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AIA Group Limited Earnings Release 2018

May 4, 2018

49833_rns_2018-05-03_6cc51116-7f2e-4e54-bc79-b50a442876e5.pdf

Earnings Release

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This announcement is for information purposes only and does not constitute an invitation or offer by any person to acquire, purchase or subscribe for securities. This announcement is not, and is not intended to be, an offer of securities of the Company for sale in the United States. The securities of the Company have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements under the U.S. Securities Act. There is not, and is not intended to be, any public offering of the securities of the Company in the United States.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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AIA Group Limited 友邦保險控股有限公司 (Incorporated in Hong Kong with limited liability) Stock Code: 1299

FIRST QUARTER 2018 NEW BUSINESS HIGHLIGHTS

友邦保險控股有限公司 香港中環干諾道中一號 友邦金融中心三十五樓

AIA Group Limited 35/F, AIA Central 1 Connaught Road Central Hong Kong T: (852) 2832 6166 F: (852) 2838 2005

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AIA.COM

Media Release

AIA Delivers Record VONB in the First Quarter of 2018

VONB growth of 20 per cent on constant exchange rates

HONG KONG, 4 May 2018 – AIA Group Limited (the “Company”; stock code: 1299) today announces record quarterly value of new business (VONB) of US$1,021 million and continued strong growth of 20 per cent on constant exchange rates (CER) for the first quarter ended 31 March 2018.

Highlights of the first quarter on constant exchange rates:

  • 20 per cent growth in VONB to US$1,021 million (26 per cent on actual exchange rates (AER))

  • 1 per cent increase in annualised new premiums (ANP) to US$1,696 million (4 per cent on AER)

  • VONB margin of 59.7 per cent, up 9.8 pps

  • Total weighted premium income (TWPI) up 14 per cent to US$7,219 million (19 per cent on AER)

KEY FINANCIAL SUMMARY

KEY FINANCIAL SUMMARY
US$ millions, unless otherwise stated 1Q 2018
1Q2017		 YoY
CER
YoY
AER
Value of new business(VONB) 1,021
811		 20%
26%
VONB margin 59.7%
49.2%		 9.8pps
10.5pps
Annualised newpremiums(ANP) 1,696
1,630		 1%
4%
Total weightedpremium income(TWPI) 7,219
6,059		 14%
19%

Ng Keng Hooi, AIA’s Group Chief Executive and President, said:

“AIA has made a strong start to the year with 20 per cent growth in VONB to US$1,021 million, which is the first time that quarterly VONB for the Group has exceeded US$1 billion.

“We have maintained our strong track record of year-on-year growth, with today’s headline figures demonstrating the consistent execution of our profitable growth strategy.

“AIA’s strategy remains closely aligned with the vast opportunities created by the unprecedented structural economic, demographic and social changes taking place across our markets. Our competitive advantages, combined with our deep roots and long history in the region, mean that the Group is exceptionally well-placed to help the rapidly growing middle-class across Asia meet their substantial needs for financial protection and long-term savings and live healthier, longer, better lives.”

1

AIA Delivers Record VONB in the First Quarter of 2018

SUMMARY FOR THE FIRST QUARTER

VONB increased by 20 per cent to US$1,021 million with each of our operating market segments registering growth compared to the first quarter of 2017.

AIA’s wholly-owned operation in China was once again our fastest growing business in the first quarter, with excellent VONB growth driven by an increase in active agents and higher productivity. Our differentiated strategy continues to set AIA apart in the industry with full-time professional agents providing high-quality advice, supported by digital platforms that enhance efficiency and effectiveness.

In Hong Kong, we delivered positive growth in VONB, building on a strong performance in the first quarter of 2017. Lower ANP through the retail IFA channel was more than offset by increased profitability of the product mix, which was also a feature of the second half of 2017.

Singapore achieved very strong growth in VONB, with continued growth in regular premium protection business. Strong agency results benefited from both an increased number of active agents and productivity improvements. Malaysia also delivered very strong VONB growth, across both agency and partnership distribution channels.

VONB growth in Thailand was positive in the first quarter of 2018, supported by improvement in agent productivity. Our Other Markets segment delivered double-digit VONB growth with strong performances in Indonesia, Korea, the Philippines and Vietnam.

VONB margin improved strongly to 59.7 per cent, compared with 49.2 per cent in the first quarter of 2017, mainly driven by product and geographic mix. ANP increased by 1 per cent compared with the first quarter of 2017 to US$1,696 million, as lower sales volumes in Hong Kong were offset by double-digit growth across all other operating market segments. Margin reported on a present value of new business premium (PVNBP) basis remained strong at 10 per cent for the first quarter of 2018. Long-term economic assumptions remain unchanged from those shown in our Annual Report 2017, following the same approach that we have applied consistently for quarterly new business highlights. TWPI increased by 14 per cent to US$7,219 million, compared with the first quarter of 2017, as we continue to layer new business onto our large in-force portfolio.

OUTLOOK

The outlook for the global economy remains positive. Asian economies have increasingly re-oriented towards domestic drivers of growth with inter-regional demand for exports continuing to rise. While global political uncertainty continues to drive volatility in capital markets, Asian policymakers retain significant monetary and fiscal flexibility to sustain domestic sources of investment.

AIA is uniquely positioned to capture the immense opportunities presented by this backdrop of positive economic developments, rising incomes and the rapid growth in the middle classes across Asia. Low levels of social insurance protection and increasing incomes combine to create strong demand for protection and savings products in all of our markets. We remain confident in our ability to deliver growing and sustainable shareholder value.

2

AIA Delivers Record VONB in the First Quarter of 2018

FOREIGN EXCHANGE VOLATILITY

AIA receives the vast majority of its premiums in local currencies and we closely match our local assets and liabilities to minimise the economic effects of foreign exchange movements. When reporting the Group’s consolidated figures, there is a currency translation effect as we report in US dollars. We have provided growth rates and commentaries on constant exchange rates unless otherwise stated, since this provides a clearer picture of the year-on-year performance of the underlying businesses.

2017 SUPPLEMENTARY FINANCIAL INFORMATION ON CALENDAR YEAR BASIS

In February 2018, the board of directors of the Company (the “Board”) resolved to change the Company’s financial year-end date from 30 November to 31 December as previously announced on 27 February 2018. Accordingly, the next 13-month financial period-end date of the Company will be 31 December 2018. The next audited financial statements of the Group will cover a 13-month period from 1 December 2017 to 31 December 2018 and a voluntary disclosure of the 12-month periods from 1 January to 31 December 2017 and from 1 January to 31 December 2018.

In conjunction with this change, the Company voluntarily discloses supplementary financial information for the calendar year 2017 as set out in the Appendix on pages 7 to 37.

