain ever grateful for her many contributions
to the Group. All of our directors bring a wealth of relevant experience which supports the executive management
in successfully navigating a complex and rapidly changing operating environment and ensuring the sustainability
of our operations.
Sustainability is a cornerstone of our business, not just because of the multigenerational nature of what we do,
but because it paves the way for an even better future for those that come long after us. Through our Purpose of
helping people live Healthier, Longer, Better Lives, we are committed to addressing material Environmental, Social
and Governance (ESG) issues in the region.
The management of our investment portfolio is vital to achieving our ESG ambitions and we led the industry in fully
divesting from directly-managed listed equity and fixed income exposures to coal mining and coal-fired power
businesses. I am delighted that AIA published its inaugural Climate Transition Plan during the year, in support of
our path towards net-zero emissions by 2050. AIA also became the first pan-Asian life and health insurer to have
its near-term emissions reduction targets validated by the Science Based Targets initiative (SBTi), in line with the
latest climate science.
We are committed to using our scale and influence to meaningfully support the economic and social development
of the region. AIA’s ESG leadership is externally recognised by Sustainalytics, a global leader in ESG and Corporate
Governance research and ratings, that has consistently ranked AIA as being “ESG Industry Top Rated”, and “ESG
Regional Top Rated” for three consecutive years.
As I look ahead, I am certain that AIA’s Operating Philosophy of “Doing the Right Thing, in the Right Way with the
Right People… and the Right Results will come” is as relevant as it has ever been. The near-term geopolitical and
macroeconomic uncertainty does not diminish the vast potential for our business. I am very grateful to our Group
Chief Executive and President, Lee Yuan Siong, and his team for their outstanding leadership that has ensured
AIA’s sustainable success. Of course, none of this would be possible without the ongoing trust that our customers
and shareholders place in us every day. On behalf of the Board, thank you for your enduring support.
Edmund Sze-Wing Tse
Independent Non-executive Chairman
14 March 2024
Note:
Growth rates are shown on constant exchange rates as management believes this provides a clearer picture of the year-on-year performance of the underlying
business.
014
AIA GROUP LIMITEDOVERVIEW OVERVIEW
GROUP CHIEF EXECUTIVE AND
PRESIDENT’S REPORT
Mr. Lee Yuan Siong
Group Chief Executive
and President
AIA’s very strong profitable new business growth in 2023 with increased
underlying free surplus generation and substantial capital returns to
shareholders demonstrates the enduring power of our unique competitive
advantages. We have the ambition, scale and financial strength to capture
the tremendous growth potential in the world’s most attractive region for
life and health insurance.
015
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP CHIEF EXECUTIVE AND PRESIDENT’S REPORT
As the largest pan-Asian life and health insurer, we are uniquely positioned to materially contribute to the economic
and social development of the region. AIA’s differentiated operating model addresses the growing and evolving
protection needs of Asia’s consumers through highly relevant and personalised products tailored to local markets.
This is backed by high-quality advice from our leading distribution network that encompasses a world-class
Premier Agency and strategic partnerships that complement our proprietary channels to broaden our customer
reach.
AIA’s substantial competitive advantages have been built over decades and keep us well positioned to capture
the tremendous opportunities in life and health insurance in the region. Our recent significant investments in
technology, digital and analytics have accelerated the pace of innovation, refining the insights that inform our
decision-making and strategic execution. While we hold leading positions in the majority of our markets, there is
expansive headroom to grow in each of our operations.
Across Asia, the strong impetus for our businesses arises from a combination of growing yet ageing populations
that are increasingly wealthy and seeking higher standards of living. Consumer spending on healthcare is rapidly
rising. At the same time, state-funded protections have proven insufficient to meet escalating demand, creating an
urgent need for private sector solutions to bridge the divide.
AIA’s clear and ambitious strategy aligns our scale, position and influence with the powerful drivers of growth
prevalent in the region, and I am confident that our focused execution will create value for many years to come.
Our financial discipline and focus on profitable new business growth translates into free surplus generation that,
in turn, funds further capital investment in organic new business and value creation for shareholders.
Our active approach to capital management has enabled us to return excess capital to shareholders through
our ongoing share buy-back programme of up to US$10 billion, while maintaining a prudent, sustainable and
progressive dividend policy. AIA’s sound financial discipline, honed over many years, ensures that today, we retain
the flexibility to capture the full economics of growth in the region.
I have every confidence that our unwavering execution of AIA’s ambitious growth strategy will advance our position
as the leading pan-Asian life and health insurance company. We are steadfast in our Purpose of helping people
live Healthier, Longer, Better Lives.
2023 PERFORMANCE HIGHLIGHTS
2023 was a strong year for AIA as we accomplished a return to growth in value of new business (VONB) of 33
per cent and a record high in annualised new premiums. Our growth was broad-based across the region from
our industry-leading businesses with 10 of our markets delivering double-digit VONB increases. Our profitable
growth also drove an increase in embedded value (EV) operating profit of 37 per cent per share, which led to an
uplift in operating return on EV (operating ROEV) of 350 basis points(1). At the same time, we returned US$5.9
billion through increased shareholder dividends and the ongoing share buy-back programme. AIA’s balance sheet
remains very strong with an increase in free surplus of 25 per cent before capital returns to shareholders and a
Group Local Capital Summation Method (LCSM) coverage ratio(2) of 275 per cent on the GWS basis, well above the
regulatory minimum requirement.
016
AIA GROUP LIMITEDOVERVIEW VALUE OF NEW BUSINESS
VONB for the Group grew by 33 per cent to US$4,034 million and annualised new premiums grew by 45 per cent to
US$7,650 million. AIA’s proprietary Premier Agency distribution achieved strong VONB growth of 23 per cent and
our partnerships delivered an excellent recovery with an increase of 58 per cent compared with 2022.
AIA’s Hong Kong operation was the largest contributor to the Group’s new business results with VONB growth of
82 per cent to US$1,430 million. AIA Hong Kong’s products and services have broad appeal to both domestic as
well as Mainland Chinese visitor customers. The launch of the AIA Wealth Management Centre in March 2023
provides an ecosystem of integrated health and wealth management services. Combined with our market-leading
Premier Agency and partnerships, we provide a comprehensive suite of propositions that balance protection and
wealth solutions. New business sales from our long-term protection and participating savings products more than
doubled compared with 2022.
VONB from Mainland China grew by 28 per cent for February to December 2023 compared with the same period
in 2022, following the removal of pandemic restrictions at the beginning of the year. VONB growth for the full year
was 20 per cent to US$1,037 million. AIA’s Premier Agency remains the gold standard for professionalism and
productivity in the market. We develop full-time agents that provide advice on more sophisticated savings and
protection products to meet the evolving needs of affluent customers. Our approach to training, recruitment and
career development sets AIA apart, enabling us to access the significant opportunities for growth in the Mainland
Chinese life insurance market.
We were delighted to open a new provincial branch in Zhengzhou, Henan in May 2023. AIA China’s Shijiazhuang
sales and service centre was also upgraded to a provincial branch in October 2023, and we have since been
granted approvals by the regulator to begin preparations to expand into new major cities in Hubei and Sichuan
provinces. VONB for our newest operations grew by 55 per cent in 2023 and AIA’s footprint in Mainland China
now covers 10 branches. Our geographical expansion is on track and there is substantial room for us to grow both
within our existing footprint and as we enter into new provinces in the future.
AIA’s 24.99 per cent investment in China Post Life Insurance Co., Ltd. (China Post Life) further expands the Group’s
exposure to growth opportunities from additional customer segments that are highly complementary to AIA
China’s strategy. Our dedicated advisory team has fostered strong engagement across all levels of management
and worked closely with China Post Life to enhance product mix and drive significant volume and margin growth.
While not consolidated into the Group’s reported new business results, China Post Life delivered 17 per cent
year-on-year growth in VONB(3) compared with 2022.
AIA is the market leader in Thailand and we delivered 21 per cent VONB growth to US$713 million in 2023. We are
the number one ranked agency, with 41 per cent market share, focused on traditional protection and unit-linked
products that differentiate the quality of our growth. Our strategic bancassurance partner, Bangkok Bank Public
Company Limited, also delivered excellent VONB growth, driven by higher productivity and increased sales of
protection and rider products.
In Singapore, AIA delivered VONB growth of 10 per cent to US$394 million driven by both agency and partnership
distribution channels. Our agency channel ranked number one in the country for Million Dollar Round Table
(MDRT), reflecting our focus on quality and productivity. AIA Singapore’s strategic partnership with Citibank, N.A.
delivered excellent new business growth, focusing on the affluent customer segment.
017
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP CHIEF EXECUTIVE AND PRESIDENT’S REPORT
Our business in Malaysia achieved a 7 per cent increase in VONB to US$319 million supported by both agency
and partnership distribution channels on the back of very strong growth in 2022. Our close collaboration with
Public Bank Berhad delivered strong VONB growth in the second half of the year following the introduction of new
recruitment and training programmes for insurance specialists focused on high net worth customers.
VONB for Other Markets of US$406 million was flat year-on-year. We delivered double-digit growth in India, the
Philippines, South Korea, Taiwan (China) and Sri Lanka. The Vietnamese market saw a decline in sales over the
year as negative consumer sentiment impacted the industry. Excluding Vietnam, VONB for Other Markets grew by
15 per cent. Tata AIA Life Insurance Company Limited (Tata AIA Life) delivered excellent VONB growth across all
distribution channels and was the third largest private life insurer in India in 2023.
EV EQUITY
EV Equity increased by 7 per cent to US$76,083 million, before shareholder dividends of US$2,293 million and the
additional return of capital to shareholders of US$3,637 million through the share buy-back programme. Net of
these items, EV Equity was US$70,153 million.
VONB was a major driver of higher EV operating profit of US$8,890 million, representing an increase of 37 per
cent on a per share basis. Combined with the return of capital to shareholders from the share buy-back, this has
resulted in a material increase in operating ROEV by 350 basis points(1) to 12.9 per cent, compared with 9.4 per
cent in 2022.
OPERATING PROFIT AFTER TAX AND FREE SURPLUS
Operating profit after tax (OPAT) of US$6,213 million increased by 2 per cent on a per share basis. Operating ROE
increased to 13.5 per cent and operating margin remained very strong at 16.4 per cent. Medical claims increased
in 2023, in line with post pandemic global trends, and, in response we continue to reprice our health insurance
portfolios and strengthened claims provisions at 31 December 2023. Excluding the increase in medical claims and
minor model refinements, OPAT growth was 7 per cent per share on an underlying basis.
Underlying free surplus generation (UFSG) of US$6,041 million grew by 5 per cent per share reflecting higher
interest rates, partially offset by medical claims experience. The Group’s financial position is very strong with
free surplus growing by 25 per cent to US$22,259 million, before shareholder dividends and share buy-back of
US$5,930 million. Net of these items, free surplus was US$16,329 million as at 31 December 2023.
SOLVENCY POSITION
The Group LCSM coverage ratio(2) was 275 per cent at 31 December 2023, after the payment of shareholder
dividends and share buy-back, and well above the regulatory minimum requirement. On a shareholder basis, the
Group LCSM coverage ratio(2) was 335 per cent at 31 December 2023.
SHAREHOLDER DIVIDEND
Our very strong performance demonstrates the execution of our clear and ambitious strategy across AIA’s
businesses. As a result, the Board has recommended a final dividend of 119.07 Hong Kong cents per share, which
brings the total dividend for 2023 to 161.36 Hong Kong cents per share, representing an increase of 5 per cent
compared with 2022. This follows AIA’s established prudent, sustainable and progressive dividend policy, allowing
for future growth opportunities and the financial flexibility of the Group.
018
AIA GROUP LIMITEDOVERVIEW EXTENDING OUR SIGNIFICANT COMPETITIVE ADVANTAGES
Our world-class technology, digital and analytics make AIA a simpler, faster, more connected organisation. AIA’s
adoption of cloud technology firmly surpasses financial services and insurance industry benchmarks globally.
We have achieved the highly-ambitious transformation targets we set out three years ago at the beginning of our
technology, digital and analytics programme.
We have achieved a significant improvement in straight-through processing (STP) automation across ‘buy’,
‘service’, and ‘claims’ customer journeys. Our end-to-end STP rate increased from 35 per cent in June 2020 to 85
per cent in December 2023 and we were able to complete 85 per cent of all buy, service and claims transactions
within a single day compared with just 50 per cent at the end of 2020.
Our strategy is not just aimed at transforming back-office capabilities but enables a leading customer experience.
More than 20 million existing and prospective registered customers used our applications in 2023 and over 85 per
cent of all customer transactions were completed digitally. We believe that providing simplified customer journeys
with faster turnaround times leads to better outcomes, including improved customer satisfaction, greater retention
and additional product sales. We have made it easier for customers to buy policies by simplifying underwriting
rules, better leveraging existing data and introducing artificial intelligence into AIA’s processes.
Our unrivalled distribution has been built over decades. The consistent execution of our Premier Agency strategy
has delivered a strong performance and accounts for 76 per cent of total Group VONB with growth of 23 per
cent. We hold market-leading positions across the region and were named the number one MDRT multinational
company in the world for the ninth consecutive year. AIA China, AIA Thailand, AIA Hong Kong and Tata AIA Life are
all individually within the top five positions globally. Full adoption of digital tools across the entire Premier Agency
value chain has delivered a material improvement in productivity, recruitment and retention, ensuring that we
continue to provide highly attractive opportunities for our career agents.
VONB for our partnership channel recovered strongly and grew by 58 per cent. Our bancassurance channel
delivered 42 per cent VONB growth through strong collaboration with our bank partners, including Citibank, N.A.
and The Bank of East Asia, Limited, Postal Savings Bank of China Co., Ltd., Bank of the Philippine Islands, Public
Bank Berhad and Bangkok Bank Public Company Limited. VONB from our intermediated channels, including
independent financial advisers and brokers, more than doubled in 2023.
AIA’s integrated ecosystems combine new products and services to offer compelling propositions that meet a
wider set of financial and health protection needs, at a more personal level. We design our propositions based on
insights gained through our deep customer relationships, extensive consumer research and data analytics. Our
propositions motivate and reward customers for taking actions that positively improve their physical and financial
health, help them seek the best treatment and encourage them to save more effectively to meet their financial
needs. In this way, we align AIA’s success with the health and well-being of our customers, delivering our Purpose
of helping people live Healthier, Longer, Better Lives.
019
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP CHIEF EXECUTIVE AND PRESIDENT’S REPORT
OUR PEOPLE
Throughout 2023, we built on AIA’s distinctive culture of empowerment with accountability and supported our
people to adapt to the changing world of work. We embedded cross-functional agile operating models in eight of
our major markets to work on our most important strategic initiatives. These new target operating models have
reduced organisational layers by around 30 per cent and, with the right talent in the right roles, we are able to
realise value more rapidly and innovate at pace.
We pride ourselves on fostering a collaborative workplace that prioritises employee engagement. Through the
Gallup Q12 Employee Engagement Survey, we track engagement annually and take positive actions to enhance
employee fulfilment, commitment and involvement across the organisation. In 2023, the survey was completed by
98 per cent of employees, and our scores placed us in the 92nd percentile of Gallup’s global finance and insurance
industry benchmark. Employee engagement has remained in the top quartile of this benchmark for seven
consecutive years, and in the top decile for the last three years. Our achievements were once again recognised,
with the Group receiving the Gallup Exceptional Workplace Award for the second year in a row.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Our people and businesses have an important role to play in ensuring the sustainability of the societies we serve.
AIA’s Environmental, Social, and Governance (ESG) strategy is aligned with our responsibilities to address material
ESG issues and create a better future for all. In November 2023, we achieved a significant milestone by being the
first pan-Asian life and health insurer to have its near-term emissions reduction targets validated by the Science
Based Targets initiative (SBTi). We also published our first Climate Transition Plan, which outlines AIA’s roadmap
to achieving these targets and the integration of climate considerations into our governance, risk management
and engagement initiatives that will support our path towards our net-zero commitment.
AIA’s global ESG leadership and efforts earned positive recognition in 2023 and I am extremely grateful for the
enduring trust that is placed in us to create progressive changes in our communities. I am certain that there is
much more we will do to support the economic and social development of the region.
OUTLOOK
AIA’s long-term prospects are clear and strong. Across the region, high levels of private savings, expanding yet
ageing populations, low insurance penetration and limited welfare coverage continue to create a pressing demand
for AIA’s tailored products and expert advice. Our strategic direction is fully aligned with these ongoing growth
trends, and our robust financial position enables us to fully leverage the region’s expansion. External shocks
such as the conflicts in Europe and the Middle East have the potential to amplify ongoing volatility in the global
macroeconomic and geopolitical landscape. Despite these near-term uncertainties, the long-term prospects for
our business are exceptionally bright.
In summary, 2023 was a year of strong execution and progress for AIA. Taken together, the fundamental drivers of
growth in the region and the scale, quality and diversity of AIA’s exceptional businesses have enabled us to deliver
very strong profitable new business growth with increased underlying free surplus generation and substantial
capital returns to shareholders.
020
AIA GROUP LIMITEDOVERVIEW Our focus continues to be on delivering our strategic priorities that will sustain and build on our competitive
advantages to make a material difference in shaping AIA’s future. I am confident that we are well placed to achieve
our ambitions in 2024 and beyond.
Lee Yuan Siong
Group Chief Executive and President
14 March 2024
Notes:
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.
(1) On an actual exchange rate (AER) basis.
(2) AIA’s eligible group capital resources and group prescribed capital requirement (GPCR) are calculated based on the Local Capital Summation Method
(LCSM). The Group LCSM coverage ratio on the GWS basis is referred to as the “eligible group capital resources coverage ratio” in the group-wide
supervision (GWS) framework and is calculated as the ratio of the eligible group capital resources to the GPCR on the prescribed capital requirement
(PCR) basis.
Group LCSM coverage ratio on the shareholder basis is defined as the Group LCSM coverage ratio excluding the contribution from participating funds and
other participating business with distinct portfolios on the PCR basis, except for Brunei and the Macau SAR. Participating businesses in Brunei and the
Macau SAR are not considered as participating funds or other participating business with distinct portfolios under applicable local regulatory regimes in
our LCSM reporting.
(3) VONB is calculated by China Post Life based on its principles and methodology in accordance with the China Association of Actuaries embedded value
assessment guidance (CAA basis), consistent with the industry practice in Mainland China. China Post Life’s VONB for the twelve-month period ended 31
December 2023 reflects its latest long-term investment return assumptions used at 31 December 2023.
021
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL AND OPERATING REVIEW
023 Group Chief Financial Officer’s Review
050 Business Review
067 Regulatory and International Developments
069 Risk Management
076 Our People and Culture
022
AIA GROUP LIMITED
FINANCIAL AND OPERATING REVIEW
GROUP CHIEF FINANCIAL OFFICER’S REVIEW
AIA has delivered a strong set of financial results in 2023. Our key performance metric,
value of new business (VONB), grew by 33 per cent to US$4,034 million, supported by
double-digit growth in 10 of our markets. We returned US$5,930 million to shareholders
during the year through our progressive dividend policy and ongoing share buy-back,
delivered increased underlying free surplus generation and retained our very strong
solvency capital position. The combination of AIA’s substantial competitive advantages
with our financial strength and flexibility enables us to capture the enormous profitable
growth opportunities across our markets, generating sustainable value and capital
returns for our shareholders.
Growth rates and commentaries are provided on a constant exchange rate (CER) basis, unless otherwise stated.
Mr. Garth Jones
Group Chief Financial Officer
023
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION SUMMARY AND KEY FINANCIAL HIGHLIGHTS
AIA delivered excellent new business growth in 2023 with VONB up by 33 per cent to US$4,034 million and
double-digit growth in 10 of our markets. This step-up in performance was driven by growth of 45 per cent in
annualised new premium (ANP) sales to US$7,650 million with excellent results from our unrivalled distribution
platform. Our Premier Agency channel delivered VONB growth of 23 per cent and a very strong recovery in our
partnership distribution generated an increase of 58 per cent in VONB compared with 2022.
EV Equity, an important measure of shareholder value creation, grew by 7 per cent over the year to US$76,083
million, before shareholder dividends of US$2,293 million and the additional US$3,637 million of capital returned
to shareholders during the second year of our ongoing three-year share buy-back programme. EV Equity was
US$70,153 million at 31 December 2023 after these payments to shareholders, an increase of 2 per cent per share
in 2023.
The increase in EV Equity before capital return to shareholders was driven by a 33 per cent increase in EV operating
profit to US$8,890 million, reflecting the substantial growth in VONB and an increased expected return resulting
from higher interest rates. Operating return on EV (operating ROEV) increased by 350 basis points(2) to 12.9 per
cent and compared with 9.4 per cent in 2022.
The very strong EV operating profit was partly offset by negative non-operating investment return variances of
US$2,790 million, largely driven by the effects of local equity market performance compared with our long-term
investment return assumptions as well as interest rate movements over the year.
Operating profit after tax (OPAT) of US$6,213 million was up by 2 per cent per share, driven by a 6 per cent
increase in CSM release to US$5,314 million offset by the effect of a significant increase in claims across our
health insurance portfolios since the end of the pandemic, in line with global trends. We are actively repricing
these portfolios as they renew during 2024 and our IFRS and EV Equity assumptions included provisions for
additional claims at 31 December 2023. Excluding the effect of higher medical claims and minor IFRS model
refinements, OPAT grew by 7 per cent per share on an underlying basis.
CSM(3) represents the discounted value of expected future earnings on our in-force business and is a key driver of
long-term OPAT growth. CSM increased to US$53,115 million at 31 December 2023, reflecting an increase in the
rate of underlying CSM growth(4) to 8.4 per cent, driven by our continued delivery of large-scale and high-quality
new business.
024
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW Operating return on shareholders’ allocated equity (operating ROE) increased to 13.5 per cent compared with 13.0
per cent for the year 2022. Operating margin remained very strong at 16.4 per cent and reflects our high-quality
sources of earnings.
Shareholders’ allocated equity was US$50,684 million, an increase of 8 per cent before capital returns to
shareholders. Shareholders’ allocated equity was US$44,754 million at 31 December 2023 after payments to
shareholders.
UFSG of US$6,041 million grew by 5 per cent per share, reflecting increased expected returns resulting from
higher interest rates, partially offset by the impact of medical claims experience.
Free surplus provides the Group with the financial flexibility to invest in profitable growth and absorb the effects
of capital market stress. The Group’s financial position remained very strong with free surplus increasing by 25
per cent to US$22,259 million before capital returns to shareholders. Net of these payments, free surplus was
US$16,329 million at 31 December 2023 and compared with US$17,850 million at 31 December 2022.
The Group LCSM coverage ratio reported under the group-wide supervision (GWS) capital adequacy rules
remained very strong at 275 per cent at 31 December 2023. On the shareholder basis(5), the Group LCSM coverage
ratio was 335 per cent at 31 December 2023.
As at 31 December 2023, the US$10 billion share buy-back programme had repurchased approximately 740
million shares for an aggregate value of US$7,207 million. As a result, the outstanding share count has been
reduced by 6 per cent since we launched the programme in March 2022.
The Board of Directors (Board) has recommended a final dividend of 119.07 Hong Kong cents per share, subject
to shareholders’ approval at the Company’s forthcoming AGM. This brings the total dividend for 2023 to 161.36
Hong Kong cents per share, an increase of 5 per cent compared with the total dividend for 2022. 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, allowing us to continue our focus on
delivering significant profitable new business growth, leveraging our competitive advantages and financial
strength to deploy capital, while maintaining our strict financial discipline.
Notes:
(1) The Group’s 2023 consolidated financial statements were prepared according to IFRS 9 and IFRS 17 accounting bases, which AIA adopted from 1 January
2023 as previously disclosed. Commentaries on IFRS results throughout this report are similarly based on comparisons with the Group’s results for 2022
under IFRS 9 and IFRS 17.
(2) On an actual exchange rate (AER) basis.
(3) CSM refers to contractual service margin on a net of reinsurance basis.
(4) Underlying CSM growth refers to the growth in CSM after the CSM release and before variances and others and the effect of exchange rate movements,
expressed as a percentage of the opening CSM.
(5) Excludes the contribution from participating funds and other participating business with distinct portfolios except for Brunei and the Macau Special
Administrative Region of the People’s Republic of China (Macau SAR). Participating businesses in Brunei and the Macau SAR are not considered as
participating funds or other participating business with distinct portfolios under applicable local regulatory regimes in our LCSM reporting.
025
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION NEW BUSINESS PERFORMANCE
VONB, ANP AND MARGIN BY SEGMENT
US$ millions, unless otherwise stated
VONB
2023
VONB
Margin
ANP
VONB
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%
VONB Change
YoY
CER
YoY
AER
20%
82%
21%
10%
7%
–
30%
13%
82%
22%
13%
4%
(3)%
28%
ANP
1,319
1,078
655
531
440
1,384
5,407
1,037
51.3%
1,430
57.5%
713
394
319
406
93.3%
67.2%
67.3%
28.9%
4,299
55.6%
2,023
2,407
765
586
473
1,396
7,650
(43)
n/m
n/m
(52)
n/m
n/m
n/m
n/m
(187)
n/m
n/m
(192)
n/m
n/m
n/m
n/m
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
(35)
n/m
n/m
(29)
n/m
n/m
Total
4,034
52.6%
7,650
3,092
57.0%
5,407
4,069
52.6%
7,650
3,121
57.0%
5,407
33%
n/m
33%
30%
n/m
30%
AIA delivered excellent new business growth in 2023 with VONB up by 33 per cent to US$4,034 million and
double-digit growth in 10 of our markets. Our Premier Agency channel delivered VONB growth of 23 per cent and
a very strong recovery in our partnership distribution generated an increase of 58 per cent in VONB compared
with 2022.
Annualised new premiums (ANP) grew by 45 per cent to US$7,650 million. While a shift in the Group’s product
mix towards long-term savings and a greater bancassurance contribution in Mainland China explained a lower
VONB margin of 52.6 per cent in 2023, a more favourable product mix and repricing supported an improved VONB
margin of 54.5 per cent in the second half of the year compared with the first half. Margin reported on a present
value of new business premium (PVNBP) basis remained stable compared with 2022 at 10 per cent.
AIA China delivered 28 per cent VONB growth from February to December, compared with the same period in
2022, rapidly building excellent momentum once normal day-to-day activities resumed following the relaxation
of COVID-19 restrictions. VONB growth of 20 per cent in the full year was driven by double-digit growth in our
Premier Agency and excellent growth from our bancassurance channel. Our compelling customer propositions
supported double-digit growth in the number of new customers acquired, and in 2023, new customers contributed
over half of our new business in terms of both ANP and the number of new policies.
AIA Hong Kong achieved VONB growth of 82 per cent in 2023, supported by the return of Mainland Chinese visitors
following the resumption of cross-border travel in February and growth from our domestic customer segment. Our
Premier Agency remains the key contributor to VONB, supported by a 59 per cent increase in the number of new
recruits and excellent growth in new agent productivity. VONB in the partnership channel more than trebled,
supported by both our intermediated channels and long-term strategic partnerships with The Bank of East Asia,
Limited (BEA) and Citibank, N.A. (Citibank).
026
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW AIA Thailand reported a 21 per cent increase in VONB for the full year, driven by strong double-digit growth
from both our agency and partnership channels. Our continued focus on quality recruitment and training in our
agency channel supported excellent growth in the number of new recruits, a double-digit increase in the number
of active agents and strong growth in agent productivity. Performance in the partnership channel was supported
by excellent VONB growth through our strategic bancassurance partner, Bangkok Bank Public Company Limited
(Bangkok Bank).
AIA Singapore delivered 10 per cent VONB growth with a shift in product mix towards protection business. Our
agency channel achieved double-digit VONB growth in the second half of the year, resulting from an increase in
agent productivity. Our partnership channel reported excellent VONB growth in 2023.
AIA Malaysia achieved VONB growth of 7 per cent, building on very strong growth in 2022, driven by strong
performances from both our agency and partnership channels. We continued to further develop our Premier
Agency by enhancing our digital tools, leading to increases in agent activity and productivity.
VONB for our Other Markets segment was stable in 2023 compared to 2022. Strong underlying growth of the
segment was offset by lower VONB in Vietnam. As previously reported, negative consumer sentiment continued
to impact the life insurance industry in Vietnam through the year. Excluding Vietnam, Other Markets delivered 15
per cent VONB growth in 2023.
In aggregate, our ASEAN markets continued to demonstrate strong momentum in 2023 and are a key growth
engine for AIA. These markets accounted for over one third of the Group’s VONB, in excess of US$1,500 million.
Excluding Vietnam, our ASEAN markets delivered 14 per cent VONB growth, with double-digit growth from both
our agency and partnership channels.
Further details are included in the Business Review section of this report.
027
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION EV EQUITY
EV EQUITY MOVEMENT
EV Equity grew by 7 per cent in 2023 to US$76,083 million, before the return of US$5,930 million capital to
shareholders through dividends and our share buy-back, and compared with US$71,202 million at 31 December
2022.
The increase in EV Equity before capital return to shareholders was driven by a 33 per cent increase in EV operating
profit to US$8,890 million, reflecting the 33 per cent increase in VONB to US$4,034 million and 38 per cent growth
in expected return on EV to US$5,227 million, resulting from higher interest and risk discount rates. Operating
ROEV increased by 350 basis points(1) to 12.9 per cent from 9.4 per cent in 2022, supported by the positive effect
of the continuing share buy-back programme.
Overall operating experience variances and assumption changes continued to have a positive effect on EV Equity
in 2023 with a net addition of US$36 million. Operating experience variances of US$75 million were partially offset
by negative operating assumption changes of US$39 million, which include a specific provision of approximately
US$400 million for expected medical claims while we reflect current experience through higher premium rates
across our health insurance portfolios. Cumulative operating experience variances and assumption changes since
our IPO in 2010 have added US$3.9 billion to EV Equity, demonstrating our strategic focus on consistently writing
high-quality business over many years.
Non-operating items reduced EV Equity by US$3,727 million, including US$2,790 million of negative investment
return variances, which largely reflect equity market movements in Mainland China and Thailand and the effect of
lower government bond yields in Mainland China. Investment return variances include movement in the reported
value of our investment in China Post Life. At year end we updated long-term investment return assumptions
taking into account recent market movements, with reductions in Mainland China and increases across the rest
of the Group. Whilst in aggregate these have positive effects on future distributable cash flows, they were offset
by the effects of changes to risk discount rates. Changes to economic assumptions at the end of 2023 reduced
EV Equity by US$543 million overall. Other non-operating variances reduced EV Equity by US$394 million as the
positive effect of the adoption of the new Korean Insurance Capital Standard (K-ICS) was offset by adjustments to
capital requirements on consolidation.
The effect of foreign exchange rate movements on EV Equity was a small negative of US$210 million.
In 2023, EV equity therefore increased by US$4,881 million to US$76,083 million before returns to shareholders
through dividends and our share buy-back programme. After total capital returns to shareholders of US$5,930
million, EV Equity was US$70,153 million at 31 December 2023, an increase of 2 per cent per share.
While our EV methodology aims to calculate a best estimate of the value to shareholders of our in-force business,
our calculations deduct the value of the Group’s outstanding medium-term notes and securities at amortised cost.
If the medium-term notes and securities were measured at fair value, EV Equity would increase by US$932 million
to US$71,085 million.
Our investment in China Post Life is included in the Group’s EV Equity at IFRS net asset value. Pro-rated for AIA’s
24.99 per cent shareholding, the EV at 31 December 2023 (as prepared and reported by China Post Life) was
US$1,472 million higher than the IFRS net asset value.
Note:
(1) On an actual exchange rate (AER) basis.
028
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW An analysis of the movement in EV Equity is shown as follows:
2023
US$ millions, unless otherwise stated
Opening EV Equity
Value of new business
Expected return on EV
Operating experience variances
Operating assumption changes
Finance costs
EV operating profit
EV Equity before non-operating items
Investment return variances
Effect of changes in economic assumptions
Other non-operating variances
EV non-operating items
Total EV Equity profit
Other capital movements
Effect of changes in exchange rates
EV Equity before dividends and share buy-back
Dividends
Share buy-back
Closing EV Equity
ANW, goodwill
and other
intangible assets
36,088
(45)
5,115
97
286
(407)
5,046
41,134
(873)
(6)
681
(198)
4,848
(72)
(219)
40,645
(2,293)
(3,637)
34,715
VIF
35,114
4,079
112
(22)
(325)
–
3,844
38,958
(1,917)
(537)
(1,075)
(3,529)
315
–
9
35,438
–
–
35,438
EV Equity
71,202
4,034
5,227
75
(39)
(407)
8,890
80,092
(2,790)
(543)
(394)
(3,727)
5,163
(72)
(210)
76,083
(2,293)
(3,637)
70,153
029
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION US$ millions, unless otherwise stated
Opening EV Equity
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 Equity before non-operating items
Investment return variances
Effect of changes in economic assumptions
Other non-operating variances
EV non-operating items
Total EV Equity profit
Other capital movements
Effect of changes in exchange rates
EV Equity before dividends and share buy-back
Dividends
Share buy-back
Closing EV Equity
EV EQUITY PER SHARE
US$ millions, unless otherwise stated
ANW
VIF
EV
Goodwill and other intangible assets(1)
EV Equity
Number of ordinary shares outstanding (millions)
EV Equity per share (US dollars)
2022
ANW, goodwill
and other
intangible assets
VIF
EV Equity
35,316
8,407
2,168
10,575
(159)
4,838
513
(331)
(359)
4,502
50,393
(5,893)
(15)
(1,316)
(7,224)
7,853
(12)
(1,240)
41,917
(2,259)
(3,570)
36,088
39,685
(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
75,001
2,379
885
3,264
3,092
3,869
299
(56)
(359)
6,845
85,110
(5,392)
(300)
(20)
(5,712)
4,397
(12)
(2,355)
77,031
(2,259)
(3,570)
71,202
As at
31 December
2023
As at
31 December
2022
32,009
35,438
67,447
2,706
70,153
11,362
6.17
33,751
35,114
68,865
2,337
71,202
11,734
6.07
Note:
(1) Goodwill and other intangible assets are consistent with the figures in the consolidated financial statements and are shown net of tax, amounts attributable
to participating funds and non-controlling interests.
030
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW EV OPERATING EARNINGS PER SHARE
EV operating profit (US$ millions)
Weighted average number of ordinary shares
outstanding (millions)
Basic EV operating earnings per share (US cents)
Weighted average number of ordinary shares
outstanding on diluted basis (millions)(1)
Diluted EV operating earnings per share (US cents)(1)
2023
8,890
11,518
77.18
11,528
77.12
2022
6,845
11,929
57.38
11,938
57.34
YoY
CER
33%
n/a
37%
n/a
37%
YoY
AER
30%
n/a
35%
n/a
34%
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 36 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. The direction of interest rate sensitivities varies 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 2023
As at 31 December 2022
EV
% Change
EV
% Change
67,447
1,799
(1,823)
(981)
945
2023
VONB
4,034
129
(155)
2.7%
(2.7)%
(1.5)%
1.4%
% Change
68,865
1,817
(1,821)
(1,246)
1,347
2.6%
(2.6)%
(1.8)%
2.0%
2022
VONB
3,092
% Change
3.2%
(3.8)%
64
(81)
2.1%
(2.6)%
Please refer to Section 3 of the Supplementary Embedded Value Information for additional information.
031
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION IFRS PROFIT
OPAT(1) COMPOSITION
US$ millions, unless otherwise stated
CSM release
Operating variances
Risk adjustment release and other
Insurance service result
Net investment result
Investment management expenses
Net investment result after expenses
Net other fees and revenue(2)
Non-attributable expenses under IFRS 17
Finance costs
Other fees, revenue and expenses
Tax
OPAT
US$ millions, unless otherwise stated
OPAT
Weighted average number of ordinary shares
outstanding (millions)
Basic OPAT per share (US cents)
Weighted average number of ordinary shares
outstanding on diluted basis (millions)(3)
Diluted OPAT per share (US cents)(3)
2023
5,314
(304)
81
5,091
3,792
(187)
3,605
76
(1,004)
(453)
(1,381)
(1,102)
6,213
2023
6,213
11,518
53.94
11,528
53.89
2022
5,121
55
290
5,466
3,597
(186)
3,411
(74)
(955)
(377)
(1,406)
(1,050)
6,421
2022
6,421
11,929
53.83
11,938
53.79
YoY
CER
6%
n/m
(71)%
(5)%
6%
1%
6%
n/m
6%
20%
(1)%
6%
(1)%
YoY
CER
(1)%
n/a
2%
n/a
2%
YoY
AER
4%
n/m
(72)%
(7)%
5%
1%
6%
n/m
5%
20%
(2)%
5%
(3)%
YoY
AER
(3)%
n/a
–
n/a
–
Notes:
(1) Attributable to shareholders of the Company only, excluding non-controlling interests.
(2) After adjusting for non-insurance expenses.
(3) Diluted OPAT per share includes the dilutive effects, if any, of the awards under various share-based compensation plans as described in note 36 to the
consolidated financial statements.
OPAT of US$6,213 million in 2023 grew by 2 per cent per share. Operating ROE increased to 13.5 per cent compared
with 13.0 per cent for the year 2022 and operating margin remained very strong at 16.4 per cent, reflecting our
high-quality sources of earnings.
The CSM release increased by 6 per cent to US$5,314 million, driven mainly by the 18 per cent growth in new
business CSM added during the year. This increase was offset by the effects of higher medical claims, leading to
a 5 per cent decline in the insurance service result to US$5,091 million. Medical claims experience flows through
both operating variances and the risk adjustment release and “other”, which includes the earnings from our large
corporate solutions business. In line with global trends, we have seen a significant increase in claims across our
health insurance portfolios since the end of the pandemic. In response to the higher claims experience, we are
increasing premium rates for our health insurance portfolios as they renew.
032
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW We have made minor refinements to our models for the 2023 reported results applying a consistent approach
to IFRS 9 and IFRS 17 principles across our operations. Excluding the effect of higher medical claims and minor
model refinements, OPAT grew by 7 per cent per share on an underlying basis.
The net investment result after expenses increased by 6 per cent to US$3,605 million, mainly due to higher equity
asset balances and increased long-term investment return assumptions compared with 2022.
Other fees, revenue and expenses of negative US$1,381 million remained broadly stable compared with the prior
year. Finance costs increased to US$453 million mainly due to higher interest costs on repos used for liquidity
management and the increased outstanding balance on our Global Medium-term Note (GMTN) and Securities
Programme.
CSM MOVEMENT, NET OF REINSURANCE
US$ millions, unless otherwise stated
Opening CSM
New business CSM
Expected return on in-force
CSM before variances and others, exchange rates and release
Variances and others
Exchange rates
Closing CSM before release
CSM release
Closing CSM
CSM release rate(1)
Note:
2023
50,225
6,974
2,569
59,768
(992)
(347)
58,429
(5,314)
53,115
9.5%
2022
52,946
6,031
2,361
61,338
(3,901)
(2,091)
55,346
(5,121)
50,225
9.4%
(1) Calculated after variances and others and exchange rates. The Group enhanced the CSM release rate presentation by using end-of-period exchange rates
to derive the CSM release rate for the first half and the second half of the year respectively, and the full year CSM release rate is based on a blended rate
of the CSM release rates for the first half and the second half of the year. Under the previously used approach, the CSM release rate was 9.3 per cent for
the full year 2022.
The CSM represents the discounted value of expected future earnings on our in-force business without any
allowance for future new business. Growth in the CSM is a key driver of OPAT growth and, in 2023, we delivered a
17 per cent increase in CSM before the release to OPAT to US$58,429 million. CSM growth was driven primarily by
the addition of new business CSM of US$6,974 million and the expected return on in-force business of US$2,569
million. New business CSM grew by 18 per cent, reflecting the strong sales growth achieved in 2023.
CSM variances and others of negative US$992 million for 2023 were mainly driven by capital market movements
and include a specific provision of approximately US$400 million for expected medical claims while we reflect
current experience through higher premium rates across our health insurance portfolios. In the second half, CSM
variances and others were positive at US$451 million.
Foreign exchange rate movements reduced CSM by US$347 million in 2023.
The closing CSM balance of US$53,115 million reflects the release of CSM of US$5,314 million into OPAT. The
CSM release rate remained stable at 9.5 per cent for 2023 compared with 9.4 per cent for 2022. Net of the release
to OPAT, we delivered underlying growth in the CSM of US$4,229 million, equivalent to 8.4 per cent growth over
the year.
033
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION OPERATING NET INVESTMENT RESULT
The net investment result included in OPAT relates to non-participating business(1) and surplus assets. For
participating(2) and unit-linked business, investment returns are offset by corresponding movements in contract
liabilities as shown below.
2023
Non-
participating
and surplus
assets and
others
Participating
and
unit-linked
9,042
5,658
Total
14,700
(8,435)(3)
(1,866)(4)
(10,301)
US$ millions, unless otherwise stated
Investment return
Insurance finance expenses and others
Movement in investment contract liabilities
Movement in third-party interests in consolidated investment funds
Net investment result
(551)
(56)
–
US$ millions, unless otherwise stated
Interest revenue on financial assets
Expected long-term investment return for
equities and real estate
Investment return on non-participating and
surplus assets(5)
Non-participating insurance finance expenses
and others(4)
Net investment result
Investment management expenses
Net investment result after expenses
2023
4,295
2022
4,197
1,363
1,151
5,658
5,348
(1,866)
3,792
(187)
3,605
(1,751)
3,597
(186)
3,411
–
–
3,792
YoY
CER
3%
19%
7%
9%
6%
1%
6%
(551)
(56)
3,792
YoY
AER
2%
18%
6%
7%
5%
1%
6%
The investment return on non-participating and surplus assets(5) increased by 7 per cent to US$5,658 million
compared with 2022, driven by higher equity asset balances and increased long-term investment return
assumptions.
Non-participating insurance finance expenses and others(4) of US$1,866 million increased by 9 per cent from the
US$1,751 million reported for 2022.
The net investment result after expenses increased by 6 per cent to US$3,605 million compared with 2022.
Notes:
(1) Non-participating business includes all insurance liabilities under the general measurement model (GMM), covering traditional protection, unit-linked
with significant protection benefits, universal life and other participating business without distinct portfolios.
(2) Participating funds and other participating business with distinct portfolios under the variable fee approach (VFA).
(3) Primarily represents the insurance contract liability offset of participating and unit-linked investment return.
(4) Primarily represents the interest accreted on non-participating business liabilities.
(5) Non-participating and surplus assets are referred to as “Other policyholder and shareholder investments” in the IFRS Balance Sheet section of Group
Chief Financial Officer’s Review.
034
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW TWPI BY SEGMENT
US$ millions, unless otherwise stated
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
2023
8,589
11,554
4,425
3,912
2,565
6,894
2022
7,592
11,237
4,166
3,577
2,464
7,140
37,939
36,176
YoY
CER
20%
3%
6%
7%
8%
–
7%
YoY
AER
13%
3%
6%
9%
4%
(3)%
5%
TWPI increased by 7 per cent to US$37,939 million compared with 2022. All five of our largest operating segments
delivered positive TWPI growth in 2023. In Hong Kong, TWPI increased by 3 per cent, with a very strong ANP
growth partly offset by a cohort of long-term participating policies reaching the end of their premium payment
terms, while continuing to remain in-force and generate OPAT.
OPERATING EXPENSES
US$ millions, unless otherwise stated
Operating expenses
Less
Operating expenses of newly acquired or
established entities(1)
Operating expenses on a comparable basis
2023
3,573
159
3,414
2022
3,251
37
3,214
YoY
CER
12%
n/m
8%
YoY
AER
10%
n/m
6%
Excluding newly acquired or established entities, operating expenses grew by 8 per cent to US$3,414 million,
while expense ratio on TWPI remained stable at 9 per cent.
Note:
(1) Amplify Health, Blue Cross, Blue Care and MediCard.
NON-OPERATING MOVEMENT AND NET PROFIT(1)
Net profit was up 15 per cent to US$3,764 million in 2023. While investment markets remained volatile, the impact
of market movements on net profit is lower under IFRS 9 and IFRS 17 than under the previous accounting regime,
as previously indicated.
Net profit includes mark-to-market movements from equity and real estate investments backing non-participating
business and shareholder surplus. Short-term investment and discount rate variances were negative US$2,007
million in 2023, mainly reflecting the short-term movements in these asset classes compared with our long-term
investment return assumptions.
Other non-operating investment return and other items improved to negative US$369 million as the overall effect
of interest rate movements in 2023 was much smaller than 2022.
Note:
(1) Attributable to shareholders of the Company only, excluding non-controlling interests.
035
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
US$ millions, unless otherwise stated
OPAT
Short-term investment and discount rate variances,
net of tax(1)
Reclassification of revaluation gains for
property held for own use, net of tax(1)
Corporate transaction related costs, net of tax
Implementation costs for new accounting standards,
net of tax
Other non-operating investment return and
other items, net of tax
Net profit
US$ millions, unless otherwise stated
Net profit
Weighted average number of ordinary shares
outstanding (millions)
Basic earnings per share (US cents)
Weighted average number of ordinary shares
outstanding on diluted basis (millions)(2)
Diluted earnings per share (US cents)(2)
2023
6,213
2022
6,421
(2,007)
(1,134)
(8)
(30)
(35)
(369)
3,764
2023
3,764
11,518
32.68
11,528
32.65
(71)
(63)
(45)
(1,777)
3,331
2022
3,331
11,929
27.92
11,938
27.90
YoY
CER
(1)%
n/m
n/m
n/m
n/m
n/m
15%
YoY
CER
15%
n/a
19%
n/a
19%
YoY
AER
(3)%
n/m
n/m
n/m
n/m
n/m
13%
YoY
AER
13%
n/a
17%
n/a
17%
Notes:
(1) Short-term investment and discount rate variances include revaluation gains for property held for own use. This amount is then reclassified from net profit
to other comprehensive income to conform to IFRS® Accounting Standards measurement and presentation requirements.
(2) Diluted earnings per share includes the dilutive effects, if any, of the awards under various share-based compensation plans as described in note 36 to
the consolidated financial statements.
MOVEMENT IN SHAREHOLDERS’ ALLOCATED EQUITY
Shareholders’ allocated equity is shown before fair value reserve and insurance finance reserve which management
considers is a view of shareholders’ equity that better reflects the long-term nature of our business.
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
Shareholders’ allocated equity per share (US dollars)
Average shareholders’ allocated equity
2023
47,171
3,764
(2,293)
(3,637)
(215)
(115)
28
51
(2,417)
44,754
3.94
45,963
2022
51,277
3,331
(2,259)
(3,570)
(1,667)
(103)
62
100
(4,106)
47,171
4.02
49,224
Shareholders’ allocated equity increased by 8 per cent to US$50,684 million, before the payment of shareholder
dividends of US$2,293 million and US$3,637 million additional return of capital to shareholders through the share
buy-back programme. This compared with US$47,171 million at 31 December 2022. Shareholders’ allocated
equity was US$44,754 million at 31 December 2023.
036
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW CSM, NET OF REINSURANCE AND PROFIT BEFORE TAX SENSITIVITIES
Sensitivities for CSM and profit before tax to changes in equity price and interest rate movements, including
management actions, are shown below. The interest rate sensitivities apply a 50 basis points movement in current
bond yield curves to asset values and with a corresponding movement in discount rates applied to the calculation
of liabilities.
US$ 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 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
As at 31 December 2023
As at 31 December 2022
CSM
% Change
CSM
% Change
53,115
50,225
679
(694)
(487)
505
1.3%
(1.3)%
(0.9)%
1.0%
577
(579)
(713)
934
1.1%
(1.2)%
(1.4)%
1.9%
2023
2022
Profit
before tax
Profit
before tax
4,564
4,054
1,170
(1,172)
(150)
165
1,191
(1,190)
(112)
134
Sensitivity analyses on insurance risk and foreign exchange rate risk are included in note 34 to the consolidated
financial statements.
037
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Insurance and reinsurance contract liabilities
203,607
183,305
IFRS BALANCE SHEET
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
US$ millions, unless otherwise stated
Assets
Financial investments
Investment property
Cash and cash equivalents
Insurance and reinsurance contract assets
Other assets
Total assets
Liabilities
Investment contract liabilities
Borrowings
Other liabilities
Less total liabilities
Equity
Total equity
Less non-controlling interests
Shareholders’ equity
Less
Fair value reserve
Insurance finance reserve
Shareholders’ allocated equity
MOVEMENT IN SHAREHOLDERS’ EQUITY
US$ millions, unless otherwise stated
Opening shareholders’ equity
Net profit
Fair value gains/(losses) on assets
As at
31 December
2023
As at
31 December
2022(1)
Change
AER
248,958
235,954
4,504
11,525
7,504
13,828
286,319
4,600
8,969
7,800
13,148
270,471
9,170
11,800
20,148
11,986
11,206
18,826
244,725
225,323
41,594
483
41,111
516
(4,159)
44,754
45,148
476
44,672
(3,737)
1,238
47,171
2023
44,672
3,764
4,253
(5,397)
(2,293)
(3,637)
(215)
(115)
28
51
6%
(2)%
28%
(4)%
5%
6%
11%
(23)%
5%
7%
9%
(8)%
1%
(8)%
n/m
n/m
(5)%
2022
56,023
3,331
(10,378)
3,133
(2,259)
(3,570)
(1,667)
(103)
62
100
(3,561)
(11,351)
41,111
11,362
3.62
44,672
11,734
3.81
Net finance (expenses)/income from insurance contracts and reinsurance contracts held
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 outstanding (millions)
Shareholders’ equity per share (US dollars)
Note:
(1) Before the reclassification of assets and liabilities in the disposal group held for sale as described in note 42 to the consolidated financial statements.
038
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW
COMPREHENSIVE EQUITY
US$ millions, unless otherwise stated
Shareholders’ equity
Net CSM(1)
Comprehensive equity
Note:
(1) After allowing for reinsurance, taxes and net of non-controlling interests.
As at
31 December
2023
As at
31 December
2022
41,111
44,313
85,424
44,672
41,743
86,415
ASSETS
Total assets increased by US$15,848 million to US$286,319 million at 31 December 2023, driven mainly by
positive net investment cash inflows and fair value movements on debt securities.
LIABILITIES
Total liabilities increased to US$244,725 million at 31 December 2023 from US$225,323 million at 31 December
2022.
Insurance and reinsurance contract liabilities increased to US$203,607 million at 31 December 2023 compared
with US$183,305 million at 31 December 2022, driven mainly by net cash inflows, changes in liability discount
rates and changes in fair value of underlying items of contracts measured under the variable fee approach.
Investment contract liabilities decreased to US$9,170 million at 31 December 2023 compared with US$11,986
million at 31 December 2022. The decrease was driven mainly by the completion of the Australian Savings and
Investments transaction in the second half of 2023, as disclosed in note 42 to the consolidated financial statements.
Borrowings increased to US$11,800 million at 31 December 2023 from US$11,206 million at 31 December 2022.
Net proceeds from the issuances and redemption of medium-term notes and securities totalled US$496 million.
The leverage ratio, which is defined as total borrowings expressed as a percentage of the sum of total borrowings,
total equity and CSM net of reinsurance and net of taxes, was 12.1 per cent at 31 December 2023, compared with
11.4 per cent at 31 December 2022. The increase was largely due to a reduction in total equity following capital
returns to shareholders from shareholder dividends and share buy-back.
Other liabilities increased to US$20,148 million at 31 December 2023 from US$18,826 million at 31 December
2022, driven mainly by the increase in repos balance.
Details of commitments and contingencies are included in note 39 to the consolidated financial statements.
EQUITY
Shareholders’ equity increased to US$47,041 million, before the payment of shareholder dividends of US$2,293
million and US$3,637 million additional return of capital to shareholders through the share buy-back programme.
Shareholders’ equity reflects the other comprehensive income or expense from fair value gains on assets due
to unrealised market movements on debt securities and the net finance expenses from insurance contracts and
reinsurance contracts held due to liability discount rate changes in our non-participating business(1) and surplus
assets. In 2023, fair value gains on debt securities were US$4,253 million, offset by net finance expenses from
insurance contracts and reinsurance contracts held of US$5,397 million.
Shareholders’ equity was US$41,111 million at 31 December 2023.
Shareholders’ allocated equity is shown before fair value reserve and insurance finance reserve, which management
considers is a view of shareholders’ equity that better reflects the long-term nature of our business. Shareholders’
allocated equity was US$44,754 million at 31 December 2023.
Comprehensive equity of US$85,424 million at 31 December 2023 comprised shareholders’ equity of US$41,111
million and the CSM of US$44,313 million after allowing for reinsurance, taxes and net of non-controlling interests.
Note:
(1) Excluding unit-linked with significant protection benefits.
039
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION TOTAL INVESTMENTS(1)
US$ millions, unless otherwise stated
Total policyholder and shareholder
Total unit-linked contracts and consolidated
investment funds
Total investments
As at
31 December
2023
Percentage
of total
As at
31 December
2022
Percentage
of total
235,936
88%
218,295
87%
32,612
268,548
12%
100%
33,506
251,801
13%
100%
UNIT-LINKED CONTRACTS AND CONSOLIDATED INVESTMENT FUNDS(1)
US$ millions, unless otherwise stated
Unit-linked contracts and consolidated
investment funds
Debt securities
Loans and deposits
Equity investments(2)
Cash and cash equivalents
Derivative financial instruments
Total unit-linked contracts and consolidated
investment funds
As at
31 December
2023
Percentage
of total
As at
31 December
2022
Percentage
of total
7,052
65
24,776
713
6
22%
–
76%
2%
–
6,869
345
24,741
1,505
46
21%
1%
74%
4%
–
32,612
100%
33,506
100%
Notes:
(1) In preparing the consolidated financial statements, the Group enhanced the presentation to further split and allocate the underlying assets held by
consolidated investment funds to the respective fund segments of the asset-backing liabilities. Where consolidated investment funds are held by third-
party unit holders, these continue to be classified under consolidated investment funds. Please refer to notes 18 and 22 to the consolidated financial
statements for additional information.
(2) 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(1)
US$ millions, unless otherwise stated
Participating funds and other participating
business with distinct portfolios(2)
Government bonds
Government agency bonds
Corporate bonds and structured securities
Loans and deposits
Subtotal – Fixed income investments
Equity investments(3)
Investment property and property held for own use
Cash and cash equivalents
Derivative financial instruments
Subtotal participating funds and other
participating business with distinct portfolios
Other policyholder and shareholder
Government bonds
Government agency bonds
Corporate bonds and structured securities
Loans and deposits
Subtotal – Fixed income investments
Equity investments(3)
Investment property and property held for own use
Cash and cash equivalents
Derivative financial instruments
Subtotal other policyholder and shareholder
Total policyholder and shareholder
As at
31 December
2023
Percentage
of total
As at
31 December
2022
Percentage
of total
21,027
6,838
49,756
470
78,091
30,209
3,574
2,421
376
9%
3%
21%
–
33%
13%
2%
1%
–
15,514
6,971
46,534
885
69,904
27,548
3,206
2,166
249
114,671
49%
103,073
54,343
7,343
31,399
3,460
96,545
11,468
4,491
8,391
370
121,265
235,936
23%
3%
13%
2%
41%
4%
2%
4%
–
51,354
7,602
31,367
3,615
93,938
11,979
3,672
5,298
335
51%
100%
115,222
218,295
53%
100%
7%
3%
22%
–
32%
13%
1%
1%
–
47%
24%
3%
14%
2%
43%
6%
2%
2%
–
Notes:
(1) In preparing the consolidated financial statements, the Group enhanced the presentation to further split and allocate the underlying assets held by
consolidated investment funds to the respective fund segments of the asset-backing liabilities. Where consolidated investment funds are held by third-
party unit holders, these continue to be classified under consolidated investment funds. Please refer to notes 18 and 22 to the consolidated financial
statements for additional information.
(2) Participating fund 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.
(3) Includes equity shares, interests in investment funds and exchangeable loan notes.
041
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
Financial investments held in respect of policyholders and shareholders increased to US$235,936 million at 31
December 2023 compared with US$218,295 million at 31 December 2022.
Fixed income investments, including debt securities, loans and term deposits held in respect of policyholders
and shareholders, totalled US$174,636 million at 31 December 2023 compared with US$163,842 million at 31
December 2022.
Government bonds and government agency bonds increased to US$89,551 million from US$81,441 million and
represented 51 per cent of fixed income investments at 31 December 2023, compared with 50 per cent at 31
December 2022.
Corporate bonds and structured securities increased to US$81,155 million from US$77,901 million accounting for
47 per cent of fixed income investments at 31 December 2023, compared with 48 per cent at 31 December 2022.
The average credit rating of the fixed income portfolio including government bonds remained stable at A, compared
with the position at 31 December 2022. The average credit rating of the fixed income portfolio excluding domestic
government bonds(1) improved to A at 31 December 2023 from A- at 31 December 2022. The corporate bond
portfolio is well diversified with over 1,900 issuers and an average holding size of US$41 million.
At 31 December 2023, 2 per cent of the total bond portfolio was rated below investment grade or not rated,
representing approximately US$4.0 billion in value. Approximately US$558 million of bonds, representing 0.3 per
cent of our total bond portfolio, were downgraded to below investment grade during the period. Expected credit
loss (ECL) provision for bond portfolio measured at amortised cost and measured at fair value through other
comprehensive income increased by US$177 million during the year. The ECL provision represented 0.5 per cent
of the bond portfolio at 31 December 2023, reflecting AIA’s overall high-quality investment portfolio.
Equity investments held in respect of policyholders and shareholders totalled US$41,677 million at 31 December
2023, compared with US$39,527 million at 31 December 2022.
Cash and cash equivalents held in respect of policyholders and shareholders increased by US$3,348 million to
US$10,812 million at 31 December 2023 compared with US$7,464 million at 31 December 2022.
Note:
(1) Domestic government bonds refer to bonds issued in local or foreign currencies by the government where the respective business unit operates.
042
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW CAPITAL
FREE SURPLUS
The Group’s free surplus is the excess of adjusted net worth over required capital, including consolidated reserving
and capital requirements, adjusted for certain assets not eligible for regulatory capital purposes. Free surplus
provides the Group with the financial flexibility to invest in profitable growth and absorb the effects of capital
market stress.
The Group’s capital position remained very strong with free surplus increasing to US$22,259 million before total
shareholder dividends and share buy-back of US$5,930 million. After capital returned to shareholders during the
year, free surplus was US$16,329 million at 31 December 2023.
Free surplus invested in writing new business increased by 8 per cent to US$1,328 million.
The following table summarises the change in free surplus:
US$ millions, unless otherwise stated
Opening free surplus
Effect of acquisitions
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 and other items,
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
2023
17,850
(238)
–
–
6,041
(1,328)
(302)
(479)
21,544
715
22,259
(2,293)
(3,637)
16,329
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
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 period before investment in new business, unallocated Group Office expenses, finance costs,
investment return variances and other non-operating items.
UFSG of US$6,041 million grew by 5 per cent per share, driven by an increased expected return resulting from
higher interest rates, partially offset by the effect of increased medical claims compared with 2022.
043
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION UNDERLYING FREE SURPLUS GENERATION PER SHARE
UFSG (US$ millions)
Weighted average number of ordinary shares
outstanding (millions)
Basic UFSG per share (US cents)
Weighted average number of ordinary shares
outstanding on diluted basis (millions) (1)
Diluted UFSG per share (US cents) (1)
Note:
2023
6,041
11,518
52.45
11,528
52.40
2022
6,039
11,929
50.62
11,938
50.59
YoY
CER
2%
n/a
5%
n/a
5%
YoY
AER
–
n/a
4%
n/a
4%
(1) Diluted UFSG per share includes the dilutive effects, if any, of the awards under various share-based compensation plans as described in note 36 to the
consolidated financial statements.
GROUP LCSM SOLVENCY POSITION
Under the GWS capital adequacy rules, the Group’s solvency is measured based on the Local Capital Summation
Method (LCSM), which aggregates the available capital, minimum capital requirements and prescribed capital
requirements measured under the regulatory requirements of each entity within the Group.
In 2023, the Group LCSM coverage ratio increased to 288 per cent before the effect of the share buy-back
programme, an increase of 5 pps from 283 per cent at 31 December 2022. After the return of capital to shareholders
through the share buy-back, the Group LCSM coverage ratio at 31 December 2023 remained very strong at 275
per cent.
In 2023, eligible group capital resources increased from US$70,698 million to US$73,156 million, driven mainly
by in-force business capital generation and the effects of regulatory changes, partially offset by the effect of the
share buy-back programme.
The group prescribed capital requirement (GPCR) increased from US$24,989 million to US$26,646 million due to
new business and the effects of regulatory changes.
As a result, the Group LCSM surplus increased from US$45,709 million to US$46,510 million.
Tier 1 group capital increased from US$45,508 million to US$46,980 million, driven mainly by the in-force business
capital generation and the effects of regulatory changes, partially offset by the effect of the share buy-back
programme. The group minimum capital requirement (GMCR) increased from US$12,810 million to US$13,613
million due to new business and the effects of regulatory changes.
044
GROUP CHIEF FINANCIAL OFFICER’S REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW The table shows a summary of the Group LCSM solvency position on the GWS basis as at 31 December 2023.
US$ millions, unless otherwise stated
Group LCSM coverage ratio(1)
Tier 1 group capital coverage ratio(2)
Eligible group capital resources
Tier 1 group capital
Tier 2 group capital
Group prescribed capital requirement (GPCR)
Group minimum capital requirement (GMCR)
Group LCSM surplus
As at
31 December
2023
275%
345%
73,156
46,980
26,176
26,646
13,613
46,510
As at
31 December
2022
283%
355%
70,698
45,508
25,190
24,989
12,810
45,709
A shareholder view of the Group LCSM is also presented to show the position excluding the Group’s participating
business(3) and for comparability with other companies which report on this basis. The Group LCSM coverage ratio
on the shareholder basis, defined as the ratio of eligible group capital resources, excluding participating business,
to the GPCR excluding participating business, was 335 per cent at 31 December 2023.
US$ millions, unless otherwise stated
Group LCSM coverage ratio
Eligible group capital resources
GPCR
Group LCSM surplus
Notes:
As at 31 December 2023
As at 31 December 2022
Shareholder
Shareholder
GWS basis
275%(1)
73,156
26,646
46,510
basis(3)
335%
53,885
16,076
37,809
GWS basis
283%(1)
70,698
24,989
45,709
basis(3)
356%
53,046
14,884
38,162
(1) The Group LCSM coverage ratio on the GWS basis shown in the tables is referred to as the “eligible group capital resources coverage ratio” in the GWS
framework and is defined as the ratio of the eligible group capital resources to the GPCR.
(2) The Tier 1 group capital coverage ratio is defined in the GWS framework as the ratio of the Tier 1 group capital to the GMCR.
(3) Excludes the contribution from participating funds and other participating business with distinct portfolios except for Brunei and the Macau SAR.
Participating businesses in Brunei and the Macau SAR are not considered as participating funds or other participating business with distinct portfolios
under applicable local regulatory regimes in our LCSM reporting.
At 31 December 2023, eligible group capital resources on the GWS basis included the following items, which are
included within Tier 2 group capital:
(i) US$4,183 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$5,158 million(1) of senior notes issued before designation that have been approved by the Hong Kong
Insurance Authority (HKIA) as capital. Prior to maturity, the approved senior notes receive full capital credit
until 14 May 2031, after which the capital credit reduces at the rate of 20 per cent per annum until 14 May
2036.
Note:
(1) The amounts represent the carrying value of medium-term notes and securities contributing to eligible group capital resources.
045
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP LCSM COVERAGE RATIO SENSITIVITIES
Group LCSM coverage ratio sensitivities arising from changes to the central assumptions from equity price and
interest rate movements, applied consistently with those in EV, are shown below.
Interest rate sensitivities apply a 50 basis points movement in current bond yield curves to asset values with a
corresponding movement in discount rates applied to the calculation of liabilities. The amount of eligible debt
capital is equal to the carrying value and is unchanged in the sensitivity calculations. The direction of interest rate
sensitivities varies by market.
Central value
Impact of equity price changes
10 per cent increase in equity prices
10 per cent decrease in equity prices
Impact of interest rate changes
50 basis points increase in interest rates
50 basis points decrease in interest rates
As at
31 December
2023
275%
As at
31 December
2022
283%
1 pps
(2) pps
(10) pps
10 pps
4 pps
(5) pps
(6) pps
5 pps
RECONCILIATION BETWEEN GROUP LCSM SURPLUS AND FREE SURPLUS
AIA considers free surplus on a consolidated basis a more representative view of the capital position of the Group
from a shareholder perspective. The table below shows a reconciliation between the Group LCSM surplus and free
surplus on a consolidated basis.
US$ millions, unless otherwise stated
Group LCSM surplus
Adjustments for:
Eligible Tier 2 debt capital
Different capital requirements under EV for AIA China(1)
Reflecting shareholders’ view of capital(2)
Free surplus on business unit basis
Adjustment to reflect consolidated reserving and capital requirements
Free surplus on consolidated basis
As at
31 December
2023
As at
31 December
2022
46,510
45,709
(9,341)
(5,658)
(8,202)
23,309
(6,980)
16,329
(9,379)
(5,622)
(7,353)
23,355
(5,505)
17,850
Notes:
(1) Adjustment from C-ROSS solvency basis to China Association of Actuaries (CAA) EV basis in line with local requirements.
(2) Mainly reflects the removal of surplus of participating funds and other participating business with distinct portfolios.
046
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 entities 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 2023.
The key developments in local solvency requirements are summarised as follows:
Mainland China
On 10 September 2023, the National Financial Regulatory Administration published “Notice on optimising
regulatory solvency standards for insurance companies”. The impacts were reflected in the Group’s EV and LCSM
results where applicable.
Hong Kong SAR(1)
The HKIA is in the final stages of preparation for the implementation of a Risk-based Capital (RBC) regime for the
Hong Kong insurance industry and is expected to implement the new Hong Kong Risk-based Capital (HKRBC)
regime in 2024.
In April 2022, AIA International, our principal operating entity in Hong Kong, obtained approval from the HKIA
to early-adopt HKRBC and report its solvency on the HKRBC basis with an effective date of 1 January 2022. The
Group’s other operating entities in Hong Kong, including AIA Co. and AIA Everest, remain subject to the current
Hong Kong Insurance Ordinance (HKIO) basis and will be subject to the revised legislation when it takes effect.
Macau SAR
In December 2023, the Monetary Authority of Macao (AMCM) started a consultation and assessment process to
develop an RBC framework for the insurance industry of Macau, with a draft Bill expected in 2027.
South Korea
The new K-ICS has taken effect for AIA Korea from 1 January 2023. Similar to other modern risk-based capital
regimes for insurers, this new capital regime is based on an economic balance sheet approach, with a current
market-based assessment of assets and liabilities, including a risk margin within the assessment of liabilities and
a risk-based assessment of capital requirements. The effects of these changes have been reflected in the Group’s
EV and LCSM results with effect from 1 January 2023.
