AIA GROUP LIMITED 友邦保險控股有限公司 ANNUAL REPORT 2013 STOCK CODE : 1299 MEETING REAL NEEDS The AIA Group seeks to provide its customers with financial protection, security and a comfortable future. The Real Life Company brand position speaks to our long and remarkable history, to the wealth of customer insights we have gained along our journey and to the help we have provided to millions of people around the Asia- Pacific region in good times and in challenging times. AIA will continue to protect generations of people, for many years to come, whatever life brings them. 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 AIA meets the savings and protection needs (collectively “AIA” or “the Group”) comprise of individuals by offering a range of products the largest independent publicly listed pan- and services including life insurance, accident Asian life insurance group. It has operations and health insurance and savings plans. The in 17 markets in Asia-Pacific – wholly-owned Group also provides employee benefits, credit branches and subsidiaries in Hong Kong, life and pension services to corporate clients. Thailand, Singapore, Malaysia, China, Korea, Through an extensive network of agents and the Philippines, Australia, Indonesia, Taiwan, employees across Asia-Pacific, AIA serves Vietnam, New Zealand, Macau, Brunei, a 97 the holders of more than 28 million individual per cent subsidiary in Sri Lanka, a 26 per cent policies and over 16 million participating joint venture in India and a representative members of group insurance schemes. office in Myanmar. AIA Group Limited is listed on the Main Board The business that is now AIA was first of The Stock Exchange of Hong Kong Limited established in Shanghai over 90 years ago. under the stock code “1299” with American It is a market leader in the Asia-Pacific region Depositary Receipts (Level 1) traded on the over- (ex-Japan) based on life insurance premiums the-counter market (ticker symbol: “AAGIY”). and holds leading positions across the majority of its markets. It had total assets of US$147 billion as of 30 November 2013. Notes: (1) Explanations of certain terms and abbreviations used in this report are set forth in the Glossary. (2) Unless otherwise specified, 2012 and 2013 refer to the financial year of AIA Group Limited, which ends on 30 November of the year indicated. ANNUAL REPORT 2013 001 OVERVIEW 03:00 04:00 05:00 06:00 07:00 08:00 09:00 10:00 11:00 12:00 …as the largest and longest- 13:00 established independent 14:00 pan-Asian insurer, operating 15:00 in 17 geographical markets. 16:00 The scale, reach and strength 17:00 of our distribution platforms and 18:00 brand, our unrivalled financial 19:00 20:00 strength, and our depth of 21:00 experience derived from our 22:00 long history in the Asia-Pacific 23:00 region leave us well positioned 00:00 to capture the enormous 01:00 growth opportunities this region 02:00 provides. 002 AIA GROUP LIMITED Contents OVERVIEW 008 Financial Highlights 010 Chairman’s Statement 012 Group Chief Executive and President’s Report FINANCIAL AND OPERATING REVIEW 018 Financial Review 032 Business Review 054 Risk Management 062 Our People 064 Corporate Social Responsibility CORPORATE GOVERNANCE 072 Statement of Directors’ Responsibilities 073 Board of Directors and Executive Committee 078 Report of the Directors 083 Corporate Governance Report 091 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 107 Consolidated Statement of Changes in Equity 108 Consolidated Statement of Cash Flows 109 Notes to the Consolidated Financial Statements and Significant Accounting Policies 204 Financial Statements of the Company 207 Supplementary Embedded Value Information ADDITIONAL INFORMATION 231 Information for Shareholders 233 Corporate Information 234 Glossary ANNUAL REPORT 2013 003 Key Milestones 1919 1948 2000 1919 Mr. Cornelius AIA put down its We entered Malaysia. We formed a Vander Starr corporate roots subsidiary in Vietnam. in Asia when the 1957 group founder Mr. We registered in 2001 Cornelius Vander Brunei. A joint venture in Starr established an India was established. insurance agency in 1972 Shanghai. We formed a 2009 subsidiary in ALICO Taiwan 1921 Australia. became our branch Mr. Cornelius Vander office. The first life insurance Starr founded Asia 1981 policy issued Philam Life became in Shanghai. Life Insurance Our New Zealand Company, his first life our operating operations began as subsidiary. insurance enterprise a branch of American in Shanghai. Life Insurance We completed the Company (ALICO). reorganisation driven 1931 by AIG’s liquidity Mr. Cornelius Vander 1982 crisis in 2008, leading Starr founded We entered Macau. to the positioning of International the Company for a Assurance Company, 1984 public listing. Limited (INTASCO), in We entered Indonesia. Shanghai. 