The 2017 supplementary financial information set out in the Appendix on pages 7 to 37 does not constitute the Company’s statutory annual consolidated financial statements for that year and has been prepared to provide a historical comparison. It has neither been audited nor reviewed by the Company’s external auditor, PricewaterhouseCoopers.

The Company has delivered the financial statements for the year ended 30 November 2017 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Companies Ordinance and will deliver the financial statements for the 13-month period ending 31 December 2018 in due course.

The Company’s external auditor has reported on the financial statements for the year ended 30 November 2017. The external auditor’s report was unqualified; it did not include a reference to any matters to which the auditor drew attention by way of emphasis of matter without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or (3) of the Companies Ordinance. The Company’s external auditor has yet to report on the financial statements for the 13-month period ending 31 December 2018.

– End –

3

AIA Delivers Record VONB in the First Quarter of 2018

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 in 1919. 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-thecounter market (ticker symbol: “AAGIY”).

Contacts

Investment Community Investment Community News Media
Lance Burbidge +852 2832 1398 Stephen Thomas +852 2832 6178
Feon Lee +852 2832 4704 Allister Fowler +852 2832 1978
Rachel Poon +852 2832 4792 Emerald Ng +852 2832 4720

As for all quarterly new business highlights announcements, there will not be a conference call for media or investors and your usual contact will be available to answer queries.

4

AIA Delivers Record VONB in the First Quarter of 2018

Notes:

  1. AIA’s first fiscal quarter of 2018 ended on 31 March 2018 and comparatives for 2017 relate to the three-month period ended on 31 March 2017.

  2. All figures are presented in actual reporting currency (US dollars) and based on actual exchange rates (AER) unless otherwise stated. Change is shown on a year-on-year basis and based on constant exchange rates (CER) unless otherwise stated. Change on CER is calculated using constant average exchange rates for 2018 and 2017.

  3. Long-term economic assumptions are the same as those shown as at 30 November 2017 in Section 5.2 of the Supplementary Embedded Value Information in our 2017 annual results preliminary announcement published on 27 February 2018. Non-economic assumptions are based on those used at 30 November 2017 updated to reflect the latest experience observed.

  4. VONB is calculated based on assumptions applicable at the point of sale and before deducting the amount attributable to non-controlling interests. The amounts of VONB attributable to non-controlling interests in the three months ended 31 March 2018 and in the three months ended 31 March 2017 were US$7 million and US$6 million respectively.

  5. VONB includes pension business. ANP and VONB margin exclude pension business.

  6. ANP represents 100 per cent of annualised first year premiums and 10 per cent of single premiums, before reinsurance ceded and excluding pension business.

  7. TWPI consists of 100 per cent of renewal premiums, 100 per cent of first year premiums and 10 per cent of single premiums, before reinsurance ceded.

This document contains forward-looking statements relating to AIA Group Limited that are based on the beliefs of the Group’s management as well as assumptions made by and information currently available to the Group’s management. These forward-looking statements are, by their nature, subject to significant risks and uncertainties. When used in this document, the words “will”, “future” and similar expressions are intended to identify forward-looking statements. You are strongly cautioned that reliance on any forward-looking statements involves known and unknown risks and uncertainties. Actual results and events may differ materially from information contained in the forward-looking statements.

This document is for information purposes only and does not constitute an invitation or offer by any person to acquire, purchase or subscribe for securities. This document is not, and is not intended to be, an offer of securities for sale in the United States. The securities of AIA Group Limited have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements under the U.S. Securities Act. There is not, and is not intended to be, any public offering of such securities in the United States.

5

By Order of the Board Ng Keng Hooi Executive Director

Group Chief Executive and President

Hong Kong, 4 May 2018

As at the date of this announcement, the Board comprises:

Independent Non-executive Chairman and Independent Non-executive Director:

Mr. Edmund Sze-Wing Tse

Executive Director, Group Chief Executive and President:

Mr. Ng Keng Hooi

Independent Non-executive Directors:

Mr. Jack Chak-Kwong So, Mr. Chung-Kong Chow, Mr. John Barrie Harrison, Mr. George Yong-Boon Yeo, Mr. Mohamed Azman Yahya, Professor Lawrence Juen-Yee Lau, Ms. Swee-Lian Teo, Dr. Narongchai Akrasanee and Mr. Cesar Velasquez Purisima

6

APPENDIX

2017 SUPPLEMENTARY FINANCIAL INFORMATION ON CALENDAR YEAR BASIS

The Board has resolved to change the Company’s financial year-end date from 30 November to 31 December. Accordingly, the next 13-month financial period-end date of the Company will be 31 December 2018 and the next audited financial statements of the Group will cover a 13-month period from 1 December 2017 to 31 December 2018. In conjunction with this change, the following supplementary financial information is voluntarily disclosed by the Company to provide a historical basis for comparison.

The following supplementary financial information does not include any definition or explanatory notes. A glossary of key terms can be found on pages 268 to 276 of the 2017 Annual Report of the Company. The accounting policies and embedded value methodologies adopted to prepare the following supplementary financial information are consistent with those used for the preparation of the Company’s consolidated financial statement and supplementary embedded value information for 2017 set out in the 2017 Annual Report of the Company. The supplementary financial information set out in the table below and on pages 8 to 37 has neither been audited nor reviewed by the Company’s external auditor, PricewaterhouseCoopers.

1 2017 KEY FINANCIAL INFORMATION

Key financial summary

Key financial summary
Three months Three months Three months
Three months
ended ended ended
ended
31 March
30 June		 30 September
31 December
US$m 2017 2017 2017 2017
Value of new business (VONB) 811 794 846 755
VONB margin 49.2% 61.3% 58.4% 56.9%
Annualised new premiums (ANP) 1,630 1,276 1,422 1,296
Total weighted premium income (TWPI) 6,059 6,115 6,611 7,608
Margin reported on a present value
of new business premium (PVNBP) basis 9% 10% 10% 9%
Six months Twelve months
ended ended
30 June 31 December
US$m 2017 2017
Operating profit after tax (OPAT) 2,233 4,635
Underlying free surplus generated 2,290 4,568
As at As at
30 June 31 December
US$m 2017 2017
Equity attributable to shareholders of the Company
on the embedded value basis (EV Equity) 48,594 52,429
Shareholders’ allocated equity 32,700 36,413
AIA Co. HKIO solvency ratio 433% 446%

7

1 2017 KEY FINANCIAL INFORMATION (CONTINUED)

