AIA Group Limited 友邦保險控股有限公司 Annual Report 2011 AIA Group Limited 友邦保險控股有限公司 Delivering Quality Annual Report 2011 Growth AIA Group Limited 友邦保險控股有限公司 AIA.COM Stock code: 1299 Vision AIA is the pre-eminent life insurance provider in the Asia Pacific region, differentiated from our competitors by the combination of our Asia regional focus, the scale, quality and profitability of our operations across the region, and the standards of service and benefits we deliver to our customers. Our vision is to grow our business prudently and profitably in all the markets we serve in order to optimise returns for our shareholders over time. About AIA AIA Group Limited and its subsidiaries (collectively “AIA” or “the Group”) comprise the largest independent publicly listed pan-Asian life insurance group in the world. It has wholly-owned main operating subsidiaries or branches in 14 markets in Asia Pacific – Hong Kong, Thailand, Singapore, Malaysia, China, Korea, the Philippines, Australia, Indonesia, Taiwan, Vietnam, New Zealand, Macau and Brunei and a 26 per cent joint venture shareholding in India. The business that is now AIA was first established in Shanghai over 90 years ago. It is a market leader in the Asia Pacific region (ex-Japan) based on life insurance premiums and holds leading positions across the majority of its markets. It had total assets of US$114,461 million as of 30 November 2011. AIA meets the savings and protection needs of individuals by offering a range of products and services including retirement planning, life insurance and accident and health insurance. The Group also provides employee benefits, credit life and pension services to corporate clients. Through an extensive network of agents and employees across Asia Pacific, AIA serves the holders of more than 24 million individual policies and over 10 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 code “1299” with American Depositary Receipts (Level 1) traded on the over-the-counter market (ticker symbol: “AAGIY”). DELIVERING QUALITY GROWTH 2011 was a very successful year for AIA. Our strong financial performance demonstrates that our strategy is working and is being executed well right across our business. We are confident in our ability to maintain this positive momentum to drive continued quality growth. Notes: (1) Explanations of certain terms and abbreviations used in this report are set forth in the Glossary. (2) Unless otherwise specified, 2010 and 2011 refer to the financial year of AIA Group Limited, which ends on 30 November of the year indicated. Contents OVERVIEW 8 Financial Highlights 10 Chairman’s Statement 12 Group Chief Executive and President’s Report FINANCIAL AND OPERATING REVIEW 18 Financial Review 34 Business Review 53 Risk Management 62 Our People 66 Corporate Social Responsibility CORPORATE GOVERNANCE 72 Statement of Directors’ Responsibilities 73 Board of Directors and Executive Committee 78 Report of the Directors 84 Corporate Governance Report 90 Remuneration Report FINANCIAL STATEMENTS 101 Independent Auditor’s Report 103 Consolidated Income Statement 104 Consolidated Statement of Comprehensive Income 105 Consolidated Statement of Financial Position 106 Consolidated Statement of Changes in Equity 107 Consolidated Statement of Cash Flows 108 Notes to the Consolidated Financial Statements and Significant Accounting Policies 212 Statement of Financial Position of the Company 214 Supplementary Embedded Value Information ADDITIONAL INFORMATION 238 Information for Shareholders 240 Corporate Information 241 Glossary Key Milestones 1919 1931 AIA put down its corporate Mr. Cornelius Vander Starr founded roots in Asia when the International Assurance Company, 1947 1981 group founder Mr. Cornelius Limited (INTASCO), in Shanghai. Vander Starr established INTASCO moved its head Our New Zealand INTASCO established branch offices in an insurance agency office to Hong Kong and operations began as Hong Kong and Singapore. in Shanghai. changed its name to a branch of American American International Life Insurance Assurance Company, Company (ALICO). Limited (AIA Co.). The Philippine American 1982 Life and General We entered Macau. Insurance Company (Philam Life) was founded 1984 in the Philippines. We entered Indonesia. 1948 We entered Malaysia. 1921 1938 Mr. Cornelius Vander INTASCO entered Siam, later renamed 1957 Starr founded his first Thailand, to write both life and general We registered in Brunei. life insurance enterprise insurance. in Shanghai. 1972 We formed a subsidiary in Australia. 2 AIA Group Limited 1987 2000 Korean operations began. We formed a subsidiary in Vietnam. 