New Zealand
In October 2022, the Reserve Bank of New Zealand (RBNZ) released its final interim solvency standards (ISS),
which came into force on 1 January 2023. The effects of the changes in the new solvency standard have been
reflected in the Group’s EV and LCSM results with effect from 1 January 2023 where applicable.
Note:
(1) Hong Kong SAR refers to the Hong Kong Special Administrative Region of the People’s Republic of China.
047
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION HOLDING COMPANY FINANCIAL RESOURCES
Holding company financial resources increased to US$14,070 million before shareholder dividends of US$2,293
million and the US$3,637 million additional return of capital to shareholders through the share buy-back
programme.
Net capital flows to the holding company of US$3,180 million was driven by US$3,292 million of capital flows
from subsidiaries. Capital flows from subsidiaries increased by US$387 million compared with last year, after
considering the one-off remittance of US$1,436 million from excess surplus held in AIA Co. to the holding company
in 2022 as previously disclosed.
Borrowings increased holding company financial resources by US$396 million, while investment income and
mark-to-market movements increased holding company financial resources by US$244 million.
After total capital returns to shareholders of US$5,930 million, holding company financial resources were
US$8,140 million at 31 December 2023.
The movements in holding company financial resources are summarised as follows:
US$ 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 paid
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
Notes:
2023
10,668
3,292
(112)
3,180
396
–
(418)
244
14,070
(2,293)
(3,637)
8,140
2022
13,136
4,341
(2,479)
1,862
1,653
985
(359)
(780)
16,497
(2,259)
(3,570)
10,668
As at
31 December
2023
As at
31 December
2022
66
(831)
(135)
57
(600)
(69)
(1) Borrowings principally include medium-term notes and securities; other intercompany loans; and amounts outstanding, if any, from the Company’s
US$2,980 million unsecured committed credit facilities.
(2) As at 31 December 2023, loans to/amounts due from subsidiaries was US$895 million (31 December 2022: US$886 million). US$66 million was
recoverable within the 12 months after 31 December 2023 (31 December 2022: US$57 million).
(3) As at 31 December 2023, medium-term notes and securities placed to the market was US$11,764 million (31 December 2022: US$11,206 million).
US$831 million was repayable within the 12 months after 31 December 2023 (31 December 2022: US$500 million). Details of the medium-term notes
and securities placed to the market are included in note 26 to the consolidated financial statements.
048
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, on 4 April 2023, the Company issued US
dollar-denominated fixed rate medium-term notes, which comprised US$600 million of 10-year notes at an annual
rate of 4.95 per cent. On 12 September 2023, the Company issued Singapore dollar (SGD) 550 million of resettable
subordinated perpetual securities at an annual rate of 5.10 per cent. Both are listed on The Stock Exchange of
Hong Kong Limited.
As at 31 December 2023, the aggregate carrying amount of the debt issued to the market under the GMTN and
Securities Programme was US$11,764 million compared with US$11,206 million at 31 December 2022.
CREDIT RATINGS
As at 31 December 2023, AIA Co. had financial strength ratings of AA (Very Strong) with a stable outlook from
Fitch; AA- (Very Strong) with a stable outlook from S&P Global Ratings; and Aa2 (Very Low Credit Risk) with a
negative outlook from Moody’s. Moody’s revised the outlook on AIA Co. from stable to negative on 8 December
2023 following the agency’s decision to change both Mainland China and Hong Kong SAR sovereign ratings
outlook from stable to negative.
As at 31 December 2023, the Company had issuer credit ratings of AA- (Very High Credit Quality) with a stable
outlook from Fitch; A+ (Strong) with a stable outlook from S&P Global Ratings; and A1 (Low Credit Risk) with
a negative outlook from Moody’s. Moody’s revised the outlook on the Company from stable to negative on 8
December 2023 following the agency’s decision to change both Mainland China and Hong Kong SAR sovereign
ratings outlook from stable to negative.
DIVIDENDS
The Board has recommended a final dividend of 119.07 Hong Kong cents per share, subject to shareholders’
approval at the Company’s forthcoming AGM. This brings the total dividend for 2023 to 161.36 Hong Kong cents
per share, an increase of 5 per cent compared with the total dividend for 2022. 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. Since the commencement of the programme, approximately 740 million shares were repurchased for an
aggregate value of US$7,207 million as at 31 December 2023. All the shares repurchased were subsequently
cancelled.
049
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION BUSINESS REVIEW
SUMMARY AND KEY BUSINESS HIGHLIGHTS
In 2023, AIA delivered 33 per cent growth in VONB as strong business momentum continued post the pandemic.
Execution of our strategic priorities and our continued focus on delivering compelling propositions and a
comprehensive range of products to our customers across the region supported double-digit VONB growth in 10
of our markets. We have continued to develop and enhance digital tools to support our agents and partners to
deliver a seamless customer journey, driving excellent growth across both our agency and partnership distribution
channels.
DISTRIBUTION
Our agency channel delivered 23 per cent VONB growth in 2023, demonstrating our ongoing commitment to
enhancing the quality of our differentiated agency distribution. Continued execution of our Premier Agency strategy
supported strong growth in the number of active agents and double-digit growth in agent productivity and agent
incomes across the Group, excluding Vietnam where we continue to transform our agency. AIA was named the
number one Million Dollar Round Table (MDRT) multinational company globally for the ninth consecutive year,
demonstrating the effectiveness of our differentiated strategy.
VONB for our partnership channel grew by 58 per cent, underpinned by our extensive network of market-leading
strategic distribution partners. Our bancassurance channel delivered 42 per cent VONB growth as we continued
to collaborate with our bank partners to upskill our insurance sellers and strengthen our digital capability. VONB
from the intermediated channels, including independent financial advisers (IFAs) and brokers, more than doubled
driven by the return of Mainland Chinese visitors in Hong Kong following the reopening of the border in February.
GEOGRAPHICAL MARKETS
AIA China delivered 28 per cent VONB growth from February to December, compared with the same period in
2022, rapidly building excellent momentum once normal day-to-day activities resumed following the relaxation
of COVID-19 restrictions. VONB growth of 20 per cent in the full year was driven by double-digit growth in our
Premier Agency and excellent growth from our bancassurance channel. Our compelling customer propositions
supported double-digit growth in the number of new customers acquired, and in 2023, new customers contributed
over half of our new business in terms of both ANP and the number of new policies.
AIA Hong Kong achieved VONB growth of 82 per cent in 2023, supported by the return of Mainland Chinese
visitors following the resumption of cross-border travel in February and growth from our domestic customer
segment. Our Premier Agency remains the key contributor to VONB, supported by a 59 per cent increase in the
number of new recruits and excellent growth in new agent productivity. VONB in the partnership channel more
than trebled, supported by both our intermediated channels and long-term strategic partnerships with The Bank
of East Asia, Limited (BEA) and Citibank, N.A. (Citibank).
050
AIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW AIA Thailand reported a 21 per cent increase in VONB for the full year, driven by strong double-digit growth
from both our agency and partnership channels. Our continued focus on quality recruitment and training in our
agency channel supported excellent growth in the number of new recruits, a double-digit increase in the number
of active agents and strong growth in agent productivity. Performance in the partnership channel was supported
by excellent VONB growth through our strategic bancassurance partner, Bangkok Bank Public Company Limited
(Bangkok Bank).
AIA Singapore delivered 10 per cent VONB growth with a shift in product mix towards protection business. Our
agency channel achieved double-digit VONB growth in the second half of the year, resulting from an increase in
agent productivity. Our partnership channel reported excellent VONB growth in 2023.
AIA Malaysia achieved VONB growth of 7 per cent, building on very strong growth in 2022, driven by strong
performances from both our agency and partnership channels. We continued to further develop our Premier
Agency by enhancing our digital tools, leading to increases in agent activity and productivity.
VONB for our Other Markets segment was stable in 2023 compared to 2022. Strong underlying growth of the
segment was offset by lower VONB in Vietnam. As previously reported, negative consumer sentiment continued
to impact the life insurance industry in Vietnam through the year. Excluding Vietnam, Other Markets delivered 15
per cent VONB growth in 2023.
In aggregate, our ASEAN markets continued to demonstrate strong momentum in 2023 and are a key growth
engine for AIA. These markets accounted for over one third of the Group’s VONB, in excess of US$1,500 million.
Excluding Vietnam, our ASEAN markets delivered 14 per cent VONB growth, with double-digit growth from both
our agency and partnership channels.
051
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION UNRIVALLED DISTRIBUTION
AGENCY
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
2023
3,219
65.4%
4,922
2022
2,659
73.2%
3,632
YoY CER
23%
(8.0) pps
38%
YoY AER
21%
(7.8) pps
36%
AIA’s unparalleled, proprietary Premier Agency is a core competitive advantage and sits at the heart of our
relationship with our customers. Our professional agency meets the diverse and rapidly growing needs of millions
of customers across Asia through personalised advice and our comprehensive suite of products. We hold market-
leading positions across the region and have been named the number one Million Dollar Round Table (MDRT)
multinational in the world for the ninth consecutive year.
The consistent execution of our Premier Agency strategy has enabled us to deliver VONB growth of 23 per cent
and ANP growth of 38 per cent in 2023, as new business momentum improved with the relaxation of pandemic-
related restrictions. Overall, agency distribution accounted for 76 per cent of the Group’s total VONB in 2023.
We support our agency force with new and enhanced digital tools that cover agency recruitment and onboarding,
activity management and new leads generation. Our best-in-class training is designed to fast track their
development and support them in achieving a full-time professional and productive career. Excluding Vietnam, we
delivered strong growth in the number of active agents, and double-digit growth in agent productivity and agent
incomes. Our social media integrated leads management platform enabled our agents to leverage their social
media networks systematically and with curated content, helping to reach new customer segments.
Quality recruitment is critical to our Premier Agency strategy. In Hong Kong, the deployment of an AI-supported
digital interview tool contributed to a 59 per cent increase in the number of new recruits. Across the Group, we
onboarded over 80 per cent of new agents in 2023 through iRecruit, our digital recruitment platform. We delivered
a strong double-digit growth in the number of new recruits for the Group when excluding Vietnam, where we
continue to transform our agency.
Developing our next-generation agency leaders is a key strategic priority, with a focus on ensuring high-quality
recruitment, training and management as we prioritise growth in professional agents across our markets. In
2023, our agency leadership programmes successfully generated a 10 per cent increase in the number of agency
leaders, building additional capacity for agency growth.
AIA’s differentiated long-term strategy is the foundation of our professional and productive agency force. AIA China,
AIA Hong Kong, AIA Thailand and Tata AIA Life Insurance Company Limited (Tata AIA Life) are all in the top five
companies with the highest number of MDRT members globally. Our continued leadership in MDRT demonstrates
the effectiveness of our Premier Agency strategy.
052
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW PARTNERSHIPS
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
2023
1,031
37.8%
2,728
2022
665
37.5%
1,775
YoY CER
58%
0.1 pps
57%
YoY AER
55%
0.3 pps
54%
AIA’s extensive network of market-leading strategic distribution partners extends our market reach and provides us
with the unique opportunity to engage and meet the protection, health, and long-term savings needs of hundreds
of millions of potential customers across Asia.
In 2023, VONB for our partnership channel grew by 58 per cent to US$1,031 million, driven by excellent performances
from both bancassurance and intermediated channels. Partnership distribution business contributed 24 per
cent of AIA’s total VONB in 2023.
Our bancassurance channel delivered a 42 per cent increase in VONB in 2023, driven by growth from the majority
of our markets through the strong collaboration with bank partners, including our regional exclusive partners of
BEA and Citibank, as well as Postal Savings Bank of China Co., Ltd. in Mainland China, Bangkok Bank in Thailand,
Public Bank Berhad (Public Bank) in Malaysia, and Bank of the Philippine Islands (BPI) in the Philippines.
Our long-term strategic partnerships with leading banks are a key competitive advantage for AIA and we continue
to work closely with them, including the delivery of structured training that upskills insurance sellers and
leveraging the strength of our digital capabilities to provide customers with a seamless omnichannel experience.
This has driven an increase in our core business metrics, including higher productivity of our insurance sellers at
our strategic partners in Mainland China, Hong Kong, Thailand, Malaysia, Indonesia and the Philippines.
Our digitally-led bancassurance strategy enables us to access previously untapped customers, and in 2023 helped
generate over 3 million leads. For example, our strategic partnership with BPI delivered excellent growth in VONB
as we continued to roll out social media and digital marketing tools to engage with our customers.
VONB from our intermediated channels, including IFAs and brokers, more than doubled in 2023, supported by the
return of Mainland Chinese visitors in Hong Kong following the reopening of the border in February.
053
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION GEOGRAPHICAL MARKET HIGHLIGHTS
MAINLAND CHINA
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2023
1,037
51.3%
2,023
8,589
1,548
2022
916
69.5%
1,319
7,592
1,551
YoY CER
20%
(18.3) pps
62%
20%
5%
YoY AER
13%
(18.2) pps
53%
13%
–
AIA China delivered 28 per cent VONB growth from February to December, compared with the same period in 2022,
driven by excellent momentum once normal day-to-day activities resumed following the relaxation of COVID-19
restrictions. VONB growth of 20 per cent in the full year was driven by double-digit growth in our Premier Agency
and excellent growth from our bancassurance channel.
Very strong customer demand for our long-term savings products supported ANP growth of 62 per cent. The
resulting product mix shift coupled with an increased contribution from bancassurance, where VONB margin is
substantially below that of our agency, led to a lower VONB margin for the year. However, repricing and a favourable
shift in product mix delivered an increase in VONB margin to 52.7 per cent for the second half of 2023, compared
with the first half of the year, supported by improvement in both our Premier Agency and bancassurance channels.
OPAT increased 5 per cent to US$1,548 million, reflecting growth in our in-force portfolio.
AIA’s commitment to our long-established Premier Agency strategy is a key differentiator and provides significant
competitive advantages for AIA China. Our continued focus on quality recruitment, best-in-class training and
digitally-enabled leader development delivered year-on-year growth in the number of new recruits and active
agents with increased momentum in the second half. Navigator, our powerful data-driven agency digital platform,
enables agents to more effectively attract, nurture, engage and service our customers. In 2023, we further evolved
Navigator with scenario-based customer acquisition and a product recommendation module, supporting excellent
growth in agent productivity.
VONB for our bancassurance channel more than trebled, driven mainly by our deepening cooperation with Postal
Savings Bank of China Co., Ltd, and our exclusive partnership with BEA. We continue to work with our strategic
partners to improve customer experience and deliver compelling propositions to meet the needs of their customers.
During 2023, we further strengthened our compelling customer propositions with new integrated value-added
services tailored to our customers’ evolving needs. We successfully launched Cancer Shield, which offers end-
to-end cancer prevention management services, two tax-deductible private pensions schemes, an innovative
retirement proposition to add to our differentiated Health and Wellness ecosystem, and a set of comprehensive
services for overseas education. Our compelling customer propositions supported double-digit growth in the
number of new customers acquired. In 2023, new customers contributed over half of our new business in terms of
both ANP and the number of new policies.
Mainland China offers tremendous growth potential for AIA, both within our existing footprint and in new
geographies. Following the successful launch of our new operation in Zhengzhou, Henan in May, we upgraded
our Shijiazhuang licence to cover all of Hebei province and we were granted approvals by the regulator to begin
preparations for expansion into more cities in Hubei and Sichuan. By replicating our efficient and scalable model
across these new operations, we delivered excellent growth in the number of active agents in these geographies.
China Post Life
We completed our 24.99 per cent equity investment in China Post Life Insurance Co., Ltd. (China Post Life) in
2022. For clarity, AIA China’s reported results and the above table do not include any contribution from China Post
Life. China Post Life delivered VONB growth of 17 per cent in 2023 compared with 2022, as prepared and reported
by 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.
054
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW HONG KONG
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2023
1,430
57.5%
2,407
11,554
2,180
2022
787
69.5%
1,078
11,237
2,202
YoY CER
82%
(12.0) pps
123%
3%
(1)%
YoY AER
82%
(12.0) pps
123%
3%
(1)%
AIA Hong Kong achieved VONB growth of 82 per cent in 2023, supported by the return of Mainland Chinese
visitors following the resumption of cross-border travel in February and growth from our domestic customer
segment. We provide a comprehensive suite of propositions for a broad range of customer segments that balance
wealth and protection solutions. Strong demand for our flagship participating savings product supported overall
ANP more than doubling to US$2,407 million while contributing to a lower VONB margin of 57.5 per cent. The
results were also supported by strong growth in our flagship participating critical illness product, which had an 84
per cent increase in the number of policies sold compared with 2022. Following the successful launch of our AIA
Wealth Management Centre in March 2023, we have launched AIA Alta Wellness Haven and introduced AIA Club
Alta in September, both offering integrated health and wealth management services alongside exclusive lifestyle
privileges and experiences for our customers.
OPAT of US$2,180 million was broadly flat as growth in the in-force portfolio was offset by the effect on investment
income, resulting from a US$2,800 million remittance to the Group Corporate Centre in 2022 to support the share
buy-back programme, as well as increased medical claims. Excluding the impact of medical claims, OPAT growth
was 2 per cent. We repriced the majority of our medical business in 2023 and we plan to further increase premium
rates in 2024.
Our Premier Agency remains the key contributor to AIA Hong Kong’s VONB and delivered excellent VONB growth in
2023, demonstrating the quality and professionalism of our people and disciplined execution of our agency strategy.
We continued to focus on supporting and enabling our agents with digital tools to increase their productivity while
we further enhanced our recruitment programme to attract diverse and high-calibre new agents. The number of
new recruits grew by 59 per cent and we achieved excellent growth in new agent productivity.
VONB in our partnership distribution channel more than trebled compared to last year. The excellent performance
contributed by our intermediated channels was supported by the resumption of cross border travel for Mainland
Chinese visitors. Our long-term strategic partnerships with BEA and Citibank both also delivered excellent VONB
growth, driven by improvements in activity and productivity.
055
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION THAILAND
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2023
713
93.3%
765
4,425
951
2022
585
89.1%
655
4,166
977
YoY CER
21%
4.2 pps
16%
6%
(3)%
YoY AER
22%
4.2 pps
17%
6%
(3)%
AIA Thailand delivered 21 per cent VONB growth and a 16 per cent increase in ANP, driven by strong double-digit
new business growth from both our market-leading agency channel and partnership distribution. VONB margin
increased to 93.3 per cent, supported by increased sales of our critical illness rider products. AIA Thailand is the
market leader for new business premiums in Thailand. OPAT increased by 3 per cent when excluding the effects
of model refinements.
In agency, our continued focus on quality recruitment and training with ongoing support from our experienced
leaders and powerful digital platforms drove excellent growth in the number of new recruits, a double-digit
increase in the number of active agents and strong growth in agent productivity. We achieved excellent growth in
the number of new Financial Advisers (FAs), resulting in a further increase in the number of FAs as a proportion of
the total agency force. In October, we launched an integrated agent journey platform, which empowers agents to
provide more personalised advice and improves productivity with real-time management information, automated
lead generation and scheduling as well as AI-powered training.
Our strategic bancassurance partner, Bangkok Bank, delivered excellent VONB growth, driven by higher
productivity of insurance sellers and increased new business from health protection products with the launch of
AIA Vitality with the bank in March. We introduced new training programmes focused on activation management,
resulting in an increased number of active insurance sellers.
SINGAPORE
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2023
394
67.2%
586
3,912
669
2022
349
65.7%
531
3,577
655
YoY CER
10%
1.5 pps
8%
7%
(2)%
YoY AER
13%
1.5 pps
10%
9%
2%
AIA Singapore delivered 10 per cent VONB growth, supported by ANP growth across all distribution channels
and an increase in VONB margin of 1.5 pps to 67.2 per cent, which was driven by a shift in product mix towards
protection products.
OPAT declined slightly partly due to lower investment income resulting from an increased remittance to the Group
Corporate Centre of US$300 million in 2023 to support the share buy-back programme. While we saw higher
medical claims compared with last year, the effect was offset by positive experience from non-medical claims.
Our Premier Agency achieved double-digit VONB growth in the second half of the year, supported by an increase
in agent productivity. We continue to invest in digital tools to enhance productivity through lead generation and
more holistic financial planning and advisory services for our customers. AIA Singapore’s comprehensive suite of
products and services helped to attract new talent with double-digit growth in the number of new recruits for the
year.
Our partnership channel recorded excellent VONB growth, driven by our strategic partnership with Citibank and
new business from other partners, which are focused on affluent and high net worth customers. In August, we
launched AIA Platinum Infinite Wealth, a new savings plan designed for long-term wealth accumulation and
intergenerational wealth transfer, which supported an increase in sales in our broker channel.
056
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW MALAYSIA
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2023
319
67.3%
473
2,565
293
2022
308
69.9%
440
2,464
362
YoY CER
7%
(2.6) pps
12%
8%
(17)%
YoY AER
4%
(2.6) pps
8%
4%
(19)%
AIA Malaysia achieved VONB growth of 7 per cent and ANP growth of 12 per cent in 2023, building on very strong
growth in 2022.
OPAT declined by 17 per cent, as growth in our in-force portfolio was more than offset by higher medical claims;
excluding the impact of these, OPAT growth was 8 per cent. We repriced medical business in 2023, with further
premium increases planned for 2024.
Our agency delivered VONB growth in 2023 as we continued to enhance our digital tools, supporting increases in
agent activity and productivity. Our partnership channel delivered strong VONB growth, supported by our strategic
partnership with Public Bank, as we collaborated to increase penetration of the bank’s high net worth customer
segment and increased the number of insurance specialists.
OTHER MARKETS
US$ millions, unless otherwise stated
VONB
VONB margin
ANP
TWPI
OPAT
2023
406
28.9%
1,396
6,894
560
2022
420
30.2%
1,384
7,140
710
YoY CER
–
(1.4) pps
4%
–
(13)%
YoY AER
(3)%
(1.3) pps
1%
(3)%
(21)%
Overview
VONB for our Other Markets segment was stable in 2023 compared to 2022. Strong underlying growth of the
segment was offset by lower VONB in Vietnam. As previously reported, negative consumer sentiment continued
to impact the life insurance industry in Vietnam through the year. Excluding Vietnam, Other Markets delivered 15
per cent VONB growth in 2023.
OPAT for Other Markets declined by 6 per cent when excluding the effects of model refinements as disclosed in
the previous section, as new business growth was offset by unfavourable medical claims experience compared to
last year.
Geographical Market Highlights
Australia: AIA Australia recorded strong VONB growth in 2023, supported by a double-digit increase in group
insurance business as we benefitted from new members joining existing group schemes, successful renewals and
also new business. In addition, we achieved higher sales in retail protection, enabled by our integrated life, health
and well-being propositions.
Cambodia: AIA Cambodia delivered strong ANP growth, driven by both agency and group insurance business.
Our agency’s continued focus on quality recruitment and training led to improved agent activity, enabled by our
powerful digital tools.
057
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION India: Tata AIA Life’s protection-focused, multi-channel distribution platform achieved excellent VONB growth in
2023, supported by all channels. We launched innovative products and maintained our industry-leading position
in the retail protection market. Tata AIA Life was the third largest private life insurer in India in 2023, based on
individual weighted new business premiums. Our differentiated Premier Agency delivered excellent results and
further expanded its reach through new, digitally-enabled branch openings across the country. We also delivered
strong double-digit growth from our partnership distribution channel and broadened our distribution reach
through new partnerships.
Indonesia: While AIA Indonesia’s VONB declined overall in 2023, we delivered an increase in agent productivity as
we continue to rebuild the fundamentals of our agency. Productivity of the insurance sellers in our bancassurance
channel also increased, as we continued to work with our bank partners and further enhanced training.
Myanmar: AIA Myanmar’s ANP more than doubled in both our agency and partnership channels, driven by excellent
growth in the number of active agents and wider coverage of our bank partner’s branches.
New Zealand: AIA New Zealand delivered double-digit ANP growth in both our bancassurance and IFA channels in
2023 as we continued to strengthen our relationships with our partners. Our strategic partnership with ASB Bank
Limited delivered strong ANP growth and a double-digit increase in the productivity of our insurance specialists.
Philippines: AIA Philippines achieved double-digit VONB growth, supported by ANP growth and an increased
VONB margin from a shift in new business towards participating products. Our partnership with BPI delivered
excellent VONB growth as the number of active in-branch insurance specialists increased by double-digits.
South Korea: AIA Korea delivered excellent VONB growth in 2023, driven by the continued performance from our
bancassurance channel, where VONB and ANP more than doubled.
Sri Lanka: AIA Sri Lanka delivered excellent ANP growth in 2023, supported by our agency and partnership
distribution channels. Agency growth was supported by strong recruitment momentum and higher sales activity.
In November, we expanded our bancassurance footprint by entering into a new long-term exclusive bancassurance
partnership with the Commercial Bank of Ceylon PLC, the largest private bank in Sri Lanka.
Taiwan (China): AIA Taiwan reported double-digit VONB growth in 2023, driven by our bancassurance partnerships
and improved productivity in our direct marketing channel.
Vietnam: AIA Vietnam’s VONB declined in 2023 as negative consumer sentiment continued to impact insurance
sales momentum for the industry. AIA Vietnam continues its efforts to build a long-term sustainable foundation
through enhanced quality recruitment, improved agency development programmes and compelling propositions.
We have seen a gradual month-on-month improvement in new business volumes in the last quarter of 2023.
058
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW TECHNOLOGY, DIGITAL AND ANALYTICS
In June 2020, we set out our ambition for AIA to become a market-leader in the use of technology, digital and
analytics (TDA) to enable every aspect of our business. We have made significant, targeted investments over
the past three years and these have accelerated AIA’s transformation into a customer-centric, world-class, and
digitally-enabled insurer. We are now an industry leader in cloud adoption, enabling rapid deployment of digital
tools and emerging technologies across the organisation. Our extensive TDA programme has delivered significant
improvements in operational efficiency, customer experience and distribution productivity. We have also enhanced
the Group’s risk management with more timely and effective monitoring of business, financial and cyber risks.
Since June 2020, we have invested around US$800 million in specific TDA projects across the Group to position
all of our businesses for sustained growth. We estimate that the TDA transformation has generated annualised
recurring savings of more than US$150 million through expense and claims efficiencies while driving productivity
improvements across our distribution that supported our excellent VONB growth in 2023.
The success of our TDA transformation has been recognised externally through numerous awards, including:
InsuranceAsia News – Digital Insurer of the Year in 2021, 2022 and 2023; International Insurance Society’s 2023
Global Innovation Award – Life/Health/Retirement Innovator of the Year; and IDC Future Enterprise Awards 2023
Asia/Pacific – Best in Future of Digital Infrastructure for the Group.
We continue to see TDA as a key enabler of our strategic priorities, driving sustainable business growth and
creating shareholder value. The first phase of the transformation focused primarily on transforming the Group’s
core technology and digital applications and was completed successfully at the end of 2023. We are now focused
on leveraging our digital enablement and extensive proprietary data using generative artificial intelligence (AI) to
support better decision-making, streamline operations, further increase distributor productivity and deliver even
better customer experiences. TDA is also at the heart of AIA’s Integrated Health Strategy, which aims to make
healthcare more accessible, more affordable and more effective to people across Asia.
WORLD-CLASS TECHNOLOGY
Across the Group, we have driven a dramatic shift to on-demand cloud technology and software as a service
(SaaS) solutions while retiring our legacy systems. AIA’s adoption of cloud technology had reached 90 per cent at
the end of 2023, up from just 15 per cent in June 2020. AIA’s adoption of cloud technology is well ahead of global
financial services and insurance industry average levels. While overall processing capacity has more than doubled
since June 2020, our information technology infrastructure costs have remained stable.
AIA’s modern technology infrastructure enables us to rapidly deliver and scale innovative solutions across the
Group and we are well positioned to leverage emerging technologies such as generative AI.
DIGITAL ENABLEMENT
Superior and personalised digital experiences provide better customer service and outcomes while bringing
us richer data and deeper customer insights. Across the Group, more than 20 million existing and prospective
customers now engage with us digitally and benefit from our high-quality digital experiences.
Our super app, AIA+, further elevates the digital experience with an expanded and integrated range of new services
across life, health and wellness. AIA+ is now operational in Mainland China, Thailand, Malaysia and Vietnam,
delivering increased customer engagement and higher repurchase rates. We plan to deploy AIA+ in more markets
in 2024.
059
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION In 2023, we continued to enhance our digital agency tools, adding extensive new features across 10 markets
with many powered by AI and analytics solutions. Our intelligent agency recruitment platform in Hong Kong has
supported higher productivity and improved retention of new agent recruits. In Malaysia, our high-potential agency
leaders who were identified by our analytics model delivered double the sales and recruitment activities compared
with regular agency leaders. Our agents rate our powerful digital tools highly with an average in-app rating of 4.7
out of 5 across the Group.
ANALYTICS
Over the last three years we have implemented more than 330 data and analytics high-impact use cases across
the Group, further deepening and industrialising our use of AI and analytics. Our data platforms are richer, faster
and more reliable, enabling efficient access and insights. The size of our data resources is seven times the 2020
levels while the speed of data processing increased by five times, and we are generating deeper and more powerful
insights in real-time. Our analytics solutions have enhanced customer experiences and increased the productivity
of our distribution, and we have established the foundations for the deployment of generative AI solutions at scale.
We have deployed AI in our underwriting processes, resulting in faster and more reliable decisions, and AI-powered
premium payment reminder calls to support higher persistency and customer retention. In our claims processing,
optical character recognition (OCR) technology and AI-adjudication support faster turnaround time while reducing
fraud, waste and abuse.
In our Premier Agency, we continue to enhance our digital tools with greater automation, AI and analytics across
the entire agency value chain. To support growth in high-quality recruitment, we have deployed AI solutions for
candidate profiling, hiring assessment and interviews. Agents are provided with personalised training programmes
that take into account attributes such as tenure, type of agent and performance to tailor the right training content
to each agent’s individual development journey. These are integrated into our agency management systems,
enabling our agency leaders to monitor and track individual progress and outcomes.
DATA GOVERNANCE AND RESPONSIBLE USE OF AI
AIA is committed to leading data quality and protection standards; we have implemented over 7,500 data quality
rules to ensure the quality and integrity of the data we use to serve our customers, delivering better decision-making
and enhanced user experiences.
Advancements in generative AI bring new risks, such as copyright infringements and the generation of incorrect
or misleading information. We continue to strengthen our governance on the responsible use of AI with additional
controls and guidelines specifically for generative AI. Our focus is on ensuring fairness and prevention of
unintended bias in our AI-driven processes. Our Responsible Use of Artificial Intelligence Standard demonstrates
our commitment to maintaining trust, promoting innovation and avoiding negative impacts on customer satisfaction
and our reputation.
CYBERSECURITY
Safeguarding the personal information of our customers, employees and distributors is a key priority for AIA,
and we are dedicated to keeping our systems and processes secure and protected. In 2023, AIA continued to
maintain the International Organization for Standardization (ISO) 27001 certification covering identity access
management, cybersecurity and cloud security operations. Additionally, Service Organization Controls ISAE
3000 Type II Report was obtained for AIA Company Limited’s Group Information Security services in 2022. Since
cybersecurity is constantly evolving, we are continuously upgrading our defences and response mechanisms, as
well as raising awareness and educating all key stakeholders of the organisation. We will continue to invest in
information security safeguards, including a focus in the areas of new cyber defence technologies, data protection
and automation, to ensure sufficient and robust operational controls that meet our information security objectives.
060
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW COMPELLING PROPOSITIONS
In 2023, we developed new products and services that broadened the customer segments we serve, made our
propositions more accessible, expanded our offerings to meet a wider set of needs, and delivered greater long-term
value to our customers.
AIA’s compelling and high-quality propositions meet our customers’ protection and long-term savings needs
across their life stages and are supported by professional advice. Our propositions motivate and reward customers
for taking actions that positively impact their physical and financial health, help them seek the best treatment and
encourage them to save more effectively to meet their financial needs. We aim to align AIA’s financial success to
the health and well-being of our customers, delivering our Purpose of helping people live Healthier, Longer, Better
Lives.
We design our propositions based on insights into our customers’ needs gained through our deep relationships,
extensive consumer research, data and analytics and test and learn approaches. The pandemic has reshaped our
customers’ needs, priorities and expectations, and we have identified four key trends across our markets that
are helping us develop more relevant and targeted solutions for our customers, including: diverging lifestyles
and lifepaths, a changing vision of retirement, sustaining through financial challenges and taking health into the
customer’s own hands.
Leveraging these insights, we are developing propositions that broaden the customer segments we serve, deepen
the coverages within each segment and address our customers’ personalised needs through their life stages.
We are also progressing our Integrated Health Strategy, which is focused on delivering more accessible, more
affordable and more effective healthcare for our customers through health technology and analytics.
INTEGRATED SOLUTIONS TO MEET CUSTOMER NEEDS
Providing relevant ecosystem services is key to our proposition strategy. AIA Vitality is our leading health and
wellness programme, that is integrated with our products, supporting and rewarding our customers for staying
healthy. We continued to expand AIA Vitality in 2023 by launching in Vietnam and adding more than 60 new
integrated products across the 11 existing AIA Vitality markets. Around 60 per cent of our new customers are
adding AIA Vitality to their policies when given the option to do so. The number of AIA Vitality members grew by
22 per cent over 2022 levels.
Broadening Segments that We Serve
AIA Thailand launched AIA Health Saver in 2023, an affordable health insurance product, making healthcare more
accessible for the mass market segment. With over 60 per cent of policies coming from customers new to AIA,
the product has successfully tapped into lower income segments and further extended our market leadership
in health and protection. AIA Thailand has also launched AIA for Kids for young and emerging families. The
proposition offers a tailored package of unit-linked products with health riders, providing parenting support for
child development through our leading digital platform, ALive.
To capitalise on the significant number of high net worth individuals in the region, AIA Hong Kong provides
one-stop financial and wellness services through dedicated wealth and wellness centres. Our loyalty programme,
AIA Club Alta, offers premium wealth management, health and wellness services and exclusive access to lifestyle
events and experiences. In Singapore, we continued to strengthen our affluent and high net worth propositions,
upgrading our loyalty programme and broadening our high net worth solutions, targeting both onshore and
offshore customers. The scale of these loyalty programmes across these markets continued to grow, with over
170,000 members.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Holistic Retirement Propositions
AIA China further strengthened its range of retirement propositions with the launch of two tax-deductible private
pension products in 2023. Customers are supported by a wide choice of retirement services providing home-based,
community-based and institution-based retirement support alongside medical care and assistance that caters to
different stages of retirement. A critical success factor for these products is the support of AIA China’s Premier
Agents who are trained and certified to provide professional advice to our customers on their retirement needs.
The proposition has successfully attracted younger and affluent customers, delivering strong VONB growth in
long-term savings and offering significant opportunities for customer acquisition and future cross-selling.
In Singapore, we launched AIA Centurion, a first-in-market simplified underwriting personal accident product
that provides protection, home care services and on-demand telemedicine consultations for customers with
multi-stage dementia, making our protection solution more accessible to elderly customers while helping them to
live independently.
Health and Protection
In Mainland China and Hong Kong, we further strengthened our protection propositions and enhanced the
ecosystem of health and wellness services to better support our customers through their increasingly complex
health journeys. To reduce the risks of cancer and limit its impact, AIA China launched Cancer Shield, a cancer
prevention and screening service attached to our products to help customers seek early and timely treatments
along with extended and upgraded medical case management services.
AIA Hong Kong continues to lead the market in innovative critical illness propositions. Our Cancer Guardian product
supports customers with a range of highly relevant and integrated services to help predict, prevent, diagnose,
treat and recover from cancer. To better support our Mainland Chinese visitor customers, AIA Hong Kong also
launched AIA CarePass in 2023, a first-in-market programme with exclusive medical support services, helping our
customers easily obtain high-quality medical care in Hong Kong.
In India, Tata AIA Life has also launched a first-in-market health solution offering life and health cover, wellness
services and medical benefits while helping customers grow their wealth over time. Tailored to meet the needs
of more affluent segments, the product offers a range of value-added health services including cashless hospital
admissions, significantly broadening the customer needs that we can address.
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BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW AIA’S INTEGRATED HEALTH STRATEGY
AIA’s Integrated Health Strategy aims to make healthcare more accessible, more affordable and more
effective for millions of people in Asia. In 2023, we made good progress by delivering more integrated
health insurance and healthcare provision, more proactively managing healthcare providers and deploying
best-in-class claims management solutions across our markets, leveraging Amplify Health, AIA’s leading
health insurtech business.
Personalised Health Insurance
We are developing more personalised and relevant health propositions that help customers access
healthcare services with greater convenience and a more integrated experience, delivering better health
outcomes at lower cost. In response to recent medical cost inflation, AIA Malaysia launched a range of new
products with various deductible and co-payment options which, together with AIA Vitality, incentivises
our customers towards healthier behaviours and more effective healthcare pathways.
Integration with Outpatient Clinics
Healthcare delivery is often not as effective as it could be with customer journeys that are fragmented,
complex and difficult to navigate, leading to variability in outcomes and higher medical costs. By better
integrating with healthcare providers, we proactively guide customers along their healthcare journeys,
helping to avoid unnecessary costs and delivering improved health outcomes.
Day surgery centres generally provide a lower cost setting compared with inpatient hospital treatments
and we are expanding our day surgery centre networks across our markets. AIA-owned clinics, including
those acquired through MediCard in the Philippines and Blue Care in Hong Kong, provide our customers
with greater choice and more cost-effective treatments. In Singapore, we have expanded our network of
day surgery centres with preferred fee arrangements, helping us better manage medical costs for our
customers.
Advanced Healthcare Administration and Management
AIA’s healthcare administration and management ensures that customers have the support of a high-quality
network that delivers more accessible, more affordable and more effective healthcare services. In 2023,
we enhanced our claims management process and delivered improvements in customer experience
through greater claims automation, increased straight-through processing and reduced fraud, waste and
abuse. By digitalising our claims processes, we are also gaining large amounts of additional health data
that support analytics for better health provider management and product development.
Amplify Health
Amplify Health, leveraging its full range of health insurtech assets and expertise, has developed a broad
suite of services that will accelerate the capability build for AIA’s businesses and support the creation of
sustainable competitive advantages in health insurance. These assets include access to a significant health
information dataset – 600 million member months of longitudinal health data over 15 years – providing
AIA with significant opportunities as we deploy our health insights to deliver more effective healthcare
for our customers. In addition to digital health engagement, other services being deployed include
healthcare provider management and optimisation, AI-driven core claims and benefits management,
payment integrity assessments, customer insights analysis and product design. Amplify Health’s solutions
currently process over 700,000 claims in 2023 for AIA Singapore with plans for continued scaling of its
solutions to other AIA markets in the future.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION LEADING CUSTOMER EXPERIENCE
We are focused on deploying digitalisation, automation, and AI and analytics across all key stages of our customers’
journeys to deliver outstanding customer experience through simple, quick, personalised and scalable processes.
Real-time customer surveys, complaint monitoring and service level tracking help us to continuously enhance our
processes and deliver the best experience.
The delivery of our strategic priorities over the last three years has supported enhanced operational efficiency
and improved customer satisfaction and loyalty. Across our buy, service and claims transactions, 85 per cent are
now completed within one day, up from 50 per cent at the end of 2020. In 2023, AIA ranked first in seven of our
markets by Net Promoter Score (NPS), a key measure of how we meet our customer expectations. Our process
enhancements are supporting improvements in persistency and ensure that customers continue to benefit
from our valuable protection for longer. Our efforts have also been recognised externally including the CX Asia
Excellence Awards 2023 – Best Customer Experience Gold Award.
Our leading customer digital apps and streamlined processes are driving greater customer engagement and
generating richer customer insights, helping us deepen customer relationships and grow customer lifetime value.
We are now focused on deploying generative AI to deliver more intelligent and personalised operations, further
increasing customer satisfaction, engagement and repurchase.
TRANSFORMING CUSTOMER JOURNEYS
Customer preferences are evolving rapidly with increased demand for high-quality and efficient digital interactions.
In response, we have extensively digitalised our processes and shifted to digital servicing models. In December
2023, 94 per cent of all of our customer submissions across buy, service and claims transactions were made
digitally.
Straight-through processing (STP) is our key measure of customer journey automation across buy, service and
claims journeys. For the Group, our end-to-end STP across all three journeys reached 85 per cent in December
2023, an increase from 35 per cent in June 2020. AIA China had the highest overall STP of 91 per cent among our
businesses and seven of our markets were above 80 per cent in December 2023.
Continuous monitoring of customer feedback and satisfaction levels allows us to identify and respond quickly to
our customers’ evolving needs. We have deployed real-time customer surveys at key customer touch points in all
of our markets and our Customer Satisfaction Score (CSAT) stood at an excellent 93 per cent in December 2023.
We have made it easier for our customers to purchase policies by simplifying underwriting rules, better leveraging
existing customer data and increasingly employing AI. In 2023, 79 per cent of new business policies were
underwritten automatically and we have improved the end-to-end STP rate for our buy transactions by 36 pps to
72 per cent since June 2020.
For servicing transactions, we have reduced turnaround times through various initiatives, including deploying
optical character and facial recognition technologies. In 2023, end-to-end service STP for the Group reached
92 per cent, an increase of 50 pps from June 2020, and six of our markets achieved rates of 85 per cent or higher
in December 2023.
We are focused on delivering a leading customer experience for customers using our contact centres with lower
headcount by leveraging the use of AI-powered voicebots and chatbots. In 2023, our contact centres achieved a
CSAT score of 98 per cent.
064
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW We have redesigned our claims processes, leveraging OCR technology, AI and digital payment connectivity, leading
to faster and more cashless settlements. End-to-end claims STP increased from 22 per cent in June 2020 to
75 per cent in December 2023. In December 2023, we settled 78 per cent of claims within one day and we paid
99 per cent of claims digitally.
DEEPENING RELATIONSHIPS WITH OUR CUSTOMERS
We aim to build deep and long-lasting relationships with our customers. Our customer engagement model is
supported by rich customer data sets, extensive analytics and leading marketing technology to drive greater
engagement and cross-sell rates. We are deploying behavioural models from real-time customer interactions
across AIA’s digital ecosystem to drive more targeted and personalised engagements, reaching more customers
and increasing existing customer cross-sell rates.
In 2023, we saw a 17 per cent increase in the number of existing customers who bought another policy from AIA,
and 15 per cent growth in VONB through cross-selling and up-selling compared with 2022. We use data and
analytics to ascertain the most optimal point to engage with our customers. For example, we launched successful
thematic campaigns in Hong Kong and Singapore to engage with our customers at key moments that matter to
them, such as birthdays, festive seasons, a newborn child or an upgrade in AIA Vitality membership tier. As a result,
we are seeing improved uptake and higher case size from these targeted marketing offers. In Thailand, we were
able to identify customers with high protection needs and record a significant uplift in conversion rates when
compared to non-targeted campaigns.
CUSTOMER ENGAGEMENT THROUGH DIGITAL CHANNELS
Customers increasingly prefer to engage with us digitally. In respect of this, we have significantly increased our
digital engagement capabilities through both AIA’s proprietary digital assets and our partnerships with digital
platforms.
These yielded promising results in 2023, with over 1.8 million customers acquired through digital platform
partnerships across Thailand, Malaysia, and India. Close to 500,000 of these customers also bought another
insurance policy from AIA, more than doubling the number over 2022 levels.
Enhanced and new features on our website, including an updated design and enhanced search engine optimisation,
supported an increase in unique visitors, generating over two million leads to our agency channel, and supporting
the generation of over US$130 million of ANP for the Group in 2023.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 and our strong commitment to developing our people.
SHAPING A SIMPLER, FASTER, MORE CONNECTED AIA
We started our journey to transform AIA into a simpler, faster, more connected organisation in the second half of
2020 to support the execution of our strategy. By the end of 2023, the majority of our larger local business units
have completed the implementation of new operating models to support the delivery of our strategic priorities.
These simplified and sustainable structures ensure we have the right resources performing in the right roles to
achieve our ambitions and put our people closer to decision-making by reducing the number of organisational
layers. This has led to better business outcomes and a more empowered organisation.
In 2023, we continued to embed and strengthen our cross-functional operating model in eight of our markets,
where these agile teams collaborate on some of our most important strategic initiatives. These new ways of working
are successfully helping us focus on customer needs, innovate at pace and deliver business benefits more rapidly.
BUILDING A FUTURE READY WORKFORCE
Ensuring that we have people with the right skills is critical to both support and leverage the Group’s TDA
transformation. As at 31 December 2023, approximately 20 per cent of our employee workforce(7) comprises talent
with TDA skill sets, an increase of 73 per cent since 1 July 2020. This material investment marks a step change in
our talent capabilities and underpins our ability to execute our growth strategy.
In 2023, we launched new programmes that continue to build our capabilities in core lines of business, including
our Distribution Leadership Programme and the AIA Design Academy, which focuses on building the Group’s
internal human-centred design skills. We also developed programmes to upskill employees and nurture talent,
including LIFT (Learn. Integrate. Focus. Thrive), a 12-month Group-wide support framework for new employees.
RECOGNISED AS AN EMPLOYER OF CHOICE
AIA’s annual employee engagement survey demonstrates our continued positive employee sentiment. Our 2023
survey was completed by 98 per cent of employees, with the Group’s employee engagement scores placing AIA
in the 92nd percentile of Gallup’s global finance and insurance industry benchmark. Our employee engagement
levels have remained in the top quartile of this benchmark for seven consecutive years and in the top 10th
percentile for three consecutive years.
In 2023, our continued focus on our people has resulted in several local and global awards, including the Gallup
Exceptional Workplace Award, an accolade that celebrates companies that have a highly engaged workforce and
performance-oriented culture.
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 adopted IFRS 9 and IFRS 17 from 1 January 2023. Comparative information of OPAT has been restated for 2022.
(4) AIA China’s financial results do not include any contribution from our 24.99 per cent shareholding in China Post Life.
(5) ANP and VONB for Other Markets include the results from our 49 per cent shareholding in 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 2023 and the twelve-month period ended 30 September 2022 in AIA’s consolidated results for the twelve-month period ended 31 December
2023 and the twelve-month period ended 31 December 2022, respectively.
(7) Overall number of employees includes full-time and part-time employees as well as employees on fixed-term contracts, and excludes interns, agents of
the Group, employees of MediCard, Amplify Health, our joint venture Tata AIA Life and our associate China Post Life.
066
BUSINESS REVIEWAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW FINANCIAL AND OPERATING REVIEW
REGULATORY AND INTERNATIONAL
DEVELOPMENTS
INSURANCE CAPITAL STANDARD
In 2020 the International Association of Insurance Supervisors (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. A public consultation on the
ICS was conducted by the IAIS in 2023. In the second phase, it is expected that the ICS as a group prescribed capital
requirement will be formally launched by the IAIS at the end of 2024, and for group supervisors then to consider its
implementation, taking into account specific market circumstances.
The Aggregation Method (AM) is an alternative being developed by US regulators, that would define group solvency
by referencing the local regimes to which a group is subject. The IAIS has begun the comparability assessment that
will ascertain whether AM provides comparable outcomes to the ICS. The IAIS collected data for the comparability
assessment in 2023 and aims to make the final decision by the end of 2024.
In addition to ICS, the IAIS is working on key strategic themes that affect the insurance sector and the broader
financial system, including on climate-related risk, financial inclusion, digital innovation, operational resilience and
cyber risk, protection gaps and diversity, equity and inclusion. AIA will continue to monitor these developments
closely.
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 relevant governments and the OECD on their
work. In 2021, the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) published draft Global Anti-Base
Erosion (GloBE) Model Rules to give effect to Pillar Two of BEPS 2.0, which imposes a global minimum effective tax
rate (ETR) on large multinational enterprises in respect of each jurisdiction in which they operate. 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. However, on 22 February 2023, it was announced in the Hong Kong
Budget that Hong Kong will defer the application of the GloBE rules, and also the introduction of a domestic minimum
top-up tax, to start from 2025 onwards. This announcement, which was reaffirmed when Hong Kong initiated its
public consultation on Pillar Two income taxes on 21 December 2023, reflects similar deferrals announced by other
jurisdictions (e.g., the European Union, Vietnam, South Korea, Australia and New Zealand, which have deferred until
2024, and Malaysia, Singapore and Thailand, which have also deferred until 2025).
Once Pillar Two income taxes are effective, the Group is expected to become liable to pay top-up tax on the difference
between its Pillar Two ETR, calculated on a jurisdiction-by-jurisdiction basis, and a 15 per cent minimum rate,
regardless of the Group’s overall ETR. As a result of specific adjustments set out in the Pillar Two income tax rules,
which result in different ETRs compared to those arising on an IFRS basis, jurisdictions with an accounting ETR
above 15 per cent may still be exposed to paying Pillar Two income taxes in any given year. Conversely, a jurisdiction’s
accounting ETR may be below 15 per cent, yet it still may not be exposed to Pillar Two income taxes.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION REGULATORY AND INTERNATIONAL DEVELOPMENTS
There remain significant areas of uncertainty around the application of Pillar Two income taxes. As an insurer, the
difficulties in accurately forecasting each entity’s net profit and its constituent components for future periods when
the Pillar Two income taxes are in effect (most notably due to fluctuations in investment returns) renders any estimate
of Pillar Two income tax liabilities inherently unreliable. There also continues to be uncertainty in relation to the
application of key areas of the rules, particularly as they relate to insurance companies. On top of these uncertainties,
most of the jurisdictions in which the Group operates, including Hong Kong and certain of our other major markets,
have not yet published domestic legislation to enact Pillar Two income taxes. Therefore, it is also uncertain which
jurisdiction’s Pillar Two legislation will apply to each entity and the precise provisions of each set of applicable
legislation when it comes into effect. In this context, the Group considers that the quantitative impact of Pillar Two
income taxes on AIA is not yet reasonably estimable. The Group has engaged tax specialists to assist with applying
the Pillar Two income tax rules. However, based on currently available information, Pillar Two income taxes are likely
to adversely affect AIA’s ETR from 2025 onwards.
068
AIA 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 our obligations
to them. For investors, it is key to protecting and enhancing the long-term value of their investment. Finally,
for regulators, sound risk management supports industry growth and enhances the public’s trust in the industry.
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 Group’s RMF provides business units with appropriate tools, processes and capabilities for
the ongoing identification, assessment, management and response, monitoring and reporting of the Group’s principal
risks in an integrated manner.
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. 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 and Compliance
(Second Line) and Internal Audit (Third Line) functions.
The First Line is made up of the business, who are the Risk Takers and are responsible for operating within the
Group’s RMF, including implementing effective controls to mitigate risks within the Risk Appetite of the Group and
the relevant business unit.
The Second Line consists of the Risk and Compliance function, which provides independent challenge and advice
to the First Line. It ensures that the Group’s RMF remains appropriate and effective with respect to the risk profile
and operations, and risks are being managed appropriately within Risk Tolerances of the Group and the relevant
business unit.
The Third Line is the Group Internal Audit (GIA) function, which is independent of the Executives and reports to the
Audit Committee of the Board. GIA is responsible for independently assess and report on the overall effectiveness of
risk management, internal controls and governance processes.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION The Three Lines of Defence converge at the Board, which retains overall responsibility for the Group’s RMF. The Group
Board is supported and advised by four Board Committees, namely the Audit Committee, the Risk Committee, the
Remuneration Committee and the Nomination Committee.
RISK COMMITTEE STRUCTURE
The 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 Group’s 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 Chairperson, being Independent Non-executive Directors. The Risk Committee meets at
least four times a year.
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 (CRO) 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 ORC and FRC
each meet at least four times a year.
The above committee structures are replicated at the business unit level where applicable.
070
RISK MANAGEMENTAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW RISK CULTURE
Risk Culture defines the Group’s attitude to risks and ensures its remuneration structure promotes the right
behaviour. Strong Risk Culture facilitates organisational resilience and supports sustainable success in delivering on
our commitment to customers in the long term.
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 and Compliance
function makes up our Second Line and is headed by the Group CRO who has overall accountability for the Risk and
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 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 Group’s 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
strategy and business objectives. The Group’s Risk Appetite Framework (RAF) establishes the quantum and nature
of risks the Group is prepared to take to achieve its strategic 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.”
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ANNUAL REPORT 2023OVERVIEWFINANCIAL 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.”
Risk Tolerances and Risk Limits, including granular measures and indicators, are used to monitor and control specific
risk types.
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 and
Compliance function has developed a systematic process to identify existing and emerging risks in the business
units. The Group’s risk taxonomy 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.
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RISK MANAGEMENTAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW 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 Group Own Risk and Solvency Assessment (ORSA) Report.
THE GROUP’S PRINCIPAL RISKS
The Group’s principal risks, while not exhaustive, and the strategies to manage the risks are detailed below.
FINANCIAL RISKS
The Group’s primary financial risks are insurance risk and market risk. AIA’s insurance operations are exposed to
insurance risk primarily from changes in mortality and morbidity experience, the acquisition and persistency of
insurance business, and business expenses. This also includes changes to assumptions regarding future experience
for these risks. Market risk relates to the adverse price movements and credit defaults leading to financial losses
immediately, as well as losses over time due to a mismatch in asset and liability cashflows. It includes interest rate
risk, equity risk, foreign exchange rate risk, liquidity risk, credit risk and credit spread risk. Please refer to note 34
to the consolidated financial statements on pages 282 to 299 of this Annual Report for details on financial risks,
including exposures and sensitivity analysis.
OPERATIONAL RISKS
Operational risks arise from internal processes, personnel and systems or from external events which may result in
a direct or indirect business impact. The Group’s RMF includes a mechanism for identifying, assessing, managing,
monitoring and reporting operational risks to ensure that potential risk exposures arising from operational activities
do not exceed the Group’s Risk Tolerances.
Data Risk
As a data-driven organisation, AIA continues to focus on managing the risk of inaccurate or incomplete data, or
mishandling of data, through a variety of Information Security standards and protocols as well as our Group Data
Governance Standard and Group Data Protection Standard. Data Councils are established at the Group and business
unit level for enhanced data management governance and controls. In addition, a group-wide Data Privacy Policy is
in place which is aligned to leading industry standards and independent assurance is provided by GIA as part of its
risk-based cyclical audit plan for data privacy compliance controls.
073
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Environmental, Social and Governance-Related Risk
AIA’s Environmental, Social and Governance (ESG) Report 2023 is published on the websites of both the Hong Kong
Exchanges and Clearing Limited at www.hkex.com.hk and the Company at www.aia.com and provides an update
on our ESG strategy, initiatives and progress. AIA’s ESG governance framework and strategy are embedded in the
organisation, enabling the Group to effectively manage ESG-related risks and opportunities across all businesses.
Financial Crime Risk
Financial crime risk refers to the risk of breach of Anti-Money Laundering (AML) and Counter-Terrorist Financing
(CTF) laws and regulations. AIA is committed to a strict programme of compliance with all applicable AML/CTF
laws and regulations to prevent the use of its products and services for money laundering and terrorist financing
purposes. The Group AML/CTF Policy sets out the detailed requirements of the Group AML/CTF Programme, including
a risk-based approach to conducting customer due diligence, ongoing monitoring, suspicious activity reporting,
training and record keeping. AIA uses appropriate AML/CTF monitoring software and tools to screen risk profile and
monitor customer activity. Employees and agents are required to complete AML/CTF training. In addition, our Group
Economic Sanctions Policy sets out standards to manage the risk of dealings with governments, individuals and
entities subject to sanctions programmes.
Fraud Risk
Fraud risk arises from fraudulent activities committed by internal and/or external parties to cause a loss (including
monetary loss, reputational loss or regulatory fines) to AIA or others. AIA adopts a zero-tolerance approach to fraud,
with clear standards for consequence management, including discipline. The Group Anti-Fraud Policy / Group
Whistleblower Protection Policy and respective trainings provide guidance to employees on their responsibilities
to be vigilant in identifying and reporting potential fraud impacting AIA or our customers, including through
whistleblowing channels. Detective controls include monitoring and modelling of intermediary conduct and checks
on employees’ expenses.
Operational Resilience Risk
Operational resilience ensures effective preparedness and response to disruptive events, which involve the
availability of critical staff, critical systems, and premises. AIA has a robust Business Continuity Management (BCM)
framework in place, aligned with leading industry standards. Critical staff have designated backups, with the
required capability and technology/systems to work remotely, whilst Disaster Recovery (DR) readiness and recovery
objectives have been defined, validated and tested for critical systems. The group-wide BCM system enables real-time
monitoring, automation of reports and digital dashboards. General BCM awareness as well as certified professional
training programmes are undertaken to enhance response capabilities of our people.
People Risk
Our organisation and people strategy enables us to attract, retain and develop outstanding people, making AIA an
employer of choice across our markets. We monitor engagement across our business units and functions each year
through the Gallup Q12 Employee Engagement Survey. This provides meaningful inputs that inform targeted and
impactful strategies to maintain and enhance our strong levels of engagement. AIA is also 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. Moreover, employees’ physical, mental, social,
and financial health continue to be a priority in retaining top talent and sustaining high performance. Please refer to
the Our People and Culture section on pages 76 to 79 of this Annual Report for additional details.
074
RISK MANAGEMENTAIA GROUP LIMITEDFINANCIAL AND OPERATING REVIEW Regulatory Risk
Regulatory risk concerns the risk of financial or reputational loss due to the failure to comply with or address
changes to regulatory requirements, guidelines and expectations. We continue to monitor adherence to various
new and existing regulatory requirements in various jurisdictions as well as international developments, including
Insurance Capital Standard (ICS) and Base Erosion and Profit Shifting (BEPS) 2.0. Please refer to the Regulatory and
International Developments section on pages 67 to 68 of this Annual Report for details.
Sales Conduct Risk
Sales conduct risk arises from inappropriate marketing and sales practices which may result in poor outcomes for
customers and reputational damage or financial loss to the Group. It is managed in accordance with group-wide
standards on business quality, which set out the minimum requirements to promote the right outcomes for customers
and the right culture across intermediaries. Agents are licensed by the respective regulators and further trained by
AIA on the relevant regulatory and company policy requirements, including AIA Code of Conduct requirements. The
interactive Point of Sale (iPoS) tool facilitates the sale process, supported by minimum standards covering product
suitability, handling of vulnerable customers and non-face-to-face sales. Sales practices are monitored through
various means, including direct verification calls with customers, mystery shopping, sample-based quality assurance
reviews of controls, and investigation of inappropriate sales practices.
Technology Risk
AIA manages technology risk in accordance with industry policies, practices and benchmarks. In 2023, AIA maintained
International Organization for Standardization (ISO) 27001 certification covering identity access management,
cybersecurity and cloud security operations and we regularly perform an independent cybersecurity maturity
assessment against the standards of the United States’ National Institute of Standards and Technology (NIST). With
growing use cases of responsible artificial intelligence (AI) in the Group, AIA has established AI governance through
the Group Responsible Use of AI Standard and the Group AI Council.
Third-Party Risk
AIA engages a variety of third parties in the normal course of its business operations, and has in place minimum
requirements for assessing, managing and governing third parties, including with respect to third-party security,
operational resilience and regulatory compliance. AIA has further strengthened the identification and management
of third-party risks through the implementation of a group-wide Third Party Management System. External and intra-
group outsourcing arrangements that are material from Group perspective are identified and a register of material
group outsourcing arrangements is maintained.
075
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION OUR PEOPLE AND CULTURE
Our people are central to our continued ability to deliver on our Purpose to help millions of people across Asia live
Healthier, Longer, Better Lives(1). Representing different geographies and communities, they make up the culture of
our business and enable us to create value for our stakeholders.
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
AIA’s rich history in Asia connects our organisation to the region’s culture and future. With our unparalleled history
of operations in the region, we are mindful that our culture brings us together, connects our people to our shared
Purpose, and distinguishes us from our peers.
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 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 and each other.
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
A collaborative and inclusive workplace that prioritises employee engagement is important to AIA. We monitor
engagement across our business units and functions each year through the Gallup Q12 Employee Engagement
Survey. This provides meaningful inputs that inform targeted and impactful strategies to maintain and enhance our
strong levels of engagement.
Our 2023 survey was completed by 98 per cent of employees, with the Group’s employee engagement scores
placing AIA in the 92nd percentile of Gallup’s global finance and insurance industry benchmark. Our employee
engagement levels have remained in the top quartile of this benchmark for seven consecutive years, and in the top
10th percentile for three consecutive years. Our strong employee engagement and performance-oriented culture
were again recognised in 2023, with the Group receiving the Gallup Exceptional Workplace Award for the second
consecutive year.
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
Through the AIA Leadership Centre (ALC), we collaborate with world-renowned business schools and consulting
firms to develop tailor-made programmes. ALC programmes support AIA’s senior leaders, top agency leaders and
key partner executives to deliver on our strategic priorities and empower them to meet our commitments to our
customers and the communities in which we operate.
Notes:
(1) As at 31 December 2023, AIA had a total of 25,927 employees, which includes full-time and part-time employees as well as employees on fixed-term
contracts, and excludes interns, agents of the Group, employees of MediCard Philippines, Inc. (MediCard), Amplify Health Asia Pte. Limited (Amplify
Health), our joint venture Tata AIA Life, and our associate China Post Life. All figures related to the number of employees in this report exclude MediCard,
which AIA acquired in 2022 and is currently integrating into the business, and Amplify Health. Including MediCard and Amplify Health, AIA has a total of
27,320 employees.
076
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. AIA’s “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 leaders to build their people leadership capability through our “Voyage” and
“ASPIRE” programmes.
SUCCESSION AND ORGANISATION PLANNING
Our annual Group Organisation and People Review process enables leaders to plan for the succession of all key
leadership roles. In 2023, more than 50 per cent of our leadership appointments were filled by leaders in our
leadership pipeline, demonstrating the success of our targeted approach.
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 and emerging business lines, strengthening
our approach to capability building, and designing new training programmes to reskill and upskill employees.
Our investment in developing technology, digital and analytics capabilities continued in 2023 and as at 31 December
2023, approximately 20 per cent of the employee workforce(2) is comprised of talent with these skill sets – an increase
of 73 per cent since 1 July 2020. 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 supports our people in their current roles and as they grow and progress within AIA. Our focus
on learning is a key part of our ambition to ensure that our people can upskill, reskill, work more flexibly and adapt to
the changing world of work. Our holistic learning approach empowers our people to learn new knowledge and skills,
including through on-the-job experiences, mobility, collaborative projects, in-person and virtual lessons, digital self-
learning, mentoring and coaching.
We believe career mobility and assignments in different business units or functions provide our employees with
new and valuable learning opportunities while building connections across the Group. These assignments provide
opportunities to learn new skills and help develop our people’s personal AIA networks.
We continuously research skills and knowledge requirements of our industry, deliver programmes that address these
needs and enhance programme designs with employee feedback. In addition, our people are required to complete
regular mandatory training on a range of technical, governance and conduct-related topics.
We have launched new programmes and enhanced existing programmes to develop capabilities and nurture talents
across the Group, including:
• LIFT (Learn. Integrate. Focus. Thrive.) is a 12-month Group-wide support framework for new employees. This
programme combines digital and in-person experiences to equip and support employees so they can thrive at
AIA. It facilitates cross-market connections and empowers employees to prioritise their well-being.
• ESG 101 is an interactive e-learning module to empower employees to become champions for Environmental,
Social and Governance (ESG), reinforcing our commitment to ESG principles. Over 24,000 employees(2) completed
this module in 2023, which is also integrated into our comprehensive AIA Fundamentals digital suite for new
employees.
Digital learning content enables self-directed continuous learning and further strengthens our learning culture. The
AIA Learning Hub online platform hosts thousands of digital learning courses and is available to all business units
and employees. In 2023, more than 10,000 digital courses were available to support employee learning needs, and
we saw a year-on-year increase in the adoption of digital learning.
Notes:
(2) Includes full-time and part-time employees as well as employees on fixed-term contracts, and excludes interns, agents of the Group, employees of our
joint venture Tata AIA Life, Amplify Health, MediCard and our associate China Post Life.
077
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION EMPLOYEE COACHING AND INTERNSHIPS
Our leadership programmes incorporate employee coaching and we encourage our employees to expand their
networks, seek guidance and foster communications across different departments and seniorities. Business unit
internship programmes provide interns with first-hand career experience with AIA and the opportunity to gain
experience and learn critical skills in a high-performing, customer-focused environment. These programmes also
enable us to identify future talent to join our business.
RECOGNISING AND REWARDING OUR PEOPLE
AIA is committed to providing our people with fair and equitable performance evaluations to recognise their
contributions and achievements. Our performance management framework and performance appraisal process
encourage regular and robust conversations about individual and team progress.
Our people managers regularly check in with employees to discuss their accomplishments and how they achieved
their performance objectives throughout the year. Our people managers also provide ongoing support, feedback and
coaching to further the professional development and growth of our employees.
To attract, retain and engage our diverse talent, we seek to reward all employees competitively and fairly, irrespective
of gender, ethnicity, age, disability or other non-performance-related factors. We believe our employees value our
existing reward programmes for their clarity, transparency and market alignment. In addition, our Employee Share
Purchase Plan connects employees to the collective success of the organisation, providing an opportunity to purchase
AIA shares and receive matching shares over time during their employment.
EMBEDDING OUR PURPOSE THROUGH WELL-BEING SUPPORT
Health and well-being is central to our Purpose and to the care we provide for our people and their families. Group-
wide benefits and workforce well-being programmes encourage our people and their families to understand their
health profile, stay active, and take steps to safeguard their well-being.
Our employees in all markets enjoy access to WorkWell with AIA, a holistic employee well-being offering for our
corporate customers that supports physical, mental, social and financial health. Known internally as WellBeing@AIA,
the programme’s initiatives, benefits and tools are tailored to each business unit, offering solutions that may include
well-being learning sessions and on-site and virtual health activities.
To further support our employees, we also provide an array of well-being benefits including discounted gym
memberships, access to sporting and recreational facilities, and wellness spaces such as nursing rooms. We
continue to offer flexible working arrangements to support employees in balancing their personal and professional
responsibilities. These include hybrid work arrangements as a standard work pattern and alternative working hours.
SUPPORTING A DIVERSE AND INCLUSIVE CULTURE
Diversity is one of AIA’s strengths, bringing together talented people from a range of backgrounds as one team
to deliver on our Purpose. To achieve the best outcomes for our people and our business, we foster an inclusive
workplace that welcomes and celebrates differences and encourages open and 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.
All employees joining AIA are required to complete training on AIA’s Code of Conduct as part of their onboarding,
which includes our approach to inclusion and non-discrimination. Moreover, our Employee Conduct Policy and
e-learning module on unconscious bias and anti-harassment outline these expectations for all employees as well as
appropriate standards of workplace conduct and professionalism, and channels for escalation. AIA is committed to
provide a work environment free of bullying and harassment, and we do not discriminate on the basis of race, religion,
gender, nationality, age, disability, military service, marital status or sexual orientation.
We aim to create an inclusive workplace that values and embraces individuals from all backgrounds. Our efforts
mean people of all genders, backgrounds and experiences are drawn to work for AIA, and we have been recognised
as an employer of choice across the region. As at 31 December 2023, women represented 57.1 per cent of our
employee population and 41.6 per cent of our senior leaders across the Group were women(2).