Key financial information by geography

Other
US$m HongKong Thailand Singapore Malaysia China Markets
Six months ended 30 June 2017
VONB 723 179 138 106 377 185
VONB margin 49.2% 75.3% 71.1% 62.3% 88.2% 41.2%
ANP 1,434 237 194 169 428 444
TWPI 4,275 1,571 1,172 882 1,467 2,807
OPAT 821 423 240 118 294 337
Other
US$m HongKong Thailand Singapore Malaysia China Markets
Twelve months ended 31 December 2017
VONB 1,384 381 297 215 725 395
VONB margin 53.7% 73.4% 69.7% 62.5% 83.1% 39.9%
ANP 2,493 519 426 340 873 973
TWPI 9,535 3,559 2,435 1,848 3,118 5,898
OPAT 1,627 868 513 274 643 742

8

2 EMBEDDED VALUE RESULTS

Summary of key metrics[(1)]

As at As at
30 June 31 December
US$m 2017 2017
EV Equity 48,594 52,429
Embedded value (EV) 47,035 50,779
Adjusted net worth (ANW) 19,067 20,974
Value of in-force business (VIF) 27,968 29,805
Six months Twelve months
ended ended
30 June 31 December
US$m 2017 2017
VONB 1,605 3,206
ANP 2,906 5,624
VONB margin 54.5% 56.0%
EV operating profit 3,370 6,654
Operating return on EV (Operating ROEV)(2) 16.3% 15.5%

Notes:

(1) The results are after adjustment to reflect the consolidated reserving and capital requirements and the present value of future after-tax unallocated Group Office expenses.

  • (2) On an annualised basis for six months ended 30 June 2017.

9

2 EMBEDDED VALUE RESULTS (CONTINUED)

Summary of EV by Business Unit

Summary of EV by Business Unit
US$m As at 30 June 2017 EV
15,625
7,340
5,299
2,192
6,061
6,876
7,608
51,001
(3,024)
(942)
47,035
EV
16,924
8,501
5,438
2,490
7,006
7,103
8,261
55,723
(3,877)
(1,067)
50,779
Business Unit
AIA Hong Kong
AIA Thailand
AIA Singapore
AIA Malaysia
AIA China
Other Markets
Group Corporate Centre
Subtotal
Adjustment to reflect consolidated reserving and
capital requirements
After-tax value of unallocated Group Office expenses
Total
US$m		 ANW(1)
5,659
4,215
2,509
1,009
2,194
4,839
7,816
28,241
(9,174)
–
19,067		 VIF before
CoC
CoC
10,786
820
3,809
684
3,464
674
1,378
195
3,867
–
3,051
1,014
(208)
–
26,147
3,387
6,177
27
(942)
–
31,382
3,414
As at 31 December		 VIF after
CoC
9,966
3,125
2,790
1,183
3,867
2,037
(208)
22,760
6,150
(942)
27,968
2017
Business Unit
AIA Hong Kong
AIA Thailand
AIA Singapore
AIA Malaysia
AIA China
Other Markets
Group Corporate Centre
Subtotal
Adjustment to reflect consolidated reserving and
capital requirements
After-tax value of unallocated Group Office expenses
Total		 ANW(1)
6,701
4,566
2,516
1,200
2,143
4,823
8,381
30,330
(9,356)
–
20,974		 VIF before
CoC
11,158
4,719
3,643
1,508
4,863
3,258
(121)
29,028
5,597
(1,067)
33,558		 CoC
935
784
721
218
–
978
(1)
3,635
118
–
3,753		 VIF after
CoC
10,223
3,935
2,922
1,290
4,863
2,280
(120)
25,393
5,479
(1,067)
29,805

Note:

(1) ANW by Business Unit is after net capital flows between Business Units and Group Corporate Centre as reported in the IFRS financial information.

10

2 EMBEDDED VALUE RESULTS (CONTINUED)

Reconciliation of the consolidated ANW from IFRS Equity

US$m US$m US$m As at
30 June 2017		 As at
30 June 2017
IFRS equity attributable to shareholders of
the Company
Elimination of IFRS deferred acquisition
and origination costs assets
Difference between IFRS policy liabilities
and local statutory policy liabilities
Difference between net IFRS policy liabilities
and local statutory policy liabilities
Mark-to-market adjustment for property
and mortgage loan investments,
net of amounts attributable to participating funds
Elimination of intangible assets
Recognition of deferred tax impacts of
the above adjustments
Recognition of non-controlling interests impacts of
the above adjustments
ANW (Business Unit)
Adjustment to reflect consolidated reserving
requirements, net of tax
ANW (Consolidated)
Breakdown of ANW
As at 30 June 2017
US$m
Business Unit
Consolidated		 39,051
(20,558)
9,363
(11,195)
362
(1,764)
1,731
56
28,241
(9,174)
19,067
As at 31
Business Unit Business Unit
Free surplus
Required capital
ANW		 20,357
7,884
28,241		 11,360
7,707
19,067		 21,831
8,499
30,330

11

2 EMBEDDED VALUE RESULTS (CONTINUED)

Profile of projected after-tax distributable earnings for the Group’s in-force business

US$m
Expectedperiod of emergence		 As at 30 June 2017
Undiscounted
Discounted		 As at 30 June 2017
Undiscounted
Discounted		 As at 30 June 2017
Undiscounted
Discounted		 As at 30 June 2017
Undiscounted
Discounted		 As at 31 December 2017
Undiscounted
Discounted
18,434
15,175
14,491
7,952
14,499
5,386
13,425
3,434
126,545
6,246
187,394
38,193
Twelve months ended
31 December 2017
VONB
before
CoC
CoC
VONB
after
CoC(1)
1,520
136
1,384
434
53
381
344
47
297
233
18
215
791
66
725
479
84
395
3,801
404
3,397
(86)
(25)
(61)
3,715
379
3,336
(130)
–
(130)
3,585
379
3,206		 As at 31 December 2017
Undiscounted
Discounted
18,434
15,175
14,491
7,952
14,499
5,386
13,425
3,434
126,545
6,246
187,394
38,193
Twelve months ended
31 December 2017
VONB
before
CoC
CoC
VONB
after
CoC(1)
1,520
136
1,384
434
53
381
344
47
297
233
18
215
791
66
725
479
84
395
3,801
404
3,397
(86)
(25)
(61)
3,715
379
3,336
(130)
–
(130)
3,585
379
3,206
Undiscounted Undiscounted
1-5 years
6-10 years
11-15 years
16-20 years
21 years and thereafter
Total
Summary of VONB by Business Unit
US$m
Business Unit		 16,832
13,992
13,482
7,550
13,209
5,083
12,117
3,223
100,434
5,827
156,074
35,675
Six months ended
30 June 2017
VONB
before
CoC		 CoC VONB
before
CoC		 CoC
AIA Hong Kong
AIA Thailand
AIA Singapore
AIA Malaysia
AIA China
Other Markets
Total before unallocated Group Office
expenses (Business Unit)
Adjustment to reflect consolidated reserving
and capital requirements
Total before unallocated Group Office
expenses (Consolidated)
After-tax value of unallocated Group Office
expenses
Total		 791
202
156
115
410
231
1,905
(36)
1,869
(79)
1,790		 68
23
18
9
33
46
197
(12)
185
–
185		 723
179
138
106
377
185
1,708
(24)
1,684
(79)
1,605		 1,520
434
344
233
791
479
3,801
(86)
3,715
(130)
3,585		 136
53
47
18
66
84
404
(25)
379
–
379

Note:

(1) VONB for the Group is calculated before deducting the amount attributable to non-controlling interests. The amounts of VONB attributable to non-controlling interests for the six months ended 30 June 2017 and for the twelve months ended 31 December 2017 were US$11m and US$22m respectively.

