ANNUAL REPORT 2017 STOCK CODE 1299 SHAPING OUR FUTURE WorldReginfo - b33b012e-77ce-4c02-95d5-1a602f4ac522 VISION & PURPOSE OUR VISION is to be the world’s pre-eminent life insurance provider. That is our service to our customers and our shareholders. OUR PURPOSE is to play a leadership role in driving economic and social development across the region. That is our service to societies and their people. 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 in Asia-Pacific – wholly-owned branches and subsidiaries in Hong Kong, Thailand, Singapore, Malaysia, China, Korea, the Philippines, Australia, Indonesia, Taiwan, Vietnam, New Zealand, Macau, Brunei, Cambodia, a 97 per cent subsidiary in Sri Lanka, a 49 per cent joint venture in India and a representative office in Myanmar. The business that is now AIA was first established in Shanghai almost a century 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$216 billion as of 30 November 2017. 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-Pacific, AIA serves the holders of more than 30 million individual policies and over 16 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”). Notes: (1) Explanations of certain terms and abbreviations used in this report are set forth in the Glossary. (2) Unless otherwise specified, 2016 and 2017 refer to the financial year of the Group, which ends on 30 November of the year indicated. WorldReginfo - b33b012e-77ce-4c02-95d5-1a602f4ac522 KEY MILESTONES 1919 1981 AIA put down its Our New Zealand operations corporate roots in Asia began as a branch of when the group founder American Life Insurance Mr. Cornelius Vander Starr Company (ALICO). established an insurance agency in Shanghai. 1982 We entered Macau. 1921 Mr. Cornelius Vander Starr 1984 founded Asia Life Insurance We entered Indonesia. Company, his first life insurance enterprise in Shanghai. 1987 Korean operations began. 1931 Mr. Cornelius Vander Starr 1990 founded International Our operations in Taiwan Assurance Company, were established as a Limited (INTASCO), in branch of ALICO. Shanghai. INTASCO established branch offices in Hong Kong and Singapore. 1938 INTASCO entered Siam, later renamed Thailand. 1919 1947 2010 The Philippine American Life and General Insurance Company (Philam Life) was 1992 founded in the Philippines. We re-established our presence in China through a INTASCO moved its head branch office in Shanghai, office to Hong Kong. the first foreign-owned life business to receive a licence 1948 in the country. INTASCO changed its name to American International 1998 Assurance Company, We celebrated the Limited. return to our former We entered Malaysia. headquarters building on The Bund in Shanghai. 1957 We registered in Brunei. 2000 We formed a subsidiary 1972 in Vietnam. We formed a subsidiary in Australia. 2001 A joint venture in India was established. WorldReginfo - b33b012e-77ce-4c02-95d5-1a602f4ac522 2009 2014 2017 ALICO Taiwan became AIA and Citibank formed a AIA OPENS FOR BUSINESS IN CAMBODIA our branch office. landmark, long-term and AIA was granted an insurance licence and exclusive bancassurance Philam Life became our commenced business in Cambodia. partnership that operating subsidiary. encompasses 11 markets in AIA FURTHER EXTENDS LEADERSHIP POSITION We completed the the Asia-Pacific region. IN THE AUSTRALIAN AND NEW ZEALAND LIFE reorganisation driven by AIA became the Official INSURANCE MARKETS AIG’s liquidity crisis in 2008, Shirt Partner of Tottenham AIA reached an agreement with the Commonwealth leading to the positioning of Hotspur Football Club to Bank of Australia (CBA) to acquire CBA’s life the Company for a public promote the role of sports as insurance business in Australia and life and health listing. a key element of healthy insurance businesses in New Zealand. AIA also living. entered into 20-year strategic bancassurance 2010 partnerships with CBA in both markets. AIA Group Limited 2015 successfully listed on the AIA NAMED #1 MDRT COMPANY IN THE WORLD AIA became the #1 MDRT Main Board of The Stock FOR THIRD YEAR RUNNING company in the world. Exchange of Hong Kong AIA became the only multinational company in the Limited, the third-largest world to have achieved the largest number of MDRT IPO ever globally at the time. members for three consecutive years. 