078
AIA GROUP LIMITEDOUR PEOPLE AND CULTUREFINANCIAL AND OPERATING REVIEW Cultural and national diversity enriches our social fabric, with over 75 nationalities represented across AIA as at
31 December 2023. We recognise the importance of understanding different generational needs and our people
policies and practices enable us to create an inclusive workplace for all age groups. As at 31 December 2023, more
than 65 per cent of our employees were Gen Y and Gen Z(3).
We continue to foster an inclusive and engaging workplace through locally-led employee networks in seven of our
business units and Group Office, providing our people with a platform to come together to share, learn and support
each other. This year we held various initiatives at the Group level and across our local markets to raise employee
awareness about diversity, equity and inclusion, including International Women’s Day and Pride month in support of
the LGBT+ community and allies.
AIA values diverse perspectives for effective governance and decision-making. 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
Our continued focus on our people has resulted in several local and global accolades in 2023, including:
• AIA received the “Gallup Exceptional Workplace Award” from Gallup, and was recognised in the “Top 100 Global
Most Loved Workplaces” by Newsweek and Best Practice Institute.
• AIA China was recognised in “Best Companies to Work for in Asia”, “Diversity, Equity, and Inclusion Awards” and
“Most Caring Company Awards” by HR Asia.
• AIA Hong Kong was recognised in “Best Companies to Work for in Asia” and “Diversity, Equity, and Inclusion
Awards” by HR Asia.
• AIA Malaysia was the insurance sector winner in “Malaysia’s 100 Leading Graduate Employers” awards by GTI
Media and “Champion” in the insurance sector for “Graduates’ Choice Award” by Talentbank.
• AIA Singapore was recognised as one of “Singapore’s 100 Leading Graduate Employers” by GTI Media.
• AIA Thailand was recognised in “Most Attractive Employers - Thailand” by Universum.
• AIA Vietnam was certified as a “Great Place to Work” by Great Place to Work and recognised in “Best Companies
to Work for in Asia” by HR Asia.
• AIA New Zealand was a winner in the “Excellence in Wellbeing and Inclusion Award” by the Financial Services
Council New Zealand, and winner in the “Excellence in Workplace Diversity and Inclusion” awards by the
Australian and New Zealand Institute of Insurance and Finance.
• AIA Sri Lanka was recognised in “Best Workplaces in Sri Lanka”, “Best Workplaces for Women in Sri Lanka”, and
“Best Workplaces for Millennials in Sri Lanka” by Great Place to Work, and is certified “Assess” by EDGE.
• AIA Taiwan was recognised in “Best Companies to Work for in Asia” and “Diversity, Equity, and Inclusion Awards”
by HR Asia.
• AIA Operations Shared Services was the “Champion” in the Shared Services sector for “Graduates’ Choice Award”
by Talentbank, and Business Process Outsourcing and Shared Services sector runner-up in “Malaysia’s 100
Leading Graduate Employers” awards by GTI Media.
• AIA Digital+ Malaysia was recognised in “Best Companies to Work for in Asia” by HR Asia.
Additional details about our People and Culture initiatives are contained in our Environmental, Social and Governance
Report 2023 which can be found on www.aia.com.
Notes:
(3) Gen Y is defined as the generation born between 1981 and 1996 and Gen Z is defined as the generation born from 1997 onwards.
079
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE
081 Statement of Directors’ Responsibilities
082 Board of Directors
092 Executive Committee
097 Report of the Directors
110 Corporate Governance Report
128 Remuneration Report
080
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
Accounting Standards; 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 97 to 127 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 Accounting
Standards, 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 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, amongst 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.
081
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION BOARD OF DIRECTORS
MR. ONG CHONG
TEE
MR. JOHN BARRIE
HARRISON
MS. SUN JIE
(JANE)
DR. NARONGCHAI
AKRASANEE
MR. JACK
CHAK-KWONG SO
MR. EDMUND
SZE-WING TSE
082
AIA GROUP LIMITEDCORPORATE GOVERNANCE MR. LEE YUAN
SIONG
MR. CHUNG-KONG
CHOW
PROFESSOR LAWRENCE
JUEN-YEE LAU
MS. MARI ELKA
PANGESTU
MS. NOR SHAMSIAH
MOHD YUNUS
MR. CESAR VELASQUEZ
PURISIMA
MR. GEORGE
YONG-BOON YEO
083
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION INDEPENDENT NON-EXECUTIVE CHAIRMAN AND INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr. Edmund Sze-Wing TSE
Aged 86, 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 Chief Executive’s Council of Advisers of the HKSAR Government, 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 degree of Doctor
of Social Science from The Hang Seng University of Hong Kong in 2024. He also received an honorary fellowship and
an honorary degree of Doctor of Social Sciences from The University of Hong Kong in 1998 and 2002, respectively.
In 2018, he was awarded an honorary degree of Doctor of Business Administration from Lingnan University. In
2003, Mr. Tse was elected to the prestigious Insurance Hall of Fame and in 2017, he 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 58, 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).
084
AIA GROUP LIMITEDCORPORATE GOVERNANCEBOARD OF DIRECTORS INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. Jack Chak-Kwong SO
Aged 79, 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), the Chairman of Airport Authority Hong Kong and a member of the
Chief Executive’s Council of Advisers of the HKSAR Government. 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 73, is an Independent Non-executive Director of the Company, having been appointed on 28 September
2010. He is also the Chairman of the Risk Committee and a member of the Nomination 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.
085
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Mr. John Barrie HARRISON
Aged 67, 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 on 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 69, 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.
086
AIA GROUP LIMITEDCORPORATE GOVERNANCEBOARD OF DIRECTORS Professor Lawrence Juen-Yee LAU
Aged 79, 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 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) and 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. He was also an independent
non-executive director of Hysan Development Company Limited (listed on the Hong Kong Stock Exchange) and
CNOOC Limited (listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange; and previously listed on
the New York Stock Exchange) from 2014 to 2020 and from 2005 to 2023 respectively. 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.
087
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Dr. Narongchai AKRASANEE
Aged 78, 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. He also acts as a Board Representative on the ESG Committee, a management
committee of the Company. 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.
Mr. Cesar Velasquez PURISIMA
Aged 63, 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
088
AIA GROUP LIMITEDCORPORATE GOVERNANCEBOARD OF DIRECTORS Philippines and Chairman of Land Bank of the Philippines. Mr. Purisima received the Centenary Award of Excellence
from the Professional Regulatory Board of Accountancy of the Philippines in 2023. 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 55, 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
honours. She also obtained a LLM degree from Peking University Law School.
089
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Ms. Mari Elka PANGESTU
Aged 67, is an Independent Non-executive Director of the Company, having been appointed on 1 July 2023.
She is also a member of the Nomination Committee of the Company. Ms. Pangestu currently serves as a Professor of
International Economics at the University of Indonesia, adjunct senior research scholar at the Columbia University
and Professor of the University of Prasetiya Mulya. She is also a member of the Advisory Board of Indonesia Bureau
of Economic Research, Co-chair of Indonesian National Committee for Pacific Economic Cooperation, member of the
Board of Trustees of United in Diversity, Indonesia and the Centre for Strategic and International Studies Foundation,
and Distinguished Fellow of Asia Global Institute, The University of Hong Kong. Ms. Pangestu was appointed as
the Managing Director, Development Policy and Partnerships for the World Bank in March 2020 and retired from
the position in March 2023. She was also a Minister of Trade of the Republic of Indonesia from 2004 to 2011 and
Minister of Tourism and Creative Economy of the Republic of Indonesia from 2011 to 2014. She served as Chair of
the Board of Trustees of International Food Policy Research Institute, Washington DC from 2017 to 2020; a member
of the Global Future Council on Trade and Investment, World Economic Forum from 2016 to 2018; and a board
member of the International Chamber of Commerce, Paris from 2015 to 2020. She was also a commissioner for
the Low Carbon Development Initiative of Indonesia and Co-chair of the expert group for the High Level Panel for
a Sustainable Ocean Economy. In addition, Ms. Pangestu was previously an Independent President Commissioner
of PT Mitra Adiperkasa Tbk from 2018 to 2020, the President Commissioner (Independent) of PT Bank BTPN Tbk
from 2016 to 2020 and an Independent Commissioner of PT Astra International Tbk from 2015 to 2017, all of which
are listed on the Indonesia Stock Exchange. Ms. Pangestu has received the Mahaputra Award, the Highest Order for
Public Service awarded by the President of Republic Indonesia, in 2013. She was also awarded the Distinguished
Fellow Award 2018 by Eisenhower Fellowships and the Economic and Social Science Prize at the Asia Cosmopolitan
Awards NARA Forum in 2023. Ms. Pangestu received her Bachelor of Economics (Honours) degree and Master of
Economics degree from the Australian National University in 1979 and 1981, respectively. She also obtained a Ph.D.
degree from the Department of Economics of the University of California, Davis in 1986.
Mr. ONG Chong Tee
Aged 62, is an Independent Non-executive Director of the Company, having been appointed on 1 July 2023. He is also
a member of the Nomination Committee of the Company. Mr. Ong currently serves as the Chairman of the Accounting
and Corporate Regulatory Authority in Singapore. He has 35 years of experience with the Monetary Authority of
Singapore (MAS), in the areas of reserve management, monetary policy, investment management, financial
development and financial supervision. He last served as the Deputy Managing Director of Financial Supervision
from 2013 to 2021, overseeing the banking and insurance, capital markets, and policy, risk and surveillance groups.
Mr. Ong also served on the boards of Central Provident Fund Board from 2000 to 2009, Singapore Land Authority
from 2005 to 2009, Urban Redevelopment Authority from 2006 to 2012 and Housing & Development Board from
2012 to 2018. Mr. Ong is also a member of the risk committee of GIC Private Limited, an independent non-executive
director of United Overseas Bank Limited (listed on the Singapore Exchange), and an independent director of Arab
Regional Payments Clearing and Settlement Organization. He is also a member of the Board of Trustees of the National
University of Singapore and a Trustee of the IFRS Foundation®. Mr. Ong graduated with a Bachelor of Engineering
(Hons) from the National University of Singapore. He was also awarded the Public Administration Medal (Gold) (Bar)
in 2021 by the President of Singapore.
090
AIA GROUP LIMITEDCORPORATE GOVERNANCEBOARD OF DIRECTORS Ms. Nor Shamsiah MOHD YUNUS
Aged 59, is an Independent Non-executive Director of the Company, having been appointed on 21 September
2023. She is also a member of the Nomination Committee of the Company. Ms. Mohd Yunus currently serves as the
Chancellor of INCEIF (International Centre for Education in Islamic Finance) University in Malaysia. Ms. Mohd Yunus
has over 34 years of experience with Bank Negara Malaysia (BNM) (the Central Bank of Malaysia). She joined BNM in
1987 and was appointed as Deputy Governor from November 2010 to June 2016 and Governor from July 2018 to June
2023. She was the Chairperson of each of BNM’s Board of Directors, Monetary Policy Committee, Financial Stability
Committee, Financial Stability Executive Committee, Reserve Management Committee, Risk Management Committee
and Digital Technology Committee. During her time at BNM, she served in diverse areas including overseeing work of
the financial stability division, encompassing regulation and supervision of banks and insurance companies, as well
as financial sector development and enforcement. During her tenure, Ms. Mohd Yunus also represented BNM as an
ex-officio Director of Perbadanan Insurans Deposit Malaysia (Malaysian Deposit Insurance Corporation), Chairman
of the Board of Directors of the South East Asian Central Banks (SEACEN) Research and Training Centre, and a non-
executive member of the Audit Oversight Board of Malaysia. She also served as the Assistant Director of the Monetary
and Capital Markets Department of the International Monetary Fund from April 2017 to June 2018. Ms. Mohd Yunus
graduated with a Bachelor of Arts in Accountancy from the University of South Australia in 1986. She is a fellow of
the CPA Australia and a member of the Malaysian Institute of Accountants.
091
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION EXECUTIVE COMMITTEE
DR. MARK KONYN
MR. MITCHELL NEW
MS. CARA ANG
MR. LEO GREPIN
MR. JACKY CHAN
MR. LEE YUAN SIONG
092
AIA GROUP LIMITEDCORPORATE GOVERNANCE MR. GARTH JONES
MR. TAN HAK LEH
DR. KELVIN LOH
MS. JAYNE PLUNKETT
MR. STUART A. SPENCER
MR. BISWA MISRA
093
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Mr. LEE Yuan Siong
Mr. Lee’s biography is set out above.
Mr. Garth Brian JONES
Aged 61, 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 60, 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 36 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 the
American Academy of Actuaries (MAAA) and a Fellow of the Canadian Institute of Actuaries (CIA).
Mr. TAN Hak Leh
Aged 58, 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.
094
AIA GROUP LIMITEDCORPORATE GOVERNANCEEXECUTIVE COMMITTEE Mr. Leo Michel GREPIN
Aged 48, 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 60, 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 Chairman of AIA International and a director of various companies within the Group including
AIA Reinsurance Limited, AIA Investment Management Private Limited and the Group’s operating subsidiaries in
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 Ontario. Mr. New 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.
Mr. Biswa Prakash MISRA
Aged 46, 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.
Dr. Mark KONYN
Aged 62, 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.
095
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Ms. Pek-San ANG (Cara)
Aged 55, is the Group Chief Human Resources Officer responsible for the development of overall human capital
strategies and their implementation across the Group, as well as leading and providing support to the human
resources functions in country market operations. She joined the Group as the Chief Human Resources Officer for AIA
Singapore in May 2016. Prior to joining AIA, Ms. Ang was the Head of Human Resources of Standard Chartered Bank
Singapore. During her time with Standard Chartered, she spent more than 10 years in a variety of country, regional
and global HR leadership roles based in Singapore and Thailand. Prior to joining Standard Chartered Bank Singapore,
Ms. Ang was the Senior Vice President and Head of Human Resources for Marsh Asia.
Mr. Stuart Anthony SPENCER
Aged 58, is the Group Chief Marketing Officer and oversees customer engagement, propositions, branding, AIA
Vitality, communications, sponsorships, events, and marketing digitalisation. He is a director of various companies
within the Group. 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 54, is the Group Chief Risk Officer responsible for the Group’s risk and compliance functions. She is also 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 Division Head Casualty Reinsurance
and Head of Casualty Underwriting for Asia. 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).
Dr. Kelvin Chi-Keon LOH
Aged 50, is the Group Chief Healthcare Officer with responsibility for the execution of AIA’s Integrated Health
Strategy as well as AIA’s health-related businesses. Dr. Loh joined the Group in May 2023, bringing more than
25 years of experience backed by a strong track record of delivery in various leadership roles across public and
private healthcare sectors. Prior to joining AIA, Dr. Loh was Managing Director and CEO of IHH Healthcare Berhad,
a leading global integrated healthcare provider operating more than 80 hospitals across 10 markets. Before that,
he was Group CEO of the Columbia Asia Group, a private healthcare provider with operations across Asian markets
including Malaysia, Indonesia and Vietnam. Dr. Loh began his career as a physician in Singapore. He holds a Master
of Business Administration as well as a Bachelor of Medicine and Bachelor of Surgery (MBBS) from the National
University of Singapore.
096
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 2023.
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 40 to the
consolidated financial statements.
RESULTS
The results of the Group for the year ended 31 December 2023 and the state of the Group’s affairs at that date are set
out in the consolidated financial statements on pages 156 to 324 of this Annual Report.
BUSINESS REVIEW
The review of the business of the Group for the year ended 31 December 2023, including a description of its principal
risks and uncertainties and an indication of likely future developments as required by Schedule 5 to the Hong Kong
Companies Ordinance, is contained in the Group Chief Executive and President’s Report (pages 15 to 21), Group
Chief Financial Officer’s Review (pages 23 to 49), Business Review (pages 50 to 66), Risk Management (pages 69
to 75) and Our People and Culture (pages 76 to 79) sections in this Annual Report, and note 39 and note 41 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 Company’s 2023 ESG Report.
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. In November
2023, we became the first pan-Asian life and health insurer to have our near-term science-based emissions reduction
targets validated by the SBTi. This includes targets for our operations and our in-scope general account portfolio.
Simultaneously, we have published AIA’s first Climate Transition Plan (CTP). The CTP outlines AIA’s near-term
science-based targets alongside the plans for meeting these targets. The Group Environmental Procedures provide
guidance and outline initiatives to reduce our environmental footprint.
097
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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.
Customer privacy and data protection are of paramount importance to the Group. In 2023, AIA continued to maintain
International Organization for Standardization (ISO) 27001 certification for our identity access management
cybersecurity and cloud security controls. AIA also obtained the Service Organisation Control (SOC) Type 2
certification for our Group Information Security function which provides control assurance on cybersecurity
protection. We will continue to upgrade and invest in physical, administrative and technical measures to protect
personal and business data. This includes programmes to protect AIA and our employees from cyber threats. The
Company has also established the necessary levels of insurance coverage to protect against cybersecurity-related
events and incidents.
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.
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.
To understand more about our progress on ESG initiatives, please refer to our 2023 ESG Report, which has been
published on the websites of both 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 2023 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 33 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 2023 are set out in note 41
to the consolidated financial statements.
098
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS DIVIDENDS
An interim dividend of 42.29 Hong Kong cents per share for the six-month period ended 30 June 2023 (2022: 40.28
Hong Kong cents per share) was paid on 26 September 2023. The Board has recommended an increase of 5 per
cent in the payment of a final dividend to 119.07 Hong Kong cents per share for the year ended 31 December 2023
(2022: 113.40 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 12 September 2023 (being the record date of the 2023 interim dividend), the trustee held 82,881,442 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$1.77 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, 14 June 2024 to Shareholders whose names appear on the register of members of the Company at the close
of business on Thursday, 30 May 2024, being the record date for determining the entitlement 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
Dr. Narongchai AKRASANEE
Mr. Cesar Velasquez PURISIMA
Ms. SUN Jie (Jane)
Ms. Mari Elka PANGESTU(1)
Mr. ONG Chong Tee(2)
Ms. Nor Shamsiah MOHD YUNUS(3)
Ms. Swee-Lian TEO(4)
Notes:
(1) Ms. Mari Elka Pangestu was appointed as an Independent Non-executive Director of the Company with effect from 1 July 2023.
(2) Mr. Ong Chong Tee was appointed as an Independent Non-executive Director of the Company with effect from 1 July 2023.
(3) Ms. Nor Shamsiah Mohd Yunus was appointed as an Independent Non-executive Director of the Company with effect from 21 September 2023.
(4) Ms. Swee-Lian Teo retired as an Independent Non-executive Director of the Company with effect from 1 September 2023.
099
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Ms. Mari Elka Pangestu, Mr. Ong Chong Tee and Ms. Nor Shamsiah Mohd Yunus were appointed by the Board during
the year, all of them will retire from office at the forthcoming AGM pursuant to Article 104 of the Company’s Articles
of Association and, being eligible, offer themselves for re-election.
In accordance with Article 100 of the Company’s Articles of Association, Mr. Lee Yuan Siong, Mr. Chung-Kong Chow,
Mr. John Barrie Harrison and Mr. Cesar Velasquez Purisima will retire from office by rotation and, being eligible, offer
themselves for re-election at the AGM.
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
Details of Changes
Mr. Edmund Sze-Wing TSE
• Received an honorary degree of Doctor of Social Science from The Hang Seng
University of Hong Kong in 2024
Dr. Narongchai AKRASANEE
• Appointed as a Board Representative on the ESG Committee, a management
committee of the Company, with effect from 1 September 2023
Mr. ONG Chong Tee
• Appointed as a trustee of the IFRS Foundation with effect from 1 January
2024
Save as disclosed above, no other information is 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.
The relevant provisions in the Company’s Articles of Association were in force during the financial year ended 31
December 2023 and as at the date of this report.
100
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 2023, 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(2)
Mr. Edmund Sze-Wing TSE(7)
Number of
Shares or
underlying
Shares
Long Position (L)
Percentage
of the total
number of
Class
Shares in issue (1)
Capacity
1,480,610(L)
2,453,058(L)
2,874,135(L)
2,095(L)
(3)
(4)
(5)
(6)
3,330,400(L)
230,000(L)
(3)
(3)
Ordinary
Ordinary
0.01
0.02
0.02
<0.01
0.02
<0.01
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Interest of controlled
corporation(8)
Mr. Jack Chak-Kwong SO
190,000(L)(3)
Ordinary
<0.01
Interest of controlled
Mr. Chung-Kong CHOW
126,000(L)(3)
Ordinary
Mr. John Barrie HARRISON
80,000(L)(3)
Ordinary
Mr. George Yong-Boon YEO
50,000(L)(3)
Ordinary
Professor Lawrence Juen-Yee LAU
250,000(L)(3)
Ordinary
Notes:
(1) Based on 11,399,354,458 Shares in issue as at 31 December 2023.
<0.01
<0.01
<0.01
<0.01
corporation(9)
Beneficial owner
Interests held jointly
with another person(10)
Beneficial owner
Interest of spouse(11)
(2) The aggregate number of the Shares and underlying Shares held by Mr. Lee Yuan Siong was 6,809,898, representing 0.05 per cent of the total number
of Shares in issue.
(3) The interests were in the Shares.
(4) 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
837,592 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.
(5) The interests were in SOs granted to Mr. Lee Yuan Siong under the share option schemes adopted by the Company from time to time.
(6) The interests were in matching RSPUs granted under the employee share purchase plans adopted by the Company from time to time.
(7) The aggregate number of the Shares and underlying Shares held by Mr. Edmund Sze-Wing Tse was 3,560,400, representing 0.03 per cent of the total
number of Shares in issue.
(8) 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.
(9) The 190,000 Shares were held by Cyber Project Developments Limited, a company beneficially wholly owned by Mr. Jack Chak-Kwong So.
(10) The 80,000 Shares were jointly held by Mr. John Barrie Harrison and his spouse, Ms. Rona Irene Harrison, as beneficial owners.
(11) 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 2023, 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.
101
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 2023, 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)
1,152,420,823(L)
326,741,568(S)
793,262,466(P)
1,015,922,305(L)
35,314,330(S)
633,375,828(P)
Class
Ordinary
Ordinary
The Capital Group Companies, Inc.
844,813,989(L)
Ordinary
Citigroup Inc.
BlackRock, Inc.
Brown Brothers Harriman & Co.
810,846,234(L)
43,759,820(S)
768,963,490(P)
690,966,881(L)
457,000(S)
Ordinary
Ordinary
605,177,810(L)
597,387,808(P)
Ordinary
Notes:
(1) The interests and short positions include underlying Shares as follows:
Percentage of
the total number
of Shares in issue
(Note 2)
10.10
2.86
6.95
8.91
0.30
5.55
7.41
7.11
0.38
6.74
6.06
<0.01
5.30
5.24
Capacity
Note 3
Note 4
Interest of
controlled
corporations
Note 5
Interest of
controlled
corporations
Note 6
Long Position
Short Position
Physically
settled
listed
derivatives
Cash
settled
listed
derivatives
Physically
settled
unlisted
derivatives
Cash
settled
unlisted
derivatives
Convertible
instruments
- listed
derivatives
Physically
settled
listed
derivatives
Cash
settled
listed
derivatives
Physically
settled
unlisted
derivatives
Cash
settled
unlisted
derivatives
Convertible
instruments
- listed
derivatives
4,941,108
–
–
–
–
–
– 326,741,568
–
–
Name of
Shareholder
The Bank of
New York
Mellon
Corporation
JPMorgan
10,870,000
57,400
117,330
2,400,800
2,843,701
2,481,000 3,996,236
9,846,837 17,175,734
139,854
Chase & Co.
The Capital
Group
Companies,
Inc.
–
– 25,193,864
–
Citigroup Inc.
8,346,684
BlackRock, Inc.
Brown Brothers
Harriman
& Co.
–
–
–
–
–
2,893,884 20,093,492
–
–
506,800
–
(2) Based on 11,399,354,458 Shares in issue as at 31 December 2023.
–
–
–
–
–
5,931,000
–
–
–
–
–
–
–
–
9,970,598 27,841,070
–
–
438,200
–
–
–
–
–
102
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
1,152,420,823
326,741,568
(4) JPMorgan Chase & Co. held the interests and short positions in the following capacities:
Number of Shares or
underlying Shares
(Long Position)
Number of Shares or
underlying Shares
(Short Position)
Capacity
Approved lending agent
Investment manager
Interest of controlled corporations
Person having a security interest in Shares
Trustee
(5) Citigroup Inc. held the interests and short positions in the following capacities:
Capacity
Approved lending agent
Interest of controlled corporations
633,375,828
311,295,602
60,844,295
9,851,317
555,263
Number of Shares or
underlying Shares
(Long Position)
768,963,490
41,882,744
(6) Brown Brothers Harriman & Co. held the interests and short positions in the following capacities:
Capacity
Approved lending agent
Investment manager
Number of Shares or
underlying Shares
(Long Position)
597,387,808
7,790,002
–
–
35,314,330
–
–
Number of Shares or
underlying Shares
(Short Position)
–
43,759,820
Number of Shares or
underlying Shares
(Short Position)
–
–
Save as disclosed above, as at 31 December 2023, 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.
103
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES
Under the service contract in the role of 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 2023 or at any time during the year under review.
RESERVES
As at 31 December 2023, 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$4,853 million (31 December 2022:
US$6,990 million).
DONATIONS
Donations for charitable and/or other purposes made by the Group during the year ended 31 December 2023
amounted to approximately US$6.8 million (2022: US$11.8 million).
MAJOR CUSTOMERS AND SUPPLIERS
During the year ended 31 December 2023, 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 2023 are set out in note 31 to the consolidated
financial statements.
104
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS DEBENTURES ISSUED
Details of the debentures issued during the year ended 31 December 2023 are set out in notes 26 and 34 to the
consolidated financial statements.
EQUITY-LINKED AGREEMENTS
During the year ended 31 December 2023, 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 2023, 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 36 to the consolidated financial statements.
The purpose of these share 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 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.
During the 10-year period from the 2020 SO Scheme Adoption Date, 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) shall not exceed 2.5 per cent
of the number of Shares in issue on the 2020 SO Scheme Adoption Date, being 302,264,978 Shares. 6,287,277 SOs
had been granted under the 2020 SO Scheme since its adoption till 31 December 2023.
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 2023, the Company awarded 1,918,599 SOs under the 2020 SO Scheme, while
661,786 SOs were exercised under the 2010 SO Scheme and the Company issued 661,786 new Shares accordingly.
The proceeds received amounted to approximately US$3.73 million.
The exercise conditions of the SOs are generally contingent on the continued employment of the participant. Further
information, including a summary of the terms, of the 2020 SO Scheme is set out in the Remuneration Report and
note 36 to the consolidated financial statements.
105
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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.
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. No consideration shall be payable by the
grantees on acceptance or vesting of any RSU awards.
During the 10-year period from the 2020 RSU Scheme Adoption Date, the aggregate number of Shares available for
issue underlying the RSU awards granted by the Company under the 2020 RSU Scheme and any other restricted
share unit scheme of the Company (i.e., the 2010 RSU Scheme) shall not exceed 2.5 per cent of the number of
Shares in issue on the reference date as specified under the rules of the 2020 RSU Scheme (i.e., 18 May 2023), being
290,494,815 Shares.
During the year ended 31 December 2023, the Company awarded 11,470,894 restricted share units under the 2020
RSU Scheme. No new Shares have been issued upon vesting of the RSU awards under both the 2010 RSU Scheme
and the 2020 RSU Scheme since their adoption.
The vesting of RSU awards is conditional upon the participant remaining in employment with the Group at the time of
vesting and subject to the achievement of pre-defined performance levels. Further information, including a summary
of the terms, of the 2020 RSU Scheme is set out in the Remuneration Report and note 36 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 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 by the Company or the on-market purchase of
Shares by the plan trustee.
During the 10-year period from the 2020 ESPP Adoption Date, the aggregate number of Shares available for issue
pursuant to the 2020 ESPP and any other employee share purchase plan (i.e., the 2011 ESPP) shall not exceed 2.5
per cent of the number of Shares in issue on the reference date as specified under the rules of the 2020 ESPP (i.e.,
18 May 2023), being 290,494,815 Shares.
106
AIA GROUP LIMITEDCORPORATE GOVERNANCEREPORT OF THE DIRECTORS During the year ended 31 December 2023, no matching RSPUs were granted and vested under the 2011 ESPP, while
1,972,908 matching RSPUs were granted and 1,196,668 matching RSPUs were 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.
The vesting of RSPUs is conditional upon the participant remaining in employment with the Group at the time of
vesting. Further information, including a summary of the terms, of the 2020 ESPP is set out in the Remuneration
Report and note 36 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.
During the 10-year period from the 2021 ASPP Adoption Date, the aggregate number of new Shares which may be
issued under the 2021 ASPP and any other agency share purchase plan (i.e., the 2012 ASPP) shall not exceed 2.5
per cent of the number of Shares in issue on the reference date as specified under the rules of the 2021 ASPP (i.e., 18
May 2023), being 290,494,815 Shares. Since the 2021 ASPP Adoption Date and up till 31 December 2023, no new
Shares were issued under the 2021 ASPP.
During the year ended 31 December 2023, no matching RSSUs were granted, 986,359 matching RSSUs were vested,
and 986,359 new Shares (Awarded Shares) were issued for RSSUs vested pursuant to the 2012 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
proceeds received amounted to approximately US$1.0 million which were used to fund the administration expenses
of the 2012 ASPP and as general working capital of the Company.
As disclosed in the Company’s announcement dated 4 April 2023, the Company estimated that a total of 1,055,863
RSSUs will be granted to the participants for the 2023 ASPP plan year which runs from 1 May 2023 to 30 April 2024.
During the year ended 31 December 2023, the actual number of matching RSSUs granted in relation to the 2023
ASPP plan year was 761,915. During the same period, no matching RSSUs were vested, and no new Shares were
issued pursuant to the 2021 ASPP.
The vesting of matching RSSUs is conditional upon the participant remaining as an agent with the Group at the time
of vesting. Further information, including a summary of the terms, of the 2021 ASPP is set out in the Remuneration
Report and note 36 to the consolidated financial statements.
107
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION NON-EXEMPT CONNECTED TRANSACTIONS
During the year ended 31 December 2023, 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 2023 in
the ordinary course of business are set out in note 38 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 2023, the Company bought back a total of 373,591,400 Shares on the Hong Kong
Stock Exchange with the aggregate consideration paid (before expenses) amounting to approximately HK$28,409
million (equivalent to approximately US$3,629 million). All the Shares bought back were subsequently cancelled.
As at 31 December 2023, the total number of Shares in issue was 11,399,354,458. Particulars of the Shares bought
back are as follows:
Price paid per Share
Aggregate
consideration
Number of Shares
bought back
(Average)
(HK$)
(Highest)
(HK$)
(Lowest)
(HK$)
(before expenses)
(HK$ million)
45,732,800
18,301,800
24,645,000
26,675,000
34,569,000
34,688,400
23,402,800
9,642,600
38,905,000
39,830,800
39,652,000
37,546,200
373,591,400
87.88
85.99
80.41
84.21
80.27
80.00
79.06
69.84
65.77
67.62
70.78
65.41
76.04
92.05
89.65
84.60
86.60
86.70
83.00
81.65
72.55
71.95
70.05
73.85
68.20
–
84.50
83.75
74.90
81.35
74.90
75.20
76.40
67.55
61.20
63.10
66.40
61.70
–
4,019
1,574
1,982
2,246
2,775
2,775
1,850
673
2,559
2,693
2,807
2,456
28,409
Month
January 2023
February 2023
March 2023
April 2023
May 2023
June 2023
July 2023
August 2023
September 2023
October 2023
November 2023
December 2023
Total
In addition, the Company also purchased 10,865,302 Shares under the 2020 RSU Scheme and the 2020 ESPP for a
total consideration of approximately HK$902 million (equivalent to approximately US$115 million) during the year
ended 31 December 2023. These purchases were made by the trustee of these share schemes on the Hong Kong
Stock Exchange. These Shares are held on trust for the participants of the relevant schemes and therefore were not
cancelled. Please refer to note 36 to the consolidated financial statements for details.
Save as disclosed above, during the year ended 31 December 2023, neither the Company nor any of its subsidiaries
purchased, sold or redeemed any of the Company’s listed securities.
108
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 2023.
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 for the year ending 31 December 2024 will
be proposed at the AGM.
By Order of the Board
Edmund Sze-Wing Tse
Independent Non-executive Chairman
14 March 2024
109
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 2023, 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.
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.
110
AIA GROUP LIMITEDCORPORATE GOVERNANCE 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 also 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 they included, but not limited to, the following:
• Receiving periodic management reports, as well as quarterly reports from the chairperson of each of the
Board committees.
• Reviewing the preliminary announcements of the Group’s 2023 interim and annual results, as well as other
documents prepared to comply with the Listing Rules and other applicable laws, codes or regulations.
• Approving material capital, investment and acquisition projects of the Group and receiving post-transaction risk
assessment updates on the projects.
• Overseeing the implementation of an effective group enterprise risk management framework, including an annual
review on the risk appetite framework of the Group and the approval of supervisory reports to be submitted to the
Hong Kong Insurance Authority during the year.
• Reviewing the adequacy and effectiveness of the risk management and internal control systems of the Group for
the year ended 31 December 2023.
• Approving the 2024 business and capital management plan, which covers the annual operating and capital
expenditure budgets of the Group.
• Receiving updates on the Group’s performance in the areas of ESG and approving the 2023 ESG Report of
the Company.
• Receiving an annual update on information security from the Company’s management.
• Reviewing the Group’s leadership capability and succession to align with its latest strategic ambitions.
• Receiving updates from selected business units of the Group on their business performance and opportunities.
• Recommending the re-appointment of the external auditor of the Company for the 2024 financial year.
• Approving the long-term incentive (LTI) target pool for the LTI grants to be made to employees in 2024 under the
Company’s share schemes.
111
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION • Attending a Board visit programme in Shanghai to meet with management of the local operations and
other stakeholders.
• Attending the annual Board Strategy Day to discuss the strategic priorities of the Group.
The Company has also adopted its own Dealing Policy on terms no less exacting than those set out in the Model
Code in respect of dealings by the Directors and Group Chief Executive in the securities of the Company. During
the year, a member of the Board had inadvertently purchased 60,000 Shares during a voluntary blackout period
designated under the Dealing Policy without possessing any inside information of the Company at the time of such
dealing, and the related notification to the Company and the Hong Kong Stock Exchange had been made within
the prescribed time limits. Except for this single incident, all of the Directors (including the Group Chief Executive)
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 2023.
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 2024. 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 amongst the Board members and senior management, as well as to enhance the Board
processes and governance practices.
BOARD COMPOSITION AND DIVERSITY
The Board consists of thirteen members, comprising one Executive Director and twelve 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. The appointments of Ms. Mari Elka Pangestu, Mr. Ong Chong Tee and Ms. Nor Shamsiah Mohd Yunus
to the Board during the year had further enhanced the spectrum of skills, experience and diversity of perspectives
(including nationality, ethnicity, educational background, functional expertise, gender and age) on the Board.
Biographies of the Directors are set out on pages 84 to 91 of this Annual Report.
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.
112
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT 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.
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 subsection 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.
BOARD INDEPENDENCE
The Company recognises that Board independence is key to good corporate governance. Twelve of the thirteen 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.
In March 2024, the Board, through its Nomination Committee, conducted a review and considered the mechanisms
to ensure independent views and inputs are available to the Board had operated effectively during the year.
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 an Independent
Non-executive Director. The Audit Committee, the Nomination Committee and the Remuneration Committee
comprise Independent Non-executive Directors only, while the Risk Committee comprises a majority of Independent
Non-executive Directors.
113
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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.
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 2024, the Nomination Committee affirmed that for the year ended 31 December 2023,
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 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 objectives.
During the year under review, there were four scheduled Board meetings, all of which were convened in accordance
with the Articles of Association of the Company.
114
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 2023 annual general meeting (2023 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
Dr. Narongchai AKRASANEE
Mr. Cesar Velasquez PURISIMA
Ms. SUN Jie (Jane)
Ms. Mari Elka PANGESTU(1)
Mr. ONG Chong Tee(2)
Ms. Nor Shamsiah MOHD YUNUS(3)
Ms. Swee-Lian TEO(4)
Number of Meetings Attended / Number of Meetings Held
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Risk
Committee
2023
AGM
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
2/2
2/2
1/1
3/3
–
–
6/8
–
8/8
7/8
–
8/8
8/8
8/8
–
–
–
–
1/1
5/5
4/4
1/1
–
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
–
–
–
1/1
–
4/4
1/1
2/5
–
–
5/5
–
–
–
4/5
–
–
–
–
–
4/4
4/4
–
4/4
–
4/4
–
–
–
–
0/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
–
–
–
3/3
1/1
Notes:
(1) Ms. Mari Elka Pangestu was appointed as an Independent Non-executive Director of the Company with effect from 1 July 2023.
(2) Mr. Ong Chong Tee was appointed as an Independent Non-executive Director of the Company with effect from 1 July 2023.
(3) Ms. Nor Shamsiah Mohd Yunus was appointed as an Independent Non-executive Director of the Company with effect from 21 September 2023.
(4) Ms. Swee-Lian Teo retired as an Independent Non-executive Director of the Company with effect from 1 September 2023.
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.
115
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
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.
The Chairman of the Board, the Group Chief Executive and other Directors do not have any financial, business, family,
or other relationships with each other.
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 Directors had visited the Group’s Shanghai operations to acquire a deeper
understanding of its latest business development and receive market updates on Mainland China. The Company
also organised a Board Strategy Day and provided a number of trainings and briefings to the Directors on topics
such as the governance of climate-related risks and opportunities, international tax policies updates and
healthcare management.
116
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT All Directors are encouraged to participate in continuous professional development to extend and refresh their
knowledge and skills, and are required to provide their training records to the Company. The training received by the
Directors during the year under review is summarised as follows:
Name of Director
Independent Non-executive Chairman and
Independent Non-executive Director
Mr. Edmund Sze-Wing TSE
Executive Director, Group Chief Executive
and President
Mr. LEE Yuan Siong
Independent Non-executive Directors
Mr. Jack Chak-Kwong SO
Mr. Chung-Kong CHOW
Mr. John Barrie HARRISON
Mr. George Yong-Boon YEO
Professor Lawrence Juen-Yee LAU
Dr. Narongchai AKRASANEE
Mr. Cesar Velasquez PURISIMA
Ms. SUN Jie (Jane)
Ms. Mari Elka PANGESTU(1)
Mr. ONG Chong Tee(2)
Ms. Nor Shamsiah MOHD YUNUS(3)
Ms. Swee-Lian TEO(4)
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
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Notes:
(1) Ms. Mari Elka Pangestu was appointed as an Independent Non-executive Director of the Company with effect from 1 July 2023. She obtained the legal
advice from the Company’s legal advisor as regards the requirements under the Listing Rules that are appliable to her as a Director and the possible
consequences of making a false declaration or giving false information to the Hong Kong Stock Exchange on 23 June 2023 and confirmed that she
understood her obligations as a Director.
(2) Mr. Ong Chong Tee was appointed as an Independent Non-executive Director of the Company with effect from 1 July 2023. He obtained the legal advice
from the Company’s legal advisor as regards the requirements under the Listing Rules that are appliable to him as a Director and the possible
consequences of making a false declaration or giving false information to the Hong Kong Stock Exchange on 29 June 2023 and confirmed that he
understood his obligations as a Director.
(3) Ms. Nor Shamsiah Mohd Yunus was appointed as an Independent Non-executive Director of the Company with effect from 21 September 2023. She
obtained the legal advice from the Company’s legal advisor as regards the requirements under the Listing Rules that are appliable to her as a Director
and the possible consequences of making a false declaration or giving false information to the Hong Kong Stock Exchange on 19 September 2023 and
confirmed that she understood her obligations as a Director.
(4) Ms. Swee-Lian Teo retired as an Independent Non-executive Director of the Company with effect from 1 September 2023.
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 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, amongst others, the Executive
Committee, the Group Operational Risk Committee, the Group Financial Risk Committee and the ESG Committee.
117
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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.
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, to review the Group’s financial
information and its preparation, to endorse the Group’s financial and accounting policies and practices and its
whistleblowing programme, as well as to monitor the adequacy of resources for and effectiveness of the internal
audit function.
The duties performed by the Audit Committee during the year under review included, but not limited to, the following:
• Reviewing the draft preliminary announcement, interim/annual report, consolidated financial statements and
supplementary embedded value information of the Company for each of the six months ended 30 June 2023 and
the year ended 31 December 2023.
• Reviewing the Company’s announcements which set out the new business highlights of the Group in the first and
third quarters of 2023.
• Approving the 2022 consolidated special purpose financial information of the Company for the year ended 31
December 2022 as well as the six months ended 30 June 2022 prepared under the new IFRS 9 and IFRS 17.
• Reviewing the Group’s internal control environment for each of the six months ended 30 June 2023 and the year
ended 31 December 2023.
• Engaging an external consultant to perform a quality assurance and annual independent survey on the
performance of the Group’s internal audit function.
• Reviewing the audit plan of the external auditor in relation to the 2023 consolidated financial statements and
supplementary embedded value information of the Company.
• Recommending to the Board the re-appointment of the external auditor for the 2024 financial year and the
pre-approved audit fees, as well as other fees for audit-related, tax and other pre-approved services.
• Monitoring the progress of the Group’s implementation of the processes to adopt the new IFRS 17.
• Quarterly reviews on the developments in international tax regulations and significant uncertain tax matters of
the Group.
• Receiving quarterly updates on the internal audit function, fraud and whistleblowing programme report and
major litigations.
• Regular reviews on the total fees paid to the Company’s external auditor in respect of audit, audit-related and
non-audit services performed.
• Reviewing the governance, risk and compliance environment of selected business units.
• Receiving quarterly updates on major regulatory developments relevant to the Group.
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 eight meetings during the year ended 31 December 2023. The attendance records of the
Audit Committee members are set out on page 115 of this Annual Report.
118
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT NOMINATION COMMITTEE
The Nomination Committee consists of twelve members, including the Independent Non-executive Chairman,
Mr. Tse, who serves as chairman of the Nomination Committee, and the remaining eleven Independent Non-executive
Directors, Mr. So, Mr. Chow, Mr. Harrison, Mr. Yeo, Professor Lau, Dr. Narongchai, Mr. Purisima, Ms. Sun, Ms. Pangestu,
Mr. Ong and Ms. Mohd Yunus. Ms. Pangestu and Mr. Ong were appointed as members of the Nomination Committee
with effect from 1 July 2023. Ms. Mohd Yunus was appointed as a member of the Nomination Committee with effect
from 21 September 2023. 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, oversee the identification
and assessment of potential candidates for directorship and make recommendations to the Board on the appointment/
re-appointment of Directors and members of the Board committees. It also provides oversight and direction in respect
of the succession planning for directors and assesses the independence of the Independent Non-executive Directors
annually ensuring independent views and input are available to the Board.
The Nomination Committee held one meeting during the year ended 31 December 2023. The attendance records
of the Nomination Committee members are set out on page 115 of this Annual Report. The duties performed by
the Nomination Committee during the year under review included reviewing 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; assessing the independence of the Independent Non-executive Directors and making recommendations
to the Board on proposals for the re-election of Directors at the 2023 AGM.
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 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.
119
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Furthermore, the Board Diversity Policy (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 Group strives to create an inclusive workplace and is proud to be an employer of choice for women. The Group 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 Group’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 2023 are disclosed in the
Company’s 2023 ESG Report.
120
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT 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.
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 five meetings during the year ended 31 December 2023. The attendance records
of the Remuneration Committee members are set out on page 115 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 six members, five of whom are Independent Non-executive Directors, including
Mr. Chow, who serves as chairman of the Risk Committee, Mr. Harrison, Professor Lau, Mr. Purisima, Mr. Tse and
Mr. Lee, the sole Executive Director of the Company. Mr. Chow was appointed as the chairman of the Risk Committee,
in place of Ms. Teo, with effect from 1 September 2023.
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 the risk management
strategy and major risk-related issues of the Group. It also reviews the Group’s risk management-related policies and
the risk-related disclosures in the publications of the Company.
The duties performed by the Risk Committee during the year under review included:
• Quarterly reviews on the Group’s risk management and compliance activities for the period, including its financial
and operational risk profiles, which set out the solvency positions, risk appetite and other metrics.
• Receiving quarterly regulatory development updates and assessing management actions.
• Reviewing and making recommendations to the Board to approve the supervisory reports to be submitted to
the Hong Kong Insurance Authority during the year, including those relate to the Group’s own risk and solvency
assessment, capital adequacy, recovery plan, liquidity risk management, internal economic capital assessment
methodology and results.
• Approving the revised risk appetite framework of the Group.
• Approving the Group’s policyholder dividend declaration policy, which governs the dividend and bonus distribution
of participating business offered by the business units of the Group.
• Approving the Group’s information technology policy, which defines the governing principles and guidelines
for the use of information technology across the Group, covering all aspects of information technology
delivery domains.
121
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION • Annual review of the information security landscape within the Group and its information security incidents.
• Reviewing the Group’s market risk management framework.
• Assessing the adequacy and effectiveness of the risk management framework of the Group for the year ended
31 December 2023.
• Reviewing the risk disclosures in the “Risk Management” section of the Company’s 2023 Annual Report.
• Annual review of the Remuneration Committee’s report on the Group’s compensation and benefits arrangements
to ensure that incentives are provided to executives consistent with the interests of the Group’s stakeholders that
do not encourage excessive or inappropriate risk taking by them.
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 2023. The attendance records of the
Risk Committee members are set out on page 115 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.
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 2023, the total estimated remuneration payable by the Group to
PricewaterhouseCoopers was US$32.7 million (2022: US$36.8 million), an analysis of which is set out below:
US$ millions
Audit services
Non-audit services, including:
Audit-related services(1)
Tax services
Other services
Total
2023
27.0
4.9
0.7
0.1
32.7
2022
22.7
13.7
0.3
0.1
36.8
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, amongst 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.
122
AIA GROUP LIMITEDCORPORATE GOVERNANCECORPORATE GOVERNANCE REPORT 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 149 to 155 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 Group has an internal audit function (Internal Audit). The key features of the Group’s internal control system
include independent reviews and testing of internal controls, taking a risk-based approach and developing an annual
audit plan presented to the Audit Committee. Reports of significant audit findings are prepared and communicated
to management and the Audit Committee and where control weaknesses or defects are identified, recommendations
are provided to resolve them. This includes issues formally identified from internal audits, forensic investigations,
regulatory reports and special projects. Management is responsible for the design, implementation and evaluation of
the internal control system, including ongoing mitigation, across the business and processes.
The Board has, through the Risk Committee and 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;
123
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION •
•
•
•
•
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 and 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 2023.
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 the Disclosure of Inside Information Policy 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.
124
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 are set out
on page 356 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, amongst 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
2023, 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 at www.aia.com.
125
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 2023 ANNUAL GENERAL MEETING
The 2023 AGM was held on 18 May 2023. Except Mr. So, the Chairman and all other members of the Board at that
time, together with the Group’s senior management and external auditor, attended the 2023 AGM in person. The poll
voting results are available on the websites of both the Company and Hong Kong Exchanges and Clearing Limited.
The matters resolved at the 2023 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 2022;
• Declaration of a final dividend of 113.40 Hong Kong cents per share for the year ended 31 December 2022;
• By way of separate ordinary resolutions, the re-election of Mr. Tse, Mr. So and Professor Lau 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 the 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 2023 AGM, and the discount for any Shares to be
issued not exceeding 10 per cent to the benchmarked price;
• General mandate to the 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 2023 AGM;
• Adjustment of the limit of the annual sum of the Directors’ fees to US$3,800,000; and
• By way of separate ordinary resolutions, amendments to the share option scheme, the restricted share unit
scheme, the employee share purchase plan and the agency share purchase plan of the Company.
The forthcoming annual general meeting of the Company will be held on Friday, 24 May 2024. 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.
126
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 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
14 March 2024
127
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 2023.
During the year, the Remuneration Committee continued its work to assure that AIA’s remuneration framework
supports the Group’s ambitions whilst taking into account key stakeholders’ interests and market developments,
AIA’s risk management framework as well as the applicable regulatory landscape.
As such, the Remuneration Committee continues to focus that the remuneration approach and its application strive for
a balance between rewarding for impact and behaviours demonstrated and positioning compensation competitively
to attract, motivate and retain our talents.
With changes to the Listing Rules relating to share schemes that came into effect, the Group’s share schemes were
reviewed and amendments were adopted to ensure compliance with the new requirements whilst continuing to be
aligned with stakeholders’ interests. The amended scheme rules were approved by the Company’s shareholders at
the 2023 annual general meeting.
In 2023, the Remuneration Committee conducted an in-depth review of the Group’s incentive plans to ensure that
they are fit for the future to support the Group in achieving its ambitions and maintaining its market competitiveness,
and continue to align with investors and shareholders’ interests. Enhancements to the design of the long-term
incentive plan are effective from 2024 and will support the Group in attracting, motivating and retaining the best
talents to drive AIA’s strategy and its unique proposition. The review was supported by the Remuneration Committee’s
independent external advisor, considering market and regulatory developments. Further information is included in
the “Looking Ahead” section of the Remuneration Report.
The overall remuneration framework for senior executives and employees remains unchanged in 2023 and will
continue to apply in 2024 focusing on encouraging behaviours, which create impact and sustainable value for all our
stakeholders in alignment with our risk management framework.
The emphasis of a balanced approach between risks and rewards, providing for competitive remuneration with
robust safeguards in place continues to be our key focus to attract, motivate and retain the talents required to deliver
on the Group’s strategy.
The Remuneration Committee continues to monitor the Group’s remuneration framework and is confident that the
remuneration framework continues to support the Group’s value proposition and prospective strategies.
George Yong-Boon Yeo
Chairman, Remuneration Committee
14 March 2024
128
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 various factors such 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 and AIA’s risk management framework.
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 that 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 2023, 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).
The Remuneration Committee held five meetings during the year ended 31 December 2023. The attendance records
of the Remuneration Committee members are set out on page 115 of this Annual Report.
129
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION KEY ACTIVITIES OF THE REMUNERATION COMMITTEE
The Remuneration Committee performed the following key activities in 2023.
Area
Summary of activities
Remuneration decisions for
the Group Chief Executive
and President and Key
Management Personnel
Design and operation
of the Group’s
incentive schemes
Remuneration governance
and disclosure
• Reviewed and approved the 2023 remuneration for the Group Chief Executive and
President and Key Management Personnel
• Recommended the 2023 long-term incentive grant for the 2023 to 2025 performance
period for the Group Chief Executive and President for approval by the Independent
Non-executive Directors
• Reviewed and approved terms and conditions including remuneration arrangements
for the Group Chief Healthcare Officer
• Reviewed the executive benchmarking results ahead of the 2023/24 annual
review cycle
• Reviewed the achievement of relevant performance levels and approved the 2022
short-term incentive plan awards for the Group Chief Executive and President and the
Key Management Personnel, and the vesting of the 2020 long-term incentive grants
for all plan participants including the Group Chief Executive and President and the
Key Management Personnel
• Reviewed and approved the 2023 long-term incentive grants for the 2023 to 2025
performance period
• Reviewed and approved the performance measures and targets for the 2024
short-term incentive plan, and the 2024 long-term incentive plan for the 2024 to 2026
performance period
• Reviewed and approved the four amended share scheme / plan rules, subsequently
approved by the Board and the Shareholders at the 2023 Annual General Meeting
• Reviewed and approved the incentive plan design adjustments to be future fit
• Reviewed and approved the 2022 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
Environmental, Social and Governance (ESG)
In conducting its business, the Remuneration Committee is advised by an independent external 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.
130
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 the remuneration and risk matters is 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 2023 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 reviewing
remuneration design elements and in 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.
When reviewing the incentive plans’ design for 2024, the control functions were engaged to ensure that any plan
design enhancements are compliant with relevant rules and regulations and are assessed in respect to AIA’s risk
management framework.
AIA’s remuneration framework contains multiple design and policy safeguards to adhere to prudent risk taking and
to discourage 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 external advisor. Other safeguards include clear incentive
funding and vesting framework 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 mechanism 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.
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.
131
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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.
TOTAL REMUNERATION AND REMUNERATION ELEMENTS
At AIA, total remuneration is reviewed holistically and is determined by taking into consideration scope and complexity
of the role, professional experience, market competitiveness, internal relativities, compliance with relevant legal and
regulatory requirements and other factors.
For Key Management Personnel, the Remuneration Committee reviews total remuneration annually, including base
salaries, short-term and long-term incentive opportunities, against AIA’s international insurance peers and wider
market levels, and approves remuneration including the individual short-term incentive awards.
The table below summarises the Company’s remuneration elements and their application to the Group Chief Executive
and President and Key Management Personnel for the year ended 31 December 2023.
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 and
reward the achievement
of business objectives and
individual contributions
and behaviours
Basis of determination
Notes on practices
Base salary is determined with
reference to the scope and complexity
of the role, geographical location,
and relevant professional experience,
whilst also considering market
competitiveness and internal
relativities.
Short-term incentives are discretionary
and recognise both business and
individual performance, taking
into consideration an individual’s
contributions 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 remuneration.
Base salary increases, where
applicable, generally take effect from
1 March.
The fixed portion of remuneration
should be set appropriately to not
induce any excessive risk taking
behaviour by leveraging the
variable component.
Short-term incentive awards are based
on the achievement of the Group’s
pre-defined financial performance
targets as well as an individual’s
contributions and behaviours.
As such, both financial and
non-financial performance measures
are taken into consideration.
132
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE Element
Basis of determination
Notes on practices
Long-term incentives
These are delivered in the
form of performance-vesting
RSUs and time-vesting SOs
generally vesting after a
three-year vesting period to
align with the Group’s strategy
and long-term interests
of shareholders
Benefits and allowances
These include benefits that
may be required by regulations
and/or in line with local market
practices
Employee share purchase plan
(ESPP)
This benefit provides employees
with an investment
opportunity with matching
Share grants to facilitate and
encourage long-term AIA share
ownership
Long-term incentives are discretionary
and are intended to align senior
employees and key talents with the
Group’s long-term strategic ambitions
and shareholders’ interests, and
to promote risk awareness whilst
encouraging to operate in a
sustainable manner.
For the Group Chief Executive and
President and Key Management
Personnel, long-term incentive
grants are made in the form of
performance-vesting RSUs and
time-vesting SOs, with a significant
portion of senior executives’ variable
remuneration being deferred.
Participation is determined annually,
and individual long-term incentive
grants are determined with reference
to the individual’s roles and
responsibilities, performance and
potential whilst considering market
competitiveness of variable and total
remuneration.
Benefits are designed to ensure market
competitiveness of the overall rewards
delivery and are fully compliant with
local regulations.
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.
Long-term incentives generally vest
after a three-year period and are
settled in Shares, with performance-
vesting RSUs subject to pre-defined
performance vesting requirements.
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.
Participants receive matching Shares
for Shares they have purchased,
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 customers, long-term
shareholders and employees. 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.
133
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION SHORT-TERM INCENTIVE PLAN
Short-term incentives are discretionary and incentivise participants for the achievement of annual business
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 achievements and behaviours,
including a balance of financial and non-financial measures. The short-term incentive plan is reviewed regularly to
ensure its design, process and governance work together to balance incentives and risk.
2023 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 2023.
Performance Measures And Weightings
For 2023, the performance measures used in the short-term incentive plan are 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 operating profit after tax based on the
financial results calculated and reported under IFRS Accounting Standards
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 Key Management Personnel for the year ended 31 December 2023 is US$17,560,680.
The short-term incentive amounts for the year ended 31 December 2023 are included in note 37 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 Key Management Personnel.
LONG-TERM INCENTIVE PLAN
Long-term incentives intend to align senior employees and key talents with the Group’s long-term strategic
ambitions and stakeholders’ interests through ownership of the Shares and/or the increase in value of the Shares.
Long-term incentives encourage engagement to operate in a sustainable manner and are designed to motivate and
retain employees, provide risk awareness and support long-term wealth creation with increase in the shareholder
value. The long-term incentive schemes are reviewed regularly to ensure their design, process and governance work
together to balance incentives and risk.
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.
134
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE Long-term incentive grants are determined on an annual basis with reference to an individual’s role and responsibilities,
performance and potential whilst considering market competitiveness of variable and total remuneration. The long-
term incentive grants are delivered in the form of performance-vesting RSUs and time-vesting SOs.
The grants vest in shares after a three-year vesting period, subject to the participant remaining in employment with
the Group at the time of vesting.
For performance-vesting RSUs, vesting occurs when performance conditions are met and the vesting level is subject
to the Remuneration Committee’s approval. For time-vesting SOs, there are no performance conditions attached.
The value of the SOs is linked to the future Share price, which in turn depends on the performance of the Company.
Performance Measures And Weightings
For 2023, the performance measures used in the long-term incentive plan are as follows:
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 vesting of performance-vesting RSUs is subject to the achievement of pre-defined performance levels assessed
over a three year performance period (i.e., for 2023 long-term incentive plan, performance period is from 1 January
2023 to 31 December 2025). For the vesting of the RSU grants, the threshold performance level for TSR is the 25th
percentile of peer companies’ performance, while the maximum performance level is 75th percentile or above of
peer companies’ performance, at which 200 per cent of the target number of performance-vesting RSUs will vest.
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 the year ended 31 December 2023 was US$49,959,548.
Details of remuneration provided during the year ended 31 December 2023 are included in note 37 to the consolidated
financial statements.
135
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION EXECUTIVE DIRECTOR
Mr. Lee Yuan Siong received remuneration exclusively for his role as Group Chief Executive and President and received
no separate fees for his role as a Board Director or for acting as a director of any subsidiary companies.
The table below provides details of annualised target level of remuneration, excluding benefits and allowances, for
the Group Chief Executive and President.
US$ thousands
Base Salary (2)
Short-term Incentive Target Amount
Long-term Incentive Target Grant Value
Total Target Direct Compensation
Annualised Target Compensation (1)
2023
Mr. Lee Yuan Siong
2022
Mr. Lee Yuan Siong
1,177
2,515
4,611
8,303
1,140
2,350
4,400
7,890
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 2022 and 2023.
(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
2022 and 2023. Base salaries are paid in Hong Kong dollars and converted to US 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 2023 in
relation to the Group Chief Executive and President are included in note 37 to the consolidated financial statements.
NON-EXECUTIVE DIRECTORS
Remuneration for the Non-executive Directors was paid during the year ended 31 December 2023 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 2023 are included in note 37 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 2023.
Non-executive Directors
Board Membership fees for the Non-executive Directors were US$220,000 per annum for the year ended 31
December 2023.
136
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE 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 INFORMATION REGARDING SHARE SCHEMES
The Board has delegated to the Remuneration Committee the duty to administer the Company’s share schemes.
None of the members of the Remuneration Committee (being independent non-executive directors only) is eligible
to participate in any of the share schemes. Any proposed grant to be made to a director or chief executive of the
Company under a share scheme will be subject to approval by all independent non-executive directors.
To bring the terms of the Company’s share schemes (namely, the 2020 SO Scheme, the 2020 RSU Scheme, the
2020 ESPP and the 2021 ASPP) in line with the amended Chapter 17 of the Listing Rules, the Company has sought
and obtained the approval from its shareholders at the annual general meeting of the Company held on 18 May
2023 to make certain amendments to the existing terms of each of the Company’s share schemes. In addition,
other amendments have also been made to these schemes to align with market practice and the Company’s values
and proposition.
For further information regarding the share schemes, please refer to summaries below and Appendix III to VI of the
shareholders’ circular of the Company’s 2023 annual general meeting.
RESTRICTED SHARE UNIT SCHEMES
The purpose of the 2020 RSU Scheme is to align the participants’ interests with those of the Group through ownership
of the Shares and/or the increase in value of the Shares. Under the 2020 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 2010 RSU Scheme, adopted by the Company on 28 September 2010, was terminated with effect from 31 July
2020, and no further grants may be made under this scheme although outstanding grants will continue to vest
based on their original terms. The 2020 RSU Scheme, with substantially the same terms as the 2010 RSU Scheme,
were adopted by the Company on 1 August 2020 (2020 RSU Scheme Adoption Date) and is effective for a period of
10 years from the 2020 RSU Scheme Adoption Date and has a remaining life of approximately six years.
137
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION During the 10-year period from the 2020 RSU Scheme Adoption Date, the aggregate number of Shares available for
issue underlying the RSU Awards granted by the Company under the 2020 RSU Scheme and any other restricted
share unit scheme of the Company (i.e., the 2010 RSU Scheme) shall not exceed 2.5 per cent of the number of Shares
in issue on the RSU Scheme Limit Reference Date (i.e. 18 May 2023) as specified under the rules of the 2020 RSU
Scheme, being 290,494,815 Shares, representing 2.572 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. The maximum number of Shares underlying all grants (i.e., the new Shares issued and to
be issued in respect of all options and awards granted) to any one participant under the Company’s share schemes
(including the RSU Scheme) in any 12-month period is 1 per cent (or 0.1 per cent for a substantial shareholder or
a Director or chief executive of the Company) of the number of Shares in issue as at the date of the relevant grant.
The vesting period under the long-term incentive plan is three years. In addition, the minimum period between the
date of the acceptance and the date of the vesting shall not be shorter than 12 months, except in cases where a grant
is made to (i) new hires to compensate for any forfeited compensation and benefits in respect of prior employment
and/or (ii) persons who falls within certain good leaver criteria. The Remuneration Committee is of the view that
allowing for a shorter vesting period in each of the above specific circumstances is appropriate and in line with the
purposes of the 2020 RSU Scheme, as it allows the Company to make buyout grants to new hires so as to attract key
talents and to adhere to addressing forgone remuneration, as well as to compensate good leavers with accelerated
vesting to address for specific good leaver’s circumstances.
During the year ended 31 December 2023, the Company granted 11,470,894 RSUs under the 2020 RSU Scheme.
The 2023 performance-vesting RSU grants will be assessed over a three-year period from 1 January 2023 to 31
December 2025 taking into consideration the performance measures described above.
During the year ended 31 December 2023, 4,698,715 RSUs vested under the 2010 RSU Scheme, while 125,468
vested under the 2020 RSU Scheme. The Remuneration Committee approved the vesting level for the 2020 long-
term incentive grants at 100 per cent of target, all of which were satisfied with purchases of existing Shares on
market by the scheme trustee.
Since the 2020 RSU Scheme Adoption Date and up to 31 December 2023, a cumulative total of 16,779,224 RSUs
vested under the 2010 RSU Scheme and the 2020 RSU Scheme, underlying Shares of which represent 0.14 per cent
of the number of Shares in issue as at the RSU Scheme Limited Reference Date. During the same period, no new
Shares were issued upon vesting of the awards under the 2010 RSU Scheme and the 2020 RSU Scheme.
As at 31 December 2023, there were a total of 29,913,377 RSUs outstanding under the 2010 RSU Scheme and
the 2020 RSU Scheme, representing 0.26 per cent of the number of Shares in issue as at 31 December 2023.
272,661,030 and 260,581,438 RSUs were available for grant pursuant to the scheme mandate as at 1 January 2023
and 31 December 2023, respectively.
138
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE RSU Movements During the Year Ended 31 December 2023
The table below summarises the movements in RSUs under the 2010 RSU Scheme and the 2020 RSU Scheme
during the year ended 31 December 2023.
Date of
grant
(day /
month /
year) (1)
Date of
vesting
(day /
month /
year) (2)
RSUs
outstanding
as at
1 January
2023
RSUs
granted
during the
year ended
31 December
2023
RSUs
vested
during the
year ended
31 December
2023
Group Chief Executive
and President
Mr. LEE Yuan Siong
2010 RSU Scheme
13/3/2020
25/3/2020
See note (4)
25/3/2023 (5)
1,153,153
420,426
2020 RSU Scheme
24/3/2021
17/3/2022
17/3/2023
24/3/2024 (5)
17/3/2025 (5)
17/3/2026 (6)
429,546
586,664
–
599,256
–
–
–
–
–
(315,561)
(210,213)
–
–
RSUs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2023
RSUs
outstanding
as at
31 December
2023 (3)
Weighted
average
closing price
of Shares
immediately
before the
dates on
which RSUs
vested
(HK$)
–
837,592
83.25
(210,213)
–
81.55
–
–
–
429,546
586,664
599,256
n/a
n/a
n/a
RSUs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2023
RSUs
outstanding
as at
31 December
2023 (3)
Weighted
average
closing price
of Shares
immediately
before the
dates on
which RSUs
vested
(HK$)
All eligible employees
and participants
Five highest-paid
individuals
Other eligible
employees and
participants
Date of
grant
(day /
month /
year) (1)
Date of
vesting
(day /
month /
year) (2)
RSUs
outstanding
as at
1 January
2023
RSUs
granted
during the
year ended
31 December
2023
RSUs
vested
during the
year ended
31 December
2023
2010 RSU Scheme
13/3/2020
25/3/2020
See note (4)
1,153,153
25/3/2023 (5)
661,862
24/3/2024 (5)
See note (7)
679,026
94,294
17/3/2025 (5)
1,902,596
17/3/2025 (8)
17/3/2026 (6)
21,891
–
1,217,852
2020 RSU Scheme
24/3/2021
14/3/2022
17/3/2022
17/3/2022
17/3/2023
2010 RSU Scheme
2020 RSU Scheme
24/3/2021
24/3/2021
2/6/2021
2/6/2021
25/3/2020
10/6/2020
25/3/2023 (5)
8,164,115
10/6/2023 (5)
31,142
24/3/2024 (5)
6,828,419
30/9/2021
30/9/2024 (5)
17/12/2021
17/12/2024 (8)
17/3/2025 (5)
9,668,506
24/3/2024 (8)
2/6/2024 (5)
2/6/2024 (8)
17/3/2025 (8)
17/3/2025 (5)
17/3/2025 (5)
19/5/2025 (5)
15/9/2025 (5)
17/3/2026 (6)
77,480
67,610
4,484
51,994
58,773
60,449
12,030
9,002
20,374
36,748
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(315,561)
(384,017)
–
837,592
(277,845)
–
–
108,472
(47,147)
–
787,498
47,147
–
–
–
140,000
2,042,596
–
–
21,891
1,217,852
(3,983,566)
(4,180,549)
(15,571)
(15,571)
–
–
(29,861)
(641,720)
6,156,838
–
–
(10,233)
(22,743)
–
–
–
–
–
–
77,480
34,634
4,484
51,994
58,773
(31,578)
(859,385)
8,777,543
–
–
–
–
–
–
–
–
–
–
60,449
12,030
9,002
20,374
36,748
83.25
81.55
n/a
84.45
n/a
n/a
n/a
81.56
80.75
77.16
n/a
77.67
n/a
n/a
n/a
75.31
n/a
n/a
n/a
n/a
n/a
17/3/2022
17/3/2022
28/3/2022
19/5/2022
19/5/2022
15/9/2022
17/3/2023
2010 RSU Scheme
2020 RSU Scheme
Total
Grand Total
–
10,253,042
(6,649)
(587,941)
9,658,452
71.04
10,010,272
–
(4,698,715)
(4,473,965)
837,592
19,593,676
11,470,894
(125,468)
(1,863,317)
29,075,785
29,603,948
11,470,894
(4,824,183)
(6,337,282)
29,913,377
139
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 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, 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. The measurement dates for grants made during the year ended 31 December 2023 was determined to be 17 March 2023. These
measurement dates were determined in accordance with IFRS 2 Share-based Payment.