12

2 EMBEDDED VALUE RESULTS (CONTINUED)

Breakdown of VONB, ANP, VONB margin and PVNBP margin

US$m
VONB
after CoC
ANP
VONB
Margin
PVNBP
Margin
Half year and full year
6 months ended 30 June 2017
1,605
2,906
54.5%
9%
12 months ended 31 December 2017
3,206
5,624
56.0%
9%
Quarter
3 months ended 31 March 2017
811
1,630
49.2%
9%
3 months ended 30 June 2017
794
1,276
61.3%
10%
3 months ended 30 September 2017
846
1,422
58.4%
10%
3 months ended 31 December 2017
755
1,296
56.9%
9%
Summary of VONB excluding pension, ANP and VONB margin by Business Unit
Six months ended
30 June 2017
Twelve months ended
31 December 2017
US$m
Business Unit
VONB
Excluding
Pension
ANP
VONB
Margin
VONB
Excluding
Pension
ANP
VONB
Margin
AIA Hong Kong
705
1,434
49.2%
1,338
2,493
53.7%
AIA Thailand
179
237
75.3%
381
519
73.4%
AIA Singapore
138
194
71.1%
297
426
69.7%
AIA Malaysia
105
169
62.3%
213
340
62.5%
AIA China
377
428
88.2%
725
873
83.1%
Other Markets
183
444
41.2%
388
973
39.9%
Total before unallocated Group
Office expenses (Business Unit)
1,687
2,906
58.1%
3,342
5,624
59.4%
Adjustment to reflect consolidated
reserving and capital requirements
(25)
–
(61)
–
Total before unallocated Group
Office expenses (Consolidated)
1,662
2,906
57.2%
3,281
5,624
58.4%
After-tax value of unallocated Group
Office expenses
(79)
–
(130)
–
Total
1,583
2,906
54.5%
3,151
5,624
56.0%		 US$m
VONB
after CoC
ANP
VONB
Margin
PVNBP
Margin
Half year and full year
6 months ended 30 June 2017
1,605
2,906
54.5%
9%
12 months ended 31 December 2017
3,206
5,624
56.0%
9%
Quarter
3 months ended 31 March 2017
811
1,630
49.2%
9%
3 months ended 30 June 2017
794
1,276
61.3%
10%
3 months ended 30 September 2017
846
1,422
58.4%
10%
3 months ended 31 December 2017
755
1,296
56.9%
9%
Summary of VONB excluding pension, ANP and VONB margin by Business Unit
Six months ended
30 June 2017
Twelve months ended
31 December 2017
US$m
Business Unit
VONB
Excluding
Pension
ANP
VONB
Margin
VONB
Excluding
Pension
ANP
VONB
Margin
AIA Hong Kong
705
1,434
49.2%
1,338
2,493
53.7%
AIA Thailand
179
237
75.3%
381
519
73.4%
AIA Singapore
138
194
71.1%
297
426
69.7%
AIA Malaysia
105
169
62.3%
213
340
62.5%
AIA China
377
428
88.2%
725
873
83.1%
Other Markets
183
444
41.2%
388
973
39.9%
Total before unallocated Group
Office expenses (Business Unit)
1,687
2,906
58.1%
3,342
5,624
59.4%
Adjustment to reflect consolidated
reserving and capital requirements
(25)
–
(61)
–
Total before unallocated Group
Office expenses (Consolidated)
1,662
2,906
57.2%
3,281
5,624
58.4%
After-tax value of unallocated Group
Office expenses
(79)
–
(130)
–
Total
1,583
2,906
54.5%
3,151
5,624
56.0%		 US$m
VONB
after CoC
ANP
VONB
Margin
PVNBP
Margin
Half year and full year
6 months ended 30 June 2017
1,605
2,906
54.5%
9%
12 months ended 31 December 2017
3,206
5,624
56.0%
9%
Quarter
3 months ended 31 March 2017
811
1,630
49.2%
9%
3 months ended 30 June 2017
794
1,276
61.3%
10%
3 months ended 30 September 2017
846
1,422
58.4%
10%
3 months ended 31 December 2017
755
1,296
56.9%
9%
Summary of VONB excluding pension, ANP and VONB margin by Business Unit
Six months ended
30 June 2017
Twelve months ended
31 December 2017
US$m
Business Unit
VONB
Excluding
Pension
ANP
VONB
Margin
VONB
Excluding
Pension
ANP
VONB
Margin
AIA Hong Kong
705
1,434
49.2%
1,338
2,493
53.7%
AIA Thailand
179
237
75.3%
381
519
73.4%
AIA Singapore
138
194
71.1%
297
426
69.7%
AIA Malaysia
105
169
62.3%
213
340
62.5%
AIA China
377
428
88.2%
725
873
83.1%
Other Markets
183
444
41.2%
388
973
39.9%
Total before unallocated Group
Office expenses (Business Unit)
1,687
2,906
58.1%
3,342
5,624
59.4%
Adjustment to reflect consolidated
reserving and capital requirements
(25)
–
(61)
–
Total before unallocated Group
Office expenses (Consolidated)
1,662
2,906
57.2%
3,281
5,624
58.4%
After-tax value of unallocated Group
Office expenses
(79)
–
(130)
–
Total
1,583
2,906
54.5%
3,151
5,624
56.0%		 US$m
VONB
after CoC
ANP
VONB
Margin
PVNBP
Margin
Half year and full year
6 months ended 30 June 2017
1,605
2,906
54.5%
9%
12 months ended 31 December 2017
3,206
5,624
56.0%
9%
Quarter
3 months ended 31 March 2017
811
1,630
49.2%
9%
3 months ended 30 June 2017
794
1,276
61.3%
10%
3 months ended 30 September 2017
846
1,422
58.4%
10%
3 months ended 31 December 2017
755
1,296
56.9%
9%
Summary of VONB excluding pension, ANP and VONB margin by Business Unit
Six months ended
30 June 2017
Twelve months ended
31 December 2017
US$m
Business Unit
VONB
Excluding
Pension
ANP
VONB
Margin
VONB
Excluding
Pension
ANP
VONB
Margin
AIA Hong Kong
705
1,434
49.2%
1,338
2,493
53.7%
AIA Thailand
179
237
75.3%
381
519
73.4%
AIA Singapore
138
194
71.1%
297
426
69.7%
AIA Malaysia
105
169
62.3%
213
340
62.5%
AIA China
377
428
88.2%
725
873
83.1%
Other Markets
183
444
41.2%
388
973
39.9%
Total before unallocated Group
Office expenses (Business Unit)
1,687
2,906
58.1%
3,342
5,624
59.4%
Adjustment to reflect consolidated
reserving and capital requirements
(25)
–
(61)
–
Total before unallocated Group
Office expenses (Consolidated)
1,662
2,906
57.2%
3,281
5,624
58.4%
After-tax value of unallocated Group
Office expenses
(79)
–
(130)
–
Total
1,583
2,906
54.5%
3,151
5,624
56.0%
VONB
Excluding
Pension		 VONB
Excluding
Pension
AIA Hong Kong
AIA Thailand
AIA Singapore
AIA Malaysia
AIA China
Other Markets
Total before unallocated Group
Office expenses (Business Unit)
Adjustment to reflect consolidated
reserving and capital requirements
Total before unallocated Group
Office expenses (Consolidated)
After-tax value of unallocated Group
Office expenses
Total		 705
179
138
105
377
183
1,687
(25)
1,662
(79)
1,583		 1,434
49.2%
237
75.3%
194
71.1%
169
62.3%
428
88.2%
444
41.2%
2,906
58.1%
–
2,906
57.2%
–
2,906
54.5%		 1,338
381
297
213
725
388
3,342
(61)
3,281
(130)
3,151