2010 INTASCO established 1987 AIA Group Limited successfully listed on 1969 branch offices in Korean operations the Main Board of The Hong Kong and began. Singapore. Stock Exchange of Hong Kong Limited, 1990 the third-largest IPO Our operations 1938 ever globally at the INTASCO entered in Taiwan were time. Siam, later renamed established as a Thailand. branch of ALICO. 2011 AIA Group Limited 1947 1992 became a constituent The Philippine We re-established stock of the Hang 1984 American Life and our presence in China Seng Index. General Insurance through a branch Company (Philam office in Shanghai, We launched a Life) was founded in the first foreign- sponsored Level 1 the Philippines. owned life business American Depositary to receive a licence in Receipt programme. INTASCO moved its the country. head office to Hong Kong and changed 2012 its name to American 1998 The divestment by International We celebrated the AIG of its remaining We entered Indonesia. Assurance Company, return to our former shareholding in AIA Limited. headquarters building marked the end of on The Bund in our association with Shanghai. AIG. 004 AIA GROUP LIMITED 1992 2013 ACQUISITION OF ING MALAYSIA 2010 AIA’s transaction with ING closed in AIA Group December 2012 and completed the full Limited successfully listed on the integration of the businesses of AIA Main Board of The Stock and ING Malaysia in June 2013. Exchange of Hong Kong Limited. EXPANSION INTO SRI LANKA We commenced business in Sri Lanka 2013 Celebrating through the acquisition of Aviva NDB the full integration of Insurance. the businesses of AIA and ING Malaysia. ENTRY INTO MYANMAR We opened a representative office in 2013 Myanmar. We launched The Real Life Company brand positioning. LAUNCH OF THE REAL LIFE COMPANY BRAND POSITIONING The new brand positioning reflects our role in providing the right financial solutions and support for our customers and their families in a constantly changing world. ANNUAL REPORT 2013 005 AIA At-a-Glance (1) We have a diversified franchise across the Asia-Pacific region. 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. VIETNAM KOREA 100% OWNERSHIP MYANMAR CHINA IN 15 OUT OF THAILAND TAIWAN INDIA HONG HONG MACAU SRI LANKA THE MALAYSIA PHILIPPINES 17 SINGAPORE AUSTRALIA GEOGRAPHICAL BRUNEI NEW ZEALAND MARKETS INDONESIA Note: (1) All the figures on pages 6 and 7 are as of 30 November 2013. 006 AIA GROUP LIMITED HISTORY OF OVER 90 YEARS IN ASIA-PACIFIC OVER SERVING THE HOLDERS OF MORE THAN 16 28 MILLION MILLION PARTICIPATING MEMBERS INDIVIDUAL POLICIES OF GROUP INSURANCE AND SCHEMES EV EQUITY OF 34.9 BILLION US$ TOTAL ASSETS OF 147 BILLION US$ ANNUAL REPORT 2013 007 OVERVIEW Financial Highlights 2013 RESULTS AT-A-GLANCE* Value of New Business (VONB)(1) Annualised New Premium (ANP)(2) US$ US$ millions millions 1,490 1,500 3,500 3,341 1,188 +25% 3,000 +24% 1,200 2,696 2,472 2,500 932 900 2,025 2,000 1,878 667 1,500 600 545 1,000 300 500 0 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Operating Profit After Tax (OPAT)(3) Total Weighted Premium Income (TWPI)(4) US$ US$ millions millions 17,808 3,000 18,000 2,504 15,360 2,500 % 15,000 14,442 % +16 13,013 +16 2,159 2,000 1,922 12,000 11,632 1,699 1,500 1,438 9,000 1,000 6,000 500 3,000 0 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 EV Equity(5) Total Assets and Total Liabilities US$ US$ TOTAL ASSETS millions billions 34,875 35,000 150 147 31,657 134 30,000 % % 27,464 +10 122 +9 120 114 24,948 108 108 25,000 TOTAL LIABILITIES 93 21,162 91 88 90 20,000 76 15,000 +13 % 60 10,000 30 5,000 0 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 * Percentages shown indicate changes in 2013 compared with 2012. 008 AIA GROUP LIMITED OVERVIEW 2013 BREAKDOWN BY SEGMENT Value of New Business (VONB)(1)(6) Annualised New Premium (ANP)(2) 14% 21% 23% 28% 6% 10% 10% 17% 7% 19% 7% FINANCIAL AND OPERATING REVIEW OPERATING AND FINANCIAL 16% 10% 12% Operating Profit After Tax (OPAT)(3) Total Weighted Premium Income (TWPI)(4) CORPORATE GOVERNANCE 10% 16% 21% 6% 30% 8% 12% 10% 19% 9% 15% 21% 11% 12% FINANCIAL STATEMENTS FINANCIAL Hong Kong Singapore China Other Markets(7) Thailand Malaysia Korea Notes: (1) Value of new business (VONB) is the present value, measured at point of sale, of projected (5) Embedded value (EV) is an actuarially determined estimate of the economic value of a life after-tax statutory profits emerging in the future from new business sold in the period less insurance business based on a particular set of assumptions as to future experience, the cost of holding required capital in excess of regulatory reserves to support this business.