AIA Group Limited 友邦保險控股有限公司 Annual Report 2010 AIA Group Limited A 友邦保險控股有限公司 BEGINNING Annual Report 2010 AIA Group Limited 友邦保險控股有限公司 AIA.COM Stock code: 1299 Vision Our vision is to be 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. We aim to grow our business prudently and profitably in all the markets we serve in order to optimise returns for our shareholders over time. About the AIA Group AIA Group Limited (“the Company”; stock code: 1299) and its subsidiaries (collectively “the AIA Group” or “the Group”) comprise the largest independent listed pan-Asian life insurance group in the world, with a broad footprint spanning 15 markets in Asia Pacific. The Group traces its roots in the region back more than 90 years and has total assets of US$107.9 billion. The AIA Group meets the protection, savings and investment needs of individuals by offering a comprehensive suite of products and services covering accident and health insurance, life insurance and retirement planning. It also provides employee benefits, credit life and pension services to corporate clients. Through an extensive network of more than 260,000 agents and over 21,000 employees across Asia Pacific, the Group serves the holders of over 23 million individual policies and over 10 million participating members of group policies. The Group has operations in Hong Kong, Thailand, Singapore, Malaysia, China, Korea, the Philippines, Australia, Indonesia, Taiwan, Vietnam, New Zealand, Macau, Brunei and India. The AIA Group is a market leader in the Asia Pacific region based on life insurance premiums, and holds number one positions in six of its geographical markets. Due to its historical roots in Asia, the AIA Group has built a network of mainly wholly-owned businesses operating as branches or subsidiaries. Only in India, where legislation restricts foreign ownership of insurance companies to 26%, is the Group’s main operating unit a joint venture. AIA Group Limited is listed on the Main Board of The Stock Exchange of Hong Kong Limited. A NEW BEGINNING It was a challenging and eventful year for the AIA Group. After our successful IPO and listing on the Stock Exchange of Hong Kong, we are in control of our own destiny as an independent, Asia-based and financially strong company with extraordinary opportunities ahead. Notes: (1) Explanations of certain terms and abbreviations used in this report are set forth in the Glossary. (2) Unless otherwise specified, 2009 and 2010 refer to the financial year of AIA Group Limited, which ends on 30 November of the year indicated. Contents Financial Highlights 8 Chairman’s Statement 10 Group Chief Executive and President’s Report 12 OVERVIEW Financial Review 18 Business Review 34 Risk Management 48 Our People 56 Corporate Social Responsibility 58 FINANCIAL AND OPERATING REVIEW OPERATING AND FINANCIAL Statement of Directors’ Responsibilities 64 Board of Directors and Executive Committee 65 Report of the Directors 70 Corporate Governance Report 76 Remuneration Report 82 CORPORATE GOVERNANCE Independent Auditor’s Report 89 Consolidated Income Statement 91 Consolidated Statement of Comprehensive Income 92 Consolidated Statement of Financial Position 93 Consolidated Statement of Changes in Equity 94 Consolidated Statement of Cash Flows 95 Notes to the Consolidated Financial Statements and Significant Accounting Policies 96 Statement of the Financial Position of the Company 208 FINANCIAL STATEMENTS Supplementary Embedded Value Information 210 Shareholder Information 237 Corporate Information 239 Glossary 240 ADDITIONAL INFORMATION Key Milestones 1919 1931 1947 The AIA Group put down its corporate roots in Asia Mr. Cornelius Vander Starr founded International when the group founder Assurance Company, Limited (INTASCO), Mr. Cornelius Vander Starr in Shanghai. established an insurance INTASCO moved its head agency in Shanghai. INTASCO established branch offices in Hong Kong and Singapore. office to Hong Kong and changed its name to American International Assurance Company, Limited (AIA Co). The Philippine American Life and General Insurance Company (PhilamLife) was founded in the Philippines. 1910 1920 1930 1940 1950 1960 1970 1921 1972 We formed a subsidiary in Australia. 1957 We registered in Brunei. 1948 We entered Malaysia. 1938 Mr. Cornelius Vander Starr founded his first life insurance enterprise in Shanghai. INTASCO entered Siam, later re-named Thailand, to write both life and general insurance. 