(2) The date of vesting is subject to applicable dealing restrictions.
(3) Includes RSUs outstanding as at 31 December 2023 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.
(4) Reference is made to the Company’s announcement dated 22 November 2019. These RSUs relate to the awarded compensation for unvested long-
term incentives and deferred payments that Mr. Lee Yuan Siong forfeited on leaving his prior employment. The vesting of these RSUs is service-based
only (i.e., there are no further performance conditions attached except for continued employment). The first four tranches of 315,561 RSUs each had
vested on 13 September 2020, 21 February 2021, 21 February 2022 and 21 February 2023 respectively. Subject to continued employment, 315,561
RSUs are scheduled to vest on 21 February 2024 and 522,031 RSUs are scheduled to vest on 21 February 2025.
(5) The vesting of these RSUs is subject to service requirements and the achievement of performance measures shown on page 135 of this Annual Report.
(6) The closing price of the Shares immediately before the date on which RSUs were granted was HK$76.4. The fair value of the RSUs at the date of grant
was determined to be HK$63.37. The vesting of these RSUs is subject to service requirements and the achievement of performance measures shown
on page 135 of this Annual Report.
(7) The vesting of these RSUs is service-based only (i.e., there are no further performance conditions attached except for continued employment). The first
two traches of 47,147 RSUs each had vested on 14 September 2022 and 14 March 2023 respectively. Subject to continued employment, 47,147 RSUs
each are scheduled to vest on 14 March 2024.
(8) The vesting of these RSUs is service-based only (i.e., there are no further performance conditions attached except for continued employment).
SHARE OPTION SCHEMES
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 2010 SO Scheme, adopted by the Company on 28 September 2010, was terminated with effect from 29 May
2020, and no further grants may be made under this scheme although outstanding grants will continue to vest based
on their original terms.
The 2020 SO Scheme, with substantially the same terms as the 2010 SO Scheme, was adopted by the Company on
29 May 2020 (2020 SO Scheme Adoption Date). The 2020 SO Scheme is effective for a period of 10 years from the
2020 SO Scheme Adoption Date and has a remaining life of approximately six years.
During the 10-year period from the 2020 SO Scheme Adoption Date, 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) shall not exceed 2.5 per cent
of the number of Shares in issue on the 2020 SO Scheme Adoption Date, being 302,264,978 shares (representing
2.676 per cent of the number of Shares in issue as at the date of this report). The maximum number of Shares
underlying all grants (i.e., the new Shares issued and to be issued in respect of all options and awards granted) to
any one participant under the Company’s shares schemes (including the SO Scheme) in any 12-month period is 1 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.
140
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE 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 vesting period under the long-term incentive plan is three years. In addition, the minimum holding period of an
SO is 12 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, except in
cases where a grant is made to (i) new hires to compensate for any forfeited compensation and benefits in respect
of prior employment and/or (ii) persons who falls within certain good leaver criteria. The Remuneration Committee is
of the view that allowing for a shorter vesting period in each of the above specific circumstances is appropriate and
in line with the purposes of the 2020 SO Scheme, as it allows the Company to make buyout grants to new hires so as
to attract key talents and to adhere to addressing forgone remuneration, as well as to compensate good leavers with
accelerated vesting to address for specific good leaver’s circumstances.
During the year ended 31 December 2023, the Company granted 1,918,599 SOs under the 2020 SO Scheme. During
the same period, 661,786 new Shares were issued upon exercise of the SOs granted under the 2010 SO Scheme
and no new Shares were issued under the 2020 SO Scheme. The Remuneration Committee is of the view that
SOs (with no performance conditions attached to them) are granted to drive long-term focus and shareholder value
creation. The value of the SOs is linked to the future Share price, which in turn depends on the performance of
the Company.
Since the 2020 SO Scheme Adoption Date and up to 31 December 2023, a cumulative total of 7,769,460 new
Shares were issued under the 2010 SO Scheme, representing approximately 0.06 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 31 December 2023, there were a total of 25,105,172 SOs outstanding under the 2010 SO Scheme and the
2020 SO Scheme, representing 0.22 per cent of the number of Shares in issue as at 31 December 2023.
271,184,000 and 269,390,346 SOs were available for grant pursuant to the scheme mandate as at 1 January 2023
and 31 December 2023, respectively.
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 294,440,807 Shares, representing approximately 2.607 per cent
of the number of Shares in issue.
141
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION SO Movements During the Year Ended 31 December 2023
The table below summarises the movements in SOs under the 2010 SO Scheme and the 2020 SO Scheme during the
year ended 31 December 2023.
Group Chief Executive
and President
and other eligible
employees and
participants
Date of
grant
(day /
month /
year) (1)
Period during
which SOs
are exercisable
(day / month / year)
SOs
outstanding
as at
1 January
2023
SOs
granted
during the
year ended
31 December
2023
SOs
vested
during the
year ended
31 December
2023
SOs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2023
SOs
exercised
during the
year ended
31 December
2023
SOs
outstanding
as at
31 December
2023 (3)
Exercise
price
(HK$)
Weighted
average
closing price
of Shares
immediately
before the
dates on
which SOs
were
exercised
(HK$)
Group Chief
Executive and
President
Mr. LEE Yuan Siong
2010 SO Scheme
25/3/2020
25/3/2023 - 24/3/2030 (4)
1,197,133
2020 SO Scheme
24/3/2021
24/3/2024 - 23/3/2031 (4)
17/3/2022
17/3/2025 - 16/3/2032 (4)
464,526
660,259
–
–
–
17/3/2023
17/3/2026 - 16/3/2033 (5)
–
552,217
Other eligible
employees and
participants
2010 SO Scheme
11/3/2013
11/3/2016 - 10/3/2023 (4)
37,266
5/3/2014
5/3/2017 - 4/3/2024 (4)
348,915
12/3/2015
12/3/2018 - 11/3/2025 (4)
1,086,369
9/3/2016
9/3/2019 - 8/3/2026 (4)
1,637,947
10/3/2017
10/3/2020 - 9/3/2027 (4)
3,604,194
31/7/2017
1/6/2020 - 30/7/2027 (4)
830,436
15/3/2018
15/3/2021 - 14/3/2028 (4)
3,726,493
27/3/2019
27/3/2022 - 26/3/2029 (4)
3,300,258
15/5/2019
1/5/2022 - 14/5/2029 (4)
82,221
25/3/2020
25/3/2023 - 24/3/2030 (4)
3,772,986
2020 SO Scheme
24/3/2021
24/3/2024 - 23/3/2031 (4)
1,365,104
17/3/2022
17/3/2025 - 16/3/2032 (4)
1,859,197
–
–
–
–
–
–
–
–
–
–
–
–
17/3/2023
17/3/2026 - 16/3/2033 (5)
–
1,366,382
1,197,133
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,380,348
(51,046)
–
–
–
(58,991)
(14,908)
–
(51,046)
(73,899)
–
–
–
–
(37,266)
(294,204)
(129,470)
–
(164,479)
–
(36,367)
–
–
–
–
–
–
(661,786)
–
n/a
n/a
n/a
n/a
88.30
77.87
85.11
n/a
79.40
n/a
88.30
n/a
n/a
n/a
n/a
n/a
n/a
68.10
1,197,133
97.33
79.85
80.73
34.35
37.56
47.73
41.90
50.30
61.55
67.15
76.38
78.70
68.10
97.33
79.85
80.73
464,526
660,259
552,217
–
54,711
956,899
1,637,947
3,439,715
830,436
3,690,126
3,300,258
82,221
3,721,940
1,306,113
1,844,289
1,366,382
18,911,386
6,193,786
25,105,172
Grand Total
2010 SO Scheme
2020 SO Scheme
Total
19,624,218
– 4,577,481
4,349,086
1,918,599
–
23,973,304 1,918,599
4,577,481
(124,945)
(661,786)
Notes:
(1) 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 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. The measurement date for grants made during the year ended 31 December 2023 was determined to be 17 March 2023. These measurement
dates were determined in accordance with IFRS 2 Share-based Payment.
(2) The date of vesting is the first day of the period during which SOs are exercisable and subject to applicable dealing restrictions.
(3) Includes SOs outstanding as at 31 December 2023 that, in accordance with the 2010 SO Scheme rules and 2020 SO Scheme rules, will lapse on or
before the end of the respective period during which the SOs are exercisable.
(4) The vesting of SOs is service-based only.
(5) The closing price of the Shares immediately before the date on which SOs were granted was HK$76.40. The fair value of the SOs at the date of grant
was determined to be HK$23.97. The vesting of SOs is service-based only.
142
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE
EMPLOYEE SHARE PURCHASE PLANS
The 2011 ESPP and the 2020 ESPP (together, ESPPs) are designed to facilitate and encourage long-term AIA share
ownership by employees 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. 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 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 six years.
Under the 2020 ESPP, eligible employees of the Group may elect to purchase Shares and, through the grant of
matching RSPUs, employees who are still employed with the Group will receive one matching Share for every two
Shares purchased that are held until the vesting of the matching RSPUs, which generally takes place 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 vesting period of the RSPUs granted is three years. In the case where a participant fulfills the good leaver
criteria or if there is a change in control or winding-up of the Company each participant’s matching RSPUs shall vest
immediately. The Remuneration Committee is of the view that allowing for a shorter vesting period in these specific
circumstances is appropriate and in line with the purposes of the ESPP as it allows the Company to compensate good
leavers with accelerated vesting to address for specific good leaver’s circumstances.
During the 10-year period from the 2020 ESPP Adoption Date, the aggregate number of Shares available for issue
pursuant to the 2020 ESPP and any other employee share purchase plan (i.e., the 2011 ESPP) shall not exceed 2.5
per cent of the number of Shares in issue on the reference date as specified under the rules of the 2020 ESPP (i.e. 18
May 2023), being 290,494,815 Shares, representing 2.572 per cent of the number of Shares in issue as at the date
of this report. The maximum number of Shares underlying all grants (i.e., the new Shares issued and to be issued
in respect of all options and awards granted) to any one participant under the Company’s share schemes (including
the ESPPs) in any 12-month period is 1 per cent (or 0.1 per cent for a substantial shareholder or a director or chief
executive of the Company) of the number of Shares in issue as at the date of filing the election form for participation
in the ESPP.
No performance targets and clawback provisions are attached to RSPUs under the ESPPs. The Remuneration
Committee is of the view that the grants under the ESPPs are time-vesting and intended for eligibility wider than
directors and senior management and focused on strengthening employees’ sense of belonging and engagement by
holding an equity stake in the Company.
143
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION During the year ended 31 December 2023, 1,972,908 matching RSPUs were granted, 1,196,668 matching RSPUs
vested and no new Shares were issued under the 2020 ESPP.
Since the 2020 ESPP Adoption Date and up to 31 December 2023, no new Shares were issued upon vesting of the
RSPUs granted under the 2020 ESPP and its predecessor plan.
As at 31 December 2023, there were a total of 3,742,988 RSPUs outstanding under 2020 ESPP, representing 0.03
per cent of the number of Shares in issue as at 31 December 2023.
The table below summarises the movements in RSPUs under the 2020 ESPP during the year ended 31 December
2023.
RSPUs
outstanding
as at
1 January
2023
RSPUs
granted
during the
year ended
31 December
2023 (1)
RSPUs
vested
during the
year ended
31 December
2023
RSPUs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2023
RSPUs
outstanding
as at
31 December
2023 (2)
Weighted
average
closing price
of Shares
immediately
before the
dates on
which RSPUs
vested
(HK$)
1,901
978
(785)
–
2,095
73.80
Group Chief Executive
and President
Mr. LEE Yuan Siong
ESPP
2020 ESPP
(3)
RSPUs
outstanding
as at
1 January
2023
ESPP
Five highest-paid individuals
2020 ESPP (3)
5,704
RSPUs
granted
during the
year ended
31 December
2023 (1)
2,934
RSPUs
vested
during the
year ended
31 December
2023
RSPUs
cancelled /
lapsed /
reclassified
during the
year ended
31 December
2023
(2,354)
–
RSPUs
outstanding
as at
31 December
2023 (2)
6,284
Weighted
average
closing price
of Shares
immediately
before the
dates on
which RSPUs
vested
(HK$)
73.80
Other eligible employees
and participants
Grand Total
2020 ESPP (3)
3,273,975
3,279,679
1,969,974
1,972,908
(1,194,314)
(1,196,668)
(312,931)
3,736,704
73.96
(312,931)
3,742,988
Notes:
(1) The grant date of matching RSPUs is taken to be the first day of the month after a participant has enrolled in the ESPP under IFRS 2 Share-based
Payment, with actual monthly share purchase on 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. The
weighted average fair value per each matching RSPUs granted during the year ended 31 December 2023 were measured to be HK$70.79 for January
2023 grant, HK$70.22 for February 2023 grant, HK$69.87 for March 2023 grant, HK$68.79 for April 2023 grant, HK$67.73 for May 2023 grant,
HK$66.05 for June 2023 grant, HK$63.68 for July 2023 grant, HK$62.69 for August 2023 grant, HK$64.04 for September 2023 grant, HK$61.21 for
October 2023 grant, HK$59.40 for November 2023 grant and HK$58.61 for December 2023 grant. No consideration is payable by participants on the
grant of RSPUs.
(2) As at 1 January 2023, 298,985,299 RSPUs were available for grant pursuant to the plan limit as of such date. The plan limit was subsequently revised
at the annual general meeting of the Company held on 18 May 2023, and taking into account the grant of RSPUs during the year ended 31 December
2023, 286,751,826 RSPUs were available for grant pursuant to the revised plan limit as at 31 December 2023.
(3) 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; d) 2023 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 2023 to October
2024, and date of vesting on 15 November 2026.
144
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE
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 had been 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 seven years.
During the 10-year period from the 2021 ASPP Adoption Date, the aggregate number of Shares available for issue
pursuant to the 2021 ASPP and any other agency share purchase plan (i.e., the 2012 ASPP) shall not exceed 2.5 per
cent of the number of Shares in issue on the reference date as specified under the rules of the 2021 ASPP (i.e. 18
May 2023), being 290,494,815 Shares, representing 2.572 per cent of the number of Shares in issue as at the date
of this report. The maximum number of Shares underlying all grants (i.e., the new Shares issued and to be issued in
respect of all options and awards granted) to any one participant under the Company’s share schemes (including
the ASPPs) in any 12-month period is 1 per cent of the number of Shares in issue as at the date of filing the election
form for participation in the ASPP.
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 generally 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.
No performance targets and clawback provisions are attached to RSSUs under the ASPPs. The Remuneration
Committee is of the view that the grants under the ASPPs are time-vesting and focused on strengthening agents’
sense of belonging and engagement by holding an equity stake in the Company.
During the year ended 31 December 2023, no matching RSSUs were granted, 986,359 matching RSSUs vested
and 986,359 new Shares were issued under the 2012 ASPP. During the same period, 1,071,710 matching RSSUs
were granted, no matching RSSUs vested and no new Shares were issued under the 2021 ASPP. The new Shares
were issued at a 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 27 April 2023 was HK$85.20.
145
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Since the 2021 ASPP Adoption Date and up to 31 December 2023, a cumulative total of 3,298,477 matching RSSUs
were vested under the ASPPs and 3,298,477 new Shares were issued under either the 2012 ASPP or the 2021 ASPP.
As at 31 December 2023, there were a total of 2,573,564 RSSUs outstanding under the 2012 ASPP and the 2021
ASPP, representing 0.02 per cent of the number of Shares in issue as at 31 December 2023.
The table below summarises the movements in RSSUs under 2012 ASPP and 2021 ASPP during the year ended 31
December 2023 for the eligible participants.
Eligible participants
ASPP
2012 ASPP (1)
2021 ASPP (2)
Total
RSSUs
outstanding
as at
1 January
2023
1,005,238
1,606,062
2,611,300
RSSUs
granted
during the
year ended
31 December
RSSUs
vested
during the
year ended
31 December
2023 (3)
2023 (4)
–
(986,359)
1,071,711
1,071,711
–
(986,359)
RSSUs cancelled /
lapsed / reclassified
during the
year ended
31 December
2023
(18,879)
(104,209)
(123,088)
RSSUs
outstanding
as at
31 December
2023 (5)
–
2,573,564
2,573,564
Weighted average
closing price of Shares
immediately before the
dates on which
RSSUs vested
(HK$)
83.85
n/a
83.85
Notes:
(1) The 2012 ASPP includes 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; c) 2023 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 2023 to April 2024, and date of vesting on 29 May 2026.
(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 share price on www.aia.com.
The weighted average fair value per matching RSSUs granted during the year ended 31 December 2023 was measured to be HK$57.03 for 27 March
2023 grant, being the last date of the enrolment period of the 2023 ASPP plan year, 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 36 to the
consolidated financial statements.
(4) The subscription price of RSSUs is US$1.00 per share.
(5) As at 1 January 2023, 297,341,560 RSSUs were available for grant pursuant to the plan limit as of such date. The plan limit was subsequently revised
at the annual general meeting of the Company held on 18 May 2023, and taking into account the issuance of new Shares and grant of RSSUs during
the year ended 31 December 2023, 284,622,774 RSSUs were available for grant pursuant to the revised plan limit as at 31 December 2023.
The number of Shares that may be issued in respect of SOs and awards granted under the share schemes of the
Company during the year ended 31 December 2023 divided by the weighted average number of Shares in issue as
at 31 December 2023 is 0.1427 per cent.
Details regarding the fair value measurement of SOs and awards granted under the share schemes of the Company
during the year ended 31 December 2023 and the accounting standard and policy adopted are set out in note 36 to
the consolidated financial statements.
146
AIA GROUP LIMITEDREMUNERATION REPORTCORPORATE GOVERNANCE
LOOKING AHEAD
This section sets out further information regarding remuneration for the performance year 2024.
During 2023, the Remuneration Committee reviewed the design of the incentive plans and conducted an in-depth
analysis with support from its independent external advisor. The review focused on ensuring that AIA’s incentive
plans are future fit to support the attraction, motivation and retention of executives and key talent, continuing to align
with our strategy and the interests of our stakeholders, whilst complying with regulatory requirements.
The enhancements include the introduction of time-vesting RSUs replacing a portion of the current long-term
incentive plan vehicle performance-vesting RSUs for plan participants other than the Group Chief Executive and
President and Key Management Personnel. SOs will continue to be provided. Further, to determine the long-term
incentive vesting level, an additional key financial performance measure (Underlying Free Surplus Generation,
UFSG) will be introduced.
The enhancements are effective for the 2024 long-term incentive plan and details will be disclosed in the 2024
Remuneration Report, which will be published in 2025.
The Remuneration Committee will continue to assess the remuneration framework to ensure that it delivers
competitive remuneration to attract and retain the best talent whilst complying with relevant regulatory requirements
and considering best practices to support the Group’s strategy.
147
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 20. Fair value measurement
21. Other assets
22. Cash and cash equivalents
23. Impairment of financial assets
24. Insurance contracts and
reinsurance contracts held
25. Investment contracts
26. Borrowings
27. Obligations under repurchase agreements
28. Offsetting of financial assets and
financial liabilities
29. Provisions
30. Other liabilities
31. Share capital and reserves
32. Non-controlling interests
33. Group capital structure
34. Risk management
35. Employee benefits
36. Share-based compensation
37. Remuneration of directors and
key management personnel
38. Related party transactions
39. Commitments and contingencies
40. Subsidiaries
41. Events after the reporting period
42. Disposal group held for sale
43. Effects of adoption of IFRS 9, IFRS 17 and
amendment to IAS 16
44. Statement of financial position of the Company
45. Statement of changes in equity of the Company
325 Independent Auditor’s Report on
the Supplementary Embedded
Value Information
329 Supplementary Embedded
Value Information
FINANCIAL STATEMENTS
149 Independent Auditor’s Report
156 Consolidated Income Statement
157 Consolidated Statement of
Comprehensive Income
158 Consolidated Statement of
Financial Position
160 Consolidated Statement of
Changes in Equity
162 Consolidated Statement of
Cash Flows
164 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. Operating profit after tax
6. Total weighted premium income and
annualised new premiums
7. Segment information
8.
Insurance revenue
9. Net investment result
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. Financial investments
19. Derivative financial instruments
148
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 156 to 324, comprise:
•
•
•
•
•
•
the consolidated statement of financial position as at 31 December 2023;
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 2023, 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 IFRS Accounting Standards 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.
149
ANNUAL REPORT 2023FINANCIAL 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 matter identified relate to the valuation of insurance contract liabilities.
Key audit matter
How our audit addressed the key audit matter
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 and Note 24
‘Insurance contracts and reinsurance contracts held’.
As at 31 December 2023, the Group has
insurance contract liabilities of US$203,271
million.
The work to address the valuation of insurance
contract liabilities including the following audit
procedures:
(a) Fulfilment cash flows
• We performed the following procedures
over actuarial methodologies:
o Understood and evaluated
the
design of the controls in place over
the determination of actuarial
methodologies used and material
model changes;
o Obtained
the
methodology
documentation and reviewed the
appropriateness of material changes
identified; and
o Performed testing on a sample basis
to verify the material changes to the
methodology are reflected in the
actuarial models (as applicable).
The Management’s valuation of
these
insurance contract liabilities which are
measured as the total of fulfilment cash
flows (“FCF”) and contractual service
margin
significant
judgement about uncertain future outcomes
including the development of significant
actuarial assumptions and methodologies.
(“CSM”),
involves
(a) Fulfilment cash flows
FCF are determined using assumptions
as at the valuation date. In addition, for
insurance contracts with significant
financial options and guarantees,
stochastic modelling techniques are
applied in measuring those contracts’
FCF.
Therefore, these liabilities are subject to
significant estimation uncertainty and
the
is
associated
considered significant.
inherent
risk
150
AIA GROUP LIMITEDFINANCIAL STATEMENTS Key Audit Matters (continued)
Key audit matter
How our audit addressed the key audit matter
Valuation of insurance contract liabilities (continued)
(a) Fulfilment cash flows (continued)
(a) Fulfilment cash flows (continued)
As part of our consideration of
assumptions, we have
focused on
assumptions that has a significant
impact to the measurement of FCF.
to actuarial
relation
We have,
in
methodologies
on
focused
used,
changes in methodologies from the prior
year as well as methodologies applied to
material new product
(as
applicable).
types
• We assessed the reasonableness of the
significant assumptions. Our assessment
of the assumptions included:
o Understood and evaluated
the
design of the controls in place to
determine the assumptions and data
inputs used in determining these
assumptions;
o Examined the approach used by
the
our
and
to
by
knowledge
management
assumptions
industry
experience; and
derive
applying
o Challenged
significant
the
assumptions used by management
against past experience, market
observable data (as applicable) and
our experience of market practice.
151
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONINDEPENDENT AUDITOR’S REPORT Key Audit Matters (continued)
Key audit matter
How our audit addressed the key audit matter
Valuation of insurance contract liabilities (continued)
(b) Contractual Service Margin
(b) Contractual Service Margin
In addition to the procedures performed
over the underlying fulfilment cash flows,
we have also:
• Understood and evaluated the design of
the controls in place over the process
including the basis used to identify the
services and to determine the quantity
of services provided;
services
• Assessed the appropriateness of the
by
different
management, by reviewing the terms
and benefits features of
insurance
contracts issued on a sample basis; and
identified
• Assessed the appropriateness of the
determination of coverage units by
management in respect of the services
to be provided against relevant market
publications.
Based upon the work performed, we found
the methodologies, assumptions and
judgments used in relation to insurance
contract liabilities to be appropriate.
The CSM represents the unearned
profits that the Group will recognise as it
provides services under the insurance
contracts.
The release of CSM of a group of
contracts is recognised as insurance
revenue in each period based on the
number of coverage units provided in
the period. Coverage units in turn are
determined by factors including the
quantity of services provided and time
value of money.
judgement
to
Management applied
identify the service provided and then
determine the quantity of services
provided.
As part of our audit we have focused on
the determination of coverage units as it
is subject
to a higher degree of
judgement and the associated inherent
risk is considered significant.
152
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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 2023 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 14 March 2024.
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
IFRS Accounting Standards 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.
153
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONINDEPENDENT AUDITOR’S REPORT 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.
154
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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
14 March 2024
155
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONINDEPENDENT AUDITOR’S REPORT US$m
Insurance revenue
Insurance service expenses
Net expenses from reinsurance contracts held
Insurance service result
Interest revenue on
Financial assets not measured at fair value through profit or loss
Financial assets measured at fair value through profit or loss
Other investment return
Net impairment loss on financial assets
Investment return
Net finance (expenses)/income from insurance contracts
Net finance income from reinsurance contracts held
Movement in investment contract liabilities
Movement in third-party interests in consolidated investment funds
Net investment result
Fee income
Other operating revenue
Other expenses
Other finance costs
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$)
Basic
Diluted
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
17,514
(12,078)
(345)
5,091
4,062
3,758
4,941
(195)
12,566
(10,456)
65
(572)
(56)
1,547
114
294
16,319
(10,434)
(419)
5,466
3,837
3,430
(38,647)
(233)
(31,613)
30,957
67
1,106
34
551
138
301
(1,752)
(1,896)
(463)
4,831
(267)
4,564
(783)
3,781
3,764
17
0.33
0.33
(385)
4,175
(121)
4,054
(689)
3,365
3,331
34
0.28
0.28
Notes
8, 24
10, 24
24
9
9
9
9
9
9
9, 25
9
9
10
10
11
12
12
156
AIA GROUP LIMITEDCONSOLIDATED INCOME STATEMENTFINANCIAL STATEMENTS US$m
Net profit
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Fair value gains/(losses) on financial assets at fair value through other
comprehensive income (net of tax of: 2023: US$(997)m; 2022: US$1,788m)
Fair value losses on financial assets at fair value through other
comprehensive income reclassified to profit or loss on disposal
(net of tax of: 2023: US$20m; 2022: US$(26)m)
Foreign currency translation adjustments
Cash flow hedges
Net finance (expenses)/income from insurance contracts
(net of tax of: 2023: US$1,403m; 2022: US$(1,164)m)
Net finance income/(expenses) from reinsurance contracts held
(net of tax of: 2023: US$(51)m; 2022: US$(3)m)
Share of other comprehensive expense 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: 2023: US$(19)m; 2022: US$(2)m)
Effect of remeasurement of net liability of defined benefit schemes
(net of tax of: 2023: US$2m; 2022: US$(6)m)
Subtotal
Total other comprehensive expense
Total comprehensive income/(expense)
Total comprehensive income/(expense) attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Note:
(1) Where applicable, amounts are presented net of tax.
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
3,781
3,365
3,589
(10,519)
95
(215)
(8)
455
(1,490)
(3)
(4,400)
3,394
60
(496)
(1,375)
28
(8)
20
(1,355)
2,426
2,417
9
(251)
(530)
(8,944)
60
25
85
(8,859)
(5,494)
(5,497)
3
157
ANNUAL REPORT 2023CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFINANCIAL STATEMENTSOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION
US$m
Assets
Intangible assets
Investments in associates and joint ventures
Property, plant and equipment
Investment property
Insurance contract assets
Reinsurance contract assets
Financial investments:
At amortised cost
Debt securities
Loans and deposits
At fair value through other comprehensive income
Debt securities
At fair value through profit or loss
Debt securities
Loans and deposits
Equity shares
Interests in investment funds and
exchangeable loan notes
Derivative financial instruments
Deferred tax assets
Current tax recoverable
Other assets
Cash and cash equivalents
Assets in disposal group held for sale
Total assets
Liabilities
Insurance contract liabilities
Reinsurance contract liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Derivative financial instruments
Provisions
Deferred tax liabilities
Current tax liabilities
Other liabilities
Liabilities in disposal group held for sale
Total liabilities
Notes
14
15
16
17
24
24
18, 20, 42
19, 42
11, 42
42
21, 42
22, 42
42
24, 42
24, 42
25, 42
26
27
19, 42
29
11, 42
30, 42
42
As at
31 December
2023
As at
31 December
2022
(restated)
As at
1 January
2022
(restated)
3,615
1,331
4,058
4,504
1,457
6,047
2,165
3,723
3,277
2,056
2,844
4,600
2,037
5,763
1,787
4,566
2,914
831
2,744
4,716
3,681
6,436
1,476
5,434
88,612
86,060
103,580
86,981
272
19,287
47,166
752
77,496
279
23,378
38,577
568
94,916
297
30,817
40,243
1,468
248,958
232,711
278,231
301
207
4,316
11,525
–
229
117
4,524
8,020
4,293
104
120
6,486
4,989
–
286,319
270,471
311,252
203,271
181,851
217,773
336
9,170
11,800
3,461
8,035
174
3,204
387
4,887
–
384
9,092
11,206
1,748
8,638
153
3,409
467
4,264
4,111
709
13,896
9,588
1,588
1,392
186
4,103
389
5,121
–
244,725
225,323
254,745
158
AIA GROUP LIMITEDCONSOLIDATED STATEMENT OF FINANCIAL POSITIONFINANCIAL STATEMENTS
US$m
Equity
Share capital
Employee share-based trusts
Other reserves
Retained earnings
Other comprehensive income
Total equity attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Total equity
Total liabilities and equity
As at
31 December
2023
As at
31 December
2022
(restated)
As at
1 January
2022
(restated)
Notes
31
31
31
32
14,176
(367)
(11,788)
44,333
(5,243)
41,111
483
41,594
14,171
(290)
14,160
(225)
(11,812)
(11,841)
46,499
(3,896)
44,672
476
45,148
48,997
4,932
56,023
484
56,507
286,319
270,471
311,252
Approved and authorised for issue by the Board of Directors on 14 March 2024.
Lee Yuan Siong
Director
Edmund Sze-Wing Tse
Director
159
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONCONSOLIDATED STATEMENT OF FINANCIAL POSITION US$m
Employee
share-
based
trusts
Share
capital
Note
Other
reserves
Retained
earnings
Fair value
reserve
Foreign
currency
translation
reserve
Insurance
finance
reserve
Property
revaluation
reserve
Non-
controlling
interests
Others
Total
equity
Other comprehensive income
Balance at 1 January 2023 (restated)
14,171
(290)
(11,812)
46,499
(3,737)
(2,735)
1,238
1,279
59
3,764
–
Net profit
Fair value gains on financial assets at fair value
through other comprehensive income
Fair value losses on financial assets at fair value
through other comprehensive income
reclassified to profit or loss on disposal
Foreign currency translation adjustments
Cash flow hedges
Net finance expenses from insurance contracts
Net finance income from reinsurance contracts held
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
Share buy-back
Shares issued under share option scheme and
agency share purchase plan
Increase in non-controlling interests
Share-based compensation
Purchase of shares held by employee
share-based trusts
Transfer of vested shares from employee
share-based trusts
13
–
–
–
–
–
–
–
–
–
–
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(15)
77
(115)
–
38
(38)
–
–
–
–
–
–
–
–
–
3,764
(2,293)
(3,637)
–
–
–
–
–
–
–
–
(213)
–
–
–
–
–
–
–
–
(4,386)
60
3,581
95
–
–
–
–
577
(2)
(1,071)
–
–
–
–
–
–
4,253
(215)
(5,397)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
28
–
28
–
–
–
–
–
–
–
–
–
–
–
(8)
–
–
–
–
(8)
(16)
–
–
–
–
–
–
–
476
17
45,148
3,781
8
3,589
–
(2)
–
95
(215)
(8)
(14)
(4,400)
–
–
–
–
9
(19)
–
–
17
–
–
–
60
(496)
28
(8)
2,426
(2,312)
(3,637)
5
2
77
(115)
–
Balance at 31 December 2023
14,176
(367)
(11,788)
44,333
516
(2,950)
(4,159)
1,307
43
483
41,594
Note:
(1) Where applicable, amounts are presented net of tax.
160
AIA GROUP LIMITEDCONSOLIDATED STATEMENT OF CHANGES IN EQUITYFINANCIAL STATEMENTS
US$m
Notes
Share
capital
Employee
share-
based
trusts
Other
reserves
Retained
earnings
Fair value
reserve
Foreign
currency
translation
reserve
Insurance
finance
reserve
Property
revaluation
reserve
Non-
controlling
interests
Others
Total
equity
Other comprehensive income
Balance at 1 January 2022, as previously reported
14,160
(225)
(11,841)
49,984
8,407
(1,068)
–
1,069
(19)
467
60,934
Impact of initial adoption of IFRS 9 and IFRS 17
Retrospective adjustments for amendment to IAS 16
43
43
–
–
–
–
–
–
(1,208)
(1,766)
221
–
–
–
(1,895)
–
369
(221)
Balance at 1 January 2022 (restated)
14,160
(225)
(11,841)
48,997
6,641
(1,068)
(1,895)
1,217
Net profit
Fair value losses on financial assets at fair value
through other comprehensive income
Fair value losses on financial assets at fair value
through other comprehensive income
reclassified to profit or loss on disposal
Foreign currency translation adjustments
Cash flow hedges
Net finance income from insurance contracts
Net finance expenses from reinsurance
contracts held
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 (restated)
Dividends
Share buy-back
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
13
–
–
–
–
–
–
–
–
–
–
–
–
–
11
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(103)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13)
–
80
–
38
(38)
3,331
–
–
–
–
(1,469)
–
–
–
(10,499)
455
–
–
–
–
(334)
(198)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,384
(251)
–
–
–
3,331
(10,378)
(1,667)
3,133
(2,259)
(3,570)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
60
–
62
–
–
–
–
–
–
–
–
56
–
37
–
–
–
–
(3)
–
–
–
–
25
22
–
–
–
–
–
–
–
–
17
–
484
34
(4,427)
–
56,507
3,365
(20)
(10,519)
–
455
(21)
(1,490)
–
10
(3)
3,394
–
–
–
–
3
(20)
–
–
13
(4)
–
–
–
(251)
(530)
60
25
(5,494)
(2,279)
(3,570)
11
–
(4)
80
(103)
–
Balance at 31 December 2022 (restated)
14,171
(290)
(11,812)
46,499
(3,737)
(2,735)
1,238
1,279
59
476
45,148
Note:
(1) Where applicable, amounts are presented net of tax.
161
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONCONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
Notes
US$m
Cash flows from operating activities
Profit before tax
Adjustments for:
Financial investments
Insurance contracts
Reinsurance contracts held
Investment contracts
Obligations under repurchase agreements
27
Other non-cash operating items, including investment income and
the effect of exchange rate changes on certain operating items
Operating cash items:
Interest received
Dividends received
Interest paid
Tax paid
Net cash provided by operating activities
Cash flows from investing activities
Payments for intangible assets
Distribution or dividend from an associate
Payments for increase in interest of joint ventures
Proceeds from sales of investment property and property,
plant and equipment
Payments for investment property and property, plant and equipment
Acquisition/disposal of subsidiaries and disposal group held for sale,
net of cash acquired/disposed of
Net cash used in investing activities
Cash flows from financing activities
Issuances of medium-term notes and securities
Redemption of medium-term notes
Proceeds from other borrowings
Repayment of other borrowings
Capital contribution from non-controlling interests
Payments for lease liabilities(1)
Interest paid on medium-term notes and securities
Dividends paid during the year
Share buy-back
Purchase of shares held by employee share-based trusts
Shares issued under share option scheme and agency share purchase plan
14
15
16, 17
16, 17
26
26
26
26
4,564
4,054
(9,435)
15,772
(269)
(2,718)
1,739
31,199
(23,413)
(78)
(1,492)
186
(7,008)
(8,312)
7,486
1,663
(82)
(793)
10,919
(326)
1
(68)
–
(1,420)
(324)
(2,137)
996
(500)
150
(114)
2
(150)
(394)
(2,312)
(3,637)
(115)
5
7,246
1,204
(47)
(680)
9,867
(386)
1
(11)
7
(157)
(271)
(817)
1,818
(165)
1,364
(1,364)
–
(168)
(330)
(2,279)
(3,570)
(103)
11
Net cash used in financing activities
(6,069)
(4,786)
162
AIA GROUP LIMITEDCONSOLIDATED STATEMENT OF CASH FLOWSFINANCIAL STATEMENTS
US$m
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of the financial year
Note:
(1) The total cash outflow for leases for the year ended 31 December 2023 was US$157m (2022: US$170m).
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
2,713
8,766
(29)
11,450
4,264
4,695
(193)
8,766
Cash and cash equivalents in the above consolidated statement of cash flows can be further analysed as follows:
US$m
As at
31 December
2023
As at
31 December
2022
(restated)
Notes
Cash and cash equivalents in the consolidated statement of financial position
22, 42
Bank overdrafts
Cash and cash equivalents in the consolidated statement of cash flows
11,525
(75)
11,450
8,969
(203)
8,766
163
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONCONSOLIDATED STATEMENT OF CASH FLOWS 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 codes “1299”
for HKD counter and “81299” for RMB counter with American Depositary Receipts (Level 1) traded on the over-the-counter
market under the 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), IFRS® Accounting Standards and the Hong Kong Companies Ordinance. IFRS Accounting
Standards 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
Accounting Standards. References to IFRS Accounting Standards, IAS® Standards and IFRIC® Interpretations 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 Accounting Standards affecting these consolidated financial
statements.
The consolidated financial statements have been approved for issue by the Board of Directors on 14 March 2024.
The consolidated financial statements have been prepared using the historical cost convention, as modified by the
revaluation of financial assets measured at fair value through other comprehensive income, financial assets and liabilities
measured 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. Additionally, insurance and reinsurance contract assets and liabilities are
measured using a fulfilment cash flow and contractual service margin (CSM) basis.
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.
(a) New amendment and new and revised standards adopted by the Group:
•
IFRS 9, Financial Instruments, addresses the classification, measurement and recognition of financial assets and
financial liabilities;
•
IFRS 17, Insurance Contracts, replaces IFRS 4, Insurance Contracts; and
• Amendment to IAS 16, Property, Plant and Equipment, consequential to the adoption of IFRS 17.
Additional information on the qualitative and quantitative effects of the adoption of the new and revised accounting
standards on the Group’s consolidated financial statements is provided in note 43.
164
AIA GROUP LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATIONFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.1 Basis of preparation and statement of compliance (continued)
(b) The following relevant new amendments to standards have been adopted for the first time for the financial year ended
31 December 2023 and have no material impact to the Group:
• Amendments to IAS 8, Definition of Accounting Estimates;
• Amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising from a Single Transaction; and
• Amendments to IAS 12, International Tax Reform – Pillar Two Model Rules.
(c) The following relevant new amendments to standards have been issued but are not effective for the financial year
ended 31 December 2023 and have not been early adopted (the financial years for which the adoption is required for
the Group are stated in parentheses). The Group has assessed the impact of these new amendments on its financial
position and results of operations and they are not expected to have a material impact on the financial position or
results of operations of the Group:
• Amendments to IAS 1, Classification of Liabilities as Current or Non-current (2024);
• Amendments to IAS 1, Non-current Liabilities with Covenants (2024);
• Amendments to IAS 7 and IFRS 7, Supplier Finance Arrangements (2024);
• Amendments to IFRS 16, Lease Liability in a Sale and Leaseback (2024); and
• Amendments to IAS 21, Lack of Exchangeability (2025).
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 and the comparative period ended 31
December 2022 has been restated to conform to IFRS 9, IFRS 17 and amendment to IAS 16. The Company’s statement of
financial position and the statement of changes in equity, as set out in notes 44 and 45 respectively, have been prepared
in accordance with the Group’s accounting policies.
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. 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 Supplementary Embedded Value Information. The Group defines operating profit after tax as net profit
excluding the following non-operating items:
• Short-term investment and discount rate variances
– Variances between expected and actual investment returns across relevant asset classes and the corresponding
impact on the measurement of relevant insurance contract liabilities;
– Variances between expected and actual discount rates impacting the measurement of fulfilment cash flows of
relevant insurance and reinsurance contract assets and liabilities;
– Other investment returns; and
• Other significant items that management considers to be non-operating income and expenses.
165
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.2 Operating profit (continued)
The impacts of non-operating items arising from investment assets as well as direct insurance contracts issued and
reinsurance contracts held by the Group entities are presented under net investment result in the segment information
note. The Group considers that the presentation of operating profit enhances the understanding and comparability of its
performance and that of its operating segments. The Group considers that trends can be more clearly identified without
the fluctuating effects of these non-operating items, many of which are largely dependent on market factors.
Operating profit is provided as additional information to assist in the comparison of business trends in different reporting
periods on a consistent basis and enhance overall understanding of financial performance.
2.3 Insurance contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held
Consistent accounting policies for the measurement and recognition of insurance, reinsurance and investment contracts
have been adopted throughout the Group. The Group has elected an accounting policy where the estimates made in
previous interim financial statements are not changed when applying IFRS 17 in subsequent interim periods or in the
annual reporting period.
2.3.1 Insurance contracts, investment contracts with DPF and reinsurance contracts held classification
The Group classifies its contracts written as either insurance contracts or investment contracts, depending on the level of
insurance risk. Contracts under which the Group transfers significant insurance risk are classified as insurance contracts,
while those contracts which have the legal form of insurance contracts but do not transfer significant insurance risk are
classified as financial liabilities and are referred to as investment contracts. Some insurance and investment contracts,
referred to as traditional participating life business, have 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 arising from investment contracts with
DPF as it does for insurance contracts.
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 and has a possibility of incurring a loss on a
present value basis, the contract is considered as transferring significant insurance risk and is accounted for as an
insurance contract. Contracts held by the Group under which it transfers significant insurance risk related to underlying
insurance contracts are classified as reinsurance contracts held. Insurance contracts and reinsurance contracts held can
also expose the Group to financial risk. For investment contracts that do not contain DPF, IFRS 9, Financial Instruments,
and, if the contract includes an investment management element, IFRS 15, Revenue from Contracts with Customers, are
applied. Once a contract has been classified as an insurance, reinsurance or investment contract, reclassification is not
subsequently performed unless the terms of the agreement are later amended.
166
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.1 Insurance contracts, investment contracts with DPF and reinsurance contracts held classification (continued)
Certain contracts with DPF supplement the amount of guaranteed benefits due to policyholders. These contracts are
distinct from other insurance and investment contracts as the Group has discretion in the amount and/or timing of the
benefits declared, and how such benefits are allocated between groups of policyholders. Policyholders may be entitled to
receive, as a supplement to guaranteed benefits, additional benefits or bonuses:
•
•
•
that are expected to be a significant portion of the total contractual benefits;
the timing or amount of which are contractually at the discretion of the Group; and
that are contractually based on:
–
the returns on 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 Group; or
–
the profit or loss of the Group, fund or other entity that issues the contract.
In some jurisdictions traditional participating life business is written in a participating fund which is distinct from the other
assets of the company or branch. The allocation of benefits from the assets held in such participating funds is subject to
minimum policyholder participation mechanisms which are established by regulation. Other participating business with
distinct portfolios refers to business where it is expected that the policyholder will receive, at the discretion of the insurer,
additional benefits based on the performance of underlying segregated assets where this asset segregation is supported
by an explicit statutory reserve and reporting in the relevant territory. The allocation of benefit from the assets held in such
other participating business with distinct portfolios is set according to the underlying bonus rule as determined by the
relevant Board based on applicable regulatory requirements after considering the Appointed Actuary’s recommendation.
The extent of such policyholder participation may change over time. The current policyholder participation ratio applied for
recognition and measurement of the insurance contract liabilities for locations with participating funds and other
participating business with distinct portfolios is set out below.
By Geography
Participating funds
Mainland China
Singapore
Brunei
Malaysia
Australia
New Zealand
Vietnam
Other participating business with distinct portfolios
Hong Kong
Current policyholder
participation
70%
90%
80%
90%
80%
80%
70% – 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.
167
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.1 Insurance contracts, investment contracts with DPF and reinsurance contracts held classification (continued)
Contracts with direct participation features are contracts for which, at inception:
•
•
•
the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying
items;
the Group expects to pay to the policyholder an amount equal to a substantial share of the fair value returns on the
underlying items; and
the Group expects a substantial proportion of any change in the amounts to be paid to the policyholder to vary with the
change in fair value of underlying items.
The Group’s products may be divided into the following main categories:
Policy type
Description of benefits payable
Insurance contracts
Investment contracts
Basis of accounting for:
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
Participating products where there is a distinct
portfolio meet the definition of an insurance
contract with direct participation features and is
measured under an approach commonly referred
to as the Variable Fee Approach (VFA)
measurement model. The VFA modifies the
general measurement model in IFRS 17 to reflect
the nature of the income to the insurer is a
variable fee
Investment contracts with DPF
are accounted for in the same
way as insurance contracts
under IFRS 17
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
Non-participating life, annuities
and other protection products
Benefits payable are not at the discretion
of the insurer
Universal life
Unit-linked
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
These may be primarily savings products
or may combine savings with an element
of protection
The general measurement model is applied to
these insurance contracts
Investment contracts with DPF
are accounted for in the same
way as insurance contracts
under IFRS 17
The general measurement model is applied to
these insurance contracts except for some
insurance contracts where the permitted premium
allocation approach (PAA) simplification (see note
2.3.7) is applied
Investment contract liabilities
are measured at amortised cost
The general measurement model is applied to
these insurance contracts
Not applicable as such
contracts generally contain
significant insurance risk
Unit-linked products that meet the definition of an
insurance contract with direct participation
features are measured under the VFA
measurement model, otherwise they follow the
IFRS 17 general measurement model
Investment contract liabilities
under IFRS 9 are measured at
fair value (determined with
reference to the accumulation
value)
The basis of accounting for insurance contracts and reinsurance contracts held is discussed in notes 2.3.2 to 2.3.11 below.
168
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.2 Separating components from insurance contracts and reinsurance contracts held
At inception, the Group separates the following components from an insurance contract or a reinsurance contract held and
accounts for them as if they were stand-alone financial instruments:
• derivatives embedded in the contract whose economic characteristics and risks are not closely related to those of the
host contract, and whose terms would not meet the definition of an insurance contract or a reinsurance contract held
as a stand-alone instrument; and
• distinct investment components – i.e. investment components that are not highly inter-related with the insurance
components and for which contracts with equivalent terms are sold, or could be sold, separately in the same market or
the same jurisdiction.
After separating any financial instrument components, the Group separates any promises to transfer distinct goods or
services other than insurance coverage and investment services and accounts for them as separate contracts with
customers (i.e. not as insurance contracts). A good or service is distinct if the policyholder can benefit from it either on its
own or with other resources that are readily available to the policyholder. A good or service is not distinct and is accounted
for together with the insurance component if the cash flows and risks associated with the good or service are highly inter-
related with the cash flows and risks associated with the insurance component, and the Group provides a significant
service of integrating the good or service with the insurance component.
2.3.3 Level of aggregation and recognition of group of insurance contracts and reinsurance contracts held
Insurance contracts
Insurance contracts are aggregated into groups for measurement purposes. Groups of contracts are determined by
identifying portfolios of insurance contracts, each comprising contracts subject to similar risks and managed together, and
dividing each portfolio into semi-annual cohorts and each semi-annual cohort into three groups based on the profitability
of contracts:
• any contracts that are onerous on initial recognition;
• any contracts that, on initial recognition, have no significant possibility of becoming onerous subsequently; and
• any remaining contracts in the portfolio.
An insurance contract issued by the Group is recognised from the earliest of:
•
the beginning of its coverage period (i.e. the period during which the Group provides services in respect of any premiums
within the boundary of the contract);
• when the first payment from the policyholder becomes due or, if there is no contractual due date, when it is received
from the policyholder; and
• when facts and circumstances indicate that the contract is onerous.
An insurance contract acquired in a transfer of contracts or a business combination is recognised on the date of acquisition.
When the contract is recognised, it is added to an existing group of contracts or, if the contract does not qualify for inclusion
in an existing group, it forms a new group to which future contracts are added. Groups of contracts are established on initial
recognition and their composition is not revised once all contracts have been added to the group.
169
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.3 Level of aggregation and recognition of group of insurance contracts and reinsurance contracts held (continued)
Reinsurance contracts held
Reinsurance contracts held by the Group cover underlying insurance contracts.
A group of reinsurance contracts held is recognised on the following dates:
• Reinsurance contracts held that provide proportionate coverage: Generally later of the beginning of the coverage
period of the group of reinsurance contracts held, or the date on which any underlying insurance contract is initially
recognised.
• Other reinsurance contracts held: The beginning of the coverage period of the group of reinsurance contracts held.
However, if the Group recognises an onerous group of underlying insurance contracts on an earlier date and the related
reinsurance contract held was entered into on or before that earlier date, then the group of reinsurance contracts held
is recognised on that earlier date.
• Reinsurance contracts acquired: The date of acquisition.
2.3.4 Fulfilment cash flows and contract boundaries
Fulfilment cash flows
Fulfilment cash flows comprise:
• estimates of future cash flows;
• an adjustment to reflect the time value of money and the financial risks related to future cash flows, to the extent that
the financial risks are not included in the estimates of future cash flows; and
• a risk adjustment for non-financial risk.
Further details of the related methodology and assumptions in respect of estimation of fulfilment cash flows are provided
in note 24.
Contract boundaries
The measurement of a group of contracts includes all of the future cash flows within the boundary of each contract in the
group, determined as follows.
Insurance contracts
Cash flows are within the boundary of a contract if they arise from substantive rights and obligations that exist during the
reporting period under which the Group can compel the policyholder to pay premiums or has a substantive obligation to
provide insurance contract services.
A substantive obligation to provide insurance contract services ends when:
the Group has the practical ability to reassess the risks of the particular policyholder and can set a price or level of
benefits that fully reflects those reassessed risks; or
the Group has the practical ability to reassess the risks of the portfolio that contains the contract and can set a price or
level of benefits that fully reflects the risks of that portfolio; and the pricing of the premiums for coverage up to the
reassessment date does not take into account risks that relate to periods after the reassessment date.
•
•
170
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.4 Fulfilment cash flows and contract boundaries (continued)
Contract boundaries (continued)
Reinsurance contracts held
Cash flows are within the contract boundary if they arise from substantive rights and obligations that exist during the
reporting period in which the Group is compelled to pay amounts to the reinsurer or has a substantive right to receive
services from the reinsurer.
A substantive right to receive services from the reinsurer ends when the reinsurer:
• has the practical ability to reassess the risks transferred to it and can set a price or level of benefits that fully reflects
those reassessed risks; or
• has a substantive right to terminate the coverage.
The contract boundary is reassessed at each reporting date to include the effect of changes in circumstances on the
Group’s substantive rights and obligations and, therefore, may change over time.
2.3.5 Insurance acquisition cash flows
Insurance acquisition cash flows are allocated to groups of contracts using a systematic and rational allocation method
and considering, in an unbiased way, all reasonable and supportable information that is available without undue cost or
effort. At each reporting date, the Group revises the amounts allocated to groups to reflect any changes in assumptions that
determine the inputs to the allocation method used. Amounts allocated to a group are not revised once all contracts have
been added to the group.
Insurance acquisition cash flows arising before the recognition of the related groups of contracts are recognised as an
asset. Such an asset is recognised for each group of contracts to which the insurance acquisition cash flows are allocated.
The asset is derecognised, fully or partially, when the insurance acquisition cash flows are included in the measurement of
the related groups of contracts.
When the Group acquires insurance contracts in a transfer of contracts or a business combination, at the date of acquisition
it recognises an asset for insurance acquisition cash flows at the fair value for the rights to obtain:
•
renewals of contracts recognised at the date of acquisition; and
• other future contracts after the date of acquisition without paying again insurance acquisition cash flows that the
acquiree has already paid.
Recoverability assessment
At each reporting date, if facts and circumstances indicate that an asset for insurance acquisition cash flows may be
impaired, then the Group:
•
•
recognises an impairment loss in profit or loss so that the carrying amount of the asset does not exceed the expected
net cash inflow of the related group; and
if the asset relates to future renewals, recognises an impairment loss in profit or loss to the extent that it expects those
insurance acquisition cash flows to exceed the net cash inflow for the expected renewals and this excess has not
already been recognised as an impairment loss.
The Group recognises any reversal of impairment losses in profit or loss when the impairment conditions no longer exist or
have improved.
171
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.6 Measurement – insurance contracts not measured under the PAA
2.3.6.1 Initial measurement
On initial recognition, the Group measures a group of contracts as the total of: (a) the fulfilment cash flows, which comprise
estimates of future cash flows, an adjustment to reflect time value of money and associated financial risks, and a risk
adjustment for non-financial risk; and (b) the contractual service margin (CSM).
The measurement of the fulfilment cash flows of a group of contracts does not reflect the Group’s non-performance risk.
The risk adjustment for non-financial risk for a group of contracts, determined separately from the other estimates, is the
compensation required for bearing uncertainty about the amount and timing of the cash flows that arises from non-
financial risk.
The CSM of a group of contracts represents the unearned profit that the Group will recognise as it provides services under
those contracts. On initial recognition of a group of contracts, if the total of the fulfilment cash flows, any cash flows arising
at that date and any amount arising from the derecognition of any assets or liabilities previously recognised for cash flows
related to the group (including assets for insurance acquisition cash flows) is a net inflow, then the group is not onerous.
In this case, the CSM is measured as the equal and opposite amount of the net inflow, which results in no income or
expenses arising on initial recognition.
If the total is a net outflow, then the group is onerous. In this case, the net outflow is recognised as a loss in profit or loss. A
loss component is created to depict the amount of the net cash outflows, which determines the amounts that are
subsequently presented in profit or loss as reversals of losses on onerous groups and are excluded from insurance revenue.
In the case of a business combination, the net outflow is recognised as an adjustment to goodwill or a gain on a bargain
purchase for contracts acquired.
For groups of contracts acquired in a transfer of contracts or a business combination, the consideration received for the
contracts is included in the fulfilment cash flows as a proxy for the premiums received at the date of acquisition. In a
business combination, the consideration received is the fair value of the contracts at that date.
2.3.6.2 Subsequent measurement
The carrying amount of a group of insurance contracts at each reporting date is the sum of the liability for remaining
coverage (LRC) and the liability for incurred claims (LIC). The LRC comprises (a) the fulfilment cash flows that relate to
services that will be provided under the contracts in future periods and (b) any remaining CSM at that date. The LIC
includes the fulfilment cash flows for incurred claims and expenses that have not yet been paid, including claims that have
been incurred but not yet reported.
The fulfilment cash flows of groups of contracts are measured at the reporting date using current estimates of future cash
flows, current discount rates and current estimates of the risk adjustment for non-financial risk. Changes in fulfilment cash
flows are recognised as follows.
• changes relating to future services are adjusted against the CSM (or recognised in the insurance service result in profit
or loss if the group is onerous);
• changes relating to current or past services are recognised in the insurance service result in profit or loss; and
• effects of the time value of money, financial risk and changes therein on estimated future cash flows are recognised as
insurance finance income or expenses for insurance contracts without direct participation features or adjusted against
CSM for insurance contracts with direct participation features.
172
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.6 Measurement – insurance contracts not measured under the PAA (continued)
2.3.6.2 Subsequent measurement (continued)
The CSM of each group of contracts is calculated at each reporting date as follows.
Insurance contracts without direct participation features
The carrying amount of the CSM at each reporting date is the carrying amount at the start of the reporting period, adjusted
mainly for:
•
•
the CSM of any new contracts that are added to the group in the period;
interest accreted on the carrying amount of the CSM during the period, measured at the discount rates determined on
initial recognition that are applied to nominal cash flows that do not vary based on the returns on underlying items;
• changes in fulfilment cash flows that relate to future services, except to the extent that:
– any increases in the fulfilment cash flows exceed the carrying amount of the CSM, in which case the excess is
recognised in insurance service expenses and recognised as a loss component in LRC; or
– any decreases in the fulfilment cash flows adjust the loss component in the LRC and the corresponding amount is
recognised in insurance service expenses. If the loss component is reduced to zero, the excess reinstates the CSM;
•
•
the effect of any currency exchange differences on the CSM; and
the amount recognised as insurance revenue for services provided in the period.
Changes in fulfilment cash flows that relate to future services mainly comprise:
• experience adjustments arising from premiums received in the period that relate to future services and related cash
flows, measured at the discount rates determined on initial recognition;
• changes in estimates of the present value of future cash flows in the LRC, measured at the discount rates determined
on initial recognition, except for those that relate to the effects of the time value of money, financial risk and changes
therein;
• differences between (a) any investment component expected to become payable in the period, determined as the
payment expected at the start of the period plus any insurance finance income or expenses related to that expected
payment before it becomes payable; and (b) the actual amount that becomes payable in the period;
• differences between (a) any loan to a policyholder expected to become repayable in the period, determined as the
repayment expected at the start of the period plus any insurance finance income or expenses related to that expected
repayment before it becomes repayable; and (b) the actual amount that becomes repayable in the period; and
• changes in the risk adjustment for non-financial risk that relate to future services.
To determine how to identify a change in discretionary cash flows, the basis is generally determined at inception of the
contract. Changes in cash flows arising from the Group’s discretion are regarded as relating to future services and
accordingly adjust the CSM, these cash flows are determined based on the relevant contract terms, dividend and bonus
philosophy.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.6 Measurement – insurance contracts not measured under the PAA (continued)
2.3.6.2 Subsequent measurement (continued)
Insurance contracts with direct participation features
Contracts with direct participation features are contracts under which the Group’s obligation to the policyholder is the net
of:
•
the obligation to pay the policyholder an amount equal to the fair value of the underlying items; and
• a variable fee in exchange for future services provided by the contracts, being the amount of the Group’s share of the
fair value of the underlying items less fulfilment cash flows that do not vary based on the returns on underlying items.
The Group provides investment services under these contracts by promising an investment return based on underlying
items, in addition to insurance coverage.
When measuring a group of contracts with direct participation features, the Group adjusts the fulfilment cash flows for the
changes in the obligation to pay policyholders an amount equal to the policyholder’s share of the fair value of the underlying
items. These changes do not relate to future services and are recognised in profit or loss.
The carrying amount of the CSM at each reporting date is the carrying amount at the start of the reporting period, adjusted
mainly for:
•
•
•
•
the CSM of any new contracts that are added to the group in the period;
the change in the amount of the Group’s share of the fair value of the underlying items and changes in fulfilment cash
flows that relate to future services, except to the extent that:
– a decrease in the amount of the Group’s share of the fair value of the underlying items, or an increase in the fulfilment
cash flows that relate to future services, exceeds the carrying amount of the CSM. The excess is recognised in
insurance service expenses and recognised as a loss component in LRC; or
– an increase in the amount of the Group’s share of the fair value of the underlying items, or a decrease in the fulfilment
cash flows that relate to future services, which adjust the loss component in the LRC and the corresponding amount
is recognised in insurance service expenses. If the loss component is reduced to zero, the excess reinstates the
CSM;
the effect of any currency exchange differences on the CSM; and
the amount recognised as insurance revenue for services provided in the period.
Changes in fulfilment cash flows not varying based on the return on underlying items that relate to future services include
the changes relating to future services specified above for contracts without direct participation features (measured at
current discount rates) and changes in the effect of the time value of money and financial risks that do not arise from
underlying items – e.g. the effect of financial guarantees.
174
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.7 Measurement – insurance contracts measured under the PAA
The Group generally uses the PAA to simplify the measurement of groups of contracts in the following circumstances:
• where the coverage period of each contract in the group of contracts is one year or less; or
•
the Group reasonably expects that the resulting measurement of the LRC would not differ materially from the result of
applying the accounting policies of contracts not measured under the PAA.
2.3.7.1 Initial measurement
On initial recognition of each group of contracts, the carrying amount of the LRC is measured as the premiums received on
initial recognition minus any insurance acquisition cash flows allocated to the group at that date, and adjusted for amounts
arising from the derecognition of any assets or liabilities previously recognised for cash flows related to the group. The
Group has elected the accounting policy choice to defer insurance acquisition cash flows through the LRC.
2.3.7.2 Subsequent measurement
Subsequently, the carrying amount of the LRC is increased by (i) any premiums received; and (ii) any amortisation of the
insurance acquisition cash flows, and decreased by (i) insurance acquisition cash flows paid; (ii) the amount recognised
as insurance revenue for coverage provided; and (iii) any investment component paid or transferred to the LIC. On initial
recognition of each group of contracts, the Group expects that the time gap between providing each part of the coverage
and the related premium due date is not significant. Accordingly, the Group has chosen not to adjust the LRC to reflect the
time value of money and the effect of financial risk.
If at any time during the coverage period, facts and circumstances indicate that a group of contracts is onerous, then the
Group recognises a loss in profit or loss and increases the LRC to the extent that the current estimates of the fulfilment
cash flows that relate to remaining coverage (including the risk adjustment for non-financial risk) exceed the carrying
amount of the LRC as loss component. The fulfilment cash flows are adjusted for the time value of money and the effect of
financial risk (using current estimates) if the LIC is also adjusted for the time value of money and the effect of financial risk.
In subsequent periods, unless facts and circumstances indicate that the group of contracts is no longer onerous, the loss
component is remeasured at each reporting date as the difference between the current estimates of the fulfilment cash
flows that relate to remaining coverage (including the risk adjustment for non-financial risk) and the carrying amount of
the LRC without loss component.
The Group recognises the LIC of a group of insurance contracts for the amount of the fulfilment cash flows relating to
incurred claims. The fulfilment cash flows are discounted (at current rates) unless the cash flows are expected to be paid
in one year or less from the date the claims are incurred.
175
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.8 Reinsurance contracts held
For groups of reinsurance contracts held, the Group applies the same accounting policies as that applied to insurance
contracts without direct participation features, with the following modifications.
The carrying amount of a group of reinsurance contracts held at each reporting date is the sum of the asset for remaining
coverage and the asset for incurred claims. The asset for remaining coverage comprises (a) the fulfilment cash flows that
relate to services that will be received under the contracts in future periods and (b) any remaining CSM at that date.
The Group measures the estimates of the present value of future cash flows using assumptions that are consistent with
those used to measure the estimates of the present value of future cash flows for the underlying insurance contracts, with
an adjustment for any risk of non-performance by the reinsurer. The effect of the non-performance risk of the reinsurer is
assessed at each reporting date and the effect of changes in the non-performance risk is recognised in profit or loss.
The risk adjustment for non-financial risk is the amount of risk being transferred by the Group to the reinsurer.
On initial recognition, the CSM of a group of reinsurance contracts held represents a net cost or net gain on purchasing
reinsurance. It is measured as the equal and opposite amount of the total of (a) the fulfilment cash flows, (b) the amount
arising from assets or liabilities previously recognised for cash flows related to the group, before the group is recognised,
(c) cash flows arising from the contracts in the group at that date and (d) any income recognised in profit or loss because
of onerous underlying contracts recognised at that date. However, if any net cost on purchasing reinsurance coverage
relates to insured events that occurred before the purchase of the reinsurance, then the Group recognises the cost
immediately in profit or loss as an expense.
The carrying amount of the CSM at each reporting date is the carrying amount at the start of the reporting period, adjusted
for:
•
•
•
the CSM of any new contracts that are added to the group in the period;
interest accreted on the carrying amount of the CSM during the period, measured at the discount rates determined on
initial recognition that are applied to nominal cash flows;
income recognised in profit or loss in respect of a loss recognised for onerous underlying contracts. A loss-recovery
component is established or adjusted in the asset for remaining coverage of reinsurance contracts held for the amount
of income recognised;
•
reversals of a loss-recovery component to the extent that they are not changes in the fulfilment cash flows of the group;
• changes in fulfilment cash flows that relate to future services, measured at the discount rates determined on initial
recognition, unless the changes result from changes in fulfilment cash flows of onerous underlying contracts, in which
case they are recognised in profit or loss and create or adjust a loss-recovery component;
•
•
the effect of any currency exchange differences on the CSM; and
the amount recognised in profit or loss for the services received in the period.
176
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.8 Reinsurance contracts held (continued)
Reinsurance of onerous underlying insurance contracts
The Group adjusts the CSM of the group to which a reinsurance contract held belongs and as a result recognises income
when it recognises a loss on initial recognition of onerous underlying contracts, if the reinsurance contract held is entered
into before or at the same time as the onerous underlying contracts are recognised. The adjustment to the CSM is determined
by multiplying:
•
•
the amount of the loss that relates to the underlying contracts; and
the percentage of claims on the underlying contracts that the Group expects to recover from the reinsurance contracts
held.
For reinsurance contracts acquired in a transfer of contracts or a business combination covering onerous underlying
contracts, the adjustment to the CSM is determined by multiplying:
•
•
the amount of the loss that relates to the underlying contracts at the date of acquisition; and
the percentage of claims on the underlying contracts that the Group expects at the date of acquisition to recover from
the reinsurance contracts held.
For reinsurance contracts held which were acquired in a business combination, the adjustment to the CSM reduces
goodwill or increases a gain on a bargain purchase.
If the reinsurance contract held covers only some of the insurance contracts included in an onerous group of contracts,
then the Group uses a systematic and rational method to determine a portion of losses recognised on the onerous group of
contracts containing the insurance contracts covered by the reinsurance contract held.
A loss-recovery component is established or adjusted in the asset for remaining coverage of reinsurance contracts held,
which determines the amounts that are subsequently presented in profit or loss as reversals of recoveries of losses from
the reinsurance contracts held and are excluded from the allocation of reinsurance premiums paid.
Reinsurance contracts held measured under the PAA
The Group applies the same accounting principles to measure a group of insurance contracts or reinsurance contracts held
under the PAA.
If a loss-recovery component is established for a group of reinsurance contracts held measured under the PAA, the Group
adjusts the carrying amount of the asset.
177
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.9 Transition approaches
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.
Contracts measured under the modified retrospective approach
The objective of this approach was to achieve the closest outcome to retrospective application possible using reasonable
and supportable information available without undue cost or effort. The Group applied each of the following modifications
only to the extent that it did not have reasonable and supportable information to apply IFRS 17 fully retrospectively.
Contracts without direct participation features
For relevant groups of contracts without direct participation features,
• The future cash flows on initial recognition were estimated by adjusting the cash flows that were known to have
occurred.
• The risk adjustment for non-financial risk on initial recognition was determined by adjusting the amount at 1 January
2022 for the expected release of risk before 1 January 2022. The expected release of risk was determined with reference
to the release of risk for similar insurance contracts that the Group issued at 1 January 2022.
• When any of these modifications was used to determine the CSM (or the loss component) at initial recognition:
–
–
the amount of the CSM recognised in profit or loss before 1 January 2022 was determined by comparing the
remaining coverage units at 1 January 2022 with the coverage units provided under the group of contracts before
that date; and
the amount allocated to the loss component before 1 January 2022 determined using the proportion of the loss
component relative to the total estimate of the present value of the future cash outflows and the risk adjustment for
non-financial risk on initial recognition.