2010 1990 2001 AIA Group Limited successfully listed on the Main Board Our operations in Taiwan A joint venture in India was of The Stock Exchange of Hong Kong Limited, the third were established as a established. largest IPO ever globally at the time. branch of ALICO. 1992 2008 We re-established our We received the first international presence in China Takaful operator licence in Malaysia. through a branch office in Shanghai, the first 2009 2011 foreign-owned life ALICO Taiwan became our branch business to receive a AIA Group Limited became a constituent stock of the office. licence in the country. Hang Seng Index. Philam Life became an operating We launched a sponsored Level 1 American Depositary subsidiary of the Group. 1998 Receipt programme. We celebrated the We completed the reorganisation return to our former driven by AIG’s liquidity crisis in headquarters building at 2008, leading to the positioning of The Bund in Shanghai. the Company for a public listing. Annual Report 2011 3 Korea China Taiwan India Hong Kong Macau The Philippines Thailand Vietnam Brunei Malaysia Singapore GEOGRAPHICAL MARKETS Indonesia We have a diversified franchise across Asia Pacific, with 100 per cent ownership in 14 (1) out of 15 markets. Our long experience in the region allows us to tailor our strategies to the culture, demographics and insurance needs of each market in which we operate. 4 AIA Group Limited AIA At-a-Glance (2) History of over 90 years in Asia Pacific 100 per cent ownership in 14 (1) out of 15 geographical markets Serving the holders of more than 24 million individual policies and over 10 million participating members of group insurance schemes Embedded value of US$27.2 billion Total assets of New Zealand US$114.5 billion Australia Notes: (1) Including operations in the Philippines in which percentage holding is 99.78 per cent. (2) All the above figures are as of 30 November 2011. Annual Report 2011 5 Unique Position AIA enjoys a strategic advantage as the largest listed pan-Asian life insurer in a fast-growing region of the world. OVERVIEW Financial Highlights 2011 Results At-a-Glance* Value of New Business (VONB) (1) Annualised New Premium (ANP) (2) US$ millions US$ millions 932 2,472 750 2,000 2,025 1,878 667 500 545 +40% +22% 1,000 250 0 0 2009 2010 2011 2009 2010 2011 Operating Profit After Tax (OPAT) Total Weighted Premium Income (TWPI) (3) US$ millions US$ millions 1,922 14,442 1,699 13,013 1,500 11,632 1,438 10,000 +13% +11% 750 5,000 0 0 2009 2010 2011 2009 2010 2011 Embedded Value (EV) (4) Total Assets US$ millions US$ millions 27,239 114,461 25,000 107,865 24,748 100,000 90,659 20,966 12,500 +10% 50,000 +6% 0 0 2009 2010 2011 2009 2010 2011 * Percentages shown indicate changes in 2011 compared with 2010. 8 AIA Group Limited 2011 Breakdown by Geographical Market Value of New Business (VONB) (1), (6) Annualised New Premium (ANP) (2) 11% 21% 24% OVERVIEW 7% 29% 10% 11% 19% 5% 22% 9% 16% 6% 10% Operating Profit After Tax (OPAT) (5) Total Weighted Premium Income (TWPI) (3) 8% REVIEW OPERATING AND FINANCIAL 15% 6% 22% 6% 36% 14% 7% 9% 21% 17% 6% 20% 13% CORPORATE GOVERNANCE Hong Kong Thailand Singapore Malaysia China Korea Other Markets (7) Notes: (1) Value of new business (VONB) is the present value, measured at 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. (2) Annualised new premium (ANP) is a measure of new business activity that is calculated as the sum of 100 per cent annualised first year premiums and 10 per cent of single premiums, before reinsurance ceded. FINANCIAL STATEMENTS (3) 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. (4) 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. (5) Operating profit after tax (OPAT) percentages shown excludes OPAT from the corporate and other segment. (6) Based on local statutory basis and before unallocated Group Office expenses, VONB by geographical market includes corporate pension business. (7) The results of our joint venture in India are accounted for using the equity method. For clarity, TWPI, ANP and VONB exclude any contribution from India. ADDITIONAL INFORMATION Annual Report 2011 9 OVERVIEW Chairman’s Statement I am pleased to report that 2011 was a very successful year for the business. The momentum for profitable growth established in the second half of 2010 was sustained and enhanced, despite a difficult global economic background. The results for the year reflect an outstanding achievement by our leadership team, employees and agents, right across the region. Our main measure of performance is value of new business (VONB), reflecting our focus on writing only new business that meets our profitability and margin targets.