13

2 EMBEDDED VALUE RESULTS (CONTINUED)

Analysis of EV movement

Analysis of EV movement
US$m Six months ended
30 June 2017		 Twelve months ended
31 December 2017
ANW
VIF
EV
16,862
25,986
42,848
(591)
3,797
3,206
4,154
(846)
3,308
297
64
361
(229)
146
(83)
(138)
–
(138)
3,493
3,161
6,654
1,272
61
1,333
(7)
(185)
(192)
387
(741)
(354)
5,145
2,296
7,441
(1,376)
–
(1,376)
134
–
134
209
1,523
1,732
20,974
29,805
50,779
Six months
ended
30 June
2017
Twelve months
ended
31 December
2017
3,370
6,654
42,848
42,848
16.3%
15.5%
Opening EV
Value of new business
Expected return on EV
Operating experience variances
Operating assumption changes
Finance costs
EV operating profit
Investment return variances
Effect of changes in economic
assumptions
Other non-operating variances
Total EV profit
Dividends
Other capital movements
Effect of changes in exchange rates
Closing EV
Operating ROEV
US$m		 ANW
16,862
(291)
2,042
325
(213)
(64)
1,799
877
–
282
2,958
(983)
86
144
19,067		 VIF
25,986
1,896
(374)
(103)
152
–
1,571
160
–
(506)
1,225
–
–
757
27,968		 EV
42,848
1,605
1,668
222
(61)
(64)
3,370
1,037
–
(224)
4,183
(983)
86
901
47,035		 ANW
16,862
(591)
4,154
297
(229)
(138)
3,493
1,272
(7)
387
5,145
(1,376)
134
209
20,974
Six months
ended
30 June
2017
EV operating profit
Opening EV
Operating ROEV(1)
Note:		 3,370
42,848
16.3%

(1) On an annualised basis for the six months ended 30 June 2017.

14

2 EMBEDDED VALUE RESULTS (CONTINUED)

Derivation of EV Equity from EV

US$m As at
30 June
2017		 As at
31 December
2017
50,779
1,650
52,429
EV
Goodwill and other intangible assets(1)
EV Equity
Note:		 47,035
1,559
48,594

(1) Consistent with the IFRS financial information, net of tax, amounts attributable to participating funds and non-controlling interests.

Free surplus generation

Free surplus generation
US$m Six months
ended
30 June
2017		 Twelve months
ended
31 December
2017
9,940
4,568
(1,386)
1,039
(195)
(1,376)
(4)
12,586
Opening free surplus as of 1 January 2017
Underlying free surplus generated
Free surplus used to fund new business
Investment return variances and other items
Unallocated Group Office expenses
Dividends
Finance costs and other capital movements
Closing free surplus		 9,940
2,290
(635)
833
(107)
(983)
22
11,360

Assumptions

Long-term economic assumptions used in the EV basis for the six months ended 30 June 2017 and for the twelve months ended 31 December 2017 remain unchanged from those shown in Section 5 of the Supplementary Embedded Value Information in the Company’s Interim Report 2017 and Annual Report 2017, respectively. VONB results were calculated based on start-of-period economic assumptions consistent with measurement at the point of sale.

15

3 IFRS FINANCIAL INFORMATION

Consolidated income statement

Consolidated income statement
US$m Six months
ended
30 June
2017		 Twelve months
ended
31 December
2017
27,241
(1,524)
25,717
13,907
224
39,848
27,112
(1,282)
25,830
3,486
2,019
185
607
32,127
7,721
–
7,721
(135)
7,586
(1,159)
135
(1,024)
6,562
6,496
66
0.54
0.54
Revenue
Premiums and fee income
Premiums ceded to reinsurers
Net premiums and fee income
Investment return
Other operating revenue
Total revenue
Expenses
Insurance and investment contract benefits
Insurance and investment contract benefits ceded
Net insurance and investment contract benefits
Commission and other acquisition expenses
Operating expenses
Finance costs
Other expenses
Total expenses
Profit before share of profit from associates and
joint venture
Share of profit from associates and joint venture
Profit before tax
Income tax expense attributable to policyholders’ returns
Profit before tax attributable to shareholders’ profits
Tax expense
Tax attributable to policyholders’ returns
Tax expense attributable to shareholders’ profits
Net profit
Net profit attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Earnings per share (US$)
Basic
Diluted		 12,307
(728)
11,579
7,377
104
19,060
12,948
(606)
12,342
1,525
949
88
296
15,200
3,860
3
3,863
(106)
3,757
(586)
106
(480)
3,277
3,241
36
0.27
0.27

16

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Consolidated statement of financial position