Contracts with direct participation features
For relevant groups of contracts with direct participation features,
• The Group determined the CSM (or the loss component) at 1 January 2022 by calculating a proxy for the total CSM for
all services to be provided under the group that equal to the fair value of the underlying items at 1 January 2022 minus
the fulfilment cash flows at 1 January 2022, adjusted for:
– amounts charged to policyholders (including charges deducted from the underlying items) before 1 January 2022;
– amounts paid before 1 January 2022 that would not have varied based on the underlying items;
–
the change in the risk adjustment for non-financial risk caused by the release from risk before 1 January 2022,
which was estimated based on an analysis of similar contracts that the Group issued at 1 January 2022; and
–
insurance acquisition cash flows arising before 1 January 2022 that were allocated to the group.
178
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.9 Transition approaches (continued)
Contracts measured under the modified retrospective approach (continued)
Contracts with direct participation features (continued)
•
If the calculation resulted in a CSM, then the Group measured the CSM at 1 January 2022 by deducting the CSM related
to services provided before 1 January 2022. The CSM related to services provided before 1 January 2022 was determined
by comparing the coverage units at 1 January 2022 with the coverage units provided under the group of contracts
before that date.
•
If the calculation resulted in a loss component, then the Group adjusted the loss component to zero and increased the
LRC excluding the loss component by the same amount at 1 January 2022.
• The amount of insurance finance income or expenses accumulated in the insurance finance reserve at 1 January 2022
was determined to be equal to the cumulative amount recognised in the other comprehensive income on the underlying
items as applicable.
Reinsurance of onerous underlying contracts
For groups of reinsurance contracts held covering onerous underlying contracts that were entered into before or at the
same time as the onerous underlying contracts, the Group established a loss-recovery component at 1 January 2022. For
some groups of reinsurance contracts held measured under the modified retrospective approach, the Group determined
the loss-recovery component by multiplying:
•
•
the amount of the loss component that relates to the underlying contracts at 1 January 2022; and
the percentage of claims on the underlying contracts that the Group expected to recover from the reinsurance contracts
held.
For certain other groups of reinsurance contracts held, the Group did not identify a loss-recovery component because it did
not have reasonable and supportable information to do so.
Insurance acquisition cash flows – Modified retrospective approach
Under the modified retrospective approach, the Group identified any insurance acquisition cash flows arising before 1
January 2022 that did not relate to contracts that had ceased to exist before that date. These cash flows were allocated,
using the same systematic and rational method, to:
• groups of contracts recognised at 1 January 2022 (which adjusted the CSM of those groups); and
• groups of contracts expected to be recognised after 1 January 2022 (which were recognised as assets for insurance
acquisition cash flows).
179
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.9 Transition approaches (continued)
Contracts measured under the fair value approach
For the groups of contracts that are measured under the fair value approach, the Group determined the CSM or loss
component of the LRC at 1 January 2022 as the difference between the fair value of a group of contracts at that date and
the fulfilment cash flows at that date.
The fair value of groups of contracts is primarily determined by using present value technique from the perspective of a
market participant with considerations of the following:
• estimate of future cash flows that a market participant would expect to incur or receive in fulfilling the liabilities;
•
time value of money, represented by the risk-free interest rate plus a spread based on the characteristic of the liabilities;
• premiums that a market participant would require for bearing uncertainty inherent in the cash flows in relation to non-
financial risks and compensation that a market participant would require to assume the obligations;
•
the non-performance risk relating to those liabilities; and
• other factors that a market participant would take into account in the circumstances.
To the extent possible, the Group maximised the use of relevant market data and information of market transactions in Asia.
For the unobservable inputs, the Group used the best information available in the circumstances, which might include the
Group’s own data.
For all contracts measured under the fair value approach, the Group used reasonable and supportable information available
at 1 January 2022 to determine:
• how to identify groups of contracts;
• whether a contract meets the definition of a contract with or without direct participation features, or investment
contract with discretionary participation features; and
• how to identify discretionary cash flows for contracts without direct participation features.
For contracts acquired in a transfer of contracts or a business combination before 2022, the Group classified liabilities for
settlement of claims as liabilities for incurred claims, even though the claims might have been incurred before the contracts
were acquired.
For groups of contracts measured under the fair value approach,
•
•
the discount rates on initial recognition were determined at 1 January 2022 instead of at the date of initial recognition.
the amount of insurance finance income or expenses accumulated in the insurance finance reserve at 1 January 2022
was determined to be zero for contracts without direct participation features and to be equal to the cumulative amount
recognised in the other comprehensive income on the underlying items for contracts with direct participation features
as applicable.
For groups of reinsurance contracts held covering onerous underlying contracts, the Group established a loss-recovery
component at 1 January 2022. The Group determined the loss-recovery component by multiplying:
the amount of the loss component that relates to the underlying contracts at 1 January 2022; and
the percentage of claims on the underlying contracts that the Group expected to recover from the reinsurance contracts
held.
•
•
180
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.9 Transition approaches (continued)
Contracts measured under the fair value approach (continued)
Insurance acquisition cash flows – Fair value approach
The Group measured an asset for insurance acquisition cash flows under the fair value approach at an amount equal to the
insurance acquisition cash flows that it would incur at 1 January 2022 for the rights to obtain:
•
recoveries of insurance acquisition cash flows from premiums of contracts issued before 1 January 2022 but not yet
recognised at that date, and future contracts that are renewals of such contracts;
•
future contracts that are renewals of contracts recognised at 1 January 2022; and
• other future contracts after 1 January 2022 without paying again insurance acquisition cash flows that the Group has
already paid.
2.3.10 Derecognition and contract modification
The Group derecognises a contract when it is extinguished – i.e. when the specified obligations in the contract expire or are
discharged or cancelled.
The Group also derecognises a contract if its terms are modified in a way that would have changed the accounting for the
contract significantly had the new terms always existed, in which case a new contract based on the modified terms is
recognised. If a contract modification does not result in derecognition, then the Group treats the changes in cash flows
caused by the modification as changes in estimates of fulfilment cash flows.
On the derecognition of a contract in a group of contracts not measured under the PAA:
•
•
•
the fulfilment cash flows allocated to the group are adjusted to eliminate those that relate to the rights and obligations
derecognised;
the CSM of the group is adjusted for the change in the fulfilment cash flows that relate to future services, except where
such changes are allocated to a loss component; and
the number of coverage units for the expected remaining services is adjusted to reflect the coverage units derecognised
from the group.
If a contract is derecognised because it is transferred to third party, then the CSM is also adjusted for the premium charged
by the third party, unless the contract is onerous.
If a contract is derecognised because its terms are modified, then the CSM is also adjusted for the premium that would
have been charged had the Group entered into a contract with the new contract’s terms at the date of modification, less
any additional premium charged for the modification. The new contract recognised is measured assuming that, at the date
of modification, the issuer received the premium that it would have charged less any additional premium charged for the
modification.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.11 Presentation
Portfolios of insurance contracts and reinsurance contracts held in an asset position are presented separately from those
in a liability position. Portfolios of insurance contracts issued are presented separately from portfolios of reinsurance
contracts held. Any assets recognised for insurance acquisition cash flows arising before the recognition of the related
group of insurance contracts are included in the carrying amount of the related portfolios of insurance contracts. Any
assets or liabilities for cash flows arising before the recognition of the related group of reinsurance contracts held are
included in the carrying amount of the related portfolios of reinsurance contracts held.
The Group disaggregates amounts recognised in the income statement and the statement of comprehensive income into
(a) an insurance service result, comprising insurance revenue and insurance service expenses, and (b) insurance finance
income or expenses.
Income and expenses from reinsurance contracts held are presented separately from income and expenses from insurance
contracts. Income and expenses from reinsurance contracts held, other than insurance finance income or expenses, are
presented on a net basis as “net expenses from reinsurance contracts held” in the insurance service result.
The Group does not disaggregate changes in the risk adjustment for non-financial risk between the insurance service
result and insurance finance income or expenses. All changes in the risk adjustment for non-financial risk are included in
the insurance service result.
Insurance revenue and insurance service expenses exclude any investment components and are recognised as follows.
2.3.11.1 Insurance revenue – insurance contracts not measured under the PAA
The Group recognises insurance revenue as it satisfies its performance obligations – i.e. as it provides services under
groups of contracts. For contracts not measured under the PAA, the insurance revenue relating to services provided for
each period represents the total of the changes in the LRC that relate to services for which the Group expects to receive
consideration, but excludes expected investment components and mainly comprises the following items:
• A release of the CSM, measured based on coverage units provided;
• Changes in the risk adjustment for non-financial risk relating to current services;
• Claims and other insurance service expenses incurred in the period, generally measured at the amounts expected at
the beginning of the period; and
• Other amounts, including experience adjustments for premium receipts for current or past services and amounts
related to incurred policyholder tax expenses.
For insurance acquisition cash flows recovery, the Group allocates a portion of premiums related to the recovery in a
systematic way based on the passage of time over the expected coverage of a group of contracts. The allocated amount is
recognised as insurance revenue with the same amount recognised as insurance service expenses.
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AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.3 Insurance contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.11 Presentation (continued)
2.3.11.2 Release of the CSM – insurance contracts not measured under the PAA
The amount of the CSM of a group of insurance contracts that is recognised as insurance revenue in each reporting period
is determined by identifying the coverage units in the group, allocating the CSM remaining at the end of the reporting
period (before any allocation) equally to each coverage unit provided in the current period and expected to be provided in
future periods, and recognising in profit or loss the amount of the CSM allocated to coverage units provided in the current
period. The number of coverage units is the quantity of services provided by the contracts in the group, determined
considering for each contract the quantity of benefits provided and its expected coverage period.
2.3.11.3 Insurance revenue – insurance contracts measured under the PAA
For contracts measured under the PAA, the insurance revenue for each period is the amount of expected premium for
providing services in the period. The Group allocates the expected premium to each period on the following bases:
•
•
the passage of time; or
the expected timing of incurred insurance service expenses, if the expected pattern of release of risk during the
coverage period differs significantly from the passage of time.
2.3.11.4 Loss components – insurance contracts not measured under the PAA
For contracts not measured under the PAA, the Group establishes a loss component of the LRC for onerous groups of
contracts. The loss component determines the amounts of fulfilment cash flows that are subsequently excluded from
insurance revenue when they occur. When the fulfilment cash flows occur, they are allocated between the loss component
and the LRC excluding the loss component on a systematic basis.
Changes in estimates of fulfilment cash flows relating to future services and changes in the Group’s share of the fair value
of underlying items are allocated solely to the loss component. If the loss component is reduced to zero, then any excess
over the amount allocated to the loss component creates or reinstates the CSM for the group of contracts.
2.3.11.5 Insurance service expenses
Insurance service expenses arising from insurance contracts are recognised in profit or loss generally as they are incurred.
They exclude repayments of investment components and mainly comprise the following items:
•
Incurred claims and other insurance service expenses;
• Amortisation of insurance acquisition cash flows: for contracts not measured under the PAA, this is equal to the amount
of insurance revenue recognised in the period that relates to recovering insurance acquisition cash flows. For contracts
measured under the PAA, the Group amortises insurance acquisition cash flows on a straight-line basis over the
coverage period of the group of contracts;
• Losses on onerous contracts and reversals of such losses; and
• Adjustments to the liabilities for incurred claims that do not arise from the effects of the time value of money, financial
risk and changes therein.
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2.3 Insurance contracts, investment contracts with discretionary participation features (DPF) and reinsurance
contracts held (continued)
2.3.11 Presentation (continued)
2.3.11.6 Net expenses from reinsurance contracts held
Net expenses from reinsurance contracts held mainly comprise an allocation of reinsurance premiums paid less amounts
recovered from reinsurers.
The Group recognises an allocation of reinsurance premiums paid as reinsurance expenses within net expenses from
reinsurance contracts held for the coverage or other services received by the Group under groups of reinsurance contracts
held. For contracts not measured under the PAA, the allocation of reinsurance premiums paid relating to services received
for each period represents the total of the changes in the asset for remaining coverage that relate to services for which the
Group expects to pay consideration.
For contracts measured under the PAA, the allocation of reinsurance premiums paid for each period is the amount of
expected premium payments for receiving services in the period.
For a group of reinsurance contracts held covering onerous underlying contracts, the Group establishes a loss-recovery
component of the asset for remaining coverage to depict the recovery of losses recognised:
• on recognition of onerous underlying contracts, if the reinsurance contract held covering those contracts is entered
into before or at the same time as those contracts are entered into; and
•
for changes in fulfilment cash flows of the group of reinsurance contracts held relating to future services that result
from changes in fulfilment cash flows of the onerous underlying contracts.
2.3.11.7 Insurance finance income or expenses
Insurance finance income or expenses comprise changes in the carrying amounts of groups of insurance contracts and
reinsurance contracts held arising from the effects of the time value of money, financial risk and changes therein. This
includes changes in the measurement of groups of contracts caused by changes in the value of underlying items (excluding
additions and withdrawals).
For certain portfolios, the Group has chosen to disaggregate insurance finance income or expenses between profit or loss
and other comprehensive income. The amount included in profit or loss is determined by a systematic allocation of the
expected total insurance finance income or expenses over the duration of the group of contracts. The systematic allocation
is determined as follows:
• Contracts for which changes in assumptions that relate to financial risk have a substantial effect on the amounts paid
to the policyholders: for insurance finance income or expenses arising from the estimates of future cash flows, using
either a rate that allocates the remaining revised expected insurance finance income or expenses over the remaining
duration of the group of contracts at a constant rate (i.e. the effective yield) or an allocation that is based on the
amounts credited in the period and expected to be credited in future periods; and for insurance finance income or
expenses arising from the CSM, the discount rates determined on initial recognition of the group of contracts. This
selection of the rate applied is based on the characteristics of contracts.
• Contracts for which changes in assumptions that relate to financial risk do not have a substantial effect on the amounts
paid to the policyholders: the discount rates determined on initial recognition of the group of contracts.
Amounts presented in other comprehensive income are accumulated in the insurance finance reserve. If the Group
derecognises a contract without direct participation features as a result of a transfer to a third party or a contract
modification, then any remaining amounts of accumulated other comprehensive income for the contract are reclassified to
profit or loss.
The Group presents insurance finance income or expenses for all other contracts in profit or loss.
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AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.4 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 IFRS 9 and are
accounted for as insurance contracts.
Revenue from these contracts consists of various charges (policy fees, handling fees, management fees and surrender
charges) made against the contract for the cost of insurance, expenses and early surrender. First year charges are amortised
over the life of the contract as the services are provided.
Investment contract fee revenue
Customers are charged fees for policy administration, investment management, surrenders or other contract services. The
fees may be fixed amounts or vary with the amounts being managed, and will generally be charged as an adjustment to the
policyholder’s account balance. The fees are recognised as revenue in the period in which they are received unless they
relate to services to be provided in future periods, in which case they are deferred and recognised as the service is provided.
When part of the fee received from a policyholder is expected to be refunded in the future, the related fee is not recognised
as a revenue and a sales inducement liability is established which forms part of the investment contract liabilities.
Origination and other “upfront” fees (fees that are assessed against the account balance as consideration for origination of
the contract) are charged on some non-participating investment and pension contracts. Where the investment contract is
recorded at amortised cost, these fees are amortised and recognised over the expected term of the policy as an adjustment
to the effective yield. Where the investment contract is measured at fair value, the front-end fees that relate to the provision
of investment management services are amortised and recognised as the services are provided.
Deferred origination costs
The costs of acquiring investment contracts with investment management services, including commissions and other
incremental expenses directly related to the issue of each new contract, are deferred and amortised over the period that
services are provided. Deferred origination costs are tested for recoverability at each reporting date.
The costs of acquiring new investment contracts without investment management services are included as part of the
effective interest rate used to calculate the amortised cost of the related investment contract liabilities.
Investment contract liabilities
Deposits received in respect of investment contracts are not accounted for through the consolidated income statement,
except for the investment income and fees attributable to those contracts, but are accounted for directly through the
consolidated statement of financial position as an adjustment to the investment contract liability, which reflects the
account balance.
The majority of the Group’s contracts classified as investment contracts are unit-linked contracts, with measurement
directly linked to the underlying investment assets. These represent investment portfolios maintained to meet specific
investment objectives of policyholders who generally bear the credit and market risks on those investments. The liabilities
are carried at fair value determined with reference to the accumulation value (current unit value) with changes recognised
in profit or loss. The costs of policy administration, investment management, surrender charges and certain policyholder
taxes assessed against customers’ account balances are included in revenue, and accounted for as described under
“Investment contract fee revenue” above.
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2.4 Investment contracts (continued)
Investment contract liabilities (continued)
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 expenses 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.
2.5 Financial instruments
2.5.1 Classification and designation of financial instruments
On initial recognition, a financial asset is classified as measured at amortised cost, fair value through other comprehensive
income or fair value through profit or loss.
Financial assets are not reclassified subsequent to their initial recognition, unless the Group changes its business model
for managing financial assets in which case all affected financial assets are reclassified at the beginning of the reporting
period during which the business model has changed.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at fair
value through profit or loss:
•
•
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 fair value through other comprehensive income if it meets both of the following conditions
and is not designated as at fair value through profit or loss:
•
•
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.
On initial recognition of an equity security that is not held for trading, the Group may irrevocably elect to present subsequent
changes in fair value in other comprehensive income on an investment-by-investment basis.
All financial assets not classified as measured at amortised cost or fair value through other comprehensive income as
described above are measured at fair value through profit or loss. In addition, on initial recognition the Group may irrevocably
designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at fair value through
other comprehensive income as at fair value through profit or loss if doing so eliminates or significantly reduces an
accounting mismatch that would otherwise arise.
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AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.5 Financial instruments (continued)
2.5.1 Classification and designation of financial instruments (continued)
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 mandatorily classified as at fair value through profit or loss; and
financial assets or liabilities designated at fair value through profit or loss upon initial recognition.
Management designates financial assets and liabilities at fair value through profit or loss if this eliminates a measurement
or recognition inconsistency or if the liabilities are actively managed on a fair value basis, including among others debt
securities held in participating funds and other participating business with distinct portfolios.
Dividend income from equity instruments measured at fair value through profit or loss is recognised in other investment
return in the consolidated income statement, generally when the security becomes ex-dividend. Interest revenue is
recognised on an accrued basis. For all financial assets and liabilities measured at fair value through profit or loss, changes
in fair value are recognised in profit or loss as part of net investment result.
Transaction costs in respect of financial assets and liabilities at fair value through profit or loss are expensed as they are
incurred.
Financial assets at fair value through other comprehensive income
These principally consist of the Group’s debt securities (other than those backing participating funds, other participating
business with distinct portfolios and unit-linked contracts). These financial assets are initially recognised at fair value plus
attributable transaction costs and are subsequently measured at fair value. The difference between their cost and par
value is amortised. Interest revenue is recognised in investment return in the consolidated income statement using the
effective interest method.
Unrealised gains and losses on securities are analysed between differences resulting from foreign currency translation,
and other fair value changes. Foreign currency translation differences are calculated as if they were carried at amortised
cost and so are recognised in the consolidated income statement as other investment return. For impairments, reference
is made to the section “Impairment of financial assets”.
Changes in the fair value of securities, except for impairment losses and relevant foreign exchange gains and losses, are
recognised in other comprehensive income. 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 financial assets measured at fair value through profit or loss excludes any interest revenue or
dividend income.
Realised gains and losses on financial assets measured at fair value through other comprehensive income 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.
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2.5 Financial instruments (continued)
2.5.1 Classification and designation of financial instruments (continued)
Derecognition, contract modification and offset
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 liabilities are generally derecognised when their contractual obligations expire or are discharged or cancelled.
Notwithstanding, when, and only when, the Group repurchases its financial liability and includes it as underlying items of
contracts with direct participation features or investment contracts with DPF, the Group may elect not to derecognise the
financial liability. Instead, the Group may elect to continue to account for that instrument as a financial liability and to
account for the repurchased instrument as if it were a financial asset and measure it at fair value through profit or loss. This
election is irrevocable and is made on an instrument-by-instrument basis.
If the terms of a financial instrument are modified, then the Group evaluates whether the cash flows of the modified
financial instrument are substantially different. If the cash flows are substantially different, in which case, a new financial
instrument based on the modified terms is recognised at fair value. If a financial instrument is modified but not substantially,
then it is not derecognised.
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.
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 that are not mandatorily measured at fair value through profit or loss are measured at amortised cost using the
effective interest method.
Financial assets measured at amortised cost
Other than cash and cash equivalents, financial assets measured at amortised cost primarily include debt securities, loans
and deposits, and receivables. These financial assets 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
revenue from debt securities measured at amortised cost is recognised in investment return in the consolidated income
statement using the effective interest method.
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AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.5 Financial instruments (continued)
2.5.2 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 fair value through other comprehensive income) 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 20.
2.5.3 Impairment of financial assets
The Group recognises loss allowances for expected credit losses (ECL) on financial assets measured at amortised cost and
debt securities measured at fair value through other comprehensive income. Loss allowances are measured at an amount
equal to lifetime ECL, except in the following cases, for which the amount recognised is 12-month ECL:
•
•
financial assets that are determined to have low credit risk at the reporting date; and
financial assets (other than trade receivables or lease receivables) for which credit risk has not increased significantly
since initial recognition.
Loss allowances for trade receivables and lease receivables are always measured at an amount equal to lifetime ECL.
Lifetime ECL are the ECL that result from possible default events over the expected life of the financial instrument, whereas
12-month ECL are the portion of ECL that results from default events that are possible within the 12 months after the
reporting date. In all cases, the maximum period considered when estimating ECL is the maximum contractual period over
which the Group is exposed to credit risk.
ECL are a probability-weighted estimate of credit losses and are measured as follows:
•
financial assets that are not credit-impaired at the reporting date: 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 Group
expects to receive; and
• other financial assets that are credit-impaired at the reporting date: the difference between the gross carrying amount
and the present value of estimated future cash flows.
Loss allowances for ECL of financial assets measured at amortised cost are deducted from the gross carrying amount of
the assets, and loss allowances for debt securities measured at fair value through other comprehensive income are
recognised in other comprehensive income and do not reduce the carrying amount of the financial assets in the statement
of financial position.
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2.5 Financial instruments (continued)
2.5.3 Impairment of financial assets (continued)
The gross carrying amount of financial assets 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 Group determines that the debtor does not have assets or sources
of income that could generate sufficient cash flows to repay the amounts subject to the write-off. This assessment is
carried out at the individual asset level. However, financial assets that are written off could still be subject to enforcement
activities in order to comply with the Group’s procedures for recovery of amounts due.
2.5.4 Derivative financial instruments
Derivative financial instruments primarily include foreign exchange contracts and interest rate swaps 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. 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 Accounting Standards 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 other
investment return.
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. As permitted by IFRS
9, the Group has elected to continue to apply the hedge accounting requirements of IAS 39. 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 fair value through
other comprehensive income, the cash flows are expected to affect profit or loss when the coupons from the purchased
bond 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.
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AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.5 Financial instruments (continued)
2.5.4 Derivative financial instruments (continued)
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 that is not a financial asset within the scope of IFRS 9, 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 IFRS 9.
2.6 Property, plant and equipment
Property held for own use, which is solely held as an underlying item of insurance contracts with direct participation
features, is measured initially at cost and subsequently at fair value, with any change therein recognised in profit or loss.
Any gain or loss on disposal of property held for own use measured at fair value (calculated as the difference between the
net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
2.7 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 deferred origination costs, intangible assets, investments in
associates and joint ventures, property, plant and equipment and investment property as non-current assets as these are
held for the longer-term use of the Group.
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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 insurance contracts (including investment contracts with DPF), fair value measurement,
impairment of financial assets and impairment of goodwill and other intangible assets.
3.1 Level of aggregation and recognition of group of insurance contracts
For contracts issued to which the Group does not apply the premium allocation approach, the judgements exercised in
determining whether contracts are onerous on initial recognition or those that have no significant possibility of becoming
onerous subsequently are:
• based on the likelihood of changes in assumptions which, if they occurred, would result in the contracts becoming
onerous; and
• using information about profitability estimation for the relevant group of products.
The accounting policy on level of aggregation and recognition of group of insurance contracts is described in note 2.3.3.
3.2 Measurement of insurance contracts not measured under the premium allocation approach
The asset or liability for groups of insurance contracts is measured as the total of fulfilment cash flows and CSM.
The fulfilment cash flows of insurance contracts (including investment contracts with DPF) represents the present value
of estimated future cash outflows, less the present value of estimated future cash inflows and adjusted for a provision for
the risk adjustment for non-financial risk. The assumptions used and the techniques for estimating fulfilment cash flows
and risk adjustment for non-financial risk are based on actual experience by each geographical market and policy form.
The Group exercises significant judgement in making appropriate assumptions and techniques.
CSM represents the unearned profits that the Group will recognise as it provides services under the insurance contracts in
a group. The amounts of CSM recognised in profit or loss are determined by identifying the coverage units in the group,
allocating the CSM at the end of period equally to each coverage unit provided in the current period and expected to be
provided in the future. The number of coverage units in a group is the quantity of the services provided by the contracts in
the group, determined by considering for each contract the quantity of the services provided under a contract and its
expected coverage period. The Group exercises judgements in determining the quantity of the services provided under a
contract which will affect the amounts recognised in the consolidated financial statements as insurance revenue from
insurance contracts issued.
The judgements exercised in the valuation of insurance contracts (including investment contracts with DPF) affect the
amounts recognised in the consolidated financial statements as assets or liabilities of insurance contracts and investment
contracts with DPF. Further details of the related accounting policies, key risk and variables, and the sensitivities of
assumptions to the key variables in respect of insurance contracts are provided in notes 2.3, 24 and 34.
192
AIA GROUP LIMITEDFINANCIAL STATEMENTS 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
3.3 Determination of coverage unit
The CSM of a group of contracts is recognised as insurance revenue in each period based on the number of coverage units
provided in the period, which is determined by considering for each contract the quantity of the services provided, its
expected coverage period and time value of money.
The quantity of services provided by insurance contracts could include insurance coverage, investment-return service and
investment-related service, as applicable. In assessing the services provided by insurance contracts, the terms and benefit
features of the contracts are considered.
For contracts providing predominately insurance coverage, the quantity of services is determined for the contract as a
whole based on the expected maximum benefits less investment component. For contracts providing multiple services, the
quantity of services is determined based on the benefits provided to policyholder for each service with the relative
weighting considered in the calculation through the use of factors. Relevant elements are considered in determining the
quantity of services including among others, benefit payments and premiums. The Group applies judgement in these
determinations.
Expected coverage period is derived based on the likelihood of an insured event occurring to the extent they affect the
expected duration of contracts in the group. Determining the expected coverage period is judgemental since it involves
making an expectation of when claims and lapse will occur.
3.4 Transition to IFRS 17
The Group applied IFRS 17 for annual reporting period beginning on 1 January 2023. The Group has determined that it was
impracticable to apply the full retrospective approach for some groups of contracts because certain historical information
was not available or was not available without undue cost or effort that would enable it to be used under this approach.
Therefore, the Group applied the modified retrospective or fair value approaches for these groups of contracts. The Group
exercises judgements in determining the transition approaches, applying the transition methods and measuring the
transition impacts on the transition date, which will affect the amounts recognised in the consolidated financial statements
on the transition date. Further details of the related accounting policies and information on the date of initial adoption are
provided in notes 2.3.9 and 43.
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.
Further details of the fair value of financial assets and the sensitivity analysis to interest rates and equity prices are
provided in notes 20 and 34.
193
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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)
3.5.2 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 of property held for own use and investment property are provided in note 20.
3.6 Impairment of financial assets
The Group recognises loss allowances for ECL on financial assets measured at amortised cost and debt securities measured
at fair value through other comprehensive income. The measurement of ECL requires the use of complex models and
significant assumptions about future economic conditions and credit behaviour. Details of the inputs, assumptions and
estimation techniques used for estimating ECL are further explained in note 23.
A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:
• Determining criteria for significant increase in credit risk since initial recognition;
• Choosing appropriate models and assumptions for the measurement of ECL; and
• Establishing the methodology for incorporating forward-looking information into the measurement of ECL.
3.7 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 year are provided in note 14.
194
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 into US dollar at the following year-end rates:
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Exchange rates are expressed in units of local currency per US$1.
US dollar exchange rates
Year ended
31 December
2023
Year ended
31 December
2022
7.08
7.83
34.80
1.34
4.56
6.73
7.83
35.02
1.38
4.40
US dollar exchange rates
As at
31 December
2023
As at
31 December
2022
7.10
7.81
34.24
1.32
4.59
6.95
7.80
34.54
1.34
4.41
195
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 5. OPERATING PROFIT AFTER TAX
Operating profit after tax may be reconciled to net profit as follows:
US$m
Operating profit after tax
Non-operating items, net of related taxes:
Short-term investment and discount rate variances(1)
Reclassification of revaluation gains for property held for own use(1)
Other significant non-operating income and expenses
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
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
6,228
6,454
Note
7
(2,007)
(8)
(30)
(35)
(367)
(2,447)
3,781
6,213
15
3,764
17
(1,134)
(71)
(63)
(45)
(1,776)
(3,089)
3,365
6,421
33
3,331
34
Notes:
(1) Short-term investment and discount rate variances include revaluation gains for property held for own use. This amount is then reclassified out of
net profit to conform to IFRS Accounting Standards measurement and presentation.
(2) The amount is net of tax of US$319m (2022: US$361m). The gross amount before tax is US$(2,766)m (2022: US$(3,450)m).
Operating profit after tax breakdown:
US$m
Insurance service result:
CSM recognised for services provided
Other insurance service result
Net investment result
Other net expenses
Operating profit before tax
Taxation
Operating profit after tax
196
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
5,314
(223)
3,792
(1,553)
7,330
(1,102)
5,121
345
3,597
(1,559)
7,504
(1,050)
6,228
6,454
AIA GROUP LIMITEDFINANCIAL STATEMENTS
6. 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 7.
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.
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
insurance revenue 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$m
TWPI by geography
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
First year premiums by geography
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
Single premiums by geography
Mainland China
Hong Kong
Thailand
Singapore
Malaysia
Other Markets
Total
Year ended
31 December
2023
Year ended
31 December
2022
8,589
11,554
4,425
3,912
2,565
6,894
7,592
11,237
4,166
3,577
2,464
7,140
37,939
36,176
1,961
2,243
725
429
392
766
1,259
885
613
358
363
863
6,516
4,341
369
1,205
126
944
255
693
3,592
280
1,813
203
1,272
274
892
4,734
197
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 6. TOTAL WEIGHTED PREMIUM INCOME AND ANNUALISED NEW PREMIUMS (continued)
Year ended
31 December
2023
Year ended
31 December
2022
6,591
9,190
3,687
3,389
2,147
6,060
6,305
10,171
3,533
3,092
2,074
6,187
31,064
31,362
Year ended
31 December
2023
Year ended
31 December
2022
2,023
2,407
765
586
473
1,396
7,650
1,319
1,078
655
531
440
1,384
5,407
TWPI (continued)
US$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
198
AIA GROUP LIMITEDFINANCIAL STATEMENTS 7. 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;
•
insurance service result;
• net investment result;
• 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, insurance finance reserve and fair value reserve).
Business volumes in respect of the Group’s five largest customers are less than 30 per cent of insurance revenue and net
investment result in this note.
The Group recognises deferred tax liabilities in respect of unremitted earnings in jurisdictions where withholding tax
charge would be incurred upon dividend distribution.
199
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 7. SEGMENT INFORMATION (continued)
US$m
Year ended 31 December 2023
ANP
TWPI
Insurance revenue
Insurance service expenses
Net (expenses)/income from
reinsurance contracts held
Insurance service result
Investment return
– Participating(1) and unit-linked
– Others
Net finance expenses from insurance
contracts and reinsurance contracts
held
Movement in investment contract
Mainland
China
Hong Kong
Thailand
Singapore
Malaysia
Other
Markets
Group
Corporate
Centre
Total
2,023
8,589
3,122
2,407
11,554
3,816
765
4,425
2,264
586
3,912
2,196
473
2,565
1,574
1,396
6,894
4,542
(1,264)
(2,412)
(1,427)
(1,596)
(1,289)
(4,090)
(53)
(110)
1,805
1,679
676
1,003
1,294
6,221
5,116
1,105
(51)
786
1,048
2
1,046
(89)
511
2,373
1,915
458
1
286
908
772
136
(32)
420
1,685
563
1,122
–
–
–
–
7,650
37,939
17,514
(12,078)
(11)
(11)
(345)
5,091
786
14,700
(2)
9,042(2)
788
5,658
(1,363)
(4,783)
(515)
(1,975)
(725)
(938)
(2) (10,301)(2)
liabilities
(25)
(197)
(86)
(67)
Movement in third-party interests in
consolidated investment funds
Net investment result
Fee income and other operating revenue
Other expenses
Other finance costs
Share of (losses)/profit from associates
and joint ventures
Operating profit before tax
Tax on operating profit before tax
Operating profit after tax
Operating profit after tax attributable to:
–
291
4
(184)
(41)
–
1,875
(327)
1,548
(56)
1,185
253
(327)
(27)
(1)
2,377
(192)
2,185
Shareholders of AIA Group Limited
1,548
2,180
Non-controlling interests
–
5
–
447
24
(83)
(1)
–
1,173
(222)
951
951
–
–
331
26
(139)
(8)
–
721
(52)
669
669
–
–
–
183
13
(56)
(2)
–
424
(120)
304
293
11
(176)
–
571
96
(405)
(8)
31
705
(135)
570
560
10
–
–
784
16
(340)
(366)
(551)(2)
(56)(2)
3,792
432
(1,534)
(453)
(28)
55
2
7,330
(54)
(1,102)
1
6,228
12
(11)
6,213
15
Notes:
(1) Participating refers to participating funds and other participating business with distinct portfolios.
(2) Net finance expenses from insurance contracts and reinsurance contracts held includes changes in fair value of underlying items of contracts with
direct participation features. Net finance expenses from insurance contracts and reinsurance contracts held, net of investment return relating to
participating and unit-linked businesses, movement in investment contract liabilities and movement in third-party interests in consolidated
investment funds amounted to US$(1,866)m, primarily related to other insurance contracts without direct participation features.
200
AIA GROUP LIMITEDFINANCIAL STATEMENTS 7. SEGMENT INFORMATION (continued)
US$m
China Hong Kong
Thailand
Singapore
Malaysia
Mainland
Other
Markets
Group
Corporate
Centre
Total
Key operating ratios:
Expense ratio
Operating margin
Operating return on shareholders’
7.4%
6.2%
6.7%
7.1%
9.1%
16.2%
18.0%
18.9%
21.5%
17.1%
11.9%
8.3%
allocated equity
29.8%
16.9%
15.4%
15.6%
13.3%
7.2%
–
–
–
9.4%
16.4%
13.5%
Operating profit before tax includes:
Operating expenses
Finance costs
633
51
718
29
295
2
277
17
233
2
1,115
8
302
366
3,573
475
US$m
China Hong Kong
Thailand
Singapore
Malaysia
Mainland
Other
Markets
Group
Corporate
Centre
Total
31 December 2023
Total assets
Total liabilities
Total equity
Shareholders’ allocated equity
Total assets include:
Investments in associates and
joint ventures
46,394 104,506
26,204
41,921
14,529
36,511
16,254 286,319
42,657
93,984
20,182
37,516
12,167
27,473
10,746 244,725
3,737
5,417
10,522
12,605
6,022
6,135
4,405
4,247
2,362
2,251
9,038
7,887
5,508
6,212
41,594
44,754
–
–
–
–
1
828
502
1,331
201
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
7. SEGMENT INFORMATION (continued)
Segment information may be reconciled to the consolidated income statement as shown below:
US$m
Year ended 31 December 2023
Insurance revenue
Insurance service expenses
Net expenses from
reinsurance contracts
held
Insurance service result
Short-term
investment and
discount rate
variances
Segment
information
Other non-
operating
items
Consolidated
income
statement
17,514
(12,078)
(345)
5,091
–
–
–
–
–
–
–
–
17,514
Insurance revenue
(12,078)
Insurance service expenses
Net expenses from
reinsurance contracts
held
(345)
5,091
Insurance service result
Investment return
14,700
(2,097)
(37)
12,566
Investment return
Net finance expenses from
insurance contracts and
reinsurance contracts
held
Movement in investment
contract liabilities
Movement in third-party
interests in consolidated
investment funds
Net investment result
Fee income and other
operating revenue
Other expenses
Other finance costs
Share of profit from
associates and joint
ventures
Operating profit before tax
(10,301)
(551)
(56)
3,792
432
(1,534)
(453)
2
7,330
(99)
(21)
–
(2,217)
–
–
–
–
(2,217)
Net finance expenses from
insurance contracts and
reinsurance contracts
held
Movement in investment
(10,391)
(572)
contract liabilities
Movement in third-party
interests in consolidated
investment funds
(56)
9
–
–
(28)
1,547 Net investment result
(24)
(218)
(10)
(269)
(549)
Fee income and other
operating revenue
408
(1,752) Other expenses
(463) Other finance costs
Share of losses from
associates and joint
ventures
(267)
4,564 Profit before tax
202
AIA GROUP LIMITEDFINANCIAL STATEMENTS 7. SEGMENT INFORMATION (continued)
US$m
Mainland
China
Hong Kong
Thailand
Singapore
Malaysia
Other
Markets
Group
Corporate
Centre
Total
Year ended 31 December 2022 (restated)
ANP
TWPI
Insurance revenue
1,319
7,592
3,087
1,078
11,237
3,432
655
4,166
1,976
531
3,577
1,954
440
2,464
1,525
1,384
7,140
4,345
Insurance service expenses
(1,156)
(1,929)
(1,176)
(1,385)
(1,085)
(3,703)
Net (expenses)/income from
reinsurance contracts held
Insurance service result
Investment return
– Participating(1) and unit-linked
– Others
Net finance (expenses)/income from
insurance contracts and reinsurance
contracts held
Movement in investment contract
(8)
(47)
1,923
1,456
759
(28,264)
(68)
(29,310)
827
1,046
(42)
758
907
(131)
1,038
(81)
488
(3,364)
(3,805)
441
9
449
190
61
129
(558)
28,597
(289)
3,438
(148)
liabilities
(27)
757
(81)
Movement in third-party interests in
consolidated investment funds
Net investment result
Fee income and other operating revenue
Other expenses
Other finance costs
Share of (losses)/profit from associates
and joint ventures
Operating profit before tax
Tax on operating profit before tax
Operating profit/(loss) after tax
Operating profit/(loss) after tax
attributable to:
–
174
1
(187)
(17)
–
1,894
(343)
1,551
34
1,124
252
(329)
(24)
(1)
2,478
(269)
2,209
–
537
20
(113)
(1)
–
1,201
(224)
977
251
–
325
24
(137)
(8)
–
692
(37)
655
Shareholders of AIA Group Limited
1,551
2,202
Non-controlling interests
–
7
977
–
655
–
–
–
42
12
(55)
(3)
–
445
(71)
374
362
12
(250)
392
322
(693)
1,015
98
134
–
554
145
(302)
(6)
5
788
(60)
728
–
–
–
–
–
–
5,407
36,176
16,319
(10,434)
(419)
5,466
857
(28,593)
5
(33,941)(2)
852
5,348
(16)
31,122(2)
–
–
841
(3)
(389)
(318)
1,034(2)
34(2)
3,597
451
(1,512)
(377)
(125)
(121)
6
7,504
(46)
(40)
(1,050)
6,454
710
18
(36)
(4)
6,421
33
Notes:
(1) Participating refers to participating funds and other participating business with distinct portfolios.
(2) Net finance (expenses)/income from insurance contracts and reinsurance contracts held includes changes in fair value of underlying items of
contracts with direct participation features. Net finance (expenses)/income from insurance contracts and reinsurance contracts held, net of
investment return relating to participating and unit-linked businesses, movement in investment contract liabilities and movement in third-party
interests in consolidated investment funds amounted to US$(1,751)m, primarily related to other insurance contracts without direct participation
features.
203
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 7. SEGMENT INFORMATION (continued)
Mainland
China
Hong Kong
Thailand
Singapore
Malaysia
Other
Markets
Group
Corporate
Centre
US$m
Key operating ratios:
Expense ratio
Operating margin
7.5%
5.0%
20.4%
19.7%
6.5%
23.5%
7.2%
18.3%
9.3%
15.2%
14.8%
10.2%
Operating return on shareholders’
allocated equity
31.9%
15.7%
16.4%
15.5%
17.1%
9.0%
Total
9.0%
17.8%
13.0%
–
–
–
Operating profit before tax includes:
Operating expenses
Finance costs
571
22
565
29
270
1
256
8
229
1
1,060
6
300
319
3,251
386
US$m
China Hong Kong
Thailand
Singapore
Malaysia
Mainland
Other
Markets
Group
Corporate
Centre
Total
31 December 2022 (restated)
Total assets
Total liabilities
Total equity
Shareholders’ allocated equity
Total assets include:
Investments in associates and joint
ventures
38,675
96,131
25,746
39,245
14,131
37,809
18,734 270,471
34,498
84,877
19,446
34,969
11,887
29,321
10,325 225,323
4,177
4,956
11,254
13,128
6,300
6,210
4,276
4,345
2,244
2,160
8,488
7,635
8,409
8,737
45,148
47,171
–
1
–
–
–
793
1,262
2,056
204
AIA GROUP LIMITEDFINANCIAL STATEMENTS 7. SEGMENT INFORMATION (continued)
Segment information may be reconciled to the consolidated income statement as shown below:
US$m
Year ended 31 December 2022
(restated)
Insurance revenue
Insurance service expenses
Net expenses from
reinsurance contracts
held
Insurance service result
Short-term
investment and
discount rate
variances
Segment
information
Other non-
operating
items
Consolidated
income
statement
16,319
(10,434)
(419)
5,466
–
–
–
–
–
–
–
–
16,319
Insurance revenue
(10,434)
Insurance service expenses
Net expenses from
reinsurance contracts
held
(419)
5,466
Insurance service result
Investment return
(28,593)
(1,420)
(1,600)
(31,613)
Investment return
Net finance income from
insurance contracts and
reinsurance contracts
held
Movement in investment
contract liabilities
Movement in third-party
interests in consolidated
investment funds
Net investment result
Fee income and other
operating revenue
Other expenses
Other finance costs
Share of losses from
associates and joint
ventures
Operating profit before tax
(147)
31,024
Net finance income from
insurance contracts and
reinsurance contracts
held
Movement in investment
–
–
1,106
contract liabilities
Movement in third-party
interests in consolidated
investment funds
34
49
72
–
(1,299)
(1,747)
551 Net investment result
–
–
–
–
(12)
(384)
(8)
Fee income and other
operating revenue
439
(1,896) Other expenses
(385) Other finance costs
–
(121)
Share of losses from
associates and joint
ventures
(1,299)
(2,151)
4,054 Profit before tax
31,122
1,034
34
3,597
451
(1,512)
(377)
(121)
7,504
205
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
8. INSURANCE REVENUE
US$m
Contracts not measured under the PAA
Amounts related to changes in liabilities for remaining coverage
Contractual service margin recognised for services provided
Change in risk adjustment for non-financial risk for risk expired
Expected incurred claims and other insurance service expenses
Others
Recovery of insurance acquisition cash flows
Contracts measured under the PAA
Total insurance revenue
Represented by:
Contracts under the modified retrospective approach
Contracts under the fair value approach
Other contracts
Year ended
31 December
2023
Year ended
31 December
2022
Note
24
24
24
5,605
210
8,239
85
968
15,107
2,407
17,514
1,696
7,791
8,027
5,363
260
8,092
113
696
14,524
1,795
16,319
1,798
9,669
4,852
206
AIA GROUP LIMITEDFINANCIAL STATEMENTS 9. NET INVESTMENT RESULT
A. Group’s net investment result in consolidated income statement and other comprehensive income
US$m
Investment return
Interest revenue on financial assets
Other investment return
Net impairment loss on financial assets
Amounts recognised in consolidated income statement
Amounts recognised in other comprehensive income(1)
Total investment return(1)
Net finance (expenses)/income from insurance contracts
Changes in fair value of underlying items of contracts with direct
participation features
Interest accreted
Effect of changes in interest rates and other financial assumptions
Effect of measuring changes in estimates at current rates and
adjusting the CSM at the rates on initial recognition
Net foreign exchange gains
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
Notes
7,820
4,941
(195)
12,566
4,708
17,274
(8,313)
(2,516)
(5,119)
(638)
327
7,267
(38,647)
(233)
(31,613)
(11,764)
(43,377)
33,094
(2,450)
4,030
708
133
Total net finance (expenses)/income from insurance contracts
24
(16,259)
35,515
Net finance income/(expenses) from reinsurance contracts held
Interest accreted
Effect of changes in interest rates and other financial assumptions
Effect of measuring changes in estimates at current rates and
adjusting the CSM at the rates on initial recognition
Net foreign exchange losses
Total net finance income/(expenses) from reinsurance contracts held
Movement in investment contract liabilities
Movement in third-party interests in consolidated investment funds
Net investment result(1)
24
25
Net investment result is represented by:
Amounts recognised in consolidated income statement
Amounts recognised in other comprehensive income(1)
Total net investment result(1)
9
247
(38)
(42)
176
(572)
(56)
563
1,547
(984)
563
12
19
(148)
(64)
(181)
1,106
34
(6,903)
551
(7,454)
(6,903)
207
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 9. NET INVESTMENT RESULT (continued)
A. Group’s net investment result in consolidated income statement and other comprehensive income (continued)
US$m
Net finance (expenses)/income from insurance contracts are
represented by:
Amounts recognised in consolidated income statement
Amounts recognised in other comprehensive income
Total net finance (expenses)/income from insurance contracts
Net finance income/(expenses) from reinsurance contracts held are
represented by:
Amounts recognised in consolidated income statement
Amounts recognised in other comprehensive income
Total net finance income/(expenses) from reinsurance contracts held
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
(10,456)
(5,803)
(16,259)
30,957
4,558
35,515
65
111
176
67
(248)
(181)
Note:
(1) The Net investment result note is presented gross of tax, gross of non-controlling interests and excluding share of returns from associates and joint
ventures. The equivalent amounts for the year ended 31 December 2022 including amounts recognised in other comprehensive income related to
tax, non-controlling interests and share of returns from associates and joint ventures were as follows:
Investment return – Amounts recognised in other comprehensive income: US$(10,316)m;
•
•
Total investment return: US$(41,929)m;
• Net investment result: US$(5,455)m;
• Net investment result – Amounts recognised in other comprehensive income: US$(6,006)m; and
•
Total net investment result: US$(5,455)m.
208
AIA GROUP LIMITEDFINANCIAL STATEMENTS
9. NET INVESTMENT RESULT (continued)
B. Interest revenue on financial assets and other investment return
US$m
Interest revenue on financial assets
Financial assets measured at amortised cost
Financial assets measured at fair value through other comprehensive income
Financial assets designated at fair value through profit or loss
Financial assets measured mandatorily at fair value through profit or loss
Total interest revenue on financial assets
Other investment return
Dividend income
Rental income(1)
Net losses of financial assets not at fair value through profit or loss
Net realised losses of debt securities measured at fair value through
other comprehensive income
At fair value through profit or loss
Net gains/(losses) of financial assets designated at fair value through profit or loss
Net gains/(losses) of debt securities
Net losses of loans and deposits
Net gains/(losses) of financial instruments mandatorily at fair value through
profit or loss
Net gains/(losses) of debt securities
Net gains/(losses) of equity shares, interests in investment funds and
exchangeable loan notes
Net fair value movement on derivatives
Net gains/(losses) in respect of financial instruments at fair value through
profit or loss
Net fair value movement of investment property and property held for own use
Net foreign exchange losses
Other net realised losses
Net gains/(losses)
Total other investment return
Note:
(1) Represents rental income from operating lease contracts in which the Group acts as a lessor.
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
546
3,516
3,403
355
7,820
1,488
154
350
3,487
3,117
313
7,267
1,323
161
(74)
(478)
3,390
(18,961)
(9)
(7)
120
(718)
1,013
(827)
(10,007)
(9,495)
3,687
(39,188)
(147)
(141)
(26)
3,299
4,941
64
(519)
(10)
(40,131)
(38,647)
209
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 9. NET INVESTMENT RESULT (continued)
Foreign currency movements resulted in the following gains recognised in the consolidated income statement (other than
gains and losses arising on items measured at fair value through profit or loss):
US$m
Foreign exchange gains
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
122
163
On transition to IFRS 17, for certain groups of contracts that the Group applies the modified retrospective approach or the
fair value approach, the cumulative insurance finance income or expenses recognised in other comprehensive income at
1 January 2022 was determined:
•
•
to be zero; or
retrospectively based on observable yield curve.
For those groups of contracts, the movement in the fair value reserve for the debt securities at fair value through other
comprehensive income was as follows:
US$m
Balance at 1 January
Net change in fair value and others
Net amount reclassified to profit or loss
Balance at 31 December
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
(3,346)
2,945
224
(177)
6,133
(10,005)
526
(3,346)
210
AIA GROUP LIMITEDFINANCIAL STATEMENTS 10. EXPENSES
US$m
Claims and benefits
Commission and other acquisition expenses incurred
Losses on onerous insurance contracts
Employee benefit expenses(3)
Depreciation(3)
Amortisation(3)
Investment management expenses and others
Depreciation on property held for own use
Finance costs
Other operating expenses(3)
Restructuring and other non-operating costs(1)
Amounts attributed to insurance acquisition cash flows
Amortisation of insurance acquisition cash flows
Insurance service and other expenses
Insurance service and other expenses represented by:
US$m
Insurance service expenses
– Contracts not measured under the PAA
– Contracts measured under the PAA
Other incurred expenses directly attributable to reinsurance contracts held
Other expenses(2)
Other finance costs
Total
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
9,250
6,370
101
2,235
221
152
554
43
485
965
166
20,542
(7,542)
1,293
14,293
8,185
5,286
61
1,986
250
121
557
20
394
894
360
18,114
(6,292)
903
12,725
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
12,078
9,775
2,303
–
1,752
463
14,293
10,434
8,869
1,565
10
1,896
385
12,725
Notes:
(1) 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.
(2) Other expenses represent general expenses and investment management expenses that are not directly attributable to insurance contracts and
reinsurance contracts held. It includes payments for short-term leases of US$7m (2022: US$2m).
(3) Operating expenses comprise employee benefit expenses, depreciation, amortisation and other operating expenses.
211
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 10. EXPENSES (continued)
Expenses include auditors’ remuneration of US$33m (2022: US$37m), an analysis of which is set out below:
Year ended
31 December
2023
Year ended
31 December
2022
27
5
1
33
23
14
–
37
Year ended
31 December
2023
Year ended
31 December
2022
75
145
1
221
83
166
1
250
Year ended
31 December
2023
Year ended
31 December
2022
66
403
4
12
485
22
337
22
13
394
Year ended
31 December
2023
Year ended
31 December
2022
1,848
1,633
72
139
9
167
66
128
10
149
2,235
1,986
US$m
Audit services
Non-audit services, including:
Audit-related services
Tax services
Total
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$m
Wages and salaries
Share-based compensation
Pension costs – defined contribution plans
Pension costs – defined benefit plans
Other employee benefit expenses
Total
212
AIA GROUP LIMITEDFINANCIAL STATEMENTS 11. INCOME TAX
US$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
2023
Year ended
31 December
2022
(restated)
175
482
126
783
153
624
(88)
689
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
2023
Year ended
31 December
2022
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 2023, Bermuda has introduced and enacted a corporate income tax rate of 15 per cent that will become effective from
1 January 2025.
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 changed to 23.1 per cent effective from 1 January 2023.
213
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 11. INCOME TAX (continued)
Corporate income tax (continued)
The Group 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 relevant governments and the OECD on their work.
In 2021, the OECD/G20 Inclusive Framework on BEPS published the Global Anti-Base Erosion (GloBE) Model Rules to give
effect to Pillar Two of BEPS 2.0, which imposes a global minimum effective tax rate on large multinational enterprises in
respect of each jurisdiction in which they operate.
The Group operates in jurisdictions that have enacted or substantively enacted Pillar Two legislation, including Luxembourg,
Malaysia, South Korea and Vietnam. The legislation in some of these jurisdictions introduced Qualified Domestic Minimum
Top-up Taxes (QDMTT) that will be effective for the Group from 1 January 2024. Under the legislation, QDMTT will apply
such that the Group will be liable to pay top-up tax for the difference between its effective tax rate for each of these
jurisdictions calculated on the basis of the respective legislation (broadly based on the GloBE Model Rules) and a 15 per
cent minimum rate. The legislation of some of these jurisdictions also introduced Undertaxed Profits Rules (UTPR) that will
be effective from 1 January 2025. Under the legislation, the UTPR is a backstop mechanism which will apply if the
difference between the Group’s effective tax rate in a jurisdiction in which it operates and the 15 per cent minimum rate is
not brought into charge after the application of other Pillar Two income taxes, by applying a top-up tax in the jurisdiction
that introduced the UTPR.
Since the Pillar Two legislation was not effective at the reporting date, the Group has no related current tax exposure.
IAS 12 states that as an exception to the standard’s requirements, entities shall neither recognise nor disclose information
about deferred tax assets and liabilities related to Pillar Two income taxes. The Group has applied this exception and has
not yet assessed the deferred tax impact of Pillar Two income taxes. The Group will continue to monitor the Pillar Two
requirements and will assess the accounting implications accordingly.
Due to significant areas of uncertainty, the quantitative impact of the enacted or substantively enacted Pillar Two legislation
is not yet reasonably estimable.
It should be noted that, even for those jurisdictions with an accounting effective tax rate above 15 per cent, there may still
be Pillar Two income tax implications due to different bases of calculation. The Group has engaged tax specialists to assist
with applying the legislation.
Withholding tax on dividends
In some jurisdictions in which 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.
214
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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
Changes in tax rate and law
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
2023
Year ended
31 December
2022
(restated)
4,564
932
–
(338)
(26)
(196)
(560)
62
88
111
39
82
29
411
783
4,054
780
(50)
(272)
(43)
(15)
(380)
–
100
126
29
2
32
289
689
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.
215
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 11. INCOME TAX (continued)
The movement in net deferred tax liabilities in the year may be analysed as set out below:
Net deferred
tax asset/
(liability) at
1 January
(restated)
Effect of
changes in
accounting
policy
Net deferred
tax asset/
(liability) at
1 January
(restated)
Acquisition of
a subsidiary(3)
Credited/
(charged)
to the
consolidated
income
statement
Foreign
currency
translation
reserve
Insurance
finance
reserve
Fair value
reserve(2)
Others
Other
movements
Net deferred
tax asset/
(liability)
at year end
Credited/(charged) to other
comprehensive income
631
(3,427)
(267)
102
103
(366)
68
(3,156)
–
–
–
–
–
–
–
–
631
(3,427)
(267)
102
103
(366)
68
(3,156)
–
–
–
–
–
–
3
3
9
(1,002)
(469)
(23)
15
398
(71)
15
(126)
–
–
–
–
–
–
(1,002)
–
-
–
2
–
–
(19)
(17)
–
13
–
–
–
–
–
(373)
(2,506)
(288)
118
507
(431)
70
13
(2,903)
(11)
25
2
(1)
6
6
3
30
–
1,352
–
–
–
–
–
1,352
Credited/(charged) to other
comprehensive income
Net deferred
tax asset/
(liability) at
1 January
– as previously
reported
Effect of
changes in
accounting
policy
Net deferred
tax asset/
(liability) at
1 January
(restated)
Acquisition of
a subsidiary
Credited/
(charged)
to the
consolidated
income
statement
Foreign
currency
translation
reserve
Insurance
finance
reserve
Fair value
reserve(2)
Others
Other
movements
Net deferred
tax asset/
(liability)
at year end
(restated)
(1,880)
(3,657)
986
(273)
139
245
(956)
(536)
(5,932)
(27)
3,657
(2,554)
47
(78)
(105)
580
413
1,933
(1,907)
–
(1,568)
(226)
61
140
(376)
(123)
(3,999)
–
–
–
–
–
–
–
–
–
799
–
(860)
(58)
59
(33)
(8)
189
88
1,731
–
–
–
–
–
–
–
1,731
8
–
168
17
(12)
(4)
18
4
199
–
–
(1,167)
–
–
–
–
–
(1,167)
–
–
–
–
(6)
–
–
(2)
(8)
–
–
–
–
–
–
–
–
–
631
–
(3,427)
(267)
102
103
(366)
68
(3,156)
US$m
31 December 2023
Revaluation of financial
instruments
Insurance and investment
contract liabilities
Withholding taxes
Provision for expenses
Losses available for offset
against future taxable
income
Life surplus(1)
Others
Total
US$m
31 December 2022 (restated)
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) Includes tax charge of US$1,022m (2022: tax credit of US$1,757m) relates to fair value gains or losses on debt securities measured at fair value
through other comprehensive income and tax credit of US$20m (2022: tax charge of US$26m) relates to fair value losses or gains on debt
securities measured at fair value through other comprehensive income reclassified to profit or loss.
(3) Includes a one-time adjustment of US$3m in respect of the acquisition of a subsidiary.
216
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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 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$106m (2022: US$57m) 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$251m (2022: US$247m) in respect of unremitted earnings of
operations in jurisdictions from which a withholding tax charge would be incurred upon distribution as the Group does not
consider it probable that this portion of accumulated earnings will be remitted in the foreseeable future.
The Group has unused income tax losses carried forward in Mainland China, Hong Kong, Thailand, Singapore, Malaysia,
Australia, Brunei, Cambodia, Macau, Myanmar, New Zealand, the Philippines, South Korea and Taiwan (China). The tax
losses in Hong Kong, Singapore, Australia and New Zealand can be carried forward indefinitely. The tax losses of remaining
branches and subsidiaries are due to expire within the periods ending 2025 (Macau), 2026 (Myanmar), 2027 (the
Philippines), 2028 (Mainland China, Cambodia and Thailand), 2029 (Brunei) and 2033 (Malaysia, South Korea and Taiwan
(China)).
217
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 12. EARNINGS PER SHARE
Basic
Basic earnings per share is calculated by dividing the net profit attributable to shareholders of AIA Group Limited by the
weighted average number of ordinary shares outstanding during the year. The shares held by employee share-based trusts
and shares that have been repurchased are not considered to be outstanding from the date of the purchase for the purposes
of computing basic and diluted earnings per share.
Net profit attributable to shareholders of AIA Group Limited (US$m)
Weighted average number of ordinary shares outstanding (million)
Basic earnings per share (US cents)
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
3,764
11,518
32.68
3,331
11,929
27.92
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to
assume conversion of all dilutive potential ordinary shares. 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 36.
Net profit attributable to shareholders of AIA Group Limited (US$m)
Weighted average number of ordinary shares outstanding (million)
Adjustment for share options, restricted share units, restricted stock purchase units and
restricted stock subscription units granted under share-based compensation plans
(million)
Weighted average number of ordinary shares for diluted earnings per share (million)
Diluted earnings per share (US cents)
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
3,764
11,518
3,331
11,929
10
11,528
32.65
9
11,938
27.90
At 31 December 2023, 6,276,007 share options (2022: 4,431,307) were excluded from the diluted weighted average
number of ordinary shares calculation as they have no effect to the diluted earnings per share.
Operating profit after tax per share
Operating profit after tax (see note 5) per share is calculated by dividing the operating profit after tax attributable to
shareholders of AIA Group Limited by the weighted average number of ordinary shares outstanding during the year. The
dilutive instruments are the share options, restricted share units, restricted stock purchase units and restricted stock
subscription units granted to eligible directors, officers, employees and agents under various share-based compensation
plans as described in note 36.
Basic operating profit after tax per share (US cents)
Diluted operating profit after tax per share (US cents)
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
53.94
53.89
53.83
53.79
218
AIA GROUP LIMITEDFINANCIAL STATEMENTS 13. DIVIDENDS
Dividends to shareholders of the Company attributable to the year:
US$m
Interim dividend declared and paid of 42.29 Hong Kong cents per share
(2022: 40.28 Hong Kong cents per share)
Final dividend proposed after the reporting date of 119.07 Hong Kong cents per share
(2022: 113.40 Hong Kong cents per share)(1)
Total
Year ended
31 December
2023
Year ended
31 December
2022
621
1,726
2,347
609
1,702
2,311
Notes:
(1) Based upon shares outstanding at 31 December 2023 and 31 December 2022 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 14 March 2024 subject to shareholders’ approval at the AGM to be
held on 24 May 2024. 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 year, approved and paid during the year:
US$m
Final dividend in respect of the previous financial year, approved and
paid during the year of 113.40 Hong Kong cents per share
(2022: 108.00 Hong Kong cents per share)
Year ended
31 December
2023
Year ended
31 December
2022
1,672
1,650
219
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
14. INTANGIBLE ASSETS
US$m
Cost
At 1 January 2022
Additions
Acquisition of subsidiaries
Disposals
Foreign exchange movements
At 31 December 2022
Additions
Acquisition of subsidiaries(1)
Disposals
Foreign exchange movements
At 31 December 2023
Accumulated amortisation and impairment
At 1 January 2022
Amortisation charge for the year
Disposals
Impairment loss
Foreign exchange movements
At 31 December 2022
Amortisation charge for the year
Disposals
Foreign exchange movements
At 31 December 2023
Net book value
At 31 December 2022
At 31 December 2023
1,854
–
207
–
(105)
1,956
–
186
(46)
(13)
Goodwill
Computer
software
Distribution
and other
rights
923
364
3
(19)
(49)
903
296
–
(28)
(27)
Total
3,680
660
210
(47)
(181)
1,222
1,144
4,322
329
9
(43)
(11)
46
59
(2)
(7)
375
254
(91)
(31)
2,083
1,506
1,240
4,829
(4)
–
–
(176)
–
(180)
–
30
(4)
(569)
(121)
11
–
27
(652)
(152)
6
2
(193)
(46)
20
–
6
(213)
(53)
1
1
(766)
(167)
31
(176)
33
(1,045)
(205)
37
(1)
(154)
(796)
(264)
(1,214)
1,776
1,929
570
710
931
976
3,277
3,615
Note:
(1) The Group is in the process of finalising the purchase price adjustments within the measurement period. The values of consideration and goodwill
are therefore provisional as of 31 December 2023. The finalisation of the values of consideration and goodwill is expected to be completed within
12 months of the acquisition date.
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.
220
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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$640m (2022: US$666m), Hong
Kong of US$481m (2022: US$481m), Australia of US$420m (2022: US$406m) and New Zealand of US$154m (2022:
US$153m).
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 (2022: 7 per cent to 14 per cent) and the perpetual growth rates for future new
business cash flows of 3 per cent (2022: 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.
221
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 15. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
US$m
Group
Investments in associates
Investments in joint ventures
Total
As at
31 December
2023
As at
31 December
2022
(restated)
1,331
–
1,331
2,026
30
2,056
Associates are entities over which the Group has significant influence, but which it does not control or joint control.
Generally, it is presumed that the Group has significant influence if it has between 20 per cent and 50 per cent of voting
rights. Joint ventures are entities whereby the Group and other parties undertake an economic activity which is subject to
joint control arising from a contractual agreement.
Investments in associates and joint ventures are accounted for using the equity method of accounting. 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
2023
As at
31 December
2022
China Post Life Insurance Co., Ltd.
Mainland China Insurance
Ordinary
Tata AIA Life Insurance Company Limited
India
Insurance
Ordinary
24.99%
49%
24.99%
49%
All associates and joint ventures are unlisted.
Aggregated financial information of associates and joint ventures
The investments in 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 of these associates and joint
ventures.
US$m
Carrying amount in the statement of financial position
Losses from continuing operations
Other comprehensive expense
Total comprehensive expense
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
1,331
(267)
(496)
(763)
2,056
(121)
(530)
(651)
222
AIA GROUP LIMITEDFINANCIAL STATEMENTS 16. PROPERTY, PLANT AND EQUIPMENT
US$m
Cost or revaluation or fair value
At 1 January 2022 (restated)
Additions
Acquisition of subsidiaries
Disposals
Net transfers from investment property
(Decrease)/increase from valuation
Foreign exchange movements
At 31 December 2022 (restated)
Additions
Acquisition of subsidiaries
Disposals
Net transfers from investment property
Decrease from valuation
Foreign exchange movements
At 31 December 2023
Accumulated depreciation
At 1 January 2022 (restated)
Depreciation charge for the year
Disposals
Impairment loss
Revaluation adjustment
Foreign exchange movements
At 31 December 2022 (restated)
Depreciation charge for the year
Disposals
Impairment loss
Revaluation adjustment
Foreign exchange movements
At 31 December 2023
Net book value
At 31 December 2022
At 31 December 2023
Property
held for own
use using fair
value model
Other
property
held for
own use
Computer
hardware
Fixtures and
fittings and
others
603
2,296
167
–
(202)
157
59
(69)
2,408
1,454
8
(174)
2
(6)
(4)
254
31
1
(12)
–
–
(12)
262
25
1
(15)
–
–
–
621
41
–
(41)
–
–
(26)
595
48
6
(92)
–
–
–
Total
3,774
239
1
(255)
157
53
(107)
3,862
1,527
15
(281)
31
(56)
(4)
3,688
273
557
5,094
(390)
(186)
170
–
19
25
(362)
(188)
138
–
47
–
(209)
(28)
9
–
–
11
(217)
(28)
11
–
–
–
(431)
(56)
36
(9)
–
21
(1,030)
(270)
215
(9)
19
57
(439)
(1,018)
(48)
49
–
–
1
(264)
198
–
47
1
(365)
(234)
(437)
(1,036)
–
–
–
–
(6)
–
597
–
–
–
29
(50)
–
576
–
–
–
–
–
–
–
–
–
–
–
–
–
597
576
2,046
3,323
45
39
156
120
2,844
4,058
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 30). 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 34.
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.
223
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 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 using fair value model
Other property held for own use
Computer hardware
Fixtures and fittings and others
Total
As at
31 December
2023
As at
31 December
2022
(restated)
507
827
2
2
534
874
2
2
1,338
1,412
Additions to right-of-use assets for the year ended 31 December 2023 were US$150m (2022: US$148m).
Property held for own use, which is solely held as an underlying item of insurance contracts with direct participation
features, is measured initially at cost and subsequently at fair value, with any change therein recognised in profit or loss.
Other properties held for own use and right-of-use assets with respect to the Group’s interests 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 20. 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.
Properties held for own use using fair value model
During the year, nil expenditure (2022: nil) recognised in the carrying amount of property held for own use was in the
course of its construction. Decrease from revaluation on property held for own use of US$50m (2022: Decrease from
revaluation on property held for own use of US$6m) were taken to profit or loss, of which US$47m (2022: US$4m) 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$53m (2022: US$48m). 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$526m
(2022: US$515m).
Properties held for own use using revaluation model
During the year, US$177m expenditure (2022: US$68m) 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$41m (2022:
Increase from revaluation on property held for own use of US$78m) were taken to other comprehensive income, of which
US$(17)m (2022: US$27m) 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$1,565m (2022: US$327m). 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$302m
(2022: US$353m). The Group holds property, plant and equipment for its long-term use and, accordingly, the annual
depreciation charge approximates to the amount expected to be recovered through consumption within 12 months after
the end of the reporting period.
