LEADING with PURPOSE ANNUAL REPORT 2019 STOCK CODE 1299 VISION & PURPOSE Our Vision is to be the Our Purpose is to play world’s pre-eminent a leadership role in life insurance provider. driving economic and social development across the region. ABOUT AIA AIA Group Limited and its AIA meets the long-term savings subsidiaries (collectively “AIA” and protection needs of or the “Group”) comprise the individuals by offering a range of largest independent publicly products and services including listed pan-Asian life insurance life insurance, accident and group. It has a presence in health insurance and savings 18 markets in Asia-Pacific – plans. The Group also provides wholly-owned branches and employee benefits, credit life subsidiaries in Hong Kong SAR, and pension services to Thailand, Singapore, Malaysia, corporate clients. Through an Mainland China, South Korea, extensive network of agents, the Philippines, Australia, partners and employees across Indonesia, Taiwan (China), Asia-Pacific, AIA serves the Vietnam, New Zealand, holders of more than 36 million Macau SAR, Brunei, Cambodia, individual policies and over Myanmar, a 99 per cent 16 million participating members subsidiary in Sri Lanka, and of group insurance schemes. a 49 per cent joint venture in India. AIA Group Limited is listed on the Main Board of The Stock The business that is now AIA Exchange of Hong Kong Limited was first established in Shanghai under the stock code “1299” a century ago in 1919. It is a with American Depositary market leader in the Asia-Pacific Receipts (Level 1) traded on the region (ex-Japan) based on life over-the-counter market (ticker insurance premiums and holds symbol: “AAGIY”). leading positions across the majority of its markets. It had total assets of US$284 billion as of 31 December 2019. Notes: (1) Hong Kong SAR refers to Hong Kong Special Administrative Region. (2) Macau SAR refers to Macau Special Administrative Region. (3) Explanations of certain terms and abbreviations used in this report are set forth in the Glossary. Driving economic and social development across Asia since 1919 1919 1992 2011 2015 AIA put down its We re-established our AIA Group Limited AIA became the #1 MDRT corporate roots in Asia presence in China through became a constituent company in the world. when the group founder a branch office in stock of the Hang Seng Mr. Cornelius Vander Shanghai, the first Index. Starr established an foreign-owned life We launched a sponsored insurance agency in business to receive a Level 1 American Shanghai. licence in the country. Depositary Receipt 1921 1998 programme. Mr. Cornelius Vander We celebrated the 2016 Starr founded Asia Life return to our former 2013 AIA completed the full The AIA Leadership Centre Insurance Company, headquarters building on integration of the opened in Bangkok. his first life insurance The Bund in Shanghai. businesses of AIA and enterprise in Shanghai. We increased AIA Group’s ING Malaysia. 2009 stake in Tata AIA Life 1931 We completed the We commenced business Insurance Company Mr. Cornelius Vander Starr reorganisation driven by in Sri Lanka through the Limited, a joint venture in founded International AIG’s liquidity crisis in acquisition of Aviva NDB India, from 26 per cent to Assurance Company, 2008, leading to the Insurance. 49 per cent. Limited (INTASCO), in positioning of the Shanghai. Company for a public 2014 2017 listing. AIA and Citibank formed a AIA presented the Hong INTASCO established landmark, long-term and Kong Observation Wheel branch offices in Hong 2010 exclusive bancassurance and the AIA Vitality Park. Kong and Singapore. AIA Group Limited partnership that 1947 successfully listed on encompasses 11 markets 2018 the Main Board of The AIA launched new brand The Philippine American in the Asia-Pacific region. Stock Exchange of Hong promise: Healthier, Longer, Life and General Kong Limited, the AIA became the Official Better Lives Insurance Company third-largest IPO ever Shirt Partner of Tottenham (Philam Life) was founded globally at the time. Hotspur Football Club to in the Philippines. promote the role of sports INTASCO moved its head as a key element of office to Hong Kong. healthy living. 1948 INTASCO changed its name to American International Assurance Company, Limited. LEADING with PURPOSE Our Centennial year marking a 100-year journey that has seen AIA become the largest independent publicly listed pan-Asian life insurance group was celebrated across the region by events and physical challenges supporting local community charities and special causes. We are committed to leading our industry by delivering on our promise of Healthier, Longer, Better Lives, with the purpose of driving economic and social development across the markets in which we operate. 