US$m As at
30 June
2017		 As at
31 December
2017
1,870
643
1,225
4,363
2,549
21,950
8,210
106,788
26,081
38,079
345
179,503
13
117
4,491
1,922
218,646
151,475
8,210
3,958
1,557
271
223
3,611
497
5,288
175,090
Assets
Intangible assets
Investments in associates and joint venture
Property, plant and equipment(1)
Investment property(1)
Reinsurance assets
Deferred acquisition and origination costs
Financial investments:
Loans and deposits
Available for sale
Debt securities
At fair value through profit or loss
Debt securities
Equity securities
Derivative financial instruments
Deferred tax assets
Current tax recoverable
Other assets
Cash and cash equivalents
Total assets
Liabilities
Insurance contract liabilities
Investment contract liabilities
Borrowings
Obligations under repurchase agreements
Derivative financial instruments
Provisions
Deferred tax liabilities
Current tax liabilities
Other liabilities
Total liabilities		 1,764
630
1,165
4,138
2,283
20,558
7,239
98,747
24,604
35,137
167
165,894
10
68
4,038
1,649
202,197
139,693
7,504
3,957
2,219
356
246
3,415
423
4,970
162,783

Note:

  • (1) The appraisal values for the real estate of the Group as at 30 June 2017 and 31 December 2017 remain unchanged from those reported in the financial statements of the Group as at 31 May 2017 and 30 November 2017, respectively.

17

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Consolidated statement of financial position (continued)

Consolidated statement of financial position (continued)
US$m As at
30 June
2017		 As at
31 December
2017
14,065
(298)
(11,943)
34,653
6,763
(569)
530
(25)
6,699
43,176
380
43,556
218,646
Equity
Share capital
Employee share-based trusts
Other reserves
Retained earnings
Fair value reserve
Foreign currency translation reserve
Property revaluation reserve
Others
Amounts reflected in other comprehensive income
Total equity attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Total equity
Total liabilities and equity		 14,064
(296)
(11,978)
31,792
6,351
(1,318)
481
(45)
5,469
39,051
363
39,414
202,197

18

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Exchange rates

The Group’s principal overseas operations during the reporting period were located within the Asia-Pacific region. The results and cash flows of these operations have been translated into US dollars at the following average rates:

US dollar exchange rates
Six months
ended
30 June
2017
Twelve months
ended
31 December
2017
7.77
7.79
34.71
33.90
1.40
1.38
4.39
4.30
6.87
6.75
Hong Kong
Thailand
Singapore
Malaysia
China

Assets and liabilities have been translated at the following period-end rates:

US dollar exchange rates
As at
30 June
2017
As at
31 December
2017
7.81
7.82
33.98
32.61
1.38
1.34
4.29
4.05
6.78
6.51
Hong Kong
Thailand
Singapore
Malaysia
China

Exchange rates are expressed in units of local currency per US$1.

19

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Operating profit after tax

Operating profit after tax may be reconciled to net profit as follows:

US$m Six months
ended
30 June
2017		 Twelve months
ended
31 December
2017
4,670
2,063
(171)
6,562
4,635
35
6,496
66
Operating profit after tax
Non-operating items, net of related changes in insurance and investment
contract liabilities:
Short-term fluctuations in investment return related to
equities and real estate (net of tax of: six months
ended 30 June 2017: US$(51)m; twelve months
ended 31 December 2017: US$(143)m)
Other non-operating investment return and other items
(net of tax of: six months ended 30 June 2017: nil; twelve months
ended 31 December 2017: US$36m)
Net profit
Operating profit after tax attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Net profit attributable to:
Shareholders of AIA Group Limited
Non-controlling interests		 2,251
1,040
(14)
3,277
2,233
18
3,241
36

Operating profit is determined using, among others, expected long-term investment return for equities and real estate. Short-term fluctuations between expected long-term investment return and actual investment return for these asset classes are excluded from operating profit. The investment return assumptions used to determine expected long-term investment return are based on the same assumptions used by the Group in determining its embedded value and are disclosed in the Supplementary Embedded Value Information.

20

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Total weighted premium income and annualised new premiums

TWPI
US$m		 Six months
ended
30 June
2017		 Twelve months
ended
31 December
2017
9,535
3,559
2,435
1,848
3,118
5,898
26,393
2,231
477
272
285
838
925
5,028
2,405
194
1,422
182
136
620
4,959
TWPI by geography
Hong Kong
Thailand
Singapore
Malaysia
China
Other Markets
Total
First year premiums by geography
Hong Kong
Thailand
Singapore
Malaysia
China
Other Markets
Total
Single premiums by geography
Hong Kong
Thailand
Singapore
Malaysia
China
Other Markets
Total		 4,275
1,571
1,172
882
1,467
2,807
12,174
1,345
216
131
136
415
422
2,665
912
90
570
76
62
309
2,019

21

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Total weighted premium income and annualised new premiums (continued)

TWPI (continued)
US$m		 Six months
ended
30 June
2017		 Twelve months
ended
31 December
2017
7,063
3,063
2,021
1,545
2,266
4,911
20,869
Twelve months
ended
31 December
2017
2,493
519
426
340
873
973
5,624
Renewal premiums by geography
Hong Kong
Thailand
Singapore
Malaysia
China
Other Markets
Total
ANP
US$m		 2,839
1,346
984
738
1,046
2,354
9,307
Six months
ended
30 June
2017
ANP by geography
Hong Kong
Thailand
Singapore
Malaysia
China
Other Markets
Total		 1,434
237
194
169
428
444
2,906

22

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Segment information

Segment information Segment information
US$m
HongKong		 Thailand Singapore Malaysia China Other
Markets		 Group
Corporate
Centre		 Total
2,906
12,174
11,683
3,429
15,112
9,778
1,518
949
190
12,435
3
2,680
(429)
2,251
2,233
18
Six months ended 30 June 2017
ANP
TWPI
Net premiums, fee income and other
operating revenue (net of
reinsurance ceded)
Investment return
Total revenue
Net insurance and investment contract
benefits
Commission and other acquisition expenses
Operating expenses
Finance costs and other expenses
Total expenses
Share of profit from associates and
joint venture
Operating profit before tax
Tax on operating profit before tax
Operating profit after tax
Operating profit after tax attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Key operating ratios:		 1,434
4,275
4,717
1,033
5,750
4,141
492
173
55
4,861
–
889
(62)
827
821
6		 237
1,571
1,599
566
2,165
1,167
346
99
23
1,635
–
530
(107)
423
423
–		 194
1,172
1,344
529
1,873
1,356
153
86
14
1,609
–
264
(24)
240
240
–		 169
882
782
260
1,042
700
105
84
6
895
–
147
(28)
119
118
1		 428
1,467
1,401
346
1,747
1,124
86
132
12
1,354
–
393
(99)
294
294
–		 444
2,807
1,839
523
2,362
1,289
336
271
20
1,916
3
449
(101)
348
337
11		 –
–
1
172
173
1
–
104
60
165
–
8
(8)
–
–
–
Expense ratio
Operating margin
Operating return on shareholders’
allocated equity(1)		 4.0%
19.3%
23.8%		 6.3%
26.9%
17.2%		 7.3%
20.5%
17.0%		 9.5%
13.5%
16.8%		 9.0%
20.0%
19.1%		 9.7%
12.4%
11.5%		 –
–
–		 7.8%
18.5%
13.9%
Operating profit before tax includes:
Finance costs
Depreciation and amortisation		 14
9		 3
3		 –
5		 –
7		 4
8		 1
15		 48
5		 70
52

Note:

(1) Operating return on shareholders’ allocated equity was measured on an annualised basis.