224
AIA GROUP LIMITEDFINANCIAL STATEMENTS 17. INVESTMENT PROPERTY
US$m
Fair value
At 1 January 2022
Additions and capitalised subsequent expenditures
Disposals
Net transfers to property, plant and equipment
Fair value gains
Foreign exchange movements
At 31 December 2022
Additions and capitalised subsequent expenditures
Acquisition of a subsidiary
Disposals
Net transfers to property, plant and equipment
Fair value losses
Foreign exchange movements
At 31 December 2023
4,716
68
(5)
(157)
70
(92)
4,600
45
1
(4)
(31)
(97)
(10)
4,504
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 20.
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 year. Rental
income generated from investment property amounted to US$154m (2022: US$161m). Direct operating expenses
(including repair and maintenance) on investment property that generates rental income amounted to US$35m (2022:
US$33m).
The Group owns investment property in the form of freehold land outside Hong Kong and leasehold land. Leasehold land
which is held for long-term rental or capital appreciation or both that is not occupied by the Group is classified as investment
property. They are leased out under operating leases and are initially recognised as right-of-use assets at cost, with
changes in fair values in subsequent periods recognised in the consolidated income statement. The Group does not hold
freehold land in Hong Kong.
The future undiscounted lease payments under operating leases that the Group expects to receive in future periods may
be analysed as follows:
US$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
2023
As at
31 December
2022
129
87
47
28
16
27
334
124
110
56
24
16
12
342
225
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 18. 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 borne by our customers and is measured at fair value
through profit or loss. 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. The Group has elected to separately analyse
financial investments held by participating funds and other participating business with distinct portfolios within
policyholder and shareholder investments as they are subject to local regulations that generally prescribe a minimum
proportion of policyholder participation in declared dividends. The Group measures debt securities, equity shares and
interests in investment funds of participating funds and other participating business with distinct portfolios at fair value
through profit or loss.
Other policyholder and shareholder investments are distinct from unit-linked investments and 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. The Group measures equity shares, interests in investment
funds and exchangeable loan notes at fair value through profit or loss in this category and at fair value through other
comprehensive income 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. For certain benefits of business written in “Participating
funds and Other participating business with distinct portfolios” funds and “Unit-linked” funds that are not supported by the
underlying segregated assets, the backing assets are generally included in the “Other policyholder and shareholder” funds.
In the following tables, “FVTPL” indicates financial investments classified at fair value through profit or loss, “FVOCI”
indicates financial investments classified at fair value through other comprehensive income and “AC” indicates financial
investments classified at amortised cost.
Debt securities
In compiling the tables, external ratings have been used where available. 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 defines 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
1
2+ to 2-
3+ to 3-
4+ to 4-
AAA
AA
A
BBB
5+ and below
Below investment grade
226
AIA GROUP LIMITEDFINANCIAL STATEMENTS 18. FINANCIAL INVESTMENTS (continued)
Debt securities (continued)
Debt securities by type comprise the following:
Policyholder and shareholder
Participating
funds and
other
participating
business
with distinct
portfolios
Other policyholder and
shareholder
Unit-linked
Unit-linked(2)
Consolidated
investment
funds(1)
US$m
FVTPL
FVTPL
FVOCI
AC
Subtotal
FVTPL
FVOCI
FVTPL
Total
31 December 2023
Government bonds(3)
By jurisdiction
Mainland China
Thailand
United States
South Korea
Singapore
Philippines
Malaysia
Indonesia
Other
7,791
–
3,645
–
5,073
275
1,416
792
2,035
Subtotal, by jurisdiction
21,027
By credit rating
AAA
AA
A
BBB
Below investment grade
Not rated
6,211
3,785
8,851
2,121
59
–
Subtotal, by credit rating
21,027
Government agency
bonds(4)
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
1,965
633
3,467
705
68
–
6,838
–
1,323
–
–
–
82
202
–
2
1,609
–
1
98
1,510
–
–
1,609
–
1
33
19
–
–
53
23,277
11,314
3,514
6,524
1,201
1,643
543
1,148
3,237
52,401
3,807
9,320
23,689
14,765
820
–
52,401
948
2,089
2,244
1,586
177
–
7,044
–
–
–
–
–
36
–
16
281
333
–
225
46
62
–
–
333
31
102
50
50
13
–
246
31,068
12,637
7,159
6,524
6,274
2,036
2,161
1,956
5,555
75,370
10,018
13,331
32,684
18,458
879
–
75,370
2,944
2,825
5,794
2,360
258
–
14,181
54
–
91
248
975
238
346
131
133
2,216
977
449
360
430
–
–
2,216
210
72
170
45
1
12
510
–
–
–
–
10
–
43
27
–
80
10
–
18
52
–
–
80
10
–
44
3
4
–
61
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
131
–
–
–
–
131
31,122
12,637
7,250
6,772
7,259
2,274
2,550
2,114
5,688
77,666
11,005
13,780
33,062
18,940
879
–
77,666
3,164
3,028
6,008
2,408
263
12
14,883
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. In preparing the
consolidated financial statements, the Group enhanced the presentation to further split and allocate the underlying assets held by consolidated
investment funds to the respective fund segments of the asset-backing liabilities. Where consolidated investment funds are held by third-party
unit holders, these continue to be classified under consolidated investment funds.
(2) Represents primarily the financial assets backing non-unit reserves of unit-linked contracts.
(3) Government bonds include bonds issued in local or foreign currencies by either the government of the jurisdiction in which the respective business
unit operates or other governments. The Group has enhanced the government bonds analysis to be presented by credit rating. The 2022
comparative information has been adjusted to conform to this presentation.
(4) Government agency bonds comprise bonds issued by government-sponsored institutions such as national, provincial and municipal authorities;
government-related entities; multilateral development banks and supranational organisations.
227
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 18. 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
Unit-linked
Unit-linked(2)
Consolidated
investment
funds(1)
US$m
FVTPL
FVTPL
FVOCI
AC
Subtotal
FVTPL
FVOCI
FVTPL
Total
31 December 2023
Corporate bonds
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
Structured securities(5)
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
Total(6)
643
3,347
23,063
21,602
748
–
49,403
20
52
82
127
67
5
353
1
2
212
294
317
12
838
–
–
–
73
71
1
205
2,216
11,690
11,627
1,459
2
–
162
888
395
132
9
849
5,727
35,853
33,918
2,656
23
–
201
1,498
860
244
230
27,199
1,586
79,026
3,033
142
246
598
645
–
–
145
1,631
–
–
–
–
–
–
–
162
298
680
845
138
6
2,129
–
–
32
19
–
–
51
–
–
109
70
17
–
196
–
–
–
–
–
–
–
–
141
510
123
–
–
849
6,069
37,970
34,971
2,917
253
774
83,029
–
–
–
–
–
–
–
162
298
712
864
138
6
2,180
77,621
2,645
88,275
2,165 170,706
5,810
337
905 177,758
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. In preparing the
consolidated financial statements, the Group enhanced the presentation to further split and allocate the underlying assets held by consolidated
investment funds to the respective fund segments of the asset-backing liabilities. Where consolidated investment funds are held by third-party
unit holders, these continue to be classified under consolidated investment funds.
(2) Represents primarily the financial assets backing non-unit reserves of unit-linked contracts.
(5) Structured securities include collateralised debt obligations, mortgage-backed securities and other asset-backed securities.
(6) Debt securities of US$8,869m are restricted due to local regulatory requirements.
228
AIA GROUP LIMITEDFINANCIAL STATEMENTS 18. FINANCIAL INVESTMENTS (continued)
Debt securities (continued)
Debt securities by type comprise the following: (continued)
Policyholder and shareholder
Participating
funds and
other
participating
business
with distinct
portfolios
Other policyholder and
shareholder
Unit-linked
Unit-linked(2)
Consolidated
investment
funds(1)
US$m
FVTPL
FVTPL
FVOCI
AC
Subtotal
FVTPL
FVOCI
FVTPL
Total
31 December 2022 (restated)
Government bonds(3)
By jurisdiction
Mainland China
Thailand
United States
South Korea
Singapore
Philippines
Malaysia
Indonesia
Other
6,048
–
917
–
4,389
150
1,364
755
1,891
–
1,169
131
–
–
79
246
–
2
19,740
10,984
5,250
5,949
1,455
1,560
502
1,017
2,955
Subtotal, by jurisdiction
15,514
1,627
49,412
By credit rating
AAA
AA
A
BBB
Below investment grade
Not rated
5,664
784
6,961
2,058
47
–
132
1
180
1,314
–
–
7,987
6,533
20,221
14,107
564
–
–
–
–
–
–
27
–
16
272
315
–
217
46
52
–
–
25,788
12,153
6,298
5,949
5,844
1,816
2,112
1,788
5,120
66,868
13,783
7,535
27,408
17,531
611
–
84
1
89
263
824
237
178
116
160
–
–
–
–
3
–
68
31
–
1,952
102
960
319
283
390
–
–
3
–
54
45
–
–
Subtotal, by credit rating
15,514
1,627
49,412
315
66,868
1,952
102
Government agency
bonds(4)
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
2,055
550
3,662
641
63
–
6,971
–
–
6
18
–
–
24
966
2,068
2,511
1,648
174
–
31
63
84
20
13
–
3,052
2,681
6,263
2,327
250
–
7,367
211
14,573
237
121
201
53
6
–
618
5
–
50
–
9
–
64
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
189
9
–
–
–
25,872
12,154
6,387
6,212
6,671
2,053
2,358
1,935
5,280
68,922
14,746
7,854
27,745
17,966
611
–
68,922
3,294
2,991
6,523
2,380
265
–
198
15,453
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. In preparing the
consolidated financial statements, the Group enhanced the presentation to further split and allocate the underlying assets held by consolidated
investment funds to the respective fund segments of the asset-backing liabilities. Where consolidated investment funds are held by third-party
unit holders, these continue to be classified under consolidated investment funds.
(2) Represents primarily the financial assets backing non-unit reserves of unit-linked contracts.
(3) Government bonds include bonds issued in local or foreign currencies by either the government of the jurisdiction in which the respective business
unit operates or other governments. The Group has enhanced the government bonds analysis to be presented by credit rating. The 2022
comparative information has been adjusted to conform to this presentation.
(4) Government agency bonds comprise bonds issued by government-sponsored institutions such as national, provincial and municipal authorities;
government-related entities; multilateral development banks and supranational organisations.
229
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 18. 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
Unit-linked
Unit-linked(2)
Consolidated
investment
funds(1)
US$m
FVTPL
FVTPL
FVOCI
AC
Subtotal
FVTPL
FVOCI
FVTPL
Total
31 December 2022 (restated)
Corporate bonds
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
Structured securities(5)
AAA
AA
A
BBB
Below investment grade
Not rated
Subtotal
Total(6)
526
3,051
21,046
20,893
638
7
46,161
31
83
83
112
50
14
373
69,019
–
8
237
119
341
15
720
38
–
–
90
71
206
405
2,776
233
1,883
11,618
12,437
1,429
–
27,600
77
160
524
591
–
29
1,381
85,760
–
148
758
354
1
–
1,261
759
5,090
33,659
33,803
2,409
22
75,742
–
–
–
–
–
–
–
146
243
607
793
121
249
2,159
1,787 159,342
12
137
1,079
936
197
293
2,654
46
–
38
19
–
–
103
5,327
–
–
98
56
17
–
171
–
–
–
–
–
–
–
337
–
205
660
142
–
–
1,007
771
5,432
35,496
34,937
2,623
315
79,574
–
–
–
–
–
–
–
192
243
645
812
121
249
2,262
1,205 166,211
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. In preparing the
consolidated financial statements, the Group enhanced the presentation to further split and allocate the underlying assets held by consolidated
investment funds to the respective fund segments of the asset-backing liabilities. Where consolidated investment funds are held by third-party
unit holders, these continue to be classified under consolidated investment funds.
(2) Represents primarily the financial assets backing non-unit reserves of unit-linked contracts.
(5) Structured securities include collateralised debt obligations, mortgage-backed securities and other asset-backed securities.
(6) Debt securities of US$9,885m are restricted due to local regulatory requirements.
230
AIA GROUP LIMITEDFINANCIAL STATEMENTS 18. FINANCIAL INVESTMENTS (continued)
Equity shares, interests in investment funds and exchangeable loan notes
Equity shares, interests in investment funds and exchangeable loan notes comprise the following:
Policyholder and shareholder
Participating
funds and other
participating
business
with distinct
portfolios
Other
policyholder
and
shareholder
Unit-linked
US$m
FVTPL
FVTPL
Subtotal
FVTPL
Consolidated
investment
funds(1)
FVTPL
31 December 2023
Equity shares
Interests in investment funds and
exchangeable loan notes
Total
7,533
4,604
12,137
7,150
22,676
30,209
6,864
11,468
29,540
41,677
17,626
24,776
–
–
–
Policyholder and shareholder
Participating
funds and other
participating
business
with distinct
portfolios
Other
policyholder
and
shareholder
Unit-linked
US$m
FVTPL
FVTPL
Subtotal
FVTPL
Consolidated
investment
funds(1)
FVTPL
31 December 2022 (restated)
Equity shares
Interests in investment funds and
exchangeable loan notes
Total
13,241
4,765
18,006
7,685
14,307
27,548
7,214
11,979
21,521
39,527
17,056
24,741
–
–
–
Total
19,287
47,166
66,453
Total
25,691
38,577
64,268
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. In preparing the
consolidated financial statements, the Group enhanced the presentation to further split and allocate the underlying assets held by consolidated
investment funds to the respective fund segments of the asset-backing liabilities. Where consolidated investment funds are held by third-party
unit holders, these continue to be classified under consolidated investment funds.
231
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 18. 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 2023
As at 31 December 2022(restated)
Investment
funds
Structured
securities(1)
Investment
funds
Structured
securities(1)
Debt securities at amortised cost
13(2)
–
–
Debt securities at fair value through other comprehensive
income
Debt securities at fair value through profit or loss
Interests in investment funds at fair value through
profit or loss
Total
830(2)
1,965(2)
45,994
48,802
1,631
549
–
2,180
806(2)
1,609(2)
37,327
39,742
–
1,381
881
–
2,262
Notes:
(1) Structured securities include collateralised debt obligations, 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 revenue 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.
232
AIA GROUP LIMITEDFINANCIAL STATEMENTS
18. FINANCIAL INVESTMENTS (continued)
Loans and deposits
Loans and deposits by type comprise the following:
US$m
Mortgage loans on residential real estate
Mortgage loans on commercial real estate
Other loans
Loss allowance for loans
Loans
Term deposits
Promissory notes(1)
Loss allowance for deposits measured at amortised cost
Total
As at
31 December
2023
As at
31 December
2022
(restated)
452
2
203
(10)
647
1,834
1,524
(10)
3,995
469
2
372
(9)
834
2,509
1,520
(18)
4,845
Note:
(1) The promissory notes are issued by a government. Promissory notes of US$272m (2022: US$279m) are measured at fair value through profit or
loss.
Certain term deposits with financial institutions and promissory notes are restricted due to local regulatory requirements
or other pledge restrictions. At 31 December 2023, the restricted balance held within term deposits and promissory notes
was US$372m (2022: US$381m).
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 2023, the carrying value of such receivables was US$99m (2022: US$261m).
At 31 December 2023, there was no material debt collateral received in respect of reverse repos.
Maturity profile of debt securities, loans and deposits
The table below shows the maturity profile of debt securities, loans and deposits based on contractual maturity dates. The
maturity profile below excludes unit-linked investments and consolidated investment funds as the investment risk is
generally borne by our customers.
US$m
31 December 2023
Debt securities
Loans and deposits
Total
US$m
31 December 2022 (restated)
Debt securities
Loans and deposits
Total
Total
Due in one
year or less
Due after
one year
through
five years
Due after
five years
through
ten years
Due after
ten years
No fixed
maturity
170,706
3,930
174,636
5,754
996
6,750
19,990
16,630
128,332
917
454
1,553
20,907
17,084
129,885
–
10
10
Total
Due in one
year or less
Due after
one year
through
five years
Due after
five years
through
ten years
Due after
ten years
No fixed
maturity
159,342
4,500
163,842
7,465
1,833
9,298
20,197
17,252
114,428
647
470
1,534
20,844
17,722
115,962
–
16
16
233
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 19. DERIVATIVE FINANCIAL INSTRUMENTS
The Group’s derivative exposure was as follows:
US$m
Notional amount
Assets
Liabilities
Fair value
31 December 2023
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 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
8,429
4,964
41
13,434
3,930
1,424
36,758
–
(41)
55,505
6,994
6,025
48
13,067
8,500
1,344
37,995
2,051
(48)
62,909
342
41
–
383
210
11
148
–
–
752
220
56
–
276
240
27
74
13
–
(271)
(78)
–
(349)
(109)
(2)
(7,575)
–
–
(8,035)
(295)
(86)
–
(381)
(283)
(1)
(8,056)
(18)
–
630
(8,739)
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$8m (2022: US$32m) 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.
234
AIA GROUP LIMITEDFINANCIAL STATEMENTS 19. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Derivative assets and derivative liabilities are recognised in the consolidated statement of financial position as derivative
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 one currency for another currency at
an agreed price and settlement date. Currency options are agreements that give the buyer the right to exchange one
currency for another currency 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 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 Accounting Standards.
Collateral under derivative transactions
At 31 December 2023, the Group had posted cash collateral of US$213m (2022: US$309m) and pledged debt securities
with carrying value of US$8,639m (2022: US$9,656m) for liabilities, and held cash collateral of US$340m (2022:
US$231m) and debt securities collateral with carrying value of US$95m (2022: US$55m) for assets in respect of derivative
transactions. The Group did not sell or repledge the debt collateral received. These transactions are conducted under terms
that are usual and customary to collateralised transactions including, where relevant, standard repurchase agreements.
235
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 20. FAIR VALUE MEASUREMENT
Fair value of financial instruments
The Group classifies all financial assets as either at fair value through profit or loss (mandatory and designated), or as at
fair value through other comprehensive income, or at amortised cost. Financial liabilities are classified as either at fair
value through profit or loss (mandatory and designated) or at amortised cost, except for investment contracts with DPF
which are accounted for under IFRS 17.
The following tables present the fair values of the Group’s financial assets and financial liabilities:
US$m
31 December 2023
Financial investments
Loans and deposits
Debt securities
Equity shares, interests in investment
funds and exchangeable loan notes
Derivative financial instruments
Receivables
Accrued investment income
Cash and cash equivalents
Financial assets
Fair value
Notes
FVTPL –
mandatory
FVTPL –
designated
FVOCI
Amortised
cost
Total
carrying
value
Total
fair value
18
19
21
21
22
–
272
–
3,723
3,995
4,100
8,086
78,895
88,612
2,165
177,758
177,508
66,453
752
–
–
4,970
–
–
–
–
–
–
–
–
–
–
–
–
1,294
1,832
6,555
66,453
66,453
752
1,294
1,832
752
1,294
1,832
11,525
11,525
80,261
79,167
88,612
15,569
263,609
263,464
Fair value
Notes
FVTPL –
mandatory
FVTPL –
designated
Amortised
cost
Total
carrying
value
Total
fair value
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Derivative financial instruments
Other liabilities
Financial liabilities
25
26
27
19
30
–
–
–
8,035
–
8,035
8,460
–
–
–
844
9,304
515
11,800
3,461
–
4,043
19,819
8,975
11,800
3,461
8,035
4,887
8,975
10,875
3,461
8,035
4,887
37,158
36,233
236
AIA GROUP LIMITEDFINANCIAL STATEMENTS
20. FAIR VALUE MEASUREMENT (continued)
Fair value of financial instruments (continued)
US$m
31 December 2022 (restated)
Financial investments
Loans and deposits
Debt securities
Equity shares, interests
in investment funds and
exchangeable loan notes
Derivative financial instruments
Receivables
Accrued investment income
Cash and cash equivalents
Financial assets
Fair value
Notes
FVTPL –
mandatory
FVTPL –
designated
FVOCI
Amortised
cost
Total
carrying
value
Total
fair value
18
19
21
21
22
–
279
–
4,566
4,845
4,912
7,482
70,845
86,097
1,787
166,211
165,944
64,268
630
–
–
2,248
–
–
–
–
–
–
–
–
–
–
–
–
1,718
1,752
6,721
64,268
64,268
630
1,718
1,752
8,969
630
1,718
1,752
8,969
74,628
71,124
86,097
16,544
248,393
248,193
Fair value
Notes
FVTPL –
mandatory
FVTPL –
designated
Amortised
cost
Total
carrying
value
Total
fair value
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Derivative financial instruments
Other liabilities
Financial liabilities
25
26
27
19
30
–
–
–
8,739
–
11,226
–
–
–
865
8,739
12,091
530
11,206
1,748
–
3,444
16,928
11,756
11,206
1,748
8,739
4,309
11,756
9,837
1,748
8,739
4,309
37,758
36,389
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 34 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.
237
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
20. 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, financial instruments classified at fair value through other comprehensive income, 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 years ended 31
December 2023 and 31 December 2022.
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. Loans with similar characteristics are aggregated
for purposes of the calculations.
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.
238
AIA GROUP LIMITEDFINANCIAL STATEMENTS 20. 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 to its fair value.
Fair value of securities sold under repurchase agreements and the associated payables
The contract values of payables under repurchase agreements approximate to 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.
239
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 20. 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 24. These are not measured at fair value as the Group
applies the same accounting policies for the measurement of investment contracts with DPF as it does for insurance
contracts under IFRS 17.
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 debt 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.
240
AIA GROUP LIMITEDFINANCIAL STATEMENTS 20. 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 2023
Recurring fair value measurements
Non-financial assets
Property held for own use
Investment property
Financial assets
At fair value through other comprehensive income
Debt securities
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
Loans and deposits
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
Cash and cash equivalents
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
–
–
–
–
2,565
4,504
2,565
4,504
78
86,177
2,357
88,612
173
3
–
–
75,640
6,712
2,450
–
15,149
24,374
4,805
4,970
–
–
4
1,283
379
1,285
–
383
210
147
1,808
77,621
–
195
272
13,777
23
5,378
–
–
–
8
6,715
2,645
272
30,209
24,776
11,468
4,970
383
210
159
49,556
19.4%
174,666
68.5%
30,887
12.1%
255,109
100.0%
–
–
–
4
–
4
0.0%
6,607
1,853
8,460
349
109
7,573
844
–
–
–
–
349
109
7,577
844
15,482
89.3%
1,853
10.7%
17,339
100.0%
241
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 20. 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 2022 (restated)
Recurring fair value measurements
Non-financial assets
Property held for own use
Investment property
Financial assets
At fair value through other comprehensive income
Debt securities
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
Loans and deposits
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
Cash and cash equivalents
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
–
–
–
2
16
–
–
16,372
24,121
4,920
2,248
–
–
17
–
–
1,235
4,600
1,235
4,600
84,300
1,797
86,097
67,408
6,516
2,347
–
1,266
249
1,782
–
276
240
56
1,609
69,019
–
429
279
9,910
371
5,277
–
–
–
41
6,532
2,776
279
27,548
24,741
11,979
2,248
276
240
114
47,696
20.1%
164,440
69.2%
25,548
10.7%
237,684
100.0%
–
–
–
14
–
14
0.1%
9,042
2,184
11,226
381
283
8,061
865
–
–
–
–
381
283
8,075
865
18,632
89.4%
2,184
10.5%
20,830
100.0%
242
AIA GROUP LIMITEDFINANCIAL STATEMENTS 20. 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 2023, the Group transferred US$1m (2022: US$103m) 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$58m (2022: US$28m) of assets from Level 2 to Level 1 during the year
ended 31 December 2023.
The Group’s Level 2 financial instruments include debt securities, equity shares, interests in investment funds, derivative
financial instruments, investment contract liabilities and other liabilities. The fair values of Level 2 financial instruments
are estimated using values obtained from private pricing services and brokers corroborated with internal review as
necessary. When the quotes from private pricing services and brokers are not available, internal valuation techniques and
inputs will be used to derive the fair value for the financial instruments.
The tables below set out a summary of changes in the Group’s Level 3 assets and liabilities measured at fair value on a
recurring basis for the years ended 31 December 2023 and 31 December 2022. The tables reflect gains and losses,
including gains and losses on assets and liabilities categorised as Level 3 as at 31 December 2023 and 31 December 2022.
Level 3 assets and liabilities
US$m
Property
held for
own use
Investment
property
Debt
securities
Loans and
deposits
Equity
shares,
interests in
investment
funds and
exchangeable
loan notes
Derivative
financial
assets/
(liabilities)
Investment
contracts
At 1 January 2023
1,235
4,600
3,835
279
15,558
41
(2,184)
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
Acquisition of subsidiaries
Transfer to/from investment property
Purchases
Sales(1)
Settlements
Transfer into Level 3
Transfer out of Level 3
At 31 December 2023
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
–
–
–
–
–
–
331
(40)
(97)
119
(9)
(178)
42
57
2
9
1,306
(4)
–
–
–
(10)
1
(31)
45
(4)
–
–
–
(40)
–
–
899
(257)
(198)
2
–
2
–
–
–
–
–
–
–
(37)
(1)
–
–
4,874
(926)
–
50
(163)
–
–
–
–
(74)
–
–
8
2,565
4,504
4,360
272
19,178
–
–
–
–
–
–
–
–
–
(1,853)
(40)
(92)
63
(9)
(143)
(32)
–
Note:
(1) Includes amounts derecognised on disposal of held for sale assets and liabilities.
243
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 20. 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
Loans and
deposits
Equity
shares,
interests in
investment
funds and
exchangeable
loan notes
At 1 January 2022 (restated)
1,037
4,716
2,796
297
8,472
–
–
–
–
–
Derivative
financial
assets/
(liabilities)
Investment
contracts
–
–
(2,163)
(21)
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 Level 3
Transfer out of Level 3
(15)
70
(64)
(6)
26
41
33
157
23
–
–
–
–
(92)
(157)
68
(5)
–
–
–
(264)
(12)
(188)
–
1,844
(202)
(229)
–
(46)
–
–
–
–
–
–
–
7,904
(637)
(4)
26
(41)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At 31 December 2022 (restated)
1,235
4,600
3,835
279
15,558
41
(2,184)
Change in unrealised gains or losses
included in the consolidated income
statement for assets and liabilities held
at the end of the reporting period, under
investment return and other expenses
(15)
70
(86)
(7)
(131)
41
–
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 25.
Assets transferred out of Level 3 mainly relate to interests in investment funds of which market-observable inputs became
available during the year 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.
244
AIA GROUP LIMITEDFINANCIAL STATEMENTS 20. FAIR VALUE MEASUREMENT (continued)
Significant unobservable inputs for Level 3 fair value measurements
As at 31 December 2023 and 31 December 2022, 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 2023 (US$m) Valuation techniques
Unobservable inputs
Range
Debt securities
2,553
Discounted cash flows Risk adjusted discount rate 3.17% - 47.22%
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%
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.
245
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 20. FAIR VALUE MEASUREMENT (continued)
Fair value of financial and insurance assets and liabilities for which the fair value is disclosed at the 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 2023 and 31 December 2022 is given below.
US$m
31 December 2023
Assets for which the fair value is disclosed
Financial assets
Debt securities
Loans and deposits
Receivables
Accrued investment income
Cash and cash equivalents
Total assets for which the fair value is disclosed
Liabilities for which the fair value is disclosed
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Other liabilities
Total liabilities for which the fair value is disclosed
Fair value hierarchy
Level 1
Level 2
Level 3
Total
–
1,025
207
24
6,555
7,811
–
9,244
–
347
9,591
1,915
914
1,024
1,808
–
5,661
–
1,631
3,461
3,680
8,772
–
1,889
63
–
–
1,915
3,828
1,294
1,832
6,555
1,952
15,424
515
–
–
16
531
515
10,875
3,461
4,043
18,894
US$m
Level 1
Level 2
Level 3
Total
Fair value hierarchy
31 December 2022 (restated)
Assets for which the fair value is disclosed
Financial assets
Debt securities
Loans and deposits
Receivables
Accrued investment income
Cash and cash equivalents
Total assets for which the fair value is disclosed
Liabilities for which the fair value is disclosed
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Other liabilities
Total liabilities for which the fair value is disclosed
–
2,062
53
30
6,721
8,866
–
8,286
–
445
8,731
1,461
688
1,611
1,722
–
5,482
–
1,551
1,748
2,945
6,244
59
1,883
54
–
–
1,520
4,633
1,718
1,752
6,721
1,996
16,344
530
–
–
54
584
530
9,837
1,748
3,444
15,559
246
AIA GROUP LIMITEDFINANCIAL STATEMENTS 21. OTHER ASSETS
US$m
Accrued investment income
Receivables
Pension scheme assets
Defined benefit pension scheme surpluses
Others(1)
Total
Note:
(1) Represents, among others, prepayments and deferred origination costs.
As at
31 December
2023
As at
31 December
2022
(restated)
1,832
1,294
57
1,133
4,316
1,752
1,718
56
1,065
4,591
All amounts other than certain prepayments are generally expected to be recovered within 12 months after the end of the
reporting period.
22. CASH AND CASH EQUIVALENTS
US$m
Cash
Cash equivalents
Total(1)
As at
31 December
2023
As at
31 December
2022
3,152
8,373
11,525
3,367
5,602
8,969
Note:
(1) US$667m (2022: US$1,462m) are held to back unit-linked contracts and US$46m (2022: US$43m) are held by consolidated investment funds.
In preparing the consolidated financial statements, the Group enhanced the presentation to further split and allocate the underlying assets held
by consolidated investment funds to the respective fund segments of the asset-backing liabilities.
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.
247
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 23. IMPAIRMENT OF FINANCIAL ASSETS
Inputs, assumptions and techniques used for estimating impairment
Significant increase in credit risk
When determining whether the credit risk (i.e. risk of default) on a financial instrument has increased significantly since
initial recognition, the Group considers reasonable and supportable information that is relevant and available without
undue cost or effort. This includes both qualitative and quantitative information and analysis based on the Group’s
experience, credit assessment performed by internal and external experts and forward-looking information.
The Group primarily identifies whether a significant increase in credit risk has occurred for an exposure by comparing the
internal rating as at the reporting date with the internal rating as at the date of initial recognition of the exposure. Where
external credit ratings are available, internal ratings are assigned consistent with such ratings in accordance with the
Group’s credit risk assessment framework. Where external credit ratings are not readily available, an internal rating
methodology has been adopted.
The Group monitors changes in credit risk by tracking the change in internal rating of the exposure. The Group also monitors
relevant information, including price movements of securities, and assess whether such information signifies a change in
credit risk.
The Group has assumed that the credit risk of a financial asset has not increased significantly since initial recognition if the
financial asset has low credit risk at the reporting date. The Group considers a financial asset to have low credit risk when
its credit risk rating is equivalent to the globally understood definition of “investment grade”. The Group considers this to
be BBB- (Standard and Poor’s rating), BBB- (Fitch rating), Baa3 (Moody’s rating) or higher, which is equivalent to an
internal rating of 4- or higher.
As a backstop, the Group considers that a significant increase in credit risk occurs no later than when an asset is more than
30 days past due, unless there are other indications that there is no significant increase in credit risk. Days past due are
determined by counting the number of days since the earliest elapsed due date in respect of which full payment has not
been received. Due dates are determined after considering any grace period that might be available to the debtor.
Modified financial assets
The contractual terms of a financial asset may be modified for a number of reasons including changing market conditions
and other factors not related to current or potential credit deterioration of the debtor. An existing financial asset whose
terms have been modified may be derecognised and the renegotiated asset recognised as a new financial asset at fair
value in accordance with the accounting policies in note 2.5.1.
When the terms of a financial asset are modified and the modification does not result in derecognition, the determination
of significant increase in credit risk is assessed based on the change in internal rating as at the reporting date and the date
of initial recognition. The internal rating as at the reporting date is rated based on the modified contractual terms while the
initial rating is rated based on the original contractual terms.
Definition of default
The Group considers a financial asset to be in default when the debtor is unlikely to pay its credit obligations to the Group
in full, without recourse by the Group to mitigating actions. The criteria of “default” are consistent with those of “credit-
impaired”.
248
AIA GROUP LIMITEDFINANCIAL STATEMENTS 23. IMPAIRMENT OF FINANCIAL ASSETS (continued)
Inputs, assumptions and techniques used for estimating impairment (continued)
Incorporation of forward-looking information
The Group incorporates forward-looking information into both its assessment of whether the credit risk of a financial
instrument has increased significantly since initial recognition and its measurement of ECL. It formulates a “base case”
view of the future direction of relevant economic variables and a representative range of other possible forecast scenarios
based on management knowledge and consideration of a variety of external actual and forecast information. This process
involves developing two or more additional economic scenarios and considering the relative probabilities of each outcome.
External information includes economic data and forecasts published by governmental bodies and monetary authorities in
the jurisdictions in which the Group operates, supranational organisations, and selected private-sector and academic
forecasters.
The base case represents a best estimate and the other scenarios represent more optimistic and more pessimistic
outcomes.
The Group has identified and documented key drivers of credit risk and ECL for each portfolio of financial instruments and,
using an analysis of historical data, has estimated relationship between macroeconomic variables and key drivers of credit
risk. The specific values of the core macroeconomic variable used by the Group for evaluating ECL for the years ended 31
December 2023 and 31 December 2022 are as follows:
GDP growth (5-year average of year-over-year %)
Base case scenario
Upside scenario
Downside scenario
As at
31 December
2023
As at
31 December
2022
2.9%
3.5%
2.1%
3.1%
3.8%
2.1%
Measurement of ECL
The key inputs into the measurement of ECL are the term structures of probability of default (PD), loss given default (LGD)
and exposure at default (EAD). They are calculated on a discounted cash flow basis using the effective interest rate as the
discounting factor.
To determine lifetime and 12-month PDs, the Group leverages on the internal rating and convert it into PD based on the
level of rating and obligor characteristics like industry type and country. Changes in the rating at the reporting date for a
counterparty or exposure lead to a change in the estimate of the associated PD.
LGD is the magnitude of the likely loss if there is a default. The Group leverages on recovery statistics to calculate LGD. The
LGD models consider a number of factors including among others, the structure, collateral and seniority of the claim, that
are integral to the financial asset. LGD estimates are recalibrated for different economic scenarios.
PDs and LGDs are adjusted to reflect forward-looking information and different economic scenarios as described above.
EAD represents the expected exposure in the event of a default. The EAD of a financial asset is its gross carrying amount
at the time of default. The Group derives the EAD from the current exposure to the counterparty, with any adjustments for
changes to the current exposure, such as amortisation, and prepayments.
249
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 23. IMPAIRMENT OF FINANCIAL ASSETS (continued)
Inputs, assumptions and techniques used for estimating impairment (continued)
Measurement of ECL (continued)
As described above, and subject to using a maximum of a 12-month PD for financial assets for which credit risk has not
significantly increased, the Group measures ECL considering the risk of default over the maximum contractual period
(including any debtor’s extension options) over which it is exposed to credit risk.
Where modelling of a parameter is carried out on a collective basis, the financial instruments are grouped on the basis of
shared risk characteristics, which include instrument type, credit risk gradings, collateral type, date of initial recognition,
remaining term to maturity, industry and geographical location of debtor.
The groupings are subject to regular review to ensure that exposures within a particular group remain appropriately
homogeneous. When ECL are measured using parameters based on collective modelling, a significant input into the
measurement of ECL is the external information that the Group uses to derive the default rates of its portfolios.
Credit-impaired financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for impairment regularly. This requires
the exercise of management judgement. The Group assesses at each reporting date whether there is objective evidence
that a financial asset or a group of financial assets is credit-impaired. Objective evidence that a financial asset, or a group
of financial assets, is credit-impaired includes observable data that comes to the attention of the Group about the following
events:
• significant financial difficulty of the issuer or debtor;
• a breach of contract, such as a default or delinquency in payments;
•
•
•
the restructuring of an amount due to the Group on terms that the Group would not otherwise consider;
it becomes probable that the issuer or debtor will enter bankruptcy or other financial reorganisation; or
the disappearance of an active market for that financial asset because of financial difficulties.
A financial asset that has been renegotiated due to a deterioration in the debtor’s condition is usually considered to be
credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and
there are no other indicators of impairment.
250
AIA GROUP LIMITEDFINANCIAL STATEMENTS 23. IMPAIRMENT OF FINANCIAL ASSETS (continued)
Inputs, assumptions and techniques used for estimating impairment (continued)
Loss allowance
The following tables show reconciliation balances from the opening to the closing balance of the loss allowance by class
of financial instrument. Gross carrying amount is the amortised cost before adjusting for loss allowance.
12-month ECL
Lifetime ECL not
credit-impaired
Lifetime ECL
credit-impaired
Total
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
US$m
Debt securities measured at
amortised cost
Balance at 1 January 2023
Transfer to 12-month ECL
Transfer to lifetime ECL not credit-
impaired
Transfer to lifetime ECL credit-impaired
Net remeasurement of loss allowance
New financial assets acquired
Financial assets derecognised other
than write-offs
Write-offs
Effects of movements in exchange
rates and other movements
1,778
10
(10)
–
–
472
(105)
–
11
Balance at 31 December 2023
2,156
4
–
–
–
–
–
–
–
–
4
15
(10)
10
–
–
–
–
–
–
15
2
–
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,793
–
–
–
–
472
(105)
–
11
2,171
6
–
–
–
–
–
–
–
–
6
US$m
Debt securities measured at
amortised cost
Balance at 1 January 2022
Transfer to 12-month ECL
Transfer to lifetime ECL not credit-
impaired
Transfer to lifetime ECL credit-impaired
Net remeasurement of loss allowance
New financial assets acquired
Financial assets derecognised other
than write-offs
Effects of movements in exchange
rates and other movements
Balance at 31 December 2022
12-month ECL
Lifetime ECL not
credit-impaired
Lifetime ECL
credit-impaired
Total
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
1,465
–
–
–
–
385
(51)
(21)
1,778
2
–
–
–
1
1
–
–
4
15
–
–
–
–
–
–
–
15
2
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,480
–
–
–
–
385
(51)
(21)
1,793
4
–
–
–
1
1
–
–
6
251
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 23. IMPAIRMENT OF FINANCIAL ASSETS (continued)
Inputs, assumptions and techniques used for estimating impairment (continued)
Loss allowance (continued)
US$m
Loans and deposits measured at
amortised cost
Balance at 1 January 2023
Transfer to 12-month ECL
Transfer to lifetime ECL not credit-
impaired
Transfer to lifetime ECL credit-impaired
Net remeasurement of loss allowance
6
(8)
(16)
–
1
–
–
(16)
10
New financial assets acquired
30,837
Financial assets derecognised other
than write-offs
Write-offs
Effects of movements in exchange
rates and other movements
Balance at 31 December 2023
(31,654)
(1)
–
(29)
3,708
–
–
11
12-month ECL
Lifetime ECL not
credit-impaired
Lifetime ECL
credit-impaired
Total
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
4,572
17
4,593
27
11
(4)
9
–
–
–
(1)
–
–
15
3
–
–
–
–
–
–
–
(1)
2
10
(2)
(1)
16
–
–
7
(1)
–
–
2
–
–
–
–
–
30,837
(3)
(1) (31,658)
–
–
20
–
–
7
–
(29)
3,743
–
–
–
(14)
10
(2)
–
(1)
20
US$m
12-month ECL
Lifetime ECL not
credit-impaired
Lifetime ECL
credit-impaired
Total
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Loans and deposits measured at
amortised cost
Balance at 1 January 2022
Transfer to 12-month ECL
Transfer to lifetime ECL not credit-
impaired
Transfer to lifetime ECL credit-impaired
Net remeasurement of loss allowance
5,423
10
(48)
(2)
–
8
2
–
–
–
New financial assets acquired
29,964
10
11
(2)
49
(1)
–
–
Financial assets derecognised
other than write-offs
Effects of movements in exchange
rates and other movements
Balance at 31 December 2022
(30,620)
(3)
(44)
(155)
4,572
–
17
(2)
11
2
–
1
–
–
–
–
–
3
18
(8)
(1)
3
–
–
8
(2)
(1)
–
2
–
5,452
18
–
–
–
–
–
–
–
2
29,964
10
(2)
– (30,666)
(3)
–
10
–
7
(157)
4,593
–
27
252
AIA GROUP LIMITEDFINANCIAL STATEMENTS 23. IMPAIRMENT OF FINANCIAL ASSETS (continued)
Inputs, assumptions and techniques used for estimating impairment (continued)
Loss allowance (continued)
US$m
12-month ECL
Lifetime ECL not
credit-impaired
Lifetime ECL
credit-impaired
Total
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Debt securities measured at fair value
through other comprehensive income
Balance at 1 January 2023
Transfer to 12-month ECL
Transfer to lifetime ECL not credit-
impaired
Transfer to lifetime ECL credit-impaired
Net remeasurement of loss allowance
89,556
214
(312)
–
–
New financial assets acquired
18,909
Financial assets derecognised other
167
20
(15)
–
(45)
29
511
(214)
312
(250)
–
–
50
(20)
15
(13)
(13)
–
(20,494)
(23)
(102)
(7)
than write-offs
Write-offs
Effects of movements in exchange
rates and other movements
–
(364)
–
–
–
9
–
5
17
Balance at 31 December 2023
87,509
133
266
103
83
90,170
300
–
–
250
–
–
–
–
13
366
–
–
13
231
–
–
–
–
–
18,909
–
–
–
173
29
– (20,596)
(30)
–
–
–
(342)
–
5
327
88,141
477
12-month ECL
Lifetime ECL not
credit-impaired
Lifetime ECL credit-
impaired
Total
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
US$m
Debt securities measured at fair value
through other comprehensive income
Balance at 1 January 2022
Transfer to 12-month ECL
Transfer to lifetime ECL not credit-
impaired
95,364
4
142
–
(426)
(12)
Transfer to lifetime ECL credit-impaired
Net remeasurement of loss allowance
–
–
New financial assets acquired
21,113
–
56
29
319
(4)
426
(102)
–
–
17
–
12
(10)
60
–
Financial assets derecognised other
than write-offs
(23,178)
(45)
(75)
(24)
Effects of movements in exchange
rates and other movements
Balance at 31 December 2022
(3,321)
89,556
(3)
167
(53)
511
(5)
50
–
–
–
102
–
–
–
1
103
–
–
–
10
73
–
95,683
159
–
–
–
–
21,113
–
–
–
189
29
– (23,253)
(69)
–
83
(3,373)
90,170
(8)
300
253
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 23. IMPAIRMENT OF FINANCIAL ASSETS (continued)
Inputs, assumptions and techniques used for estimating impairment (continued)
Loss allowance (continued)
12-month ECL
Lifetime ECL not
credit-impaired
Lifetime ECL
credit-impaired
Total
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
US$m
Receivables
Balance at 1 January 2023
1,673
Transfer to lifetime ECL not credit-
impaired
Transfer to lifetime ECL credit-impaired
Net remeasurement of loss allowance
Net decrease in receivables
Write-offs
Effects of movements in exchange
rates and other movements
3
(3)
–
(415)
–
(4)
Balance at 31 December 2023
1,254
–
–
–
–
–
–
–
–
42
11
28
14
1,743
25
(3)
(2)
–
(7)
–
–
30
–
(2)
(5)
(1)
–
–
3
–
5
–
(1)
(3)
–
29
–
2
2
–
(2)
–
16
–
–
–
(423)
(3)
(4)
1,313
–
–
(3)
(1)
(2)
–
19
12-month ECL
Lifetime ECL not
credit-impaired
Lifetime ECL
credit-impaired
Total
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
Gross
carrying
amount
Loss
allowance
US$m
Receivables
Balance at 1 January 2022
1,618
Transfer to lifetime ECL not credit-
impaired
Transfer to lifetime ECL credit-impaired
Net remeasurement of loss allowance
Net increase/(decrease) in receivables
Effects of movements in exchange
rates and other movements
(5)
–
–
64
(4)
Balance at 31 December 2022
1,673
–
–
–
–
–
–
–
43
5
–
–
8
–
–
4
(6)
(1)
–
42
–
11
30
18
1,691
26
–
–
–
–
(2)
28
–
–
(3)
–
(1)
14
–
–
–
58
(6)
1,743
–
–
1
(1)
(1)
25
24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD
Movement in carrying amounts
The following reconciliations show how the net carrying amounts of insurance contracts and reinsurance contracts held
changed during the year as a result of cash flows and amounts recognised in the consolidated income statement and
consolidated statement of comprehensive income. The Group presents a table separately analysing movements in the
liabilities for remaining coverage and movements in the liabilities for incurred claims and reconciles these movements to
the line items in the consolidated income statement and consolidated statement of comprehensive income. A second
reconciliation is presented for contracts not measured under the premium allocation approach, which separately analyses
changes in the estimates of the present value of future cash flows, the risk adjustment for non-financial risk and the
contractual service margin.
The estimates of the present value of future cash flows from insurance and reinsurance contract assets represent the
Group’s maximum exposure to credit risk from these assets.
254
AIA GROUP LIMITEDFINANCIAL STATEMENTS 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by remaining coverage and incurred claims of insurance contracts not measured under the premium allocation
approach
US$m
Opening assets
Opening liabilities
Net opening balance
Insurance revenue
Insurance service expenses
Incurred claims and other insurance service expenses
Amortisation of insurance acquisition cash flows
Losses and reversal of losses on onerous contracts
Adjustments to liabilities for incurred claims
Total insurance service expenses
Investment components
Other changes
Insurance service result
Net finance expenses/(income) from insurance
contracts
Effect of movements in exchange rates
Total changes in the consolidated income statement and
consolidated statement of comprehensive income
Cash flows
Premiums received
Claims and other insurance service expenses paid,
including investment components
Insurance acquisition cash flows paid
Other amounts (paid)/received
Total cash flows
Adjusted for:
Non-cash operating expenses
Other non-cash items
Total non-cash items
Contracts derecognised on disposal of held for sale
assets and liabilities
Net closing balance
Closing assets
Closing liabilities
Net closing balance
Year ended 31 December 2023
Liabilities for remaining coverage
Notes
Excluding loss
component
Loss
component
Liabilities for
incurred claims
(1,230)
176,319
175,089
(15,107)
–
968
–
–
968
(11,737)
(14)
(25,890)
15,923
(508)
8
9
Total
(570)
183,572
183,002
640
7,003
7,643
–
(15,107)
20
250
270
–
(113)
8,974
–
214
–
101
–
–
–
–
(268)
8,706
11,737
14
8,861
968
214
(268)
9,775
–
–
101
20,457
(5,332)
(24)
56
360
(19)
16,259
(471)
(10,475)
133
20,798
10,456
38,761
18
(6,325)
(1)
32,453
(161)
(370)
(531)
(910)
195,626
(454)
196,080
195,626
–
–
–
–
–
–
–
–
(56)
347
42
305
347
–
38,761
(24,074)
(24,056)
–
3,770
(20,304)
(6,325)
3,769
12,149
(71)
–
(71)
(232)
(370)
(602)
(57)
(1,023)
8,009
627
7,382
8,009
203,982
215
203,767
203,982
255
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by remaining coverage and incurred claims of insurance contracts not measured under the premium allocation
approach (continued)
US$m
Opening assets
Opening liabilities
Net opening balance
Insurance revenue
Insurance service expenses
Incurred claims and other insurance service expenses
Amortisation of insurance acquisition cash flows
Losses and reversal of losses on onerous contracts
Adjustments to liabilities for incurred claims
Total insurance service expenses
Investment components
Other changes
Insurance service result
Net finance (income)/expenses from insurance
contracts
Effect of movements in exchange rates
Total changes in the consolidated income statement
and consolidated statement of comprehensive
income
Cash flows
Premiums received
Claims and other insurance service expenses paid,
including investment components
Insurance acquisition cash flows paid
Other amounts received
Total cash flows
Adjusted for:
Non-cash operating expenses
Other non-cash items
Total non-cash items
Net closing balance
Closing assets
Closing liabilities
Net closing balance
Year ended 31 December 2022
Liabilities for remaining coverage
Notes
Excluding loss
component
Loss
component
Liabilities for
incurred claims
(2,753)
210,450
207,697
(14,524)
–
696
–
–
696
(10,674)
(14)
(24,516)
(35,058)
(5,145)
8
9
10
204
214
–
(68)
–
129
–
61
–
–
61
3
(8)
Total
(2,118)
218,529
216,411
625
7,875
8,500
–
(14,524)
8,371
–
–
(259)
8,112
10,674
14
8,303
696
129
(259)
8,869
–
–
18,800
(5,655)
(460)
(493)
(35,515)
(5,646)
(64,719)
56
17,847
(46,816)
38,174
–
(5,536)
–
32,638
(184)
(343)
(527)
175,089
(1,230)
176,319
175,089
–
–
–
–
–
–
–
–
270
20
250
270
–
38,174
(21,550)
(21,550)
–
2,902
(18,648)
(56)
–
(56)
7,643
640
7,003
7,643
(5,536)
2,902
13,990
(240)
(343)
(583)
183,002
(570)
183,572
183,002
Insurance contract assets of US$501m (2022: US$608m) and insurance contract liabilities of US$5,633m (2022:
US$4,652m) are expected to be recovered within 12 months after the reporting date.
256
AIA GROUP LIMITEDFINANCIAL STATEMENTS
24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by measurement component of insurance contracts not measured under the premium allocation approach
Year ended 31 December 2023
Estimates
of present
value of
future
cash flows
Risk
adjustment
for non-
financial risk
Notes
CSM
Total
CSM
Contracts
under
modified
retrospective
approach
Contracts
under fair
value
approach
Other
contracts
Total
(8,689)
135,747
127,058
739
2,796
3,535
7,380
(570)
–
4,983
45,029
183,572
10,627
26,411
2,397
7,991
7,380
45,029
52,409
183,002
10,627
31,394
10,388
52,409
US$m
Opening assets
Opening liabilities
Net opening balance
Insurance service result
–
(5,605)
(5,605)
(1,009)
(2,670)
(1,926)
(5,605)
Changes that relate to current services
CSM recognised for services provided
8
Change in risk adjustment for non-
financial risk
Experience adjustments
Others
Changes that relate to future services
Contracts initially recognised in the year
Changes in estimates that adjust the CSM
Changes in estimates that result in losses
and reversal of losses on onerous
contracts
Changes that relate to past services
Total insurance service result
Net finance expenses/(income) from
insurance contracts
Effect of movements in exchange rates
Total changes in the consolidated income
statement and consolidated statement of
comprehensive income
Cash flows
Non-cash operating expenses
Other non-cash items
Contracts derecognised on disposal of held
for sale assets and liabilities
Net closing balance
Closing assets
Closing liabilities
Net closing balance
–
–
581
(129)
(125)
–
–
–
–
–
(7,380)
(971)
473
23
7,060
948
(125)
581
(129)
153
–
–
–
–
–
15
–
–
–
–
–
–
1,360
–
–
–
–
–
–
7,060
(427)
7,060
948
–
–
–
–
–
–
–
–
61
(268)
17
(208)
(8,090)
9
15,129
(32)
44
(60)
355
(26)
(2)
2,403
(5,332)
(994)
(1,310)
4,707
2,403
1,156
16,259
(437)
(471)
471
(222)
335
(103)
350
(112)
1,156
(437)
327
3,122
10,456
(745)
(1,078)
4,945
3,122
7,007
12,149
(232)
(370)
–
–
–
–
–
–
12,149
(232)
(370)
(986)
(24)
(13)
(1,023)
–
–
–
–
–
–
–
(13)
–
–
–
–
–
–
–
(13)
144,626
3,838
55,518
203,982
9,882
30,303
15,333
55,518
(9,961)
154,587
144,626
888
2,950
3,838
9,288
215
–
5,640
3,648
9,288
46,230
203,767
55,518
203,982
9,882
9,882
24,663
11,685
46,230
30,303
15,333
55,518
257
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by measurement component of insurance contracts not measured under the premium allocation approach
(continued)
US$m
Opening assets
Opening liabilities
Net opening balance
Insurance service result
Year ended 31 December 2022
Estimates
of present
value of
future
cash flows
Risk
adjustment
for non-
financial risk
Notes
CSM
Total
CSM
Contracts
under
modified
retrospective
approach
Contracts
under fair
value
approach
Other
contracts
(10,154)
167,514
157,360
796
3,097
3,893
7,240
(2,118)
–
5,900
47,918
218,529
11,983
31,017
55,158
216,411
11,983
36,917
1,340
4,918
6,258
Total
7,240
47,918
55,158
–
(5,363)
(5,363)
(1,059)
(3,072)
(1,232)
(5,363)
–
–
151
(134)
(179)
–
–
–
–
–
(6,358)
2,783
450
5,983
(364)
(2,419)
(179)
151
(134)
75
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,983
5,983
140
(2,068)
(491)
(2,419)
71
(186)
(3,673)
(17)
(73)
–
–
54
(259)
–
–
–
–
–
–
–
–
(183)
(1,799)
(5,655)
(919)
(5,140)
4,260
(1,799)
9
(36,703)
(3,333)
–
1,188
(35,515)
(175)
(2,138)
(5,646)
492
(929)
447
(830)
249
1,188
(379)
(2,138)
(43,709)
13,990
(240)
(343)
(358)
(2,749)
(46,816)
(1,356)
(5,523)
4,130
(2,749)
–
–
–
–
–
–
13,990
(240)
(343)
–
–
–
–
–
–
–
–
–
–
–
–
127,058
3,535
52,409
183,002
10,627
31,394
10,388
52,409
(8,689)
135,747
127,058
739
2,796
3,535
7,380
(570)
–
4,983
45,029
183,572
10,627
26,411
2,397
7,991
52,409
183,002
10,627
31,394
10,388
7,380
45,029
52,409
Changes that relate to current services
CSM recognised for services provided
8
Change in risk adjustment for non-
financial risk
Experience adjustments
Others
Changes that relate to future services
Contracts initially recognised in the year
Changes in estimates that adjust the CSM
Changes in estimates that result in losses
and reversal of losses on onerous
contracts
Changes that relate to past services
Total insurance service result
Net finance (income)/expenses from
insurance contracts
Effect of movements in exchange rates
Total changes in the consolidated income
statement and consolidated statement
of comprehensive income
Cash flows
Non-cash operating expenses
Other non-cash items
Net closing balance
Closing assets
Closing liabilities
Net closing balance
258
AIA GROUP LIMITEDFINANCIAL STATEMENTS 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by remaining coverage and incurred claims of reinsurance contracts held not measured under the premium
allocation approach
US$m
Opening assets
Opening liabilities
Net opening balance
Year ended 31 December 2023
Asset for remaining coverage
Excluding
loss-recovery
component
Note
Loss-recovery
component
Asset for
incurred claims
2,044
(775)
1,269
124
6
130
3,537
374
3,911
Total
5,705
(395)
5,310
Changes in the consolidated income statement
and consolidated statement of comprehensive
income
Net (expenses)/income from reinsurance
contracts held (excluding effect of changes in
non-performance risk of reinsurers)
Effect of changes in non-performance risk of
reinsurers
Net (expenses)/income from reinsurance
contracts held
Investment components
Other changes
Net finance income from reinsurance contracts
held
9
Effect of movements in exchange rates
Total changes in the consolidated income
statement and consolidated statement of
comprehensive income
Cash flows
Premiums paid
Amounts received
Other amounts paid
Total cash flows
Adjusted for:
Non-cash operating expenses
Other non-cash items
Total non-cash items
Contracts derecognised on disposal of held for
sale assets and liabilities
Net closing balance
Closing assets
Closing liabilities
Net closing balance
(2,059)
–
(2,059)
(136)
–
46
138
10
–
10
–
–
1
1
1,762
(287)
–
1,762
136
–
128
(63)
–
(287)
–
–
175
76
(2,011)
12
1,963
(36)
2,149
–
–
2,149
–
–
–
21
1,428
2,091
(663)
1,428
–
–
–
–
–
–
–
–
142
133
9
142
–
(1,807)
4
(1,803)
–
–
–
1
4,072
3,746
326
4,072
2,149
(1,807)
4
346
–
–
–
22
5,642
5,970
(328)
5,642
259
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by remaining coverage and incurred claims of reinsurance contracts held not measured under the premium
allocation approach (continued)
US$m
Opening assets
Opening liabilities
Net opening balance
Year ended 31 December 2022
Asset for remaining coverage
Excluding
loss-recovery
component
Note
Loss-recovery
component
Asset for
incurred claims
2,410
(1,035)
1,375
124
2
126
3,815
324
4,139
Total
6,349
(709)
5,640
Changes in the consolidated income statement
and consolidated statement of comprehensive
income
Net (expenses)/income from reinsurance
contracts held (excluding effect of changes in
non-performance risk of reinsurers)
Effect of changes in non-performance risk of
reinsurers
Net (expenses)/income from reinsurance
contracts held
Investment components
Other changes
Net finance income/(expenses) from
reinsurance contracts held
Effect of movements in exchange rates
Total changes in the consolidated income
statement and consolidated statement of
comprehensive income
9
Cash flows
Premiums paid
Amounts received
Other amounts paid
Total cash flows
Adjusted for:
Non-cash operating expenses
Other non-cash items
Total non-cash items
Net closing balance
Closing assets
Closing liabilities
Net closing balance
(2,045)
–
(2,045)
(139)
–
85
50
(2,049)
1,943
–
–
1,943
–
–
–
1,269
2,044
(775)
1,269
10
–
10
–
–
1
(7)
4
–
–
–
–
–
–
–
130
124
6
130
1,654
(381)
–
1,654
139
–
(259)
(258)
–
(381)
–
–
(173)
(215)
1,276
(769)
–
(1,509)
4
(1,505)
1
–
1
3,911
3,537
374
3,911
1,943
(1,509)
4
438
1
–
1
5,310
5,705
(395)
5,310
Reinsurance contract assets of US$1,547m (2022: US$386m) and reinsurance contract liabilities of US$(51)m (2022:
US$(17)m) are expected to be recovered/(settled) within 12 months after the reporting date.
260
AIA GROUP LIMITEDFINANCIAL STATEMENTS 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by measurement component of reinsurance contracts held not measured under the premium allocation
approach
US$m
Note
Opening assets
Opening liabilities
Net opening balance
Net (expenses)/income from reinsurance
contracts held
Changes that relate to current services
CSM recognised for services received
Change in risk adjustment for non-
financial risk
Experience adjustments
Changes that relate to future services
Changes in recoveries of losses on
onerous underlying contracts that
adjust the CSM
Contracts initially recognised in the year
Changes in estimates that adjust the CSM
Changes in estimates that relate to losses
and reversal of losses on onerous
underlying contracts
Changes that relate to past services
Effect of changes in non-performance risk
of reinsurers
Total net (expenses)/income from
reinsurance contracts held
Net finance income/(expenses) from
reinsurance contracts held
Effect of movements in exchange rates
Total changes in the consolidated income
statement and consolidated statement
of comprehensive income
Cash flows
Non-cash operating expenses
Other non-cash items
Contracts derecognised on disposal of held
for sale assets and liabilities
Net closing balance
Closing assets
Closing liabilities
Net closing balance
9
Year ended 31 December 2023
Estimates
of present
value of
future
cash flows
Risk
adjustment
for non-
financial risk
CSM
Total
CSM
Contracts
under
modified
retrospective
approach
Contracts
under
fair value
approach
Other
contracts
Total
3,356
(1,007)
2,349
523
254
777
1,826
358
2,184
5,705
(395)
5,310
(1,031)
3,110
(253)
1,826
–
115
(1,031)
3,225
243
(10)
358
2,184
–
–
(66)
–
(143)
(320)
36
45
–
(448)
39
172
(237)
346
–
–
5
2,463
3,371
(908)
2,463
–
(291)
(291)
89
(367)
(13)
(291)
(11)
–
–
72
(44)
(1)
(14)
–
2
3
(6)
–
–
(11)
(66)
15
71
364
–
–
–
15
–
–
35
31
–
–
–
–
–
124
–
–
–
–
–
–
–
54
–
–
–
–
–
15
71
186
–
–
–
–
–
15
71
364
–
–
–
159
(287)
213
(313)
259
159
133
(90)
175
76
(57)
20
199
295
(9)
(405)
133
(90)
(1)
202
–
–
–
–
776
579
197
776
–
–
–
17
2,403
2,020
383
2,403
(36)
346
–
–
22
5,642
5,970
(328)
5,642
176
181
(155)
202
–
–
–
–
(855)
(855)
–
–
–
–
17
3,423
3,040
383
–
–
–
–
(165)
(165)
–
–
–
–
17
2,403
2,020
383
(855)
3,423
(165)
2,403
261
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by measurement component of reinsurance contracts held not measured under the premium allocation
approach (continued)
Year ended 31 December 2022
Estimates
of present
value of
future
cash flows
Risk
adjustment
for non-
financial risk
CSM
Total
CSM
Contracts
under
modified
retrospective
approach
Contracts
under
fair value
approach
Other
contracts
Total
3,785
(1,377)
2,408
750
270
1,020
1,814
398
2,212
6,349
(709)
5,640
(1,643)
3,763
(306)
1,814
–
77
(1,643)
3,840
321
15
398
2,212
–
(242)
(242)
125
(391)
24
(242)
–
–
(198)
(43)
–
–
–
(43)
(198)
–
12
–
47
11
(59)
(171)
(160)
331
(1)
113
–
–
(21)
–
–
–
–
11
–
–
(1)
92
–
–
–
–
–
–
–
–
–
–
–
–
–
11
(59)
11
(59)
437
(136)
30
331
–
–
–
–
–
–
–
–
–
6
–
–
–
41
(22)
(47)
(245)
(177)
41
(381)
562
(527)
(151)
(102)
–
(66)
(22)
(47)
(173)
(215)
(87)
137
80
(168)
(15)
(16)
(498)
438
1
–
2,349
3,356
(1,007)
2,349
(243)
(28)
–
–
–
777
523
254
777
–
–
–
2,184
1,826
358
2,184
(769)
438
1
–
5,310
5,705
(395)
5,310
612
(615)
(25)
(28)
–
–
–
–
–
–
(1,031)
(1,031)
–
3,225
3,110
115
(1,031)
3,225
–
–
–
(10)
(253)
243
(10)
–
–
–
2,184
1,826
358
2,184
US$m
Note
Opening assets
Opening liabilities
Net opening balance
Net (expenses)/income from reinsurance
contracts held
Changes that relate to current services
CSM recognised for services received
Change in risk adjustment for
non-financial risk
Experience adjustments
Changes that relate to future services
Changes in recoveries of losses on
onerous underlying contracts that
adjust the CSM
Contracts initially recognised in the year
Changes in estimates that
adjust the CSM
Changes in estimates that relate to
losses and reversal of losses on
onerous underlying contracts
Changes that relate to past services
Effect of changes in non-performance risk
of reinsurers
Total net (expenses)/income from
reinsurance contracts held
Net finance (expenses)/income from
reinsurance contracts held
9
Effect of movements in exchange rates
Total changes in the consolidated income
statement and consolidated statement
of comprehensive income
Cash flows
Non-cash operating expenses
Other non-cash items
Net closing balance
Closing assets
Closing liabilities
Net closing balance
262
AIA GROUP LIMITEDFINANCIAL STATEMENTS
24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by remaining coverage and incurred claims of insurance contracts measured under the premium allocation
approach
Year ended 31 December 2023
Liabilities for
remaining coverage
Liabilities for
incurred claims
Excluding
loss
component
Loss
component
Notes
Estimate of
present value
of future
cash flows
Risk
adjustment
for non-
financial risk
US$m
Opening assets
Opening liabilities
Net opening balance
Insurance revenue
–
308
308
8
(2,407)
Insurance service expenses
Incurred claims and other insurance service
expenses
Amortisation of insurance acquisition cash
flows
Losses and reversal of losses on onerous
contracts
Adjustments to liabilities for incurred claims
Total insurance service expenses
Investment components
Other changes
Insurance service result
Net finance expenses/(income) from insurance
contracts
9
Effect of movements in exchange rates
Total changes in the consolidated income
statement and consolidated statement of
comprehensive income
Cash flows
Premiums received
Claims and other insurance service expenses
paid, including investment components
Insurance acquisition cash flows paid
Other amounts received
Total cash flows
Adjusted for:
Non-cash operating expenses
Other non-cash items
Total non-cash items
Net closing balance
Closing assets
Closing liabilities
Net closing balance
–
325
–
–
325
(6)
(3)
(2,091)
–
(16)
(2,107)
2,559
–
(328)
–
2,231
(12)
–
(12)
420
1
419
420
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
412
413
–
–
18
18
–
Total
1
738
739
(2,407)
2,099
12
2,111
–
–
(120)
1,979
6
3
1,988
–
38
2,026
–
(1,984)
–
1
(1,983)
(3)
–
(3)
453
–
453
453
–
–
(13)
(1)
–
–
(1)
–
1
–
–
–
–
–
–
–
–
–
18
–
18
18
325
–
(133)
2,303
–
–
(104)
–
23
(81)
2,559
(1,984)
(328)
1
248
(15)
–
(15)
891
1
890
891
263
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by remaining coverage and incurred claims of insurance contracts measured under the premium allocation
approach (continued)
Year ended 31 December 2022
Liabilities for
remaining coverage
Liabilities for
incurred claims
Excluding
loss
component
Loss
component
Notes
Estimate of
present value
of future
cash flows
Risk
adjustment
for non-
financial risk
US$m
Opening assets
Opening liabilities
Net opening balance
Insurance revenue
1
285
286
8
(1,795)
Insurance service expenses
Incurred claims and other insurance service
expenses
Amortisation of insurance acquisition cash
flows
Losses and reversal of losses on onerous
contracts
Adjustments to liabilities for incurred claims
Total insurance service expenses
Investment components
Other changes
Insurance service result
Net finance income from insurance contracts
9
Effect of movements in exchange rates
Total changes in the consolidated income
statement and consolidated statement of
comprehensive income
Cash flows
Premiums received
Claims and other insurance service expenses
paid, including investment components
Insurance acquisition cash flows paid
Other amounts received
Total cash flows
Adjusted for:
Non-cash operating expenses
Other non-cash items
Total non-cash items
Net closing balance
Closing assets
Closing liabilities
Net closing balance
–
207
–
–
207
(2)
(3)
(1,593)
–
(14)
(1,607)
1,834
(1)
(200)
–
1,633
(4)
–
(4)
308
–
308
308
264
–
372
372
–
–
18
18
–
Total
1
675
676
(1,795)
1,391
11
1,402
–
–
(34)
1,357
2
3
1,362
–
(9)
1,353
–
(1,309)
–
–
(1,309)
(3)
–
(3)
413
1
412
413
–
–
(10)
1
–
–
1
–
(1)
–
–
–
–
–
–
–
–
–
18
–
18
18
207
–
(44)
1,565
–
–
(230)
–
(24)
(254)
1,834
(1,310)
(200)
–
324
(7)
–
(7)
739
1
738
739
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
AIA GROUP LIMITEDFINANCIAL STATEMENTS 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by measurement component of reinsurance contracts held measured under the premium allocation approach
Year ended 31 December 2023
Asset for remaining coverage
Asset for incurred claims
Excluding
loss-recovery
component
Note
Loss-recovery
component
Estimate of
present value
of future
cash flows
Risk
adjustment
for non-
financial risk
US$m
Opening assets
Opening liabilities
Net opening balance
Changes in the consolidated income statement
and consolidated statement of
comprehensive income
Net (expenses)/income from reinsurance
contracts held (excluding effect of changes in
non-performance risk of reinsurers)
Effect of changes in non-performance risk of
reinsurers
Net (expenses)/income from reinsurance
contracts held
Investment components
Other changes
Net finance income from reinsurance contracts
held
9
Effect of movements in exchange rates
Total changes in the consolidated income
statement and consolidated statement of
comprehensive income
Cash flows
Premiums paid
Amounts paid/(received)
Other amounts paid
Total cash flows
Adjusted for:
Non-cash operating expenses
Other non-cash items
Total non-cash items
Net closing balance
Closing assets
Closing liabilities
Net closing balance
(248)
(77)
(325)
(346)
–
(346)
(26)
–
1
11
(360)
384
1
–
385
–
–
–
(300)
(241)
(59)
(300)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
304
65
369
288
–
288
26
–
–
(3)
311
–
(316)
2
(314)
–
–
–
366
316
50
366
2
1
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
2
1
3
Total
58
(11)
47
(58)
–
(58)
–
–
1
8
(49)
384
(315)
2
71
–
–
–
69
77
(8)
69
265
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Movement in carrying amounts (continued)
Analysis by measurement component of reinsurance contracts held measured under the premium allocation approach
Year ended 31 December 2022
Asset for remaining coverage
Asset for incurred claims
Excluding
loss-recovery
component
Note
Loss-recovery
component
Estimate of
present value
of future
cash flows
Risk
adjustment
for non-
financial risk
(191)
(5)
(196)
(289)
–
(289)
(28)
–
(8)
17
(308)
179
1
(1)
179
–
–
–
(325)
(248)
(77)
(325)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
275
5
280
251
–
251
28
–
–
(11)
268
–
(181)
2
(179)
–
–
–
369
304
65
369
3
–
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
2
1
3
Total
87
–
87
(38)
–
(38)
–
–
(8)
6
(40)
179
(180)
1
–
–
–
–
47
58
(11)
47
(continued)
US$m
Opening assets
Opening liabilities
Net opening balance
Changes in the consolidated income statement
and consolidated statement of
comprehensive income
Net (expenses)/income from reinsurance
contracts held (excluding effect of changes in
non-performance risk of reinsurers)
Effect of changes in non-performance risk of
reinsurers
Net (expenses)/income from reinsurance
contracts held
Investment components
Other changes
Net finance expenses from reinsurance contracts
held
9
Effect of movements in exchange rates
Total changes in the consolidated income
statement and consolidated statement of
comprehensive income
Cash flows
Premiums paid
Amounts paid/(received)
Other amounts (received)/paid
Total cash flows
Adjusted for:
Non-cash operating expenses
Other non-cash items
Total non-cash items
Net closing balance
Closing assets
Closing liabilities
Net closing balance
266
AIA GROUP LIMITEDFINANCIAL STATEMENTS 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Effect of contracts initially recognised in the year
The following tables summarise the effect on the measurement components of insurance contracts and reinsurance
contracts held arising from the initial recognition of contracts not measured under the premium allocation approach that
were initially recognised in the year.