2 AIA Group Limited 1981 1998 2009 We celebrated the return to ALICO Taiwan became our branch office. our former headquarters building PhilamLife became an operating subsidiary of at The Bund in Shanghai. the Group. 2000 We completed the reorganisation driven by AIG’s liquidity crisis in 2008, leading to the positioning of the Company for a public listing. 2010 Our New Zealand operations began as a branch of Amercian Life Insurance Company (ALICO). 1984 We entered Indonesia. We formed a subsidiary 1990 in Vietnam. Our operations in Taiwan were 2001 AIA Group Limied successfully listed on established as a A joint venture in India the Main Board of The Stock Exchange of branch of ALICO. was established. Hong Kong Limited, the third largest IPO ever globally at the time. 1980 1990 2000 2010 1992 2008 We re-established our presence in China through a branch office in Shanghai, the first foreign-owned life business to receive a licence in the country. 1987 We received the first international Takaful operator licence in Malaysia. Korean operations began. 1982 We entered Macau. Annual Report 2010 3 Korea China Taiwan Hong Kong Macau India Thailand Vietnam The Philippines Malaysia Brunei Singapore Indonesia GEOGRAPHICAL MARKETS Australia We have a diversified franchise across Asia Pacific, with 100% 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 where we operate. 4 AIA Group Limited AIA Group At-a-Glance(2) History of over 90 years in Asia Pacific 100% ownership in 14(1) out of 15 geographical markets Serving the holders of more than 23 million in-force policies and 10 million participating members of group corporate clients More than 260,000 tied agents (including 101,000 in India) Over 120 bancassurance relationships with 13,000 branches More than 21,000 employees (including 6,000 in India) Total assets of US$107.9 billion New Zealand Notes: (1) Including operations in the Philippines in which percentage holding is 99.78%. (2) All the above figures are as of 30 November 2010. 5 We Grow with PRIDE Following our listing and with the right team in place, at the right time, with the right opportunities, we are poised to forge ahead. OVERVIEW Financial Highlights 2010 Results At-a-Glance Total Weighted Premium Income (TWPI)(1) Annualised New Premium (ANP)(2) US$m US$m 2,000 13,013 2,025 1,878 11,632 10,000 +12% 1,000 +8% 5,000 0 0 2009 2010 2009 2010 Operating Profit After Tax (OPAT) Value of New Business (VONB)(3) US$m US$m 1,708 667 1,500 1,443 500 545 1,000 +18% +22% 250 500 0 0 2009 2010 2009 2010 Net Profit Attributable to Shareholders Embedded Value (EV)(4) of AIA Group Limited US$m US$m 2,701 24,748 20,000 20,965 2,000 1,754 +54% +18% 10,000 1,000 0 0 2009 2010 2009 2010 8 AIA Group Limited 2010 Breakdown by Geographical Market Total Weighted Premium Income (TWPI)(1) Annualised New Premium (ANP)(2) 13% OVERVIEW 23% 17% 22% 15% 14% 9% 21% 21% 10% 6% 13% 6% 10% Operating Profit After Tax (OPAT)(5) Value of New Business (VONB)(3), (6) 7% 8% 13% FINANCIAL AND OPERATING REVIEW 28% 4% 8% 40% 6% 9% 18% 5% 23% 14% 17% Hong Kong Thailand Singapore Malaysia CORPORATE GOVERNANCE China Korea Other Markets(7) Notes: (1) Total weighted premium income (TWPI) consists of 100% of renewal premiums, 100% of first year premiums and 10% of single premiums. (2) Annualised new premium (ANP) is a measure of new business activity that is calculated as the sum of 100% annualised first year premiums and 10% of single premiums, before reinsurance ceded. (3) 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. (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. FINANCIAL STATEMENTS (7) The results attributable to our interest in our joint venture in India are not reflected in TWPI, ANP or VONB for our Other Markets reporting segment because we account for this interest using the equity method of accounting. ADDITIONAL INFORMATION Annual Report 2010 9 OVERVIEW Chairman’s Statement “The IPO and establishment of the AIA Group as an independent Asia-based company have reinforced our historical roots in the region, and have enabled us to focus once again on capturing the outstanding opportunities in the Asia Pacific region.” Edmund Sze Wing Tse Non-executive Chairman 10 AIA Group Limited It gives me great pleasure to write my first Statement as Non-executive Chairman of AIA Group Limited, and to share with you our first Annual Report as an independent listed company.