2015 2016 2017 2011 2016 AIA Group Limited The AIA Leadership Centre became a constituent stock opened in Bangkok. of the Hang Seng Index. AIA became the world’s We launched a sponsored #1 MDRT company for Level 1 American Depositary two consecutive years. Receipt programme. AIA PARTNERS WITH BANGKOK BANK We increased AIA Group’s AIA agreed a strategic long-term bancassurance stake in Tata AIA Life partnership with Bangkok Bank, in keeping with our 2013 Insurance Company Limited, strategic priority of partnering with leading financial AIA completed the full a joint venture in India, from institutions across the Asia-Pacific region. integration of the businesses 26 per cent to 49 per cent. of AIA and ING Malaysia. AIA APPOINTS DAVID BECKHAM AS We commenced business GLOBAL AMBASSADOR in Sri Lanka through the AIA appointed David Beckham as our Global acquisition of Aviva NDB Ambassador in support of our goal to help people Insurance. live healthier, longer, better lives. We opened a representative office in Myanmar. AIA PRESENTS THE HONG KONG OBSERVATION WHEEL AND THE AIA VITALITY PARK In December 2017, AIA became the exclusive Principal Sponsor of the Hong Kong Observation Wheel and also enhanced the site by an adjoining, newly created AIA Vitality Park. WorldReginfo - b33b012e-77ce-4c02-95d5-1a602f4ac522 CONTENTS OVERVIEW 004 Financial Highlights 006 Chairman’s Statement 008 Group Chief Executive and President’s Report FINANCIAL 015 Financial Review AND 032 Business Review OPERATING 050 Risk Management REVIEW 061 Regulatory and International Developments 062 Our People 064 Corporate Social Responsibility CORPORATE 069 Statement of Directors’ Responsibilities GOVERNANCE 070 Board of Directors 078 Executive Committee 083 Report of the Directors 092 Corporate Governance Report 104 Remuneration Report FINANCIAL 121 Independent Auditor’s Report STATEMENTS 128 Consolidated Income Statement 129 Consolidated Statement of Comprehensive Income 130 Consolidated Statement of Financial Position 132 Consolidated Statement of Changes in Equity 134 Consolidated Statement of Cash Flows 136 Notes to the Consolidated Financial Statements and Significant Accounting Policies 240 Independent Auditor’s Report on the Supplementary Embedded Value Information 244 Supplementary Embedded Value Information ADDITIONAL 264 Information for Shareholders INFORMATION 267 Corporate Information 268 Glossary WorldReginfo - b33b012e-77ce-4c02-95d5-1a602f4ac522 AIA AT-A-GLANCE We have a diversified business 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. DRIVING ECONOMIC AND SOCIAL DEVELOPMENT ACROSS ASIA SINCE 1919 PRESENCE IN MARKETS HONG KONG INDONESIA MACAU NEW ZEALAND THAILAND THE PHILIPPINES SINGAPORE SRI LANKA BRUNEI TAIWAN MALAYSIA VIETNAM CHINA INDIA KOREA MYANMAR AUSTRALIA CAMBODIA 002 | AIA GROUP LIMITED WorldReginfo - b33b012e-77ce-4c02-95d5-1a602f4ac522 THE LARGEST LISTED COMPANY ON THE HONG KONG STOCK EXCHANGE NO.1 WORLDWIDE which is incorporated and FOR MDRT MEMBERS headquartered in Hong Kong the only multinational company to top the table for three consecutive years 2ND LARGEST LIFE INSURER IN The only international THE WORLD life insurer headquartered and listed in Hong Kong and 100% FOCUSED ON ASIA-PACIFIC Serving the holders 13 MILLION of more than BENEFIT PAYMENTS 30 MILLION are made during 2017, individual policies helping customers and and over their families to cope with 16 MILLION challenges at different PARTICIPATING life stages MEMBERS of group insurance Provides protection schemes to people across the region with total sum assured of over US$1TRILLION ANNUAL REPORT 2017 | 003 WorldReginfo - b33b012e-77ce-4c02-95d5-1a602f4ac522 OVERVIEW 2017 RESULTS AT-A-GLANCE* VALUE OF NEW BUSINESS ANNUALISED NEW OPERATING PROFIT AFTER (VONB)(1) PREMIUMS (ANP)(2) TAX (OPAT)(3) US$ US$ US$ millions millions millions 3,512 6,092 3,500 6,000 5,000 4,647 5,123 3,000 2,750 5,000 3,981 4,000 3,556 2,500 3,991 3,248 2,198 4,000 3,700 3,341 3,000 2,839 2,000 1,845 1,490 3,000 1,500 2,000 2,000 1,000 1,000 500 1,000 0 0 0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 +28% +28% +19% +19% +16% +17% YoY (CER) YoY (AER) YoY (CER) YoY (AER) YoY (CER) YoY (AER) TOTAL WEIGHTED PREMIUM TOTAL ASSETS AND INCOME (TWPI)(4) EV EQUITY(5) TOTAL LIABILITIES US$ US$ US$ millions millions billions 30,000 60,000 250 26,147 51,775 216 25,000 50,000 22,133 43,650 200 185 19,876 39,818 169 170 173 20,000 19,211 40,000 39,042 17,808 34,871 149 150 150 136 138 123 15,000 30,000 100 10,000 20,000 50 5,000 10,000 0 0 0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 +18% +18% +15% +19% +17% +16% YoY (CER) YoY (AER) YoY (CER) YoY (AER) TOTAL ASSETS TOTAL LIABILITIES Note: * Percentages shown indicate changes in 2017 compared with 2016.