23

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Segment information (continued)

Segment information (continued) Segment information (continued)
US$m
HongKong		 Thailand
Singapore		 Malaysia China Other
Markets		 Group
Corporate
Centre		 Total
202,197
162,783
39,414
32,700
(881)
30 June 2017
Total assets
Total liabilities
Total equity
Shareholders’ allocated equity
Net capital (out)/in flows
Total assets includes:		 60,604
50,355
10,249
6,990
(602)		 28,398
22,213
6,185
4,986
(197)		 34,132
30,758
3,374
2,919
–		 13,444
12,073
1,371
1,347
(192)		 19,297
16,173
3,124
3,030
(206)		 35,336
27,633
7,703
6,012
28		 10,986
3,578
7,408
7,416
288
Investments in associates and joint venture – – 1 6 – 623 – 630

24

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Segment information (continued)

Segment information may be reconciled to the consolidated income statement as shown below:

US$m Segment
information
Short-term fluctuations in
investment return related
to equities and real
estate		 Segment
information
Short-term fluctuations in
investment return related
to equities and real
estate		 Other non-
operating
items(1)		 Consolidated
income
statement
Six months ended 30 June 2017
Net premiums, fee income and
other operating revenue
Investment return		 11,683
3,429		 –
1,487		 –
2,461		 11,683
Net premiums, fee income
and other operating revenue
7,377
Investment return
Total revenue 15,112 1,487 2,461 19,060
Total revenue
Net insurance and investment
contract benefits
Other expenses		 9,778
2,657		 396
–		 2,168
201		 12,342
Net insurance and
investment contract benefits
2,858
Other expenses
Total expenses
Share of profit from associates and
joint venture
Operating profit before tax		 12,435
3
2,680		 396
–
1,091		 2,369
–
92		 15,200
Total expenses
3
Share of profit from
associates and joint venture
3,863
Profit before tax

Note:

(1) Include unit-linked contracts.

25

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Segment information (continued)

Segment information (continued) Segment information (continued)
US$m
HongKong		 Thailand Singapore Malaysia China Other
Markets		 Group
Corporate
Centre		 Total
5,624
26,393
25,941
7,189
33,130
21,646
3,472
2,019
406
27,543
–
5,587
(917)
4,670
4,635
35
Twelve months ended 31 December 2017
ANP
TWPI
Net premiums, fee income and other
operating revenue (net of reinsurance
ceded)
Investment return
Total revenue
Net insurance and investment contract
benefits
Commission and other acquisition expenses
Operating expenses
Finance costs and other expenses
Total expenses
Share of profit from associates and joint
venture
Operating profit before tax
Tax on operating profit before tax
Operating profit/(losses) after tax
Operating profit/(losses) after tax
attributable to:
Shareholders of AIA Group Limited
Non-controlling interests
Key operating ratios:		 2,493
9,535
10,972
2,187
13,159
9,615
1,232
416
119
11,382
–
1,777
(138)
1,639
1,627
12		 519
3,559
3,567
1,208
4,775
2,697
747
202
49
3,695
–
1,080
(212)
868
868
–		 426
2,435
2,840
1,094
3,934
2,821
352
183
28
3,384
–
550
(37)
513
513
–		 340
1,848
1,622
554
2,176
1,457
209
167
11
1,844
–
332
(56)
276
274
2		 873
3,118
3,011
747
3,758
2,410
183
286
30
2,909
–
849
(206)
643
643
–		 973
5,898
3,921
1,058
4,979
2,642
748
569
43
4,002
–
977
(214)
763
742
21		 –
–
8
341
349
4
1
196
126
327
–
22
(54)
(32)
(32)
–

Expense ratio
Operating margin
Operating return on shareholders’
allocated equity		 4.4%
17.2%
23.1%		 5.7%
24.4%
17.2%		 7.5%
21.1%
18.6%		 9.0%
14.9%
18.8%		 9.2%
20.6%
20.3%		 9.6%
12.9%
12.5%		 –
–
–		 7.6%
17.7%
14.0%

Operating profit before tax includes:

Finance costs
Depreciation and amortisation		 29
37		 7
10		 –
16		 –
17		 18
18		 2
41		 106
11		 162
150

26

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Segment information (continued)

Segment information (continued) Segment information (continued)
US$m
HongKong		 Thailand
Singapore		 Malaysia China Other
Markets		 Group
Corporate
Centre		 Total
218,646
175,090
43,556
36,413
(1,240)
31 December 2017
Total assets
Total liabilities
Total equity
Shareholders’ allocated equity
Net capital (out)/in flows
Total assets includes:		 66,710
54,658
12,052
8,122
(952)		 31,299
24,111
7,188
5,656
(467)		 36,175
32,665
3,510
3,019
(238)		 14,546
12,957
1,589
1,566
(192)		 20,470
17,263
3,207
3,511
(207)		 37,913
29,852
8,061
6,539
17		 11,533
3,584
7,949
8,000
799
Investments in associates and
joint venture		 – – 1 7 – 635 – 643

27

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Segment information (continued)

Segment information may be reconciled to the consolidated income statement as shown below:

US$m Segment
information
Short-term fluctuations in
investment return related
to equities and real
estate		 Segment
information
Short-term fluctuations in
investment return related
to equities and real
estate		 Other non-
operating
items(1)		 Consolidated
income
statement
Twelve months ended
31 December 2017
Net premiums, fee income and
other operating revenue
Investment return		 25,941
7,189		 –
2,713		 –
4,005		 25,941
Net premiums, fee income
and other operating revenue
13,907
Investment return
Total revenue 33,130 2,713 4,005 39,848
Total revenue
Net insurance and investment
contract benefits
Other expenses		 21,646
5,897		 507
–		 3,677
400		 25,830
Net insurance and
investment contract benefits
6,297
Other expenses
Total expenses
Share of profit from associates and
joint venture
Operating profit before tax		 27,543
–
5,587		 507
–
2,206		 4,077
–
(72)		 32,127
Total expenses
–
Share of profit from
associates and joint venture
7,721
Profit before tax

Note:

(1) Include unit-linked contracts.