Insurance contracts
US$m
Profitable
contracts
issued
Onerous
contracts
issued
Profitable
contracts
acquired
Total
Year ended 31 December 2023
Estimates of present value of future cash outflows
Insurance acquisition cash flows
Claims payable and other expenses
Total estimates of present value of future cash outflows
6,058
28,637
34,695
386
2,217
2,603
Estimates of present value of future cash inflows
(42,195)
(2,483)
Risk adjustment for non-financial risk
Contractual service margin
Losses recognised on initial recognition
440
7,060
–
33
–
153
–
–
–
–
–
–
–
6,444
30,854
37,298
(44,678)
473
7,060
153
US$m
Year ended 31 December 2022
Estimates of present value of future cash outflows
Insurance acquisition cash flows
Claims payable and other expenses
Total estimates of present value of future cash outflows
Profitable
contracts
issued
Onerous
contracts
issued
Profitable
contracts
acquired
Total
5,150
23,226
28,376
157
662
819
–
74
74
5,307
23,962
29,269
Estimates of present value of future cash inflows
(34,786)
(763)
(78)
(35,627)
Risk adjustment for non-financial risk
Contractual service margin
Losses recognised on initial recognition
431
5,979
–
19
–
75
–
4
–
450
5,983
75
267
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Effect of contracts initially recognised in the year (continued)
Reinsurance contracts held
Year ended 31 December 2023
Year ended 31 December 2022
US$m
Contracts
originated
Contracts
acquired
Total
Contracts
originated
Contracts
acquired
Estimates of present value of future cash inflows
Estimates of present value of future cash outflows
Risk adjustment for non-financial risk
Income recognised on initial recognition
Contractual service margin
2,179
(2,322)
72
(15)
(86)
–
–
–
–
–
2,179
1,553
(2,322)
(1,541)
72
(15)
(86)
47
(11)
48
–
–
–
–
–
Total
1,553
(1,541)
47
(11)
48
Analysis of assets for insurance acquisition cash flows
US$m
Opening balance presented in insurance contract assets
Opening balance presented in insurance contract liabilities
Total opening balance
Acquisitions through business combinations
Assets recognised for insurance acquisition cash flows paid during the year
Allocation to groups of insurance contracts
Amounts derecognised on disposal of held for sale assets and liabilities
Impairment losses and reversals
Effect of movements in exchange rates
Total closing balance
Closing balance presented in insurance contract assets
Closing balance presented in insurance contract liabilities
Total closing balance
Year ended
31 December
2023
Year ended
31 December
2022
1,468
1,411
2,879
–
294
(217)
–
–
103
3,059
1,673
1,386
3,059
1,564
1,431
2,995
–
280
(193)
–
–
(203)
2,879
1,468
1,411
2,879
268
AIA GROUP LIMITEDFINANCIAL STATEMENTS 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Analysis of assets for insurance acquisition cash flows (continued)
The following table illustrates when the Group expects to derecognise the assets for insurance acquisition cash flows and
include those cash flows in the measurement of the group of insurance contracts to which they are allocated.
US$m
31 December 2023
Total
Five years
or less
After
five years
through
ten years
Assets for insurance acquisition cash flows
31 December 2022
Assets for insurance acquisition cash flows
3,059
2,879
794
773
613
604
After
ten years
1,652
1,502
Analysis of contractual service margin
The following table illustrates when the Group expects to recognise the remaining contractual service margin as revenue
for contracts not measured under the premium allocation approach.
US$m
31 December 2023
Insurance contracts
Reinsurance contracts held
31 December 2022
Insurance contracts
Reinsurance contracts held
Total
Five years
or less
After
five years
through
ten years
After
ten years
55,518
2,403
20,319
12,691
22,508
980
497
926
52,409
2,184
19,349
824
12,007
456
21,053
904
269
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Fulfilment cash flows
Estimates of future cash flows
The Group’s objective in estimating future cash flows is to determine the expected value or probability-weighted mean of
the full range of possible outcomes. The Group incorporates, in an unbiased way, all reasonable and supportable information
that is available without undue cost or effort at the reporting date. This information includes both internal and external
historical data about claims and other experience, updated to reflect current expectations of future events.
The estimates of future cash flows reflect the Group’s view of current conditions at the reporting date and the estimates of
any relevant market variables are consistent with observable market prices.
When estimating future cash flows, the Group takes into account current expectations of future events that might affect
those cash flows. However, expectations of future changes in legislation that would change or discharge a present
obligation or create new obligations under existing contracts are not taken into account until the change in legislation is
substantively enacted.
Cash flows are within the boundary of a contract if they arise from substantive right and obligations that exist during the
reporting period. They relate directly to the fulfilment of the contract, including those for which the Group has discretion
over the amount or timing. These include payments to (or on behalf of) policyholders, insurance acquisition cash flows and
other costs that are incurred in fulfilling contracts.
Insurance acquisition cash flows arise from the activities of selling, underwriting and starting a group of contracts that are
directly attributable to the portfolio of contracts to which the group belongs. Other costs that are incurred in fulfilling the
contracts include claims handling, maintenance and administration costs, and recurring commissions payable on
instalment premiums receivable within the contract boundary.
Insurance acquisition cash flows and other costs that are incurred in fulfilling contracts comprise both direct costs and an
allocation of fixed and variable overheads.
Methodology and assumptions
Mortality
Assumptions have been developed by each business unit based on their recent historical experience, and their expectations
of current and expected future experience including mortality improvement. 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.
Morbidity
Assumptions have been developed by each business unit based on their recent historical experience, and their expectations
of current and expected future experience. Morbidity rate assumptions have been expressed as a percentage of standard
industry experience tables or as expected claims ratios.
Persistency
Persistency covers the assumptions required, where relevant, for policy lapse (including surrender), premium persistency,
premium holidays, partial withdrawals, policy loan take up and repayment and retirement rates for pension products.
Assumptions have been developed by each of the business units based on their recent historical experience, and their best
estimate expectations of currency and expected future experience. Persistency assumptions would vary by policy year and
product type with different rates for regular and single premium products where appropriate.
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.
270
AIA GROUP LIMITEDFINANCIAL STATEMENTS 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Fulfilment cash flows (continued)
Methodology and assumptions (continued)
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, maintenance and other activities, and then to allocate these acquisition
and maintenance expenses that can be directly attributed to the portfolio of insurance contracts 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 that can be directly attributed to
the portfolio of insurance contracts, 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.
Reinsurance
Reinsurance assumptions have been developed by each business unit based on the reinsurance arrangements in-force as
at the reporting date and the recent historical and expected future experience.
Policyholder dividends, profit sharing and interest crediting
The projected policyholder dividends, profit sharing and interest crediting assumptions set by each business unit reflect
contractual and regulatory requirements, policyholders’ reasonable expectations (where clearly defined) and each
business unit’s best estimate of future policies, strategies and operations consistent with the investment return assumptions.
Participating funds and other participating business with distinct portfolios 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.
The assumed estimated crediting rates and participation percentages are generally based on the actual rates and
percentages applied in the current year. The crediting rates applied vary between products and Group entities; in the
current economic environment, the amounts credited are often determined by interest rate guarantees.
271
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Fulfilment cash flows (continued)
Methodology and assumptions (continued)
An adjustment to reflect the time value of money and the financial risks related to future cash flows
The Group adjusts the estimate of future cash flows to reflect the time value of money and the financial risks related to
those cash flows. The cash flows are discounted by the discount rates to reflect the time value of money, the characteristics
of the cash flows and the liquidity characteristics of the insurance contracts.
The top-down approach has been primarily adopted for the derivation of discount rates. A top-down approach starts with
considering a yield curve that reflects the current market rates of return of a reference portfolio of assets that have similar
characteristics of the insurance contracts, and adjust this downwards to eliminate any factors not relevant to the insurance
contracts (primarily the allowance for credit risk). The assessment of credit risk premium is done on external and internal
ratings when the reference portfolio contains assets which are locally rated. Alternatively, a bottom-up approach could be
used under which discount rates are determined by adjusting the liquid risk-free yield curve to reflect the liquidity
characteristics of the insurance contracts.
In constructing the discount rates, market observable rates are used up to the last available market data point which is
reliable and also relevant in reflecting the characteristics of the insurance contracts. The market observable rates are
extrapolated between this point and an ultimate forward rate derived using long-term estimates by applying generally
accepted technique such as Smith-Wilson method etc.
The tables below set out the spot rates used to discount the cash flows of insurance contracts for major currencies. To
reflect the liquidity characteristics of the insurance contracts, the risk-free spot rates are adjusted by an illiquidity premium.
As at 31 December 2023
1 year
5 years
10 years
15 years
20 years
Spot rates
Risk free
With
illiquidity
premium Risk free
With
illiquidity
premium Risk free
With
illiquidity
premium Risk free
With
illiquidity
premium Risk free
With
illiquidity
premium
USD
HKD
CNY
SGD
MYR
THB
4.73% 5.33% 3.78% 4.56% 3.79% 4.78% 3.89% 4.98% 4.21% 5.24%
4.28% 4.88% 3.27% 4.05% 3.29% 4.28% 3.41% 4.50% 3.73% 4.76%
2.07% 2.55% 2.41% 2.84% 2.59% 2.96% 2.75% 3.16% 2.89% 3.37%
3.53% 4.28% 2.64% 4.07% 2.67% 3.95% 2.74% 3.97% 2.71% 3.90%
3.30% 3.75% 3.65% 3.94% 3.74% 4.11% 4.05% 4.50% 4.18% 4.70%
2.39% 2.74% 2.47% 3.04% 2.73% 3.42% 3.11% 3.88% 3.37% 4.19%
As at 31 December 2022
1 year
5 years
10 years
15 years
20 years
Spot rates
Risk free
With
illiquidity
premium Risk free
With
illiquidity
premium Risk free
With
illiquidity
premium Risk free
With
illiquidity
premium Risk free
With
illiquidity
premium
USD
HKD
CNY
SGD
MYR
THB
4.62% 4.96% 3.88% 4.92% 3.75% 5.20% 3.84% 5.42% 4.10% 5.69%
4.85% 5.19% 3.96% 4.99% 3.78% 5.22% 3.82% 5.40% 4.08% 5.66%
2.09% 2.63% 2.66% 3.29% 2.88% 3.47% 3.04% 3.72% 3.16% 3.88%
3.88% 5.15% 2.84% 4.56% 3.07% 4.97% 2.92% 4.80% 2.59% 4.39%
3.25% 3.86% 3.88% 4.36% 4.09% 4.67% 4.36% 5.02% 4.46% 5.18%
1.38% 1.83% 1.98% 2.62% 2.74% 3.59% 3.34% 4.33% 3.75% 4.79%
For the insurance contracts with cash flows that vary based on the returns on any financial underlying items, the Group
applies risk-neutral measurement techniques. Stochastic modelling is applied for insurance contracts with significant
financial options and guarantees to estimate the expected present value. A large number of possible economic scenarios
for market variables such as interest rates and equity returns are considered using risk neutral approach and consistent
with market observable price.
272
AIA GROUP LIMITEDFINANCIAL STATEMENTS 24. INSURANCE CONTRACTS AND REINSURANCE CONTRACTS HELD (continued)
Risk adjustments for non-financial risk
Risk adjustments for non-financial risk are generally determined by considering the expected cash flows arising from
insurance contracts in each segment for each of the geographical markets in which the Group operates, consistent with
the way that non-financial risk is managed. Risk adjustments are determined separately from estimates from the present
value of future cash flows, using the confidence level technique.
Applying a confidence level technique, the Group estimates the probability distribution of the expected present value of
the future cash flows from insurance contracts at each reporting date and calculates the risk adjustment for non-financial
risk as the excess of the value at risk at 75th percentile (the target confidence level) over the expected present value of the
future cash flows.
Contractual service margin
The CSM of a group of contracts is recognised as insurance revenue in each period based on the number of coverage units
provided in the period, which is determined by considering for each contract the quantity of the services provided, its
expected coverage period and time value of money.
For a group of contracts that is onerous at the start of a reporting period and becomes profitable subsequently that CSM is
recognised during the reporting period, the total amount of recognised CSM is released to profit or loss if there are no more
future coverage units.
Investment components
The Group identifies the investment component of an insurance contract by determining the amount that it would be
required to repay to the policyholder in all circumstances, regardless of whether an insured event occurs. Investment
components are excluded from insurance revenue and insurance service expenses. Generally, for relevant contracts,
surrender value would be determined as an investment component.
Underlying items of contracts with direct participation features
The following table sets out the composition and the fair value of the underlying items for the Group’s contracts with direct
participation features at the reporting date.
US$m
Cash and cash equivalents
Financial investments and policy loans
Property held for own use and investment property
Investment in subsidiaries and associates
Other assets
Less: payables and other liabilities
Total
As at
31 December
2023
As at
31 December
2022
2,662
133,092
1,591
1,517
5,813
(17,196)
127,479
2,761
120,964
1,151
1,564
5,581
(16,490)
115,531
273
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 25. INVESTMENT CONTRACTS
US$m
At beginning of financial year
Investment contract benefits
Fees charged
Net withdrawals and other movements(1)
Effect of foreign exchange movements
At end of financial year(2)
Year ended
31 December
2023
Year ended
31 December
2022
(restated)
11,986
572
(54)
(3,236)
(98)
9,170
13,896
(1,106)
(58)
(331)
(415)
11,986
Notes:
(1) Includes amounts derecognised on disposal of held for sale assets and liabilities.
(2) Of investment contract liabilities, US$195m (2022: US$230m) represents deferred fee income. Movement of deferred fee income of US$35m
(2022: US$35m) represents revenue recognised as a result of performance obligations satisfied during the year.
26. BORROWINGS
US$m
Other loans
Medium-term notes and securities
Senior notes
Subordinated securities
Total
As at
31 December
2023
As at
31 December
2022
36
–
7,581
4,183
11,800
7,480
3,726
11,206
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 34.
The following table summarises the Company’s outstanding medium-term notes and securities placed to the market at 31
December 2023:
Senior notes
Issue date
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)
4 April 2023(1)
274
Nominal amount
Interest rate
Tenor at issue
Maturity
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
US$600m
4.875%
3.200%
4.500%
4.470%
3.900%
3.680%
3.600%
3.375%
2.950%
2.250%
5.040%
5.625%
4.950%
30 years
10 years
30 years
30 years
10 years
12 years
10 years
10 years
10 years
1.99 years
2.99 years
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
10 years
4 April 2033
AIA GROUP LIMITEDFINANCIAL STATEMENTS 26. BORROWINGS (continued)
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)
12 September 2023(1)(3)(4)
Nominal amount
Interest rate
Tenor at issue
Maturity
US$1,750m
US$750m
SG$500m
EUR750m
SG$105m
SG$550m
3.200%
2.700%
2.900%
0.880%
3.000%
5.100%
20 years 16 September 2040
Perpetual
Perpetual
n/a
n/a
12 years
9 September 2033
30 years
19 October 2051
Perpetual
n/a
Notes:
(1) These medium-term notes and securities are listed on The Stock Exchange of Hong Kong Limited.
(2) These medium-term notes are listed on The Taipei Exchange, Taiwan. The Company has the right to redeem these notes at par on 23 May of each
year beginning on 23 May 2022.
(3) The Company has the right to redeem these securities in whole, at par on predetermined dates as set out within the terms and conditions of the
securities, subject to regulatory approval.
(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 years ended 31 December 2023 and 31 December 2022 are used for refinancing
and general corporate purposes.
The Group has access to an aggregate of US$2,980m unsecured committed credit facilities, which includes a US$250m
revolving credit facility expiring in 2024 and a US$2,730m 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
2023 and 31 December 2022.
27. 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 2023, the obligations under repurchase agreements were
US$3,461m (2022: US$1,748m).
The securities sold under repurchase agreements continue to be recognised within the appropriate financial asset
classification. A liability is established for the consideration received. During the term of the repurchase agreements, the
Group is restricted from selling or pledging the transferred debt securities. The following table specifies the amounts
included within financial investments subject to repurchase agreements which do not qualify for de-recognition at each
year end:
US$m
Debt securities – FVOCI
Repurchase agreements
Debt securities – FVTPL
Repurchase agreements
Total
As at
31 December
2023
As at
31 December
2022
(restated)
2,665
1,769
1,406
4,071
112
1,881
Collateral under repurchase agreements
At 31 December 2023 and 31 December 2022, there was no material collateral in respect of repurchase agreements.
275
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 28. 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
752
99
851
–
–
–
752
99
851
(95)
(99)
(194)
(340)
–
(340)
317
–
317
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
US$m
31 December 2023
Financial assets:
Derivative assets
Reverse repurchase agreements
Total
US$m
31 December 2022
Financial assets:
Derivative assets
Reverse repurchase agreements
Total
276
AIA GROUP LIMITEDFINANCIAL STATEMENTS 28. 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
Related amounts
not set off in the
consolidated statement
of financial position
Financial
instruments
Cash
collateral
pledged
Net amount
–
–
–
8,035
3,461
(8,639)
(3,461)
11,496
(12,100)
(213)
–
(213)
(817)
–
(817)
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
Related amounts
not set off in the
consolidated statement
of financial position
Financial
instruments
Cash
collateral
pledged
Net amount
–
–
–
8,739
1,748
(9,656)
(1,748)
(309)
(1,226)
–
–
10,487
(11,404)
(309)
(1,226)
Gross
amount of
recognised
financial
liabilities
8,035
3,461
11,496
Gross
amount of
recognised
financial
liabilities
8,739
1,748
10,487
US$m
31 December 2023
Financial liabilities:
Derivative liabilities
Repurchase agreements
Total
US$m
31 December 2022
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 Accounting Standards 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 Accounting Standards 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.
277
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 29. PROVISIONS
US$m
At 1 January 2022 (restated)
Charged to the consolidated income statement
Credited to other comprehensive income
Exchange differences
Released during the year
Utilised during the year
Other movements
At 31 December 2022 (restated)
Charged to the consolidated income statement
Charged to other comprehensive income
Exchange differences
Released during the year
Utilised during the year
Other movements
At 31 December 2023
Employee benefits
Other
158
10
(21)
(5)
–
(10)
1
133
9
7
1
–
(5)
8
153
28
5
–
(2)
(5)
(6)
–
20
12
–
–
(4)
(7)
–
21
Total
186
15
(21)
(7)
(5)
(16)
1
153
21
7
1
(4)
(12)
8
174
Other provisions
Other provisions comprise provisions in respect of regulatory matters, litigation, reorganisation and restructuring. In view
of the diverse nature of the matters provided for and the contingent nature of the matters to which they relate, the Group
is unable to provide an accurate assessment of the term over which provisions are expected to be utilised.
30. OTHER LIABILITIES
US$m
Trade and other payables
Lease liabilities
Third-party interests in consolidated investment funds
Total
As at
31 December
2023
As at
31 December
2022
(restated)
3,678
365
844
4,887
3,049
395
865
4,309
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.
278
AIA GROUP LIMITEDFINANCIAL STATEMENTS 31. 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 2023
As at 31 December 2022
Million shares
US$m
Million shares
US$m
11,781
14,171
12,097
14,160
1
(383)
11,399
5
–
14,176
3
(319)
11,781
11
–
14,171
(37)
–
(47)
–
11,362
14,176
11,734
14,171
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) During the year ended 31 December 2023, the Company acquired a total of 373,591,400 ordinary shares (2022: 366,267,400 ordinary shares)
on the Hong Kong Stock Exchange with the aggregate cost amounting to approximately HK$28,472m (2022: HK$27,969m) (equivalent to
approximately US$3,637m (2022: US$3,570m)). Of these shares, 336,045,200 shares (2022: 319,150,200 shares) were cancelled during the
year and 37,546,200 shares (2022: 47,117,200 shares) were in the process of share cancellation as at 31 December 2023 and were cancelled
subsequent to the reporting date on 8 January 2024.
The Company issued 661,786 shares under share option scheme (2022: 1,895,760 shares) and 986,359 shares under
agency share purchase plan (2022: 1,119,763 shares) during the year ended 31 December 2023.
During the year ended 31 December 2023, the employee share-based trusts purchased 10,865,302 shares (2022:
9,933,820 shares) and sold nil shares (2022: 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 2023, 6,268,286 shares (2022: 6,884,726 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 2023, 37,957,417 shares (2022: 33,360,398 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 debt securities measured at fair value
through other comprehensive income held at the end of the reporting period plus the related loss allowance recognised in
profit or loss until the assets are derecognised.
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.
Insurance finance reserve
The insurance finance reserve comprises the cumulative insurance finance income or expenses recognised in other
comprehensive income.
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.
279
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 32. NON-CONTROLLING INTERESTS
US$m
Equity shares in subsidiaries
Share of earnings
Share of other reserves
Total
As at
31 December
2023
As at
31 December
2022
(restated)
107
416
(40)
483
90
418
(32)
476
33. 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 eligible group capital resources
and group capital requirements are calculated as the sum of the eligible capital resources and capital requirements for
each entity within the Group according to the respective local regulatory requirements, subject to any variation considered
necessary by the HKIA.
The group prescribed capital requirement (GPCR) is the sum of the prescribed capital requirements of each entity within
the Group, and represents the level below which the HKIA may intervene on grounds of capital adequacy.
The Group LCSM coverage ratio is calculated as the ratio of the eligible group capital resources to the GPCR and the Group
LCSM surplus is defined as the excess of the eligible group capital resources over the GPCR.
The group minimum capital requirement (GMCR) is the sum of the minimum capital requirements of each entity within the
Group.
280
AIA GROUP LIMITEDFINANCIAL STATEMENTS 33. GROUP CAPITAL STRUCTURE (continued)
Group-wide Supervision Framework and the Local Capital Summation Method (continued)
The table shows a summary of the Group capital adequacy position.
US$m
Group LCSM coverage ratio(1)
Tier 1 group capital coverage ratio(2)
Eligible group capital resources
Tier 1 group capital
Tier 2 group capital
Group prescribed capital requirement (GPCR)
Group minimum capital requirement (GMCR)
Group LCSM surplus
As at
31 December
2023
As at
31 December
2022
275%
345%
73,156
46,980
26,176
26,646
13,613
46,510
283%
355%
70,698
45,508
25,190
24,989
12,810
45,709
At 31 December 2023, the eligible group capital resources includes the following items, which are included within Tier 2
group capital:
(i) US$4,183m(3) 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$5,158m(3) 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.
Notes:
(1) The Group LCSM coverage ratio is referred to as the “eligible group capital resources coverage ratio” in the GWS framework and is defined as the
ratio of the eligible group capital resources to the GPCR.
(2) The Tier 1 group capital coverage ratio is defined in the GWS framework as the ratio of the Tier 1 group capital to the GMCR.
(3) The amounts represent the carrying value of medium-term notes and securities contributing to the eligible group capital resources.
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 Company Limited (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
years ended 31 December 2023 and 31 December 2022, 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.
281
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 34. 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 relates to 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.
The Group manages insurance risk concentration by diversification, reinsurance and establishing retention limits. For the
years ended 31 December 2023 and 31 December 2022, there were no significant insurance concentration risks.
Pandemic and catastrophe risk
The Group is also exposed to morbidity and mortality risk related to a single event, namely pandemics, natural catastrophic
events or human-made disasters.
Geographical concentration of insured individuals could increase the severity of this risk. However, the Group’s insured
populations are geographically dispersed, thereby diversifying the exposure to pandemic and catastrophe risk. In addition,
the Group limits its exposure to large claims arising from a catastrophe by purchasing reinsurance to cover losses due to a
single catastrophic event exceeding a pre-determined level.
Climate change could increase the odds of pandemic and/or catastrophic events. Whilst the effect of climate change to AIA
as a life and health insurer is expected to be relatively smaller than a general insurer, the Group will continue to evolve the
climate scenario analysis, with the advancement of reliable data and methodologies, in evaluating the impacts of climate
change to its portfolio.
Expense risk
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.
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 risk
Morbidity and mortality risk is the risk that the incidence and/or amounts of medical, critical illness, disability, death or
survival 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 portfolio. These
internal studies together with external data are used to identify the impact of emerging trends, such as medical technology,
health and wellness, climate change and long COVID-19, which can then be used to inform product design, pricing,
underwriting, claims management and reinsurance needs.
The Group limits its exposure to new risks and large claims on any single insured life 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.
Persistency (Lapse) risk
Persistency (Lapse) risk arises from policies lapsing, on average, differently to that assumed in the pricing or reserving
assumptions. Persistency risk is assessed as part of the product development process and monitored through regular
experience studies.
Ensuring customers buy products that sustainably 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.
282
AIA GROUP LIMITEDFINANCIAL STATEMENTS 34. RISK MANAGEMENT (continued)
Insurance risk (continued)
Sensitivity analysis on insurance risk
The table below sets out the sensitivity analysis in respect of insurance contracts and reinsurance contracts held to key
variables affecting insurance risk exposures. This analysis assumes that all other variables remain constant. Information
below presents the sensitivities both before and after risk mitigation by reinsurance, and illustrates the estimated impact
on profits, CSM, total equity and comprehensive equity arising from a change in a single variable before taking into account
the effects of taxation. The effects on these items are mainly as below:
• The effects on profit or loss are changes relating to CSM recognised for services provided, loss components and
changes in insurance finance income or expenses that are recognised in profit or loss.
• The effects on CSM reflect the change of the corresponding insurance risks that impacts CSM.
• The effects on equity are the effects on profit and loss and the effects on other comprehensive income arising from
changes in insurance finance income or expenses.
• The effects on comprehensive equity are the effects on shareholders’ equity and net CSM.
Sensitivity analysis before risk mitigation by reinsurance(1)(2)
US$m
31 December 2023
10% increase in attributable expenses
10% decrease in attributable expenses
10% increase in mortality/morbidity rates
10% decrease in mortality/morbidity rates
10% increase in lapse/discontinuance rates
10% decrease in lapse/discontinuance rates
US$m
31 December 2022 (restated)
10% increase in attributable expenses
10% decrease in attributable expenses
10% increase in mortality/morbidity rates
10% decrease in mortality/morbidity rates
10% increase in lapse/discontinuance rates
10% decrease in lapse/discontinuance rates
Impact on
profit before
tax
Impact on CSM
Impact on total
equity (before
the effects of
taxation)
Impact on
comprehensive
equity(3) (before
the effects of
taxation and
deduction of
non-controlling
interests)
(59)
56
(921)
552
(3)
(2)
(781)
784
(7,905)
8,433
(2,838)
3,137
(61)
57
(504)
137
338
(396)
(842)
841
(8,409)
8,570
(2,500)
2,741
Impact on
profit before
tax
Impact on CSM
Impact on total
equity (before
the effects of
taxation)
Impact on
comprehensive
equity(3) (before
the effects of
taxation and
deduction of
non-controlling
interests)
(61)
65
(1,039)
717
(12)
6
(633)
642
(7,392)
7,863
(2,606)
2,866
(38)
38
(257)
(65)
239
(297)
(671)
680
(7,649)
7,798
(2,367)
2,569
Notes:
(1) At 31 December 2022, the assets and liabilities of Australian Savings and Investments (S&I) were included in the assets in disposal group held for
sale and the liabilities in disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets
and liabilities. The 2022 comparatives were prepared on the same basis to conform to the presentation for 2023.
(2) The sensitivity analysis on insurance risk includes the impact of unit-linked contracts under IFRS 17.
(3) Represents the total of shareholders’ equity and net CSM.
283
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 34. RISK MANAGEMENT (continued)
Insurance risk (continued)
Sensitivity analysis on insurance risk (continued)
Sensitivity analysis after risk mitigation by reinsurance(1)(2)
US$m
31 December 2023
10% increase in attributable expenses
10% decrease in attributable expenses
10% increase in mortality/morbidity rates
10% decrease in mortality/morbidity rates
10% increase in lapse/discontinuance rates
10% decrease in lapse/discontinuance rates
US$m
31 December 2022 (restated)
10% increase in attributable expenses
10% decrease in attributable expenses
10% increase in mortality/morbidity rates
10% decrease in mortality/morbidity rates
10% increase in lapse/discontinuance rates
10% decrease in lapse/discontinuance rates
Impact on
profit before
tax
Impact on CSM
Impact on total
equity (before
the effects of
taxation)
Impact on
comprehensive
equity(3) (before
the effects of
taxation and
deduction of
non-controlling
interests)
(58)
56
(641)
308
1
(7)
(781)
784
(6,337)
6,783
(2,617)
2,861
(61)
56
(106)
(238)
259
(321)
(842)
840
(6,443)
6,545
(2,358)
2,540
Impact on
profit before
tax
Impact on CSM
Impact on total
equity (before
the effects of
taxation)
Impact on
comprehensive
equity(3) (before
the effects of
taxation and
deduction of
non-controlling
interests)
(61)
65
(757)
473
(6)
1
(633)
641
(5,662)
6,043
(2,341)
2,566
(38)
38
(39)
(248)
178
(226)
(671)
679
(5,701)
5,795
(2,163)
2,340
Notes:
(1) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the liabilities in
disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets and liabilities. The 2022
comparatives were prepared on the same basis to conform to the presentation for 2023.
(2) The sensitivity analysis on insurance risk includes the impact of unit-linked contracts under IFRS 17.
(3) Represents the total of shareholders’ equity and net CSM.
284
AIA GROUP LIMITEDFINANCIAL STATEMENTS 34. RISK MANAGEMENT (continued)
Investment and financial risks
Investment management 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 borne by our customers,
and the investment return gains or losses are largely offset by the changes in fair value of underlying items. 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
before tax.
Policyholder and shareholder investments are further categorised as participating funds, other participating business with
distinct portfolios and other policyholder and shareholder.
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.
Climate change, and the transition to net zero, create risks for the financial system. The Group recognises the potential
investment losses due to climate risk in the long term and, as a result, it mandates the consideration of various Environmental,
Social and Governance (ESG) factors, including climate change, in the bottom-up investment process applicable to its
general account assets. The Group has developed internal ESG scoring methodologies to assess relevant ESG factors in
potential and actual investee companies in relation to our directly managed general account assets and to assess external
asset managers on their approach to both ESG engagement with investee companies and the assessment of ESG factors
for investment decisions. The Group will continue to enhance its climate scenario analysis in assessing the impacts of
climate change on its investment assets.
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, credit spread risk, interest rate risk, equity risk,
foreign exchange rate risk, and liquidity risk. The exposures and sensitivity analysis are detailed below.
Credit risk
Credit risk arises from third parties failing 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 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. Fundamental to AIA’s credit risk management is adherence to a well-controlled
underwriting process. Credit risk limits are applied to control concentrations in individual exposures, sector and cross-
border investments. A detailed analysis of each counterparty is performed and a rating is determined by the investment
teams according to an internal rating framework. 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.
285
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Exposure to credit risk
In compiling the tables, external ratings have been used where available. 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 defines 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
Note:
(1) Unless otherwise identified individually.
1
2+ to 2-
3+ to 3-
4+ to 4-
AAA
AA
A
BBB
5+ and below
Below investment grade(1)
Measuring and monitoring of credit risk is an ongoing process and is designed to enable early identification of emerging
risk. The Group’s processes for measuring expected credit losses include processes for initial approval, regular validation
and back-testing of the models used, and incorporation of forward-looking information.
The Group monitors concentrations of credit arising from investment in debt securities by type, nature and rating as shown
in note 18. Reinsurance is ceded across all geographical regions in which the Group operates. The Group does not have
excessive credit risk with any single reinsurer.
The following table sets out information about the credit quality of reinsurance contract assets and financial assets not
measured at FVTPL.
Reinsurance contract assets(1)
US$m
Investment grade
Below investment grade
Not rated
Total
As at
31 December
2023
As at
31 December
2022
(restated)
6,040
5,755
–
7
–
8
6,047
5,763
Note:
(1) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the liabilities in
disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets and liabilities. The 2022
comparatives were prepared on the same basis to conform to the presentation for 2023.
286
AIA GROUP LIMITEDFINANCIAL STATEMENTS 34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Exposure to credit risk (continued)
Financial assets measured at amortised cost(1)(2)
As at 31 December 2023
As at 31 December 2022 (restated)
Lifetime
ECL not
credit-
impaired
Lifetime
ECL
credit-
impaired
12-month
ECL
Purchased
or
originated
credited-
impaired
Lifetime
ECL not
credit-
impaired
Lifetime
ECL
credit-
impaired
Purchased
or
originated
credited-
impaired
12-month
ECL
Total
31
490
985
509
132
9
2,156
(4)
2,152
15
171
597
1,488
853
584
3,708
(11)
3,697
–
–
–
–
15
–
15
(2)
13
–
–
–
–
–
15
15
(2)
13
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20
20
(7)
13
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31
490
985
509
147
9
31
427
891
428
1
–
2,171
1,778
(6)
(4)
2,165
1,774
15
171
597
–
976
590
1,488
1,514
853
619
722
770
3,743
4,572
(20)
(17)
3,723
4,555
–
–
–
–
15
–
15
(2)
13
–
–
–
–
–
11
11
(3)
8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10
10
(7)
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
31
427
891
428
16
–
1,793
(6)
1,787
–
976
590
1,514
722
791
4,593
(27)
4,566
US$m
Debt securities
AAA
AA
A
BBB
Below investment
grade
Not rated
Total gross carrying
amount
Loss allowance
Amortised cost
Loans and deposits
AAA
AA
A
BBB
Below investment
grade
Not rated
Total gross carrying
amount
Loss allowance
Amortised cost
Notes:
(1) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the
liabilities in disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets
and liabilities. The 2022 comparatives were prepared on the same basis to conform to the presentation for 2023.
(2) The Group’s maximum exposure to credit risk of accrued investment income and cash and cash equivalents is limited to the carrying
amounts of the assets, the majority of which is arising from the financial assets rated as investment grade and deposits with reputable
financial institutions.
287
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Exposure to credit risk (continued)
Financial assets measured at fair value through other comprehensive income(1)
As at 31 December 2023
Lifetime
ECL not
credit-
impaired
Lifetime
ECL
credit-
impaired
Purchased
or
originated
credited-
impaired
As at 31 December 2022 (restated)
Lifetime
ECL not
credit-
impaired
Lifetime
ECL
credit-
impaired
Purchased
or
originated
credited-
impaired
12-month
ECL
Total
US$m
Debt securities
AAA
AA
A
BBB
Below investment
grade
Not rated
Total gross carrying
amount
Loss allowance
Amortised cost
Carrying amount –
12-month
ECL
5,223
14,735
35,814
29,618
2,117
2
87,509
(133)
87,376
fair value
88,355
219
–
–
–
–
266
–
266
(17)
249
–
–
–
–
366
–
366
(327)
39
38
–
5,223
9,608
– 14,735
12,340
– 35,814
34,404
– 29,618
31,245
–
–
2,749
1,922
2
–
– 88,141
89,519
–
(477)
(167)
– 87,664
89,352
–
–
–
–
511
–
511
(50)
461
– 88,612
85,714
325
–
–
–
–
103
–
103
(83)
20
21
–
–
–
–
–
–
–
–
–
–
Total
9,608
12,340
34,404
31,245
2,536
–
90,133
(300)
89,833
86,060
Note:
(1) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the liabilities in
disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets and liabilities. The 2022
comparatives were prepared on the same basis to conform to the presentation for 2023.
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 key 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. The risk is monitored by the business units, with special attention paid to any issuers with credit ratings
close to the lower boundary of investment grade.
288
AIA GROUP LIMITEDFINANCIAL STATEMENTS
34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Interest rate risk
Interest rate risk is primarily measured through the duration gap, which provides an understanding of the implications of
interest rates movements on surplus. Since most markets do not have assets of sufficient tenor to match life insurance
contract liabilities, an uncertainty arises around the reinvestment of maturing assets to match the Group’s insurance
contract 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, AIA
actively manages interest rate risk by extending asset duration, managing liability duration, repricing products, and
implementing appropriate hedging programmes and reinsurance solutions where possible. 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$m
31 December 2023
Financial instruments
Financial assets
Loans and deposits
Receivables
Debt securities
Equity shares, interests in investment funds and
exchangeable loan notes
Accrued investment income
Cash and cash equivalents
Derivative financial instruments
Total financial assets
Financial liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Other liabilities
Derivative financial instruments
Total financial liabilities
Insurance contracts and reinsurance contracts held
Liabilities
Assets
Variable
interest rate
Fixed
interest rate
Non-interest
bearing
Total
687
192
3,295
–
13
1,102
3,995
1,294
13,384
164,374
–
177,758
–
–
4,138
–
1,172
65,281
–
–
–
1,832
7,387
752
66,453
1,832
11,525
752
18,401
168,841
76,367
263,609
–
–
2,996
95
–
–
11,800
465
196
–
3,091
12,461
8,975
–
–
4,596
8,035
21,606
8,975
11,800
3,461
4,887
8,035
37,158
204,993
5,831
289
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Exposure to interest rate risk (continued)
US$m
31 December 2022 (restated)(1)
Financial instruments
Financial assets
Loans and deposits
Receivables
Debt securities
Equity shares, interests in investment funds and
exchangeable loan notes
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
Insurance contracts and reinsurance contracts held
Liabilities
Assets
Variable
interest rate
Fixed
interest rate
Non-interest
bearing
Total
1,745
167
14,621
–
–
4,385
–
3,097
–
150,722
3
1,496
4,845
1,663
–
165,343
1,250
60,705
61,955
–
–
–
1,740
3,635
568
1,740
8,020
568
20,918
155,069
68,147
244,134
–
–
1,748
92
–
–
11,206
–
391
–
1,840
11,597
8,862
–
–
3,781
8,638
21,281
8,862
11,206
1,748
4,264
8,638
34,718
183,646
6,332
Note:
(1) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the liabilities in
disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets and liabilities. The 2022
comparatives were prepared on the same basis to conform to the presentation for 2023.
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 arising from
the underlying items of participating contracts is generally borne by policyholders except to the extent of the Group’s share
of the performance of the underlying items. The Group is also exposed to equity price risk from equity guarantees in
variable contracts and hedges its exposure using equity derivatives.
Equity risk is managed through strategic asset allocation and tactical asset allocation. Equity investments are subject to
benchmarks and controls relating to maximum concentration and tracking errors. Equity limits are also applied to contain
concentration risk of individual stocks and sectors, liquidity as well as equity volatility. Equity exposures are included in the
aggregate exposure reports on each individual counterparty to ensure concentrations are avoided.
290
AIA GROUP LIMITEDFINANCIAL STATEMENTS
34. 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 (2022: approximately 1 per cent) of the total equity and debt investments as at 31 December
2023.
Sensitivity analysis
Sensitivity analysis to the key variables, namely interest rate and equity risks, affecting insurance contracts and reinsurance
contracts held, and financial instruments held by the Group is set out below. 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 to
changes in interest rates and equity prices, the Group has made assumptions about the corresponding impact of asset
valuations on liabilities to policyholders. The market risk in respect of unit-linked investments is generally borne by our
customers, and the investment return gains or losses are largely offset by the changes in fair value of underlying items.
Policyholder and shareholder investments include all financial investments other than unit-linked investments.
Information is presented to illustrate the estimated impact on profits, total equity, allocated equity and CSM arising from a
change in a single variable before taking into account the effects of taxation. The effects on these items are mainly as
follows:
• The effects on profit or loss are changes relating to CSM recognised for services provided, loss components and
changes in investment return, insurance finance income or expenses and foreign exchange differences that are
recognised in profit or loss.
• The effects on equity are the effects on profit or loss, and the effects on other comprehensive income arising from net
changes in net investment results and net insurance finance income or expenses.
• The effects on CSM reflects the change of the corresponding market risks that impacts CSM.
The impact of any impairments of financial assets has been ignored for the purpose of illustrating the sensitivity of profit
before tax, total equity, allocated equity and CSM 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.
291
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Sensitivity analysis on interest rate risk(1)(2)
An analysis of the Group’s sensitivity to 50 basis points parallel increase or decrease in yield curves at the reporting date,
assuming that all other variables remain constant, is presented below.
US$m
31 December 2023
+ 50 basis points shift in yield curves:
Insurance contracts and reinsurance contracts held
Financial instruments
Impact on
profit before
tax
Impact on total
equity (before
the effects of
taxation)
Impact on
allocated equity
(before the
effects of
taxation)
Impact on CSM
6,633
(6,783)
(150)
9,859
(11,916)
(2,057)
6,633
(6,783)
(150)
(487)
–
(487)
505
–
505
– 50 basis points shift in yield curves:
Insurance contracts and reinsurance contracts held
(7,444)
(11,060)
(7,444)
Financial instruments
7,609
165
13,414
2,354
7,609
165
US$m
31 December 2022 (restated)
+ 50 basis points shift in yield curves:
Insurance contracts and reinsurance contracts held
Financial instruments
– 50 basis points shift in yield curves:
Insurance contracts and reinsurance contracts held
Financial instruments
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 CSM
5,911
(6,023)
(112)
(6,630)
6,764
134
8,476
(10,700)
(2,224)
(9,329)
12,031
2,702
5,911
(6,023)
(112)
(6,630)
6,764
134
(713)
–
(713)
934
–
934
Notes:
(1) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the liabilities in
disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets and liabilities. The 2022
comparatives were prepared on the same basis to conform to the presentation for 2023.
(2) The scope of this sensitivity analysis excludes unit-linked investments on the basis that the market risk in respect of unit-linked investments is
generally borne by our customers.
292
AIA GROUP LIMITEDFINANCIAL STATEMENTS
34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Sensitivity analysis on equity risk(1)(2)
An analysis of the Group’s sensitivity to 10 per cent increase or decrease in equity prices at the reporting date, assuming
that all other variables remain constant, is presented below.
US$m
31 December 2023
10 per cent increase in equity prices:
Impact on
profit before
tax
Impact on total
equity (before
the effects of
taxation)
Impact on
allocated equity
(before the
effects of
taxation)
Impact on CSM
Insurance contracts and reinsurance contracts held
(2,998)
(3,039)
(2,998)
Financial instruments
10 per cent decrease in equity prices:
Insurance contracts and reinsurance contracts held
Financial instruments
4,168
1,170
2,996
(4,168)
(1,172)
4,168
1,129
3,039
(4,168)
(1,129)
4,168
1,170
2,996
(4,168)
(1,172)
679
–
679
(694)
–
(694)
US$m
31 December 2022 (restated)
10 per cent increase in equity prices:
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 CSM
Insurance contracts and reinsurance contracts held
(2,702)
(2,744)
(2,702)
Financial instruments
10 per cent decrease in equity prices:
Insurance contracts and reinsurance contracts held
Financial instruments
3,893
1,191
2,703
(3,893)
(1,190)
3,893
1,149
2,744
(3,893)
(1,149)
3,893
1,191
2,703
(3,893)
(1,190)
577
–
577
(579)
–
(579)
Notes:
(1) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the liabilities in
disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets and liabilities. The 2022
comparatives were prepared on the same basis to conform to the presentation for 2023.
(2) The scope of this sensitivity analysis excludes unit-linked investments on the basis that the market risk in respect of unit-linked investments is
generally borne by our customers.
293
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
34. 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 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 except for
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 hedged with cross-currency swaps or foreign
exchange forward contracts.
Exposure to foreign exchange rates(1)(2)
US$m
United States
Dollar
China
Renminbi
Hong Kong
Dollar
Thai
Baht
Singapore
Dollar
Malaysian
Ringgit
31 December 2023
Insurance contracts and reinsurance
contracts held
Assets
Liabilities
Financial instruments
Assets
Liabilities
Net positions of currency derivatives
–
1,564
635
719
1,246
42
(75,807)
(37,088)
(5,934)
(14,874)
(19,854)
(8,113)
118,532
44,699
1,418
19,675
15,954
8,961
(21,447)
(3,222)
(4,769)
(2,040)
(3,370)
(1,649)
(3,387)
390
2,190
2,684
(72)
441
US$m
United States
Dollar
China
Renminbi
Hong Kong
Dollar
Thai
Baht
Singapore
Dollar
Malaysian
Ringgit
31 December 2022 (restated)
Insurance contracts and reinsurance
contracts held
Assets
Liabilities
Financial instruments
Assets
Liabilities
337
1,483
685
1,131
1,154
9
(66,341)
(30,059)
(5,869)
(14,345)
(18,554)
(8,238)
Net positions of currency derivatives
(5,996)
(344)
324
1,996
3,875
105,383
39,337
4,133
19,104
15,414
(20,692)
(3,443)
(2,292)
(2,313)
(2,821)
9,415
(368)
210
Notes:
(1) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the liabilities in
disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets and liabilities. The 2022
comparatives were prepared on the same basis to conform to the presentation for 2023.
(2) The scope of this exposure to foreign exchange rates excludes unit-linked investments on the basis that the market risk in respect of unit-linked
investments is generally borne by our customers.
294
AIA GROUP LIMITEDFINANCIAL STATEMENTS 34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Sensitivity analysis on foreign exchange rate risk(1)(2)
A reasonably possible strengthening or weakening of the following currencies against all other currencies at the reporting
date would have affected the measurement of insurance contracts and reinsurance contracts held and financial instruments
denominated in foreign currency and affected the profit before tax, total equity and CSM by the amounts shown below. This
analysis assumes that all other variables remain constant.
United States
Dollar
China
Renminbi
Hong Kong
Dollar
Thai
Baht
Singapore
Dollar
Malaysian
Ringgit
US$m
31 December 2023
5% strengthening of original currency
Impact on profit before tax
Insurance contracts and reinsurance
contracts held
Financial instruments
Impact on total equity
Insurance contracts and reinsurance
contracts held
Financial instruments
Impact on CSM
Insurance contracts and reinsurance
contracts held
5% strengthening of the US dollar
Impact on profit before tax
Insurance contracts and reinsurance
contracts held
Financial instruments
Impact on total equity
Insurance contracts and reinsurance
contracts held
Financial instruments
Impact on CSM
Insurance contracts and reinsurance
contracts held
(1,055)
1,011
(11)
8
(1,777)
1,894
14
(83)
(94)
(78)
–
27
(6)
(79)
(3)
12
(708)
1,011
(539)
763
(404)
467
818
57
322
148
123
(1,055)
1,011
9
(5)
1,693
(1,804)
(13)
88
89
74
–
(26)
1
94
–
(12)
674
(963)
535
(726)
384
(444)
(779)
(55)
(307)
(143)
(117)
–
–
–
–
–
–
Notes:
(1) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the liabilities in
disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets and liabilities. The 2022
comparatives were prepared on the same basis to conform to the presentation for 2023.
(2) The scope of this sensitivity analysis excludes unit-linked investments on the basis that the market risk in respect of unit-linked investments is
generally borne by our customers.
295
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Sensitivity analysis on foreign exchange rate risk(1)(2) (continued)
US$m
United States
Dollar
China
Renminbi
Hong Kong
Dollar
Thai
Baht
Singapore
Dollar
Malaysian
Ringgit
31 December 2022 (restated)
5% strengthening of original currency
Impact on profit before tax
Insurance contracts and reinsurance
contracts held
Financial instruments
Impact on total equity
Insurance contracts and reinsurance
contracts held
Financial instruments
Impact on CSM
Insurance contracts and reinsurance
contracts held
5% strengthening of the US dollar
Impact on profit before tax
Insurance contracts and reinsurance
contracts held
Financial instruments
Impact on total equity
Insurance contracts and reinsurance
contracts held
Financial instruments
Impact on CSM
Insurance contracts and reinsurance
contracts held
(901)
889
(48)
143
(128)
99
(9)
(14)
(24)
(8)
(4)
(2)
–
–
–
(1,473)
1,778
(249)
108
(669)
939
(583)
823
(415)
463
847
69
303
150
124
(901)
889
39
(127)
105
(66)
7
15
19
25
3
2
–
–
–
1,399
(1,693)
220
(103)
636
(895)
611
(784)
395
(441)
(806)
(64)
(289)
(149)
(118)
Notes:
(1) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the liabilities in
disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets and liabilities. The 2022
comparatives were prepared on the same basis to conform to the presentation for 2023.
(2) The scope of this sensitivity analysis excludes unit-linked investments on the basis that the market risk in respect of unit-linked investments is
generally borne by our customers.
296
AIA GROUP LIMITEDFINANCIAL STATEMENTS
34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Liquidity risk
The Group defines 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 Board approved 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 monthly time steps for 12-month period, as well
as a projection in line with strategic planning. The forward-looking management of liquidity over short to longer-term
horizons allows for the early detection of risks and enables management to action the pre-defined liquidity contingency
plans. The framework is comprised of four pillars:
• Daily Cash Forecasting and Liquidity Adequacy Ratio;
• Structural Liquidity Adequacy Ratio;
• Liquidity Projection over the Strategic Planning Period; 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 liabilities, insurance contract liabilities and reinsurance contract liabilities are
presented below which provides a supplemental long-term view on the Group’s liquidity profile.
297
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Liquidity risk (continued)
Contractual maturities of financial liabilities
US$m
31 December 2023
Borrowings
Obligations under repurchase agreements
Other liabilities excluding lease liabilities
Lease liabilities
Derivative financial instruments
Subtotal
Investment contract liabilities and third-party
interests in consolidated investment funds
Total
Due in
one year
or less
Due after
one year
through
five years
Due after
five years
through
ten years
Due after
ten years
No fixed
maturity(2)
Total
16,365
3,461
3,698
381
8,408
3,706(1)
4,842
4,994
1,546
1,277
3,461
3,537
141
1,991
–
86
221
6,028
–
4
18
186
32,313
10,407
10,041
5,050
–
2
1
203
5,200
–
69
–
–
1,615
9,992
87
264
42,305
10,494
10,305
237
5,287
213
9,191
5,413
10,806
Notes:
(1) Including US$2,410m which fall due after 2 years through 5 years.
(2) Balances with no fixed maturity are repayable on demand as the counterparty has a choice of when the amount is paid.
US$m
31 December 2022 (restated)(3)
Borrowings
Obligations under repurchase agreements
Other liabilities excluding lease liabilities
Lease liabilities
Derivative financial instruments
Subtotal
Investment contract liabilities and third-party
interests in consolidated investment funds
Total
Total
15,664
1,748
3,007
413
9,155
29,987
9,939
39,926
Due in
one year
or less
Due after
one year
through
five years
Due after
five years
through
ten years
Due after
ten years
No fixed
maturity(2)
3,931(1)
3,761
5,945
1,147
880
1,748
2,898
140
1,415
7,081
–
67
249
7,180
11,427
66
262
7,147
11,689
–
12
23
232
4,028
266
4,294
–
2
1
328
6,276
–
28
–
–
1,175
257
9,088
6,533
10,263
Notes:
(1) Including US$2,739m which fall due after 2 years through 5 years.
(2) Balances with no fixed maturity are repayable on demand as the counterparty has a choice of when the amount is paid.
(3) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the liabilities in
disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets and liabilities. The 2022
comparatives were prepared on the same basis to conform to the presentation for 2023.
298
AIA GROUP LIMITEDFINANCIAL STATEMENTS
34. RISK MANAGEMENT (continued)
Investment and financial risks (continued)
Liquidity risk (continued)
Maturity analysis of insurance and reinsurance contract liabilities(1)(2)
Due after
one year
through
two years
Due in
one year
or less
US$m
Total
Due after
two years
through
three years
Due after
three years
through
four years
Due after
four years
through
five years
Due after
five years
31 December 2023
Insurance contract liabilities
155,459
(4,778)
(5,496)
(3,214)
(1,452)
1,172
169,227
Reinsurance contract liabilities
917
59
44
43
41
48
682
US$m
31 December 2022 (restated)
Due in
one year
or less
Total
Due after
one year
through
two years
Due after
two years
through
three years
Due after
three years
through
four years
Due after
four years
through
five years
Due after
five years
Insurance contract liabilities
135,469
(4,010)
(4,397)
(2,270)
Reinsurance contract liabilities
979
27
35
41
(779)
43
772
42
146,153
791
Notes:
(1) At 31 December 2022, the assets and liabilities of Australian S&I were included in the assets in disposal group held for sale and the liabilities in
disposal group held for sale. Therefore, the amounts in the above table exclude the effects on the Australian S&I assets and liabilities. The 2022
comparatives were prepared on the same basis to conform to the presentation for 2023.
(2) The amounts of payable on demand of insurance contracts are US$190,031m as at 31 December 2023 (2022: US$176,195m).
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 2023, material intra-group transactions were mainly related to support services
provided within the Group, a limited number of financing and reinsurance arrangements, collective investment funds that
provide a simple return of capital guarantee and are backed by investment grade fixed income assets, and a limited number
of intra-group transfers of assets and subsidiaries.
299
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 35. 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 2023 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 52 per cent
(2022: 56 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$109m (2022: US$94m). The total expenses relating to these plans recognised in the consolidated
income statement was US$9m (2022: US$10m).
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$139m (2022:
US$128m). 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.
300
AIA GROUP LIMITEDFINANCIAL STATEMENTS 36. 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 years ended 31 December 2023 and 31 December 2022, 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 years ended 31 December 2023 and 31 December 2022, 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.
301
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 36. 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
2023
Year ended
31 December
2022
29,603,948
28,418,958
11,470,894
12,535,139
(6,337,282)
(5,437,310)
(4,824,183)
(5,912,839)
29,913,377
29,603,948
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 share 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 2023
Year ended
31 December 2022
Number of
share options
Weighted
average
exercise price
(HK$)
Number of
share options
Weighted
average
exercise price
(HK$)
23,973,304
1,918,599
(661,786)
(124,945)
25,105,172
19,270,954
66.48
80.73
44.16
83.30
68.07
62.95
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
At the respective dates on which the SOs were exercised, the weighted average share price of the Company was HK$81.27
for the year ended 31 December 2023 (2022: HK$80.70).
302
AIA GROUP LIMITEDFINANCIAL STATEMENTS 36. 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 2023 and 31 December 2022 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 2023
Year ended
31 December 2022
Number of
share options
outstanding
Weighted
average
remaining
contractual life
(years)
Number of
share options
outstanding
Weighted
average
remaining
contractual life
(years)
–
1,692,658
4,396,614
830,436
8,609,199
7,805,626
1,770,639
25,105,172
–
2.12
2.75
3.58
5.36
7.17
7.23
5.32
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
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 2023, eligible employees paid US$39m (2022: US$38m)
to purchase 4,062,855 ordinary shares (2022: 3,815,201 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 2023, eligible agents paid US$20m (2022: US$20m) to purchase 2,143,422 ordinary
shares (2022: 2,061,772 ordinary shares) of the Company under the ASPPs.
303
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 36. 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. Significant
assumptions include expected dividend yield and risk-free interest rate. The value of expected dividends during the vesting
period 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. For performance-based RSUs, the simulation for achievement of market condition depends
on assumptions of expected volatility of the Company’s share and other market comparators as well as the correlations.
These assumptions are estimated based on an analysis of historical data over a period consistent with the expected life of
the RSUs.
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 2023
Share options
Restricted
share units
ESPP Restricted
stock purchase
units
ASPP Restricted
stock subscription
units
3.19%
28%
1.60%
80.73
10
7.47
23.97
3.27%*
3.16% – 4.17%
28%
n/a
1.60% 1.60% – 1.70%
n/a
n/a
n/a
n/a
n/a
n/a
2.87%
n/a
1.60%
n/a
n/a
n/a
63.37
61.72
57.03
Year ended 31 December 2022
Share options
Restricted
share units
ESPP Restricted
stock purchase
units
ASPP Restricted
stock subscription
units
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
2.12%
n/a
1.70%
n/a
n/a
n/a
64.26
73.00
58.32
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.
304
AIA GROUP LIMITEDFINANCIAL STATEMENTS 36. SHARE-BASED COMPENSATION (continued)
Valuation methodology (continued)
The weighted average share price for SO valuation for grants made during the year ended 31 December 2023
is HK$78.95 (2022: HK$79.85). The total fair value of SO granted during the year ended 31 December 2023 is
US$6m (2022: US$7m).
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 2023 is US$77m (2022: US$80m).
37. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL
Directors’ remuneration
The Executive Director receives compensation in the form of salaries, bonuses, contributions to pension schemes, long-
term incentives, housing and other allowances, and benefits in kind subject to applicable laws, rules and regulations.
Bonuses and long-term incentives represent the variable components in the Executive Director’s compensation and are
linked to the performance of the Group and the Executive Director. Details of share-based payment schemes are described
in note 36.
US$
Year ended 31 December 2023
Executive Director
Mr. Lee Yuan Siong(4)
Total
US$
Year ended 31 December 2022
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
– 1,716,746
5,029,000 4,819,618
– 1,716,746
5,029,000 4,819,618
70,224
70,224
– 1,785,500 13,421,088
– 1,785,500 13,421,088
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
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.
305
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 37. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL (continued)
Directors’ remuneration (continued)
The remuneration of Independent Non-executive Directors of the Company at 31 December 2023 and 31 December 2022
are included in the tables below:
Salaries,
allowances
and benefits
in kind(2)
Director’s
fees(1)
Bonuses
Share-based
payments
Pension
scheme
contribution
Other
benefits
Other
payments
Total
US$
Year ended 31 December
2023
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
Professor Lawrence
Juen-Yee Lau
Ms. Swee-Lian Teo(3)
Dr. Narongchai Akrasanee(4)
Mr. Cesar Velasquez
Purisima
Ms. Sun Jie (Jane)
Ms. Mari Elka Pangestu(5)
Mr. Ong Chong Tee(6)
Ms. Nor Shamsiah Mohd
Yunus(7)
860,000
330,000
288,356
350,000
355,000
280,000
216,370
396,685
355,000
330,000
120,986
120,986
67,068
146,721
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 1,006,721
–
–
–
–
–
–
–
–
–
–
–
–
330,000
288,356
350,000
355,000
280,000
216,370
396,685
355,000
330,000
120,986
120,986
67,068
– 4,217,172
Total
4,070,451
146,721
306
AIA GROUP LIMITEDFINANCIAL STATEMENTS 37. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL (continued)
Directors’ remuneration (continued)
US$
Year ended 31 December
2022
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
Professor Lawrence
Juen-Yee Lau
Ms. Swee-Lian Teo(3)
Dr. Narongchai Akrasanee(4)
Mr. Cesar Velasquez
Purisima
Ms. Sun Jie (Jane)
Total
Salaries,
allowances
and benefits
in kind(2)
Director’s
fees(1)
Bonuses
Share-based
payments
Pension
scheme
contribution
Other
benefits
Other
payments
Total
860,000
330,000
280,000
350,000
355,000
280,000
325,000
390,000
355,000
292,767
152,016
–
–
–
–
–
–
–
–
–
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
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) Ms. Swee-Lian Teo retired as Independent Non-executive Director of the Company with effect from 1 September 2023.
(4) US$100,000 (2022: US$100,000) represented remuneration to Dr. Narongchai Akrasanee in respect of his services as Chairman of
Advisory Board of AIA Thailand for the year ended 31 December 2023 included in his fees stated above.
(5) Ms. Mari Elka Pangestu was appointed as Independent Non-executive Director of the Company with effect from 1 July 2023.
(6) Mr. Ong Chong Tee was appointed as Independent Non-executive Director of the Company with effect from 1 July 2023.
(7) Ms. Nor Shamsiah Mohd Yunus was appointed as Independent Non-executive Director of the Company with effect from 21 September
2023.
Remuneration of five highest-paid individuals
The aggregate remuneration of the five highest-paid individuals employed by the Group in each of the years ended 31
December 2023 and 31 December 2022 is presented in the table below.
US$
Year ended
31 December 2023
31 December 2022
Salaries,
allowances
and benefits
in kind(1)
Director’s
fees
Bonuses
Share-based
payments(2)
Pension
scheme
contribution Other benefits
Other
payments(3)
Total
– 5,898,388 10,372,280 12,352,364
– 5,377,073
4,982,273 12,275,886
369,727
317,109
– 1,785,500 30,778,259
– 6,623,926 29,576,267
Notes:
(1) Benefits in the years ended 31 December 2023 and 31 December 2022 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 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.
307
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
37. 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
27,500,001 to 28,000,000
28,500,001 to 29,000,000
29,000,001 to 29,500,000
30,000,001 to 30,500,000
31,500,001 to 32,000,000
41,000,001 to 41,500,000
47,500,001 to 48,000,000
105,000,001 to 105,500,000
105,500,001 to 106,000,000
Year ended
31 December
2023
Year ended
31 December
2022
–
–
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
2023
Year ended
31 December
2022
30,273,575
22,150,292
631,999
623,561
19,053,974
20,966,295
–
2,950,796
49,959,548
46,690,944
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
6,000,001 to 7,000,000
Over 10,000,000
308
Year ended
31 December
2023
Year ended
31 December
2022
–
1
4
5
–
–
1
1
–
–
7
2
1
1
–
1
AIA GROUP LIMITEDFINANCIAL STATEMENTS 38. RELATED PARTY TRANSACTIONS
Remuneration of Directors and key management personnel is disclosed in note 37.
39. 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
2023
As at
31 December
2022
17,624
123
17,747
14,962
105
15,067
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 reassessment. 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.
309
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 40. 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
interest %
interest %
interest %
interest %
Place of
incorporation and
As at
As at
31 December 2023
31 December 2022
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
AIA Philippines Life and General
Insurance Company Inc.
Philippines
Insurance
Insurance
Registered share capital of
100%
RMB3,777,399,440
199,560,671 ordinary shares of
PHP10 each and 67,349,329
treasury shares
100%
–
–
–
–
–
100%
100%
100%
100%
100%
–
–
–
–
–
BPI AIA Life Assurance Corporation
Philippines
Insurance
749,993,979 ordinary shares of
51%
49%
51%
49%
AIA Singapore Private Limited
Singapore
Insurance
1,558,021,163 ordinary shares
100%
PHP1 each and 6,000
treasury shares
AIA Everest Life Company Limited
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 Company
Vietnam
Insurance
Contributed capital of
100%
Limited
VND8,724,420,000,000
–
–
–
–
–
100%
100%
100%
100%
100%
–
–
–
–
–
Bayshore Development Group Limited British Virgin
Islands
Investment
holding
company
100 ordinary shares of US$1
90%
10%
90%
10%
each
AIA Life Insurance Co. Ltd.
South Korea
Insurance
60,328,932 ordinary shares of
100%
AIA New Zealand Limited
New Zealand Insurance
KRW603,289,320,000 issued
share capital
248,217,572 ordinary shares of
NZD863,709,199 issued
share capital
100%
AIA Reinsurance Limited
Bermuda
Reinsurance 250,000 common shares of
100%
US$1 each
–
–
–
100%
100%
100%
–
–
–
Notes:
(1) The Company’s subsidiary.
(2) All of the above subsidiaries are audited by PricewaterhouseCoopers.
All subsidiaries are unlisted.
310
AIA GROUP LIMITEDFINANCIAL STATEMENTS
41. EVENTS AFTER THE REPORTING PERIOD
On 14 March 2024, a Committee appointed by the Board of Directors proposed a final dividend of 119.07 Hong Kong cents
per share (2022: final dividend of 113.40 Hong Kong cents per share).
42. DISPOSAL GROUP HELD FOR SALE
On 24 February 2022, the Group announced it had entered into an agreement to sell its Australian S&I business to
Resolution Life Australasia Limited. The Australian S&I business was a constituent part of the businesses that transferred
to AIA Australia following the acquisition of The Colonial Mutual Life Assurance Society Limited from Commonwealth Bank
of Australia. The assets and liabilities of the Australian S&I business were classified as assets in disposal group held for
sale and liabilities in disposal group held for sale in the consolidated statement of financial position, contributed by the
Australia operating segment. The transaction was completed with statutory transfer approved by the Federal Court of
Australia, effective on 1 July 2023.
311
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 42. DISPOSAL GROUP HELD FOR SALE (continued)
At 31 December 2022, the assets and liabilities in disposal group held for sale were stated at the lower of its carrying
amount and fair value less costs to sell. The assets and liabilities in disposal group held for sale as at 31 December 2022
are summarised below.