2019 AIA Celebrates AIA and CBA Execute Its Centennial Year Joint Cooperation Our 100-year journey has been one of Agreement and Extend pioneering growth that has seen AIA become the largest independent, Strategic Partnership publicly listed, pan-Asian life insurance to 25 years group, with a presence across AIA and Commonwealth Bank of 18 markets. In 2019, we held a year-long Australia (CBA) executed a Joint series of centennial-themed activities Cooperation Agreement enabling in all our markets in support of local AIA to exercise a level of direct community charities and special management control and oversight causes. over CBA’s life insurance business in Australia. Additionally, AIA Australia’s AIA Opens New Sales strategic bancassurance partnerships and Service Centres in with CBA in Australia and ASB Bank Limited in New Zealand were Mainland China extended to 25 years. AIA set up sales and service centres in Tianjin and Shijiazhuang, Hebei in AIA and Spurs Extend accordance with the pilot programme promoting insurance integration Global Principal Partnership under the Beijing–Tianjin–Hebei until 2027 Integration Plan. AIA and Tottenham Hotspur Football Club extended their partnership to AIA Granted Approval to the end of the 2026/27 season. The Operate in Myanmar AIA brand will continue to appear on the front of the team shirts in all AIA was granted approval to operate competitions. in Myanmar through a 100% wholly- owned subsidiary. We opened for business in November 2019 and AIA Tops The Table for became the first foreign insurer to Fifth Year Running issue a policy in the country. AIA became the only multinational company in the world to rank number one in terms of the largest number of Million Dollar Round Table members for five consecutive years. AIA AT-A-GLANCE Presence in The only international life insurer headquartered and 18 Markets listed in Hong Kong and 100% focused The largest on Asia-Pacific listed company on the Hong Hong Over 14 million Stock Exchange benefit payments which is incorporated were made during 2019, and headquartered helping customers and in Hong Kong their families to cope with challenges at different The largest (1) life stages life insurer in Serving the holders the world of more than 36 million No.1 Worldwide individual policies for MDRT Members and over The only multinational 16 million company to top the table participating members for five consecutive years of group insurance schemes Provides protection to people across the Asia-Pacific region with total sum assured of US$1.74 trillion Note: (1) The largest life insurer in the world by market capitalisation as at 12 March 2020. CONTENTS OVERVIEW 004 Financial Highlights 006 Chairman’s Statement 009 Group Chief Executive and President’s Report FINANCIAL AND OPERATING REVIEW 017 Financial Review 038 Business Review 056 Risk Management 064 Regulatory and International Developments 066 Our People CORPORATE GOVERNANCE 071 Statement of Directors’ Responsibilities 072 Board of Directors 080 Executive Committee 085 Report of the Directors 095 Corporate Governance Report 108 Remuneration Report FINANCIAL STATEMENTS 125 Independent Auditor’s Report 132 Consolidated Income Statement 133 Consolidated Statement of Comprehensive Income 134 Consolidated Statement of Financial Position 136 Consolidated Statement of Changes in Equity 138 Consolidated Statement of Cash Flows 140 Notes to the Consolidated Financial Statements and Significant Accounting Policies 257 Supplementary Financial Information on a Calendar Year Basis 269 Independent Auditor’s Report on the Supplementary Embedded Value Information 273 Supplementary Embedded Value Information ADDITIONAL INFORMATION 299 Information for Shareholders 302 Corporate Information 303 Glossary ANNUAL REPORT 2019 | 003 OVERVIEW 2019 RESULTS AT-A-GLANCE(1) ANNUALISED NEW OPERATING PROFIT AFTER VALUE OF NEW BUSINESS (2)(8) PREMIUMS (3)(8) TAX (4) US$ US$ US$ millions millions millions 4,500 4,154 7,000 6,510 6,585 6,000 5,741 3,955 5,298 4,000 6,000 5,624 5,000 4,635 3,500 3,206 5,123 5,000 3,981 3,000 2,750 4,000 3,991 3,556 2,500 2,198 4,000 3,000 2,000 3,000 1,500 2,000 2,000 1,000 1,000 1,000 500 0 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 +6% +5% +2% +1% +9% +8% YoY (CER) YoY (AER) YoY (CER) YoY (AER) YoY (CER) YoY (AER) TOTAL WEIGHTED PREMIUM TOTAL ASSETS AND INCOME (5) EV EQUITY (6) TOTAL LIABILITIES US$ US$ US$ millions millions billions 35,000 34,002 70,000 300 284 63,905 30,543 30,000 60,000 56,203 250 230 26,393 52,429 219 226 25,000 50,000 22,133 43,650 200 185 190 19,876 39,818 170 175 20,000 40,000 150 150 138 15,000 30,000 100 10,000 20,000 5,000 10,000 50 0 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 +13% +11% +12% +14% +24% +19% YoY (CER) YoY (AER) YoY (CER) YoY (AER) TOTAL ASSETS TOTAL LIABILITIES 004 | AIA GROUP LIMITED 2019 BREAKDOWN BY MARKET SEGMENT OVERVIEW ANNUALISED NEW VALUE OF NEW BUSINESS (2)(7) PREMIUMS (3) Hong Kong 12% Mainland China 19% 6% Thailand 37% 37% Singapore 8% 6% Malaysia 8% (8) 11% Other Markets 11% 26% 19% FINANCIAL AND OPERATING REVIEW OPERATING AND FINANCIAL OPERATING PROFIT AFTER TOTAL WEIGHTED PREMIUM TAX (4) INCOME (5) 14% 20% 6% 33% 38% GOVERNANCE CORPORATE 6% 10% 9% 19% 18% 13% 14% Notes: (1) The financial information from 2017 to 2019 is presented on the (6) Embedded value (EV) is an actuarially determined estimate of the 31 December financial year-end basis.