US$m
Assets
Intangible assets
Investments in associates and joint ventures
Property, plant and equipment
Investment property
Insurance contract assets
Reinsurance contract assets
Financial investments:
At amortised cost
Debt securities
Loans and deposits
At fair value through other comprehensive income
Debt securities
At fair value through profit or loss
Debt securities
Loans and deposits
Equity shares
In terests 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
Reinsurance 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
24
24
18, 20
19
11
21
22
24
24
25
26
27
19
29
11
30
As at
31 December
2022
(Excluding
disposal group)
Assets and
liabilities in
disposal group
As at
31 December
2022
(Including
disposal group)
3,277
2,056
2,844
4,600
2,037
5,763
1,787
4,566
–
–
–
–
–
–
–
–
3,277
2,056
2,844
4,600
2,037
5,763
1,787
4,566
86,060
37
86,097
77,496
279
23,378
38,577
568
232,711
229
117
4,524
8,020
4,293
270,471
181,851
384
9,092
11,206
1,748
8,638
153
3,409
467
4,264
4,111
225,323
831
–
2,313
–
62
3,243
25
9
67
949
(4,293)
–
1,048
22
2,894
–
–
101
–
1
–
45
(4,111)
–
78,327
279
25,691
38,577
630
235,954
254
126
4,591
8,969
–
270,471
182,899
406
11,986
11,206
1,748
8,739
153
3,410
467
4,309
–
225,323
312
AIA GROUP LIMITEDFINANCIAL STATEMENTS
43. EFFECTS OF ADOPTION OF IFRS 9, IFRS 17 AND AMENDMENT TO IAS 16
Except for the changes below, the Group has consistently applied the accounting policies as set out in note 2 to all periods
presented in these consolidated financial statements. The Group has adopted IFRS 9, IFRS 17 and amendment to IAS 16,
including any consequential amendments to other standards, with a date of initial adoption of 1 January 2023. The
following table set out the impact of initial adoption of these standards on the Group’s equity at 1 January 2022.
US$m
Equity
Share capital
Employee share-based trusts
Other reserves
Retained earnings
Fair value reserve
Foreign currency translation reserve
Insurance finance 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
As at
31 December 2021
(As previously
reported)
Impact upon initial
adoption of IFRS 9,
IFRS 17 and
amendment to
IAS 16
As at
1 January 2022
(restated)
14,160
(225)
(11,841)
49,984
8,407
(1,068)
–
1,069
(19)
8,389
60,467
467
60,934
–
–
–
(987)
(1,766)
–
(1,895)
148
56
(3,457)
(4,444)
17
(4,427)
14,160
(225)
(11,841)
48,997
6,641
(1,068)
(1,895)
1,217
37
4,932
56,023
484
56,507
IFRS 17 Insurance Contracts
Recognition, measurement and presentation of insurance contracts
IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts,
reinsurance contracts held and investment contracts with DPF. It introduces a model that measures groups of contracts
based on the Group’s estimates of the present value of future cash flows that are expected to arise as the Group fulfils the
contracts, an explicit risk adjustment for non-financial risk and a CSM.
Under IFRS 17, insurance revenue in each reporting period represents the changes in the liabilities for remaining coverage
that relate to services for which the Group expects to receive consideration and an allocation of premiums that relate to
recovering insurance acquisition cash flows. In addition, investment components are excluded from insurance revenue
and insurance service expenses.
The Group no longer applies shadow accounting to insurance-related assets and liabilities.
Insurance finance income or expenses, disaggregated between profit or loss and other comprehensive income for the
relevant business in participating funds and other participating business with distinct portfolios, other policyholder and
shareholder and unit-linked funds, are presented separately from insurance revenue and insurance service expenses.
The Group applies the premium allocation approach to simplify the measurement of certain contracts. When measuring
liabilities for remaining coverage, the premium allocation approach is similar to the Group’s previous accounting treatment;
however, when measuring liabilities for incurred claims, the Group now discounts cash flows that are expected to occur
more than one year after the date on which the claims are incurred and includes an explicit risk adjustment for non-
financial risk, as appropriate.
313
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
43. EFFECTS OF ADOPTION OF IFRS 9, IFRS 17 AND AMENDMENT TO IAS 16 (continued)
IFRS 17 Insurance Contracts (continued)
Recognition, measurement and presentation of insurance contracts (continued)
Previously, all acquisition costs were recognised and presented as separate assets from the related insurance contracts
(deferred acquisition costs) and are subsequently amortised over the expected life of the contracts. Under IFRS 17, only
insurance acquisition cash flows that arise before the recognition of the related insurance contracts are recognised as
separate assets and are tested for recoverability. These assets are presented as part of the carrying amount of the related
portfolio of contracts and are subsequently derecognised when respective groups of contracts are recognised and hence
included in the CSM measurement of that group.
Income and expenses from reinsurance contracts held other than insurance finance income or expenses are now presented
as a single net amount in profit or loss. Previously, amounts recovered from reinsurers and reinsurance expenses were
presented separately.
For an explanation of how the Group accounts for insurance contracts and reinsurance contracts held under IFRS 17, see
note 2.3.
Transition
Changes in accounting policies resulting from the adoption of IFRS 17 have been applied full retrospective approach to the
extent practicable. Under the full retrospective approach, at 1 January 2022, the Group:
–
–
identified, recognised and measured each group of insurance contracts and reinsurance contracts held as if IFRS 17
had always been applied;
identified, recognised and measured any assets for insurance acquisition cash flows as if IFRS 17 had always been
applied, except that the recoverability assessment in note 2.3.5 was not applied before 1 January 2022;
– derecognised previously reported balances that would not have existed if IFRS 17 had always been applied. These
included 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, etc. Under IFRS 17, these
are included in the measurement of the insurance contracts;
– recognised any resulting net difference in equity. The carrying amount of goodwill from previous business combinations
was not adjusted.
314
AIA GROUP LIMITEDFINANCIAL STATEMENTS 43. EFFECTS OF ADOPTION OF IFRS 9, IFRS 17 AND AMENDMENT TO IAS 16 (continued)
IFRS 17 Insurance Contracts (continued)
Transition (continued)
Insurance contracts and reinsurance contracts held
For certain groups of contracts, the Group applied the modified retrospective approach or the fair value approach in IFRS
17 to identify, recognise and measure certain groups of contracts at 1 January 2022 because it was impracticable to apply
the full retrospective approach.
The Group considered the full retrospective approach impracticable for contracts in these segments under any of the
following circumstances.
– The effects of retrospective application were not determinable because the information required had not been collected
(or had not been collected with sufficient granularity) and was unavailable because of system migrations, data retention
requirements or other reasons.
– The full retrospective approach required assumptions about what Group management’s intentions would have been in
previous periods or significant accounting estimates that could not be made without the use of hindsight, the application
of full retrospective approach is considered as impracticable if such assumptions and estimates were not determinable.
Irrespective of the transition approach used, the following items have not been applied retrospectively.
– When the Group uses derivatives to mitigate the financial risk from interest rate guarantees in traditional participating
contracts and equity guarantees in variable annuity contracts, the option to exclude changes in the effect of that
financial risk from the CSM has not been applied for periods before 1 January 2023.
– The consequential amendments to IFRS 3, Business Combinations introduced by IFRS 17 require the Group to classify
contracts acquired as insurance contracts based on the contractual terms and other factors at the date of acquisition.
This requirement was not applied to business combinations before 1 January 2023, for which the Group classified
contracts acquired as insurance contracts based on the conditions at contract inception.
To indicate the effect of applying the modified retrospective approach or the fair value approach on the CSM, insurance
revenue and insurance finance income or expenses, the Group has provided additional disclosures in notes 2.3.9, 8, 9 and
24.
Assets for insurance acquisition cash flows
The Group also applied the modified retrospective approach or the fair value approach to identify, recognise and measure
certain assets for insurance acquisition cash flows at 1 January 2022.
It was impracticable to apply the full retrospective approach because:
– data had not been collected with sufficient granularity;
–
information required to identify fixed and variable overheads as relating to acquisition activities and to allocate them to
groups of contracts was not available; or
– original assumptions about the manner in which the Group would have expected insurance acquisition cash flows to
be recovered, which were required to allocate them to renewals, could not be made without the use of hindsight.
Effect of initial adoption
The Group has applied the transition provisions in IFRS 17 and has not disclosed the impact of the adoption of IFRS 17 on
each financial statement line item.
315
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION 43. EFFECTS OF ADOPTION OF IFRS 9, IFRS 17 AND AMENDMENT TO IAS 16 (continued)
IFRS 9 Financial Instruments
Classification of financial assets and financial liabilities
IFRS 9 includes three principal classification categories for financial assets: measured at amortised cost, fair value through
other comprehensive income and fair value through profit or loss. The classification of financial assets under IFRS 9 is
generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.
IFRS 9 eliminates the previous IAS 39 categories of held-to-maturity investments, loans and receivables, and available for
sale financial assets. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of
IFRS 9 are not separated. Instead, the hybrid financial instrument as a whole is assessed for classification.
For explanations of how the Group classifies and measures financial assets and accounts for related gains and losses
under IFRS 9, see note 2.5.
IFRS 9 has not had a significant effect on the Group’s accounting policies for financial liabilities and hedge accounting.
Impairment of financial assets
IFRS 9 replaces the “incurred loss” model in IAS 39 with a forward-looking “expected credit loss” model. The new
impairment model applies to financial assets measured at amortised cost, debt securities at fair value through other
comprehensive income, trade receivables and lease receivables. Under IFRS 9, credit losses are recognised earlier than
under IAS 39 (see note 2.5.3).
Transition
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described
below.
– The comparative period has been restated. As permitted under IFRS 17, the Group has elected to apply classification
overlay in the comparative period presented. The classification overlay has been 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.
– The following assessments have been made on the basis of the facts and circumstances that existed at 1 January 2023.
– The determination of the business model within which a financial asset is held.
– The designation and revocation of previous designations of certain financial assets and financial liabilities as
measured at fair value through profit or loss.
–
If an investment in a debt security had low credit risk at 1 January 2023, then the Group determined that the credit risk
on the asset had not increased significantly since initial recognition.
As permitted by IFRS 7, the Group has not disclosed information about the line item amounts that are reported in accordance
with the classification and measurement (including impairment) requirements of IFRS 9 for 2022 and those that would
have been reported in accordance with the classification and measurement requirements of IAS 39 for 2023.
316
AIA GROUP LIMITEDFINANCIAL STATEMENTS 43. EFFECTS OF ADOPTION OF IFRS 9, IFRS 17 AND AMENDMENT TO IAS 16 (continued)
IFRS 9 Financial Instruments (continued)
Effect of initial adoption
Classification of financial assets and financial liabilities
The following table shows the original measurement category and carrying amount under IAS 39 and the new measurement
category and carrying amount under IFRS 9 for each class of the Group’s financial assets and financial liabilities.
US$m
Financial assets
Debt securities
Debt securities
Debt securities
Debt securities
Debt securities
Debt securities
Debt securities
Loans and deposits
Loans and deposits
Equity shares
Original classification
under IAS 39
New classification
under IFRS 9
Original carrying
amount under
IAS 39 as at
31 December
2022
New carrying
amount under
IFRS 9 as at
1 January
2023
FVTPL
FVTPL (mandatory)
Available for sale
FVTPL (mandatory)
FVTPL
FVTPL (designated)
Available for sale
FVTPL (designated)
FVTPL
Available for sale
Available for sale
Loans and receivables
FVOCI
FVOCI
Amortised cost
Amortised cost
Loans and receivables
FVTPL (designated)
6,802
680
28,634
42,211
1,226
84,871
1,519
4,582
250
6,802
680
28,634
42,211
1,226
84,871
1,787
4,566
279
FVTPL
FVTPL (mandatory)
25,691
25,691
FVTPL (mandatory)
38,577
38,577
Interests in investment funds and
exchangeable loan notes
Derivative assets
FVTPL
FVTPL
Accrued investment income
Loans and receivables
Receivables
Loans and receivables
FVTPL (mandatory)
Amortised cost
Amortised cost
Cash and cash equivalents
Loans and receivables
FVTPL (mandatory)
Cash and cash equivalents
Loans and receivables
Amortised cost
Total financial assets
Financial liabilities
Investment contract liabilities(1)
FVTPL
FVTPL (designated)
Investment contract liabilities(1)
Not applicable
FVTPL (designated)
Investment contract liabilities(1)
Borrowings
Obligations under repurchase
agreements
Derivative liabilities
Trade and other payables
Trade and other payables
Third-party interests in consolidated
investment funds
Total financial liabilities
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
FVTPL
FVTPL (mandatory)
Amortised cost
Not applicable
Amortised cost
Amortised cost
FVTPL
FVTPL (designated)
630
1,752
1,743
2,248
6,721
630
1,752
1,718
2,248
6,721
248,137
248,393
9,441
–
530
9,441
2,015
530
11,206
11,206
1,748
8,739
2,913
–
865
35,442
1,748
8,739
2,913
137
865
37,594
Note:
(1) For the purpose of consistency in preparation of the investment contract liabilities to the statement of financial position, the balance includes
US$230m of deferred fee income that are not carried at FVTPL.
317
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
43. EFFECTS OF ADOPTION OF IFRS 9, IFRS 17 AND AMENDMENT TO IAS 16 (continued)
IFRS 9 Financial Instruments (continued)
Effect of initial adoption (continued)
Classification of financial assets and financial liabilities (continued)
The Group’s accounting policies on the classification of financial instruments under IFRS 9 are set out in note 2.5. The
application of these policies resulted in the reclassifications set out in the table above and explained below.
a. Under IAS 39, certain debt securities were designated as at fair value through profit or loss because the Group managed
them on a fair value basis or such designation eliminates or significantly reduces a measurement or recognition
inconsistency. Under IFRS 9, these assets are mandatorily measured at fair value through profit or loss because they
are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial
assets or their contractual cash flows do not represent solely payments of principal and interest on the principal amount
outstanding.
b. Under IAS 39, certain debt securities that were classified as available for sale financial assets; under IFRS 9, a portion
of these assets are mandatorily measured at fair value through profit or loss either because their contractual cash flows
do not represent solely payments of principal and interest on the principal amount outstanding or they are neither held
to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets. Some of
these debt securities are designated as at fair value through profit or loss to eliminate or significantly reduce a
measurement or recognition inconsistency that would otherwise arise, while others are classified as fair value through
other comprehensive income based on the criteria in IFRS 9.
c. There are some debt securities being designated as at fair value through profit or loss under IAS 39. The Group has
revoked the designation to measure them at fair value through profit or loss upon the adoption of IFRS 9 because there
is no longer a significant accounting mismatch arising from the securities as a result of adoption of IFRS 17. These
assets are classified as fair value through other comprehensive income based on the criteria in IFRS 9.
d. Certain debt securities that were classified as available for sale under IAS 39 are held within a business model whose
objective is to hold assets to collect the contractual cash flows and they have contractual cash flows that are solely
payments of principal and interest on the principal amount outstanding. Therefore, these assets are measured at
amortised cost under IFRS 9.
e. Under IAS 39, equity shares, interests in investment funds and exchangeable loan notes were designated as at fair
value through profit or loss because they are managed on a fair value basis. Under IFRS 9, these assets are mandatorily
measured at fair value through profit or loss because they do not give rise to cash flows that are solely payments of
principal and interest on the principal amount outstanding and the Group has not elected to measure them at fair value
through other comprehensive income.
f. Certain cash equivalents that were classified as loans and receivables under IAS 39 are mandatorily measured at fair
value through profit or loss under IFRS 9 because the contractual cash flows do not represent solely payments of
principal and interest on the principal amount outstanding.
g. Certain financial assets and liabilities recognised upon the adoption of IFRS 9 are designated at FVTPL because such
designation eliminates or significantly reduces measurement inconsistency.
318
AIA GROUP LIMITEDFINANCIAL STATEMENTS 43. EFFECTS OF ADOPTION OF IFRS 9, IFRS 17 AND AMENDMENT TO IAS 16 (continued)
IFRS 9 Financial Instruments (continued)
Effect of initial adoption (continued)
Classification of financial assets and financial liabilities (continued)
There are no changes in carrying amounts of equity shares, interests in investment funds, exchangeable loan notes,
derivative assets and financial liabilities except for investment contract liabilities at fair value through profit or loss and
payables under IAS 39 to the carrying amounts under IFRS 9. The following table reconciles the carrying amounts of other
financial assets, investment contract liabilities at fair value through profit or loss and payables that there are reclassifications
and/or remeasurement on transition to IFRS 9 on 1 January 2023.
US$m
Financial assets
Financial assets measured at fair value through
profit or loss
Debt securities
Brought forward
Reclassified from available for sale
Reclassified to fair value through other comprehensive
income
Carried forward
Loans and deposits
Brought forward
Reclassified from amortised cost
Remeasurement
Carried forward
Cash and cash equivalents
Brought forward
Reclassified from amortised cost
Carried forward
Total financial assets measured at fair value through
profit or loss
Debt securities measured at fair value through
other comprehensive income
Debt securities
Reclassified from fair value through profit or loss
Reclassified from available for sale
Carried forward
Total debt securities measured at fair value through
other comprehensive income
Available for sale debt securities
Brought forward
Reclassified to fair value through
other comprehensive income
Reclassified to fair value through profit or loss
Reclassified to amortised cost
31 December
2022
IAS 39
Reclassification
Remeasurement
1 January
2023
IFRS 9
36,662
–
–
–
–
–
–
–
–
–
–
–
42,891
(1,226)
–
–
250
–
–
–
2,248
–
–
–
–
–
–
–
29
–
–
–
–
–
–
–
78,327
–
–
–
279
–
–
2,248
36,662
44,163
29
80,854
–
–
–
–
1,226
84,871
–
86,097
129,281
–
–
–
–
(84,871)
(42,891)
(1,519)
–
–
–
–
–
–
–
–
–
–
–
86,097
86,097
–
–
–
–
–
319
Total available for sale debt securities
129,281
(129,281)
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
43. EFFECTS OF ADOPTION OF IFRS 9, IFRS 17 AND AMENDMENT TO IAS 16 (continued)
IFRS 9 Financial Instruments (continued)
Effect of initial adoption (continued)
Classification of financial assets and financial liabilities (continued)
31 December
2022
IAS 39
Reclassification
Remeasurement
1 January
2023
IFRS 9
–
–
1,787
–
–
–
4,566
–
1,752
–
–
1,718
–
–
6,721
16,544
–
268
–
–
–
(16)
–
–
–
–
(25)
–
–
–
–
227
–
2,015
–
–
–
11,456
2,015
11,456
–
137
–
137
–
–
3,050
3,050
–
–
–
4,832
–
–
–
1,752
–
1,743
–
–
8,969
–
–
17,296
9,441
–
–
9,441
2,913
–
–
2,913
1,519
–
–
–
(250)
–
–
–
–
–
–
–
–
(2,248)
–
(979)
–
–
–
–
–
–
–
–
US$m
Financial assets measured at amortised cost
Debt securities
Reclassified from available for sale
Remeasurement
Carried forward
Loans and deposits
Brought forward: Loans and receivables
Reclassified to fair value through profit or loss
Remeasurement
Carried forward
Accrued investment income
Brought forward: Loans and receivables
Carried forward
Receivables
Brought forward: Loans and receivables
Remeasurement
Carried forward
Cash and cash equivalents
Brought forward: Loans and receivables
Reclassified to fair value through profit or loss
Carried forward
Total financial assets measured at amortised cost
Financial liabilities
Investment contract liabilities measured at
fair value through profit or loss
Investment contract liabilities
Brought forward
Recognised on transition to IFRS 17
Carried forward
Total investment contract liabilities measured at
fair value through profit or loss
Trade and other payables measured at amortised cost
Trade and other payables
Brought forward
Recognised on transition to IFRS 17
Carried forward
Total trade and other payables measured at
amortised cost
320
AIA GROUP LIMITEDFINANCIAL STATEMENTS
43. EFFECTS OF ADOPTION OF IFRS 9, IFRS 17 AND AMENDMENT TO IAS 16 (continued)
IFRS 9 Financial Instruments (continued)
Effect of initial adoption (continued)
Classification of financial assets and financial liabilities (continued)
The following table summarises the effects of the reclassification of (i) debt securities measured at fair value through
profit or loss to fair value through other comprehensive income category and (ii) debt securities reclassified to amortised
cost category as a result of the transition to IFRS 9.
Reclassification from FVTPL to FVOCI
US$m
Fair value at 31 December
Fair value losses that would have been recognised in the profit or loss during the year
if the financial asset had not been reclassified
Effective interest rate determined on 1 January
Interest revenue recognised
Reclassifications to amortised cost
US$m
From available for sale
Fair value at 31 December
Fair value losses that would have been recognised in the profit or loss during the year
if the financial asset had not been reclassified
Fair value gains that would have been recognised in the other comprehensive income during the year
if the financial asset had not been reclassified
2023
1,002
(8)
3.8%
49
2023
1,443
(2)
17
Impairment of financial assets
The following table reconciles the closing impairment allowance in accordance with IAS 39 as at 31 December 2022 with
the opening loss allowance determined in accordance with IFRS 9 as at 1 January 2023.
US$m
Debt securities at FVOCI under IFRS 9:
from available for sale under IAS 39
Financial assets at amortised cost under IFRS 9:
from loans and receivables under IAS 39
from available for sale under IAS 39
31 December
2022
IAS 39
Reclassification
Remeasurement
78
11
–
89
–
–
–
–
222
41
6
269
1 January
2023
IFRS 9
300
52
6
358
321
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
43. EFFECTS OF ADOPTION OF IFRS 9, IFRS 17 AND AMENDMENT TO IAS 16 (continued)
Amendment to IAS 16 Property, Plant and Equipment
At the same time as IFRS 17 was issued, an amendment was made to IAS 16 to allow for measuring own used properties
using the fair value model. On adoption of IFRS 17, the Group applied this election and changed its accounting policy for
measuring its own used properties that are solely held as underlying items of insurance contracts with direct participation
features from revaluation model to fair value model to reduce accounting mismatches with that for the corresponding
insurance contracts. As a result of this change, which was adopted on a retrospective basis, revaluation gains on property
held for own use that have been accumulated in other comprehensive income of US$221m at 1 January 2022 was
reclassified from property revaluation reserve to retained earnings. For the year ended 31 December 2023, net fair value
losses of property held for own use measured at fair value model of US$50m (2022: net fair value losses of property held
for own use measured at fair value model of US$6m) was included in other investment return in the consolidated income
statement.
Impact on earnings per share
Upon the initial adoption of IFRS 9 and IFRS 17, together with the amendment to IAS 16, the impact to basic and diluted
earnings per share is as follows.
US cents
Net profit per share
Basic
Diluted
Operating profit after tax per share
Basic
Diluted
Year ended
31 December
2022
(As previously
reported)
Impact of
changes in
accounting
policies
Year ended
31 December
2022
(restated)
2.36
2.36
53.40
53.36
25.56
25.54
0.43
0.43
27.92
27.90
53.83
53.79
322
AIA GROUP LIMITEDFINANCIAL STATEMENTS 44. STATEMENT OF FINANCIAL POSITION OF THE COMPANY
US$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
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
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
2023
As at
31 December
2022
22,506
21,580
3,970
7,151
502
57
4,529
895
126
–
3,668
31,724
2,156
1
9,308
886
40
63
1,298
33,175
12,257
11,799
42
261
1
109
12,560
11,909
14,176
14,171
(367)
390
4,853
112
19,164
31,724
(290)
351
6,990
44
21,266
33,175
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$494m (2022: US$833m) 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$2,112m (2022: US$4,914m) and China Government bonds of US$1,858m (2022: US$2,237m)
as at 31 December 2023.
(4) The promissory notes from subsidiaries are repayable on demand.
Approved and authorised for issue by the Board of Directors on 14 March 2024.
Lee Yuan Siong
Director
Edmund Sze-Wing Tse
Director
323
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICY INFORMATION
45. STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
US$m
Share capital
Employee
share-based
trusts
Other
reserves
Retained
earnings
Amounts
reflected in other
comprehensive
income
Total
equity
Balance at 1 January 2023
14,171
(290)
351
Net profit
Fair value gains on debt securities at fair
value through other comprehensive
income
Fair value gains on debt securities at fair
value through other comprehensive
income transferred to profit or loss on
disposal
Dividends
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
–
–
–
–
–
5
–
–
–
Balance at 31 December 2023
14,176
–
–
–
–
–
–
–
(115)
38
(367)
–
–
–
–
–
–
77
–
(38)
390
6,990
3,793
44
–
21,266
3,793
–
–
(2,293)
(3,637)
–
–
–
–
132
132
(64)
–
–
–
–
–
–
(64)
(2,293)
(3,637)
5
77
(115)
–
4,853
112
19,164
US$m
Share capital
Employee
share-based
trusts
Other
reserves
Retained
earnings
Amounts
reflected in other
comprehensive
income
9,519
3,300
125
–
Total
equity
23,888
3,300
–
–
(2,259)
(3,570)
–
–
–
–
(222)
(222)
141
–
–
–
–
–
–
141
(2,259)
(3,570)
11
80
(103)
–
6,990
44
21,266
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
324
AIA GROUP LIMITEDFINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY EMBEDDED VALUE
INFORMATION AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2023
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 329 to 355,
comprises:
•
•
the consolidated EV results as at and for the year ended 31 December 2023;
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 2023 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.
325
ANNUAL REPORT 2023INDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY EMBEDDED VALUE INFORMATIONFINANCIAL STATEMENTSOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION Other Matter
The Group has prepared a separate set of consolidated financial statements for the year ended 31
December 2023 in accordance with Hong Kong Financial Reporting Standards issued by the
HKICPA and IFRS Accounting Standards issued by the International Accounting Standards Board,
on which we issued a separate auditor’s report to the shareholders of the Company dated 14
March 2024.
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.
326
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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.
327
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONINDEPENDENT AUDITOR’S REPORT ON THE SUPPLEMENTARY EMBEDDED VALUE INFORMATION 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
14 March 2024
328
AIA GROUP LIMITEDFINANCIAL STATEMENTS CAUTIONARY STATEMENTS CONCERNING SUPPLEMENTARY EMBEDDED VALUE INFORMATION
This report includes non-IFRS results and should not be viewed as a substitute for IFRS results.
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.
329
ANNUAL REPORT 2023SUPPLEMENTARY EMBEDDED VALUE INFORMATIONFINANCIAL STATEMENTSOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 1. SUMMARY
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 2.7 of this report.
Effective from 1 January 2023, the Financial Supervisory Service (FSS) has announced a new capital adequacy framework
(Korean Insurance Capital Standard (K-ICS)) for Korean insurers. Further the Korean local statutory basis, referred to as
the Statutory Accounting Principles (SAP), has also been changed to align to IFRS 17. The effects of these changes have
been reflected in the Group’s EV and VONB results with effect from 1 January 2023.
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 are based on the basic number of ordinary shares outstanding
as at the specified point in time, as disclosed in the consolidated financial statements.
330
AIA GROUP LIMITEDFINANCIAL STATEMENTS 1. SUMMARY (continued)
Summary of Key Metrics(1) (US$ millions)
EV Equity
EV Equity per share (US$)
EV
EV per share (US$)
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)
As at
31 December
2023
As at
31 December
2022
Change
CER
Change
AER
70,153
6.17
67,447
5.94
16,329
32,009
35,438
71,202
6.07
68,865
5.87
17,850
33,751
35,114
Year ended
31 December
2023
Year ended
31 December
2022
4,034
7,650
52.6%
8,890
12.9%
6,041
3,092
5,407
57.0%
6,845
9.4%
6,039
(1)%
2%
(2)%
2%
(8)%
(5)%
1%
YoY
CER
33%
45%
(1)%
2%
(2)%
1%
(9)%
(5)%
1%
YoY
AER
30%
41%
(4.5) pps
(4.4) pps
33%
3.4 pps
2%
30%
3.5 pps
–
Note:
(1) The results are after adjustment to reflect the consolidated reserving and capital requirements and the present value of future after-tax unallocated
Group Office expenses.
331
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 2. EMBEDDED VALUE RESULTS
2.1 Embedded Value by Business Unit
The EV as at 31 December 2023 is presented consistently with the segment information in the consolidated financial
statements.
Summary of EV by Business Unit (US$ millions)
Business Unit
AIA China
AIA Hong Kong
AIA Thailand
AIA Singapore
AIA Malaysia
Other Markets(2)
Group Corporate Centre
Subtotal
Adjustment to reflect consolidated
reserving and capital requirements(3)
After-tax value of unallocated Group
Office expenses
Total EV (before non-controlling interests)
Non-controlling interests
Total EV
Goodwill and other intangible assets(4)
Total EV Equity
As at 31 December 2023
ANW(1)
VIF before
CoC
5,439
12,523
4,508
2,899
1,169
5,935
4,274
8,227
15,098
4,971
5,126
2,270
4,056
–
CoC
140
1,315
862
652
207
1,459
–
VIF after
CoC
8,087
13,783
4,109
4,474
2,063
2,597
–
EV
13,526
26,306
8,617
7,373
3,232
8,532
4,274
36,747
39,748
4,635
35,113
71,860
(4,368)
2,816
597
2,219
(2,149)
–
32,379
(370)
32,009
(1,625)
40,939
(298)
40,641
–
5,232
(29)
5,203
(1,625)
35,707
(269)
35,438
(1,625)
68,086
(639)
67,447
2,706
70,153
332
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. EMBEDDED VALUE RESULTS (continued)
2.1 Embedded Value by Business Unit (continued)
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(3)
After-tax value of unallocated Group
Office expenses
Total EV (before non-controlling interests)
Non-controlling interests
Total EV
Goodwill and other intangible assets(4)
Total EV Equity
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
2,337
71,202
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 in South Korea (K-ICS and SAP) effective from 1 January 2023.
(3) Adjustment reflects the consolidated reserving and capital requirements as described in Section 4.4 of this report.
(4) Consistent with the consolidated financial statements, shown net of tax, amounts attributable to participating funds and non-controlling interests.
333
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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)(1)
Shareholders’ allocated equity
Fair value reserve
Insurance finance reserve
IFRS equity attributable to shareholders of the Company
Elimination of deferred acquisition and origination costs assets
Difference between policy liabilities calculated and reported under IFRS®
Accounting Standards and local statutory policy liabilities(2)
Difference between net policy liabilities calculated and reported under IFRS
Accounting Standards 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
2023
As at
31 December
2022
44,754
516
(4,159)
41,111
–
(2,149)
(2,149)
(63)
(3,615)
980
113
36,377
(4,368)
32,009
44,805
(6,709)
–
38,096
(30,046)
28,831
(1,215)
112
(3,277)
2,692
101
36,509
(2,758)
33,751
Notes:
(1) The amounts as at 31 December 2023 presented in this section are after the adoption of IFRS 9 and IFRS 17. The amounts as at 31 December 2022
presented are under IFRS 4 and IAS 39, and these are in line with the consolidated financial statements in the Company’s Annual Report 2022.
(2) Includes the effects of the change in solvency regime in South Korea (K-ICS and SAP) effective from 1 January 2023.
2.3 Reconciliation of Free Surplus from ANW
Derivation of Free Surplus from ANW (US$ millions)
As at 31 December 2023
As at 31 December 2022
Business Unit
Consolidated
Business Unit
Consolidated
ANW
36,377
32,009
36,509
33,751
Adjustment for certain assets not eligible for regulatory
capital purposes
Less: Required capital
Free surplus(1)
(503)
12,565
23,309
(503)
15,177
16,329
(1,482)
11,672
23,355
(1,482)
14,419
17,850
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.
334
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 2023
Undiscounted
Discounted
20,876
22,070
21,897
19,922
204,392
289,157
17,032
12,103
8,081
4,963
8,436
50,615
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
The profile of distributable earnings is shown on an undiscounted and discounted basis. The discounted value of after-tax
distributable earnings of US$50,615 million (2022: US$49,533 million) plus the free surplus of US$16,329 million (2022:
US$17,850 million) and the non-eligible assets excluded in the free surplus calculation of US$503 million (2022: US$1,482
million) as shown in Section 2.3 of this report is equal to the EV of US$67,447 million (2022: US$68,865 million) shown in
Section 2.1 of this report.
335
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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 2023 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 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 2023 was US$4,034 million, an increase of US$942 million, or 33 per
cent, from US$3,092 million for the year ended 31 December 2022.
Summary of VONB by Business Unit (US$ millions)
Business Unit
AIA China
AIA Hong Kong
AIA Thailand
AIA Singapore
AIA Malaysia
Other Markets(1)
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 2023
Year ended 31 December 2022
VONB
before
CoC
1,174
1,498
751
413
336
547
VONB
after
CoC
1,037
1,430
713
394
319
406
VONB
before
CoC
977
849
627
364
327
530
CoC
137
68
38
19
17
141
VONB
after
CoC
916
787
585
349
308
420
CoC
61
62
42
15
19
110
4,719
420
4,299
3,674
309
3,365
(43)
–
(43)
(46)
6
(52)
4,676
420
4,256
3,628
315
3,313
expenses
(187)
–
(187)
(192)
–
(192)
Total before non-controlling interests
(Consolidated)
Non-controlling interests
Total
4,489
(39)
4,450
420
(4)
416
4,069
(35)
4,034
3,436
(30)
3,406
315
(1)
314
3,121
(29)
3,092
Note:
(1) The VONB for the year ended 31 December 2023 has reflected the effects of the change in solvency regime in South Korea (K-ICS and SAP)
effective from 1 January 2023.
336
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 2023.
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 2023 was 52.6 per cent compared with 57.0 per cent for the year
ended 31 December 2022. The Group PVNBP margin for the year ended 31 December 2023 was 10 per cent compared
with 10 per cent for the year ended 31 December 2022.
Breakdown of VONB, ANP, VONB Margin and PVNBP Margin (US$ millions)
VONB
after CoC
ANP
VONB
margin
PVNBP
margin
Year
Values for 2023
Twelve months ended 31 December 2023
4,034
7,650
52.6%
Values for 2022
Twelve months ended 31 December 2022
3,092
5,407
57.0%
Quarter
Values for 2023
Three months ended 31 March 2023
Three months ended 30 June 2023
Three months ended 30 September 2023
Three months ended 31 December 2023
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
1,046
983
994
1,011
853
683
741
815
1,998
1,986
1,938
1,728
1,567
1,211
1,271
1,358
52.3%
49.3%
51.2%
58.2%
54.4%
56.2%
58.1%
59.5%
10%
10%
10%
9%
10%
11%
10%
10%
10%
10%
337
ANNUAL REPORT 2023OVERVIEWFINANCIAL 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
AIA Hong Kong
AIA Thailand
AIA Singapore
AIA Malaysia
Other Markets(1)
Total before unallocated Group Office
expenses (Business Unit)
Adjustment to reflect consolidated
reserving and capital requirements
Total before unallocated Group Office
expenses (Consolidated)
After-tax value of unallocated Group
Office expenses
Total
Year ended 31 December 2023
Year ended 31 December 2022
VONB
excluding
pension
1,037
1,384
713
394
318
404
VONB
margin
51.3%
57.5%
93.3%
67.2%
67.3%
28.9%
VONB
excluding
pension
916
749
585
349
307
418
ANP
2,023
2,407
765
586
473
1,396
ANP
1,319
1,078
655
531
440
1,384
VONB
margin
69.5%
69.5%
89.1%
65.7%
69.9%
30.2%
4,250
7,650
55.6%
3,324
5,407
61.5%
(42)
–
(52)
–
4,208
7,650
55.0%
3,272
5,407
60.5%
(187)
4,021
–
7,650
52.6%
(192)
3,080
–
5,407
57.0%
Note:
(1) The VONB for the year ended 31 December 2023 has reflected the effects of the change in solvency regime in South Korea (K-ICS and SAP)
effective from 1 January 2023.
338
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 2023
Year ended 31 December 2022
YoY AER
ANW
VIF
EV
ANW
VIF
EV
EV
33,751
35,114
68,865
33,302
39,685
72,987
Investment return variances
(873)
(1,917)
(2,790)
(5,893)
Opening EV Equity
Removal of goodwill and other
intangible assets(1)
Opening EV
Effect of acquisitions
Release of resilience margins
Impact of HKRBC early adoption
(238)
–
–
–
–
–
VONB
(45)
4,079
Expected return on EV
Operating experience variances
Operating assumption changes
Finance costs
EV operating profit
5,115
97
286
(407)
5,046
112
(22)
(325)
–
3,844
(6)
506
4,673
(2,293)
(3,637)
(72)
(175)
(537)
(1,075)
315
–
–
–
9
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
Inclusion of goodwill and other
intangible assets(1)
Closing EV Equity
Closing EV per share (US$)
Closing EV Equity per share
(US$)
71,202
(2,337)
(238)
–
–
4,034
5,227
75
(39)
(407)
8,890
(200)
2,168
8,407
(159)
4,838
513
(331)
(359)
4,502
(543)
(569)
4,988
(2,293)
(3,637)
(72)
(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)
–
–
–
2,706
70,153
5.94
6.17
75,001
(5)%
(2,014)
(200)
885
2,379
3,092
3,869
299
(56)
(359)
6,845
(5,392)
(300)
(234)
4,183
(2,259)
(3,570)
2,337
71,202
5.87
16%
(6)%
n/m(2)
n/m
n/m
30%
35%
(75)%
n/m
13%
30%
n/m
n/m
n/m
19%
2%
n/m
n/m
(2)%
16%
(1)%
1%
(12)
500%
6.07
2%
32,009
35,438
67,447
33,751
35,114
68,865
(166)
(1,149)
(1,115)
(2,264)
Notes:
(1) Consistent with the consolidated financial statements, shown net of tax, amounts attributable to participating funds and non-controlling interests.
(2) Not meaningful (n/m).
339
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 2. EMBEDDED VALUE RESULTS (continued)
2.6 Analysis of EV Movement (continued)
The opening EV Equity was US$71,202 million at 31 December 2022.
The opening EV was US$68,865 million at 31 December 2022 after removal of goodwill and other intangible assets of
US$2,337 million.
EV operating profit was US$8,890 million (2022: US$6,845 million), reflecting VONB of US$4,034 million (2022: US$3,092
million), an expected return on EV of US$5,227 million (2022: US$3,869 million), operating experience variances and
operating assumption changes with a net positive impact of US$36 million (2022: US$243 million), net of finance costs of
US$407 million (2022: US$359 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 2023. 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$75 million (2022: increased by US$299 million), driven
by:
• Expense variances of US$(31) million (2022: US$(27) million) and development costs of US$13 million (2022: US$12
million);
• Mortality and morbidity claims variances of US$(85) million (2022: US$115 million); and
• Persistency and other variances of US$204 million (2022: US$223 million) which included persistency variances of
US$(41) million (2022: US$73 million) and other variances including management actions of US$245 million (2022:
US$150 million).
The effect of changes in operating assumptions during the year was a decrease in EV of US$39 million (2022: a decrease
in EV of US$56 million).
The EV profit of US$4,988 million (2022: US$4,183 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$2,790 million (2022: decreased in EV of US$5,392 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$543 million (2022: a decrease in EV of
US$300 million).
Other non-operating variances decreased EV by US$569 million (2022: decreased EV by US$234 million) which comprised
negative impacts from adjustments to capital requirements on consolidation, non-operating expenses and the effect of the
implementation of IFRS 17, partly offset by positive impacts from the effects of the change in solvency regime in South
Korea (K-ICS and SAP) effective from 1 January 2023 and model-related enhancements.
The Group paid total shareholder dividends of US$2,293 million (2022: US$2,259 million). The capital deployed for the
share buy-back programme, under which 374 million shares(1) (2022: 366 million shares) have been repurchased in the
year of 2023, was US$3,637 million (2022: US$3,570 million). Other capital movements decreased EV by US$72 million
(2022: decreased EV by US$12 million).
Foreign exchange movements decreased EV by US$166 million (2022: decreased EV by US$2,264 million).
The closing EV was US$67,447 million at 31 December 2023.
The closing EV Equity was US$70,153 million as at 31 December 2023, after inclusion of goodwill and other intangible
assets of US$2,706 million.
While our EV methodology aims to calculate a best estimate of the value to shareholders of our in-force business, our
calculations deduct the value of the Group’s outstanding medium-term notes and securities(2) at amortised cost. If the
medium-term notes and securities were measured at fair value, EV Equity would increase by US$932 million to US$71,085
million.
Notes:
(1) Of these shares, 336 million shares were cancelled during 2023, and the remaining 38 million shares have subsequently been cancelled as per
note 31 to the consolidated financial statements.
(2) Refers to medium-term notes and securities under note 26 to the consolidated financial statements.
340
AIA GROUP LIMITEDFINANCIAL STATEMENTS 2. EMBEDDED VALUE RESULTS (continued)
2.6 Analysis of EV Movement (continued)
Operating ROEV (US$ millions)
Operating return on EV (operating ROEV) is calculated as EV operating profit expressed as a percentage of the opening EV
and was 12.9 per cent (2022: 9.4 per cent) for the year ended 31 December 2023.
EV operating profit
Opening EV
Operating ROEV
EV operating earnings per share (US cents)(1)
Year ended
31 December
2023
Year ended
31 December
2022
8,890
68,865
12.9%
77.18
6,845
72,987
9.4%
57.38
YoY
CER
33%
(3)%
3.4 pps
37%
YoY
AER
30%
(6)%
3.5 pps
35%
Note:
(1) Based on weighted average number of ordinary shares outstanding during the respective period.
2.7 Free Surplus Generation
Free Surplus Generation (US$ millions)
Opening free surplus
Effect of acquisitions
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
Closing free surplus
Year ended
31 December
2023
Year ended
31 December
2022
17,850
(238)
–
–
6,041
(1,328)
715
(302)
(2,293)
(3,637)
(479)
16,329
17,025
(200)
3,400
4,403
6,039
(1,274)
(5,093)
(250)
(2,259)
(3,570)
(371)
17,850
YoY
CER
7%
n/m(1)
n/m
n/m
2%
8%
n/m
21%
2%
n/m
n/m
(8)%
YoY
AER
5%
n/m
n/m
n/m
0%
4%
n/m
21%
2%
n/m
n/m
(9)%
Free surplus decreased by US$1,521 million (2022: increased by US$825 million) to US$16,329 million (2022: US$17,850
million) as of 31 December 2023, after reflecting the impact of share buy-back of US$3,637 million.
UFSG, as defined in Section 4.8, increased by 2 per cent, to US$6,041 million (2022: US$6,039 million). Investment in
writing new business was US$1,328 million (2022: US$1,274 million).
Investment return variances and other items amounted to US$715 million (2022: US$(5,093) 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$302 million (2022: US$250 million).
Note:
(1) Not meaningful (n/m).
341
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 3. SENSITIVITY ANALYSIS
The EV as at 31 December 2023 and the VONB for the year ended 31 December 2023 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 2023 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 2023); and
• Equity prices decreased proportionally by 10 per cent (i.e. 90 per cent of the prices at 31 December 2023).
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 2023 and the values of debt instruments and derivatives held at 31 December 2023 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 2023 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 2023 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.
342
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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%
As at 31 December 2023
As at 31 December 2022
EV
% Change
EV
% Change
67,447
68,865
(8,450)
(12.5)%
(8,133)
(11.8)%
13,167
1,799
(1,823)
(981)
945
2,585
(1,374)
1,374
(1,790)
1,984
(5,380)
5,296
1,048
1,088
19.5%
2.7%
(2.7)%
(1.5)%
1.4%
3.8%
(2.0)%
2.0%
(2.7)%
2.9%
(8.0)%
7.9%
1.6%
1.6%
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%
Year ended 31 December 2023
Year ended 31 December 2022
VONB
% Change
VONB
% Change
4,034
(871)
1,332
129
(155)
412
(142)
142
(261)
284
(480)
478
103
77
(21.6)%
33.0%
3.2%
(3.8)%
10.2%
(3.5)%
3.5%
(6.5)%
7.0%
(11.9)%
11.8%
2.6%
1.9%
3,092
(634)
944
64
(81)
333
(129)
129
(191)
242
(408)
436
98
72
(20.5)%
30.5%
2.1%
(2.6)%
10.8%
(4.2)%
4.2%
(6.2)%
7.8%
(13.2)%
14.1%
3.2%
2.3%
343
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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.; 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);
• 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. AIA Sovereign Limited is a
subsidiary of AIA Holdings Pte. Limited, a wholly-owned subsidiary of the Company;
• 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 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.
344
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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 20 to the 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.
345
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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.
346
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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
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(1)
AIA Hong Kong(2)
100% of regulatory Risk-Based Capital requirement
AIA Indonesia
AIA Korea(3)
AIA Malaysia
120% of regulatory Risk-Based Capital requirement
150% of regulatory Risk-Based Capital requirement
170% of regulatory Risk-Based Capital requirement
AIA New Zealand(4)
100% of regulatory capital adequacy requirement
AIA Philippines
AIA Singapore
AIA Sri Lanka
AIA Taiwan
AIA Thailand
AIA Vietnam
Tata AIA Life
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) China Risk-Oriented Solvency System phase II (C-ROSS II).
(2) The capital requirement for the Hong Kong branch of AIA International reflects the early adoption approved by the HKIA with effect from 1 January
2022 of the Hong Kong Risk-based Capital (HKRBC). For clarity, AIA Everest Life Company Limited, which is a closed block of business under AIA
Co., and the Hong Kong business written by AIA Co., continue to be 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) Effective from 1 January 2023, the Financial Supervisory Service (FSS) has announced a new capital adequacy framework (K-ICS) for Korean
insurers.
(4) The Reserve Bank of New Zealand has issued a new solvency standard effective 1 January 2023.
Capital Requirements on Consolidation
The Company’s subsidiaries, 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 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 Local Capital Summation Method (LCSM), under which the Group’s published eligible group
capital resources, group minimum capital requirement (GMCR) and group prescribed capital requirement (GPCR) are
calculated as the sum of the eligible capital resources, minimum capital requirements and prescribed capital requirements
for each entity within the Group according to the respective local regulatory requirements, subject to any variation
considered necessary by the HKIA. This has not imposed any additional capital requirement to those mentioned above.
347
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 4. METHODOLOGY (continued)
4.7 Foreign Exchange
The EV as at 31 December 2023 and 31 December 2022 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 2023 and the VONB
for the year ended 31 December 2023 and highlights certain differences in assumptions between the EV as at 31 December
2022 and the EV as at 31 December 2023.
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.
348
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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
2023
As at
31 December
2022
3.89
2.57
3.84
6.49
3.18
3.73
4.31
5.95
2.70
13.10
1.21
2.70
2.30
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
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.
349
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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 2023 reflect the weighted average of the risk margins of the in-force business at the start of 2023, and
those of the new business written during 2023 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
2023
As at
30 Jun
2023
(Unaudited)
7.93
9.16
7.97
7.43
9.67
7.45
As at
31 Dec
2022
7.43
9.69
7.46
13.17
13.13
13.09
8.81
8.80
7.85
12.10
7.38
14.70
7.62
7.81
9.54
8.86
8.86
7.39
12.10
7.22
21.00
7.64
8.00
9.55
8.91
8.92
7.43
12.10
7.27
21.00
7.67
8.09
9.57
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
2023
As at
30 Jun
2023
(Unaudited)
As at
31 Dec
2022
As at
31 Dec
2023
As at
30 Jun
2023
(Unaudited)
3.80
3.50
3.50
7.50
3.00
4.50
3.80
6.00
3.10
3.30
3.70
3.00
7.50
3.00
4.50
3.30
5.80
2.90
3.30
3.70
3.00
7.50
3.00
4.50
3.30
5.80
2.90
10.00
10.00
10.00
1.50
3.40
4.00
1.50
3.20
4.00
1.50
3.20
4.00
As at
31 Dec
2022
7.60
9.30
7.50
8.10
8.80
8.00
7.60
9.30
7.50
12.00
12.00
12.00
7.30
9.10
8.30
10.80
7.60
12.00
6.10
8.10
9.30
7.30
9.10
7.80
10.80
7.40
12.00
6.10
8.20
9.30
7.30
9.10
7.80
10.80
7.40
12.00
6.10
8.20
9.30
Note:
(1) The majority of AIA Hong Kong’s assets and liabilities are denominated in US dollars. The 10-year government bond assumptions shown above are
those of US dollar-denominated bonds, and the local equities assumption shown is that of US dollar-denominated equities.
350
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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 2023. 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.
351
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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
2023
As at
31 December
2022
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
6.85
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
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.
352
AIA GROUP LIMITEDFINANCIAL STATEMENTS 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.
353
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION 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
AIA Taiwan
AIA Thailand
AIA Vietnam
Tata AIA Life
As at
31 December
2023
As at
31 December
2022
30.0
25.0
16.5
22.0
23.1
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
26.5
24.0
28.0
25.0
17.0
30.0
20.0
20.0
20.0
14.6
Note:
(1) AIA Korea was 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 has changed to 23.1 per cent
effective from 1 January 2023.
In 2023, Bermuda has introduced and enacted a corporate income tax rate of 15 per cent, effective from 1 January 2025.
The impact of the introduction of corporate income tax in Bermuda has been reflected in Group EV as at 31 December
2023.
354
AIA GROUP LIMITEDFINANCIAL STATEMENTS 5. ASSUMPTIONS (continued)
5.11 Statutory Valuation Bases
The projection of regulatory liabilities at future points in time assumes the continuation of the reserving methodologies
used to value policyholder liabilities as at the valuation date.
5.12 Product Charges
Management fees and product charges reflected in the VIF and VONB have been assumed to follow existing scales.
6. EVENTS AFTER THE REPORTING PERIOD
On 14 March 2024, a Committee appointed by the Board of Directors proposed a final dividend of 119.07 Hong Kong cents
per share (2022: final dividend of 113.40 Hong Kong cents per share).
355
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONSUPPLEMENTARY EMBEDDED VALUE INFORMATION ANNUAL GENERAL MEETING
The AGM will be held at 11:00 a.m. (Hong Kong time) on Friday, 24 May 2024. 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 for the AGM. The register of
members of the Company will be closed from Tuesday, 21 May 2024 to Friday, 24 May 2024 (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 Friday, 24 May 2024 after the AGM.
FINAL DIVIDEND
The Board has recommended an increase of 5 per cent in the payment of a final dividend to 119.07 Hong Kong cents per
Share for the year ended 31 December 2023 (2022: 113.40 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, 14 June 2024 to Shareholders
whose names appear on the register of members of the Company at the close of business on Thursday, 30 May 2024, being
the record date for determining the entitlement to the final dividend.
RELEVANT DATES FOR THE 2023 FINAL DIVIDEND
Ex-dividend date
Wednesday, 29 May 2024
Record date
Payment date
Thursday, 30 May 2024
Friday, 14 June 2024
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. 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 subsection
headed “Shareholder Centre” in the section headed “Investor Relations” to view the annual statement.
356
AIA GROUP LIMITEDADDITIONAL INFORMATIONINFORMATION FOR SHAREHOLDERS 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
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) by electronic means through the Company’s website at www.aia.com and Hong Kong
Exchanges and Clearing Limited’s website at www.hkexnews.hk. 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
357
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONINFORMATION FOR SHAREHOLDERS 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.
358
AIA GROUP LIMITEDADDITIONAL INFORMATION 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
Dr. Narongchai AKRASANEE
Mr. Cesar Velasquez PURISIMA
Ms. SUN Jie (Jane)
Ms. Mari Elka PANGESTU
Mr. ONG Chong Tee
Ms. Nor Shamsiah MOHD YUNUS
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
Dr. Narongchai AKRASANEE
Mr. Cesar Velasquez PURISIMA
Ms. SUN Jie (Jane)
Ms. Mari Elka PANGESTU
Mr. ONG Chong Tee
Ms. Nor Shamsiah MOHD YUNUS
REMUNERATION COMMITTEE
Mr. George Yong-Boon YEO (Chairman)
Mr. Jack Chak-Kwong SO
Ms. SUN Jie (Jane)
Mr. Edmund Sze-Wing TSE
RISK COMMITTEE
Mr. Chung-Kong CHOW (Chairman)
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
359
ANNUAL REPORT 2023ADDITIONAL INFORMATIONCORPORATE INFORMATIONOVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATION 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
ownership of Shares 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 of new Shares to facilitate and encourage ownership
of Shares 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 (as
amended), a voluntary share purchase plan with matching offer to facilitate and
encourage ownership of Shares 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 (as amended),
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 (as amended), 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 (as
amended), a share purchase plan with matching offer of new Shares to facilitate and
encourage ownership of Shares by agents, and is effective for a period of 10 years from
the date of adoption.
2010 RSU Scheme
2010 SO Scheme
2011 ESPP
2012 ASPP
2020 ESPP
2020 RSU Scheme
2020 SO Scheme
2021 ASPP
360
AIA GROUP LIMITEDADDITIONAL INFORMATIONGLOSSARY active agent
An agent who sells at least one policy per month. The number of active agents is
calculated as the average number of active agents across the specific period.
active market
A market in which all the following conditions exist:
•
the items traded within the market are homogeneous;
• willing buyers and sellers can normally be found at any time; and
• prices are available to the public.
adjusted net worth or ANW
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.
AER
AGM
Actual exchange rates.
2024 Annual General Meeting of the Company to be held at 11:00 a.m. (Hong Kong
time) on Friday, 24 May 2024.
AIA or the Group
AIA Group Limited and its subsidiaries.
AIA Co.
AIA Company Limited, a company incorporated in Hong Kong and a wholly-owned
subsidiary of the Company.
AIA Everest
AIA Everest Life Company Limited.
AIA International
AIA International Limited, a company incorporated in Bermuda and an indirect wholly-
owned subsidiary of the Company.
AIA Vitality
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.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONGLOSSARY ALC
The AIA Leadership Centre located in Bangkok, Thailand.
amortised cost
Other than cash and cash equivalents, financial assets measured at amortised cost
primarily include debt securities, loans and deposits, and receivables. These financial
assets 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 revenue from debt securities measured at amortised cost is recognised
in investment return in the consolidated income statement using the effective interest
method.
Amplify Health
Amplify Health Asia Pte. Limited.
annualised new premiums
or ANP
ASEAN markets
Asia
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, markets refer 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.
average credit rating of the fixed
income portfolio
The average credit rating of the fixed income portfolio represents the credit rating of
our bonds, weighted by each bond’s market value.
bancassurance
The distribution of insurance products through banks or other financial institutions.
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”, a phase of the OECD/G20 Base Erosion
and Profit Shifting (BEPS) Project.
Blue Care JV (BVI) Holdings Limited.
Blue Cross (Asia-Pacific) Insurance Limited.
The board of Directors.
BEPS 2.0
Blue Care
Blue Cross
Board
362
AIA GROUP LIMITEDADDITIONAL INFORMATION
business model
CER
Financial assets are classified on the basis of the business model within which they are
held and their contractual cash flow characteristics. Below are examples of business
model:
• Whose objective is to hold financial assets to collect contractual cash flows;
• Whose objective is achieved by both collecting contractual cash flows and selling
financial assets.
Constant exchange rates. Change on constant exchange rates is calculated for all
figures for the current period and for the prior period, using constant average exchange
rates, other than for balance sheet items as at the end of the current period 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 codes:
1299 (HKD counter) and 81299 (RMB counter)).
comprehensive equity
The total of shareholders’ equity and net contractual service margin (CSM).
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, and consist of third-party unit holders’
interests in these funds. These are consolidated in the financial statements.
contract boundary
The measurement of a group of contracts includes all of the future cash flows within
the boundary of each contract in the group. For details, please refer to note 2.3.4 to the
consolidated 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 Group will recognise as it provides
insurance contract services under the insurance contracts in the group. For details,
please refer to note 2.3.6 to the consolidated financial statements.
Corporate Governance Code
Corporate Governance Code set out in Appendix C1 to the Listing Rules, as amended
from time to time.
cost of capital or CoC
CoC is calculated as the face value of the required capital as at the valuation date less
the present value of the net-of-tax investment return on the shareholder assets backing
the required capital and the present value of projected releases from the assets backing
the required capital. Where the required capital may be covered by policyholder assets
such as surplus assets in participating funds, there is no associated cost of capital
included in the VIF or VONB. CoC for AIA is stated after adjustment to reflect
consolidated capital requirements. CoC by market is stated before adjustment to reflect
consolidated capital requirements, and presented on a local statutory basis.
363
ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONGLOSSARY coverage unit
The amount of the CSM of a group of insurance contracts that is recognised as insurance
revenue in each reporting period is determined by identifying the coverage units in the
group, allocating the CSM remaining at the end of the reporting period (before any
allocation) equally to each coverage unit provided in the current period and expected
to be provided in future periods, and recognising in profit or loss the amount of the CSM
allocated to coverage units provided in the current period. The number of coverage
units is the quantity of services provided by the contracts in the group, determined
considering for each contract the quantity of benefits provided and its expected
coverage period. Determination of coverage unit is further elaborated in note 3.3 to the
consolidated financial statements.
COVID-19
C-ROSS
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.
Director(s)
The director(s) of the Company.
eligible capital resources
For a regulated entity, eligible capital resources 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, eligible
capital resources refers to IFRS equity less intangible assets, plus eligible financial
instruments, including subordinated securities as well as senior notes approved for
inclusion.
eligible group capital resources
The sum of the eligible capital resources of each entity within the Group according to
the respective local regulatory requirements, subject to any variation considered
necessary by the HKIA.
eligible group capital resources
coverage ratio or the Group
LCSM coverage ratio
embedded value or EV
equity attributable to
shareholders of the Company
on the embedded value basis
or EV Equity
The ratio of the eligible group capital resources to the group prescribed capital
requirement (GPCR).
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.
EV Equity is the total of embedded value, goodwill and other intangible assets
attributable to shareholders of the Company, after allowing for taxes.
364
AIA GROUP LIMITEDADDITIONAL INFORMATION ESG
ExCo
Environmental, Social and Governance.
The Executive Committee of the Group.
expected credit losses or ECL
The weighted average of credit losses with the respective risks of a default occurring
as the weights.
expense ratio
fair value reserve
Expense ratio is measured as operating expenses divided by total weighted premium
income (TWPI).
Fair value reserve comprises the cumulative net change in the fair value of debt
securities measured at fair value through other comprehensive income and the
cumulative related loss allowance recognised in profit or loss.
fair value through other
comprehensive income
or FVOCI
For financial assets and liabilities measured at fair value through other comprehensive
income, some changes in fair value are recognised in other comprehensive income. For
details, please refer to note 2.5.1 to the consolidated financial statements.
fair value through profit
or loss or FVTPL
For financial assets and liabilities measured at fair value through profit or loss, changes
in fair value are recognised in profit or loss as part of net investment result. For details,
please refer to note 2.5.1 to the consolidated financial statements.
first year premiums
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.
free surplus
fulfilment cash flows
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.
An explicit, unbiased and probability-weighted estimate (i.e. expected value) of the
present value of the future cash outflows minus the present value of the future cash
inflows that will arise as the Group fulfils insurance contracts, including a risk
adjustment for non-financial risk.
gross carrying amount
Gross carrying amount is the amortised cost before adjusting for loss allowance.
Group LCSM surplus
The excess of the eligible group capital resources over the GPCR.
group minimum capital
requirement or GMCR
The sum of the minimum capital requirements of each entity within the Group, subject
to any variation considered necessary by the HKIA.
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.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONGLOSSARY
group prescribed capital
requirement or GPCR
The sum of the prescribed capital requirements of each entity within the Group, subject
to any variation considered necessary by the HKIA. 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 securities, 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 44 to the consolidated financial statements.
Hong Kong or HKSAR
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 the
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
Hong Kong Insurance
Ordinance or HKIO
Hong Kong Stock
Exchange or HKSE
IAIG
IAIS
IASB
Insurance Authority established under the Hong Kong Insurance Ordinance.
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.
The Stock Exchange of Hong Kong Limited.
Internationally Active Insurance Group.
International Association of Insurance Supervisors.
International Accounting Standard Board.
IFRS assumptions
Assumptions made and used to determine IFRS results.
IFRS balance sheet
Balance sheet prepared in accordance with the IFRS Accounting Standards.
IFRS earnings
Earnings calculated and reported under the IFRS Accounting Standards.
366
AIA GROUP LIMITEDADDITIONAL INFORMATION
IFRS equity
Equity position calculated and reported under the IFRS Accounting Standards.
IFRS model
Models used to determine IFRS results.
IFRS net asset value
Net asset value calculated and reported under the IFRS Accounting Standards.
IFRS profit
Profit calculated and reported under the IFRS Accounting Standards.
IFRS results
Financial results calculated and reported under the IFRS Accounting Standards.
insurance acquisition cash flows Cash flows arising from the costs of selling, underwriting and starting a group of
insurance contracts (issued or expected to be issued) that are directly attributable to
the portfolio of insurance contracts to which the group belongs. Such cash flows
include cash flows that are not directly attributable to individual contracts or groups of
insurance contracts within the portfolio.
Insurance Capital Standard
or ICS
A risk-based global insurance capital standard applicable to IAIGs being developed by
the IAIS.
insurance contract services
The following services that the Group provides to a policyholder of an insurance
contract:
(a) coverage for an insured event (insurance coverage);
(b) for insurance contracts without direct participation features, the generation of an
investment return for the policyholder, if applicable (investment-return service);
and
(c) for insurance contracts with direct participation features, the management of
underlying items on behalf of the policyholder (investment-related service).
insurance finance reserve
Insurance finance reserve comprises the cumulative insurance finance income or
expenses recognised in other comprehensive income.
insurance revenue
Insurance revenue arising from insurance contracts and exclude any investment
components. For details, please refer to notes 2.3.11.1 and 2.3.11.3 to the consolidated
financial statements.
insurance service expenses
Insurance service expenses arising from insurance contracts and exclude repayments
of investment components. For details, please refer to note 2.3.11.5 to the consolidated
financial statements.
insurance service result
Insurance service result comprises insurance revenue, insurance service expenses
and net expenses from reinsurance contracts held.
investment component
Amount that an insurance contract requires the Group to repay to a policyholder in all
circumstances, regardless of whether an insured event occurs. Generally, for relevant
contracts, surrender value would be determined as an investment component.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONGLOSSARY 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 comprises interest revenue on financial assets, other investment
return and net impairment loss on financial assets.
IPO
Initial Public Offering.
liability for incurred claims or LIC The Group’s obligation to:
liability for remaining coverage
or LRC
(a) investigate and pay valid claims for insured events that have already occurred,
including events that have occurred but for which claims have not been reported,
and other incurred insurance expenses; and
(b) pay amounts that are not included in (a) and that relate to:
(i) insurance contract services that have already been provided; or
(ii) any investment components or other amounts that are not related to the
provision of insurance contract services and that are not in the liability for
remaining coverage.
The Group’s obligation to:
(a) investigate and pay valid claims under existing insurance contracts for insured
events that have not yet occurred (i.e. the obligation that relates to the unexpired
portion of the insurance coverage); and
(b) pay amounts under existing insurance contracts that are not included in (a) and
that relate to:
(i) insurance contract services not yet provided (i.e. the obligations that relate to
future provision of insurance contract services); or
(ii) any investment components or other amounts that are not related to the
provision of insurance contract services and that have not been transferred to
the liability for incurred claims.
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
Method or LCSM
LCSM is the method used by the HKIA as a measure of group capital under the GWS
framework.
Under the LCSM, AIA’s published eligible group capital resources, GMCR and GPCR are
calculated as the sum of the eligible capital resources, minimum capital requirements
and prescribed capital requirements for each entity within the Group according to the
respective local regulatory requirements, subject to any variation considered necessary
by the HKIA. Adjustments are made to eliminate double counting.
loss component
Loss component for onerous contracts. For details, please refer to note 2.3 to the
consolidated financial statements.
368
AIA GROUP LIMITEDADDITIONAL INFORMATION MediCard
MediCard Philippines, Inc.
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).
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.
Model Code
Model Code for Securities Transactions by Directors of Listed Issuers set out in
Appendix C3 to the Listing Rules, as amended from time to time.
n/a
n/m
Not available.
Not meaningful.
net CSM
CSM after allowing for reinsurance, taxes and net of non-controlling interests.
net investment result
Comprises investment return, net finance income or expenses from insurance contracts
and reinsurance contracts held, movement in investment contract liabilities and
movement in third-party interests in consolidated investment funds.
operating margin
Operating margin is measured as operating profit after tax expressed as a percentage
of TWPI.
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.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONGLOSSARY 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 policyholders 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 such
participating funds is subject to minimum policyholder participation mechanisms
which are 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.
portfolio of insurance contracts
Insurance contracts subject to similar risks and managed together.
pps
Percentage points.
premium allocation approach
or PAA
Simplified measurement of insurance contracts where the coverage period of each
contract in the group of contracts is one year or less; or the Group reasonably expects
that the resulting measurement of the liabilities for remaining coverage would not
differ materially from the result of applying the accounting policies of contracts not
measured under PAA.
prescribed capital requirement
or PCR
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).
PVNBP margin
VONB gross of non-controlling interests excluding pension business, expressed as a
percentage of present value of new business premiums (PVNBP). PVNBP margin for
AIA is stated after adjustments to reflect consolidated reserving and capital
requirements and the after-tax value of unallocated Group Office expenses.
renewal premiums
Premiums receivable in subsequent years of a recurring premium policy.
reverse repo
Reverse repurchase agreement.
risk adjustment
The compensation the Group requires for bearing the uncertainty about the amount
and timing of the cash flows that arises from non-financial risk as the Group fulfils
insurance contracts.
370
AIA GROUP LIMITEDADDITIONAL INFORMATION
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 the Shares.
shareholders’ allocated equity
Shareholders’ allocated equity is total equity attributable to shareholders of the
Company less fair value reserve and insurance finance reserve.
Singapore
The Republic of Singapore; in the context of our reportable market segments, Singapore
includes Brunei.
single premium
A single payment that covers the entire cost of an insurance policy.
solvency
The ability of an insurance company to satisfy its policyholder benefits and claims
obligations.
SOs
Share options.
Tata AIA Life
Tata AIA Life Insurance Company Limited.
Tier 1 group capital
The resources and financial instruments of the group eligible to be included, in
accordance with the Insurance (Group Capital) Rules, Rule 7(1) from the HKIA.
Tier 1 group capital
coverage ratio
Tier 1 group capital coverage ratio is calculated as the ratio of the Tier 1 group capital
to the GMCR.
Tier 2 group capital
The resources and financial instruments of the group eligible to be included, in
accordance with the Insurance (Group Capital) Rules, Rule 7(3) from the HKIA.
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. The amounts are not intended to be indicative of insurance revenue
and fee income recorded in the consolidated income statement.
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ANNUAL REPORT 2023OVERVIEWFINANCIAL AND OPERATING REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONGLOSSARY 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 consolidated reserving and capital requirements.
underlying items
Items that determine some of the amounts payable to a policyholder. Underlying items
can comprise any items; for example, a reference portfolio of assets, the net assets of
the Group, or a specified subset of the net assets of the Group.
unit-linked investments
Financial investments held to back unit-linked contracts.
unit-linked products
value of in-force business or VIF
value of new business or VONB
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.
variable fee approach or VFA
The VFA modifies the general measurement model in IFRS 17 to reflect the nature of
the income to the insurer is a variable fee.
VONB margin
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.
372
AIA GROUP LIMITEDADDITIONAL INFORMATION A
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