28

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Investment return

Investment return
Six months Twelve months
ended ended
30 June 31 December
US$m 2017 2017
Interest income 2,736 5,652
Dividend income 341 693
Rental income 74 152
Investment income 3,151 6,497
Available for sale
Net realised gains from debt securities 83 202
Net gains of available for sale financial assets reflected in the
consolidated income statement 83 202
At fair value through profit or loss
Net gains of financial assets designated at fair value through profit
or loss
Net gains of debt securities 241 53
Net gains of equity securities 3,653 6,781
Net gains of financial instruments held for trading
Net fair value movement on derivatives 467 743
Net gains in respect of financial instruments at fair value through
profit or loss 4,361 7,577
Net fair value movement of investment property 200 367
Net foreign exchange losses (415) (709)
Other net realised losses (3) (27)
Investment experience 4,226 7,410
Investment return 7,377 13,907
Foreign currency movements resulted in the following losses recognised in the consolidated
income statement (other than gains and losses arising on items measured at fair value through
profit or loss):
profit or loss):
Six months Twelve months
ended ended
30 June 31 December
US$m 2017 2017
Foreign exchange losses (132) (279)

29

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Expenses

Expenses
US$m Six months
ended
30 June
2017		 Twelve months
ended
31 December
2017
11,735
13,982
1,395
27,112
(1,282)
25,830
5,505
(2,019)
3,486
1,265
65
53
148
488
2,019
408
22
153
24
607
185
32,127
Insurance contract benefits
Change in insurance contract liabilities
Investment contract benefits
Insurance and investment contract benefits
Insurance and investment contract benefits ceded
Insurance and investment contract benefits,
net of reinsurance ceded
Commission and other acquisition expenses incurred
Deferral and amortisation of acquisition costs
Commission and other acquisition expenses
Employee benefit expenses
Depreciation
Amortisation
Operating lease rentals
Other operating expenses
Operating expenses
Investment management expenses and others
Depreciation on property held for own use
Restructuring and other non-operating costs(1)
Change in third-party interests in consolidated investment funds
Other expenses
Finance costs
Total
Note:		 5,155
7,029
764
12,948
(606)
12,342
2,687
(1,162)
1,525
613
31
21
72
212
949
188
11
73
24
296
88
15,200

(1) Restructuring costs represent costs related to restructuring programmes and are primarily comprised of redundancy and contract termination costs. Other non-operating costs primarily consist of acquisition-related and integration expenses.

Finance costs may be analysed as:

US$m Six months
ended
30 June
2017		 Twelve months
ended
31 December
2017
47
134
4
185
Repurchase agreements
Medium-term notes
Other loans
Total		 24
62
2
88

30

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Earnings per share

Basic

Basic
Six months Twelve months
ended ended
30 June 31 December
2017 2017
Net profit attributable to shareholders of AIA Group Limited (US$m) 3,241 6,496
Weighted average number of ordinary shares in issue (million) 11,995 12,002
Basic earnings per share (US cents per share) 27.02 54.12
Diluted
Six months Twelve months
ended ended
30 June 31 December
2017 2017
Net profit attributable to shareholders of AIA Group Limited (US$m) 3,241 6,496
Weighted average number of ordinary shares in issue (million) 11,995 12,002
Adjustment for share options, restricted share units, restricted stock
purchase units and restricted stock subscription units awarded under
share-based compensation plans (million) 23 37
Weighted average number of ordinary shares for diluted earnings per
share (million) 12,018 12,039
Diluted earnings per share (US cents per share) 26.97 53.96
At 30 June 2017 and 31 December 2017, share options of 5,529,112 and 5,835,750 respectively
were excluded from the diluted weighted average number of ordinary shares calculation as their
effect would have been anti-dilutive.

Operating profit after tax per share

Operating profit after tax per share
Six months Twelve months
ended ended
30 June 31 December
2017 2017
Basic (US cents per share) 18.62 38.62
Diluted (US cents per share) 18.58 38.50

31

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Deferred acquisition and origination costs

US$m As at
31 December
2017
21,451
370
129
21,950
Twelve months
ended
31 December
2017
19,031
2,094
1,102
(75)
(202)
21,950
Carrying amount
Deferred acquisition costs on insurance contracts
Deferred origination costs on investment contracts
Value of business acquired
Total
US$m
Movements in the year
At beginning of year
Deferral and amortisation of acquisition and origination costs
Foreign exchange movements
Impact of assumption changes
Other movements
At end of year

32

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Financial investments

Debt securities

Debt securities by type comprise the following:

US$m Policyholder and shareholder
Participating
funds
Other policyholder and
shareholder
FVTPL
FVTPL
AFS		 Policyholder and shareholder
Participating
funds
Other policyholder and
shareholder
FVTPL
FVTPL
AFS		 Policyholder and shareholder
Participating
funds
Other policyholder and
shareholder
FVTPL
FVTPL
AFS		 Subtotal Unit-linked
FVTPL		 Consolidated
investment
funds(4)
FVTPL		 Total
Participating
funds
FVTPL
FVTPL
30 June 2017
Government bonds
Government agency bonds(1)
Corporate bonds
Structured securities(2)
Total(3)
US$m		 5,088
72
33,838
3,478
13
9,566
10,807
175
54,616
238
46
727
19,611
306
98,747
Policyholder and shareholder
Participating
funds
Other policyholder and
shareholder
FVTPL
FVTPL
AFS		 38,998
13,057
65,598
1,011
118,664
Subtotal		 1,113
227
1,386
1
2,727
Unit-linked
FVTPL		 –
270
1,690
–
1,960
Consolidated
investment
funds(4)
FVTPL		 40,111
13,554
68,674
1,012
123,351
Total
Participating
funds
FVTPL
FVTPL
31 December 2017
Government bonds
Government agency bonds(1)
Corporate bonds
Structured securities(2)
Total(3)		 6,069
3,942
10,841
179
21,031		 88
13
187
42
330		 37,823
9,228
59,116
621
106,788		 43,980
13,183
70,144
842
128,149		 1,131
212
1,365
–
2,708		 –
344
1,668
–
2,012		 45,111
13,739
73,177
842
132,869

Notes:

  • (1) Government agency bonds comprise bonds issued by government-sponsored institutions such as national, provincial and municipal authorities; government-related entities; multilateral development banks and supranational organisations.

  • (2) Structured securities include collateralised debt obligations, mortgage-backed securities and other asset-backed securities.

  • (3) As of 30 June 2017 and 31 December 2017, debt securities of US$4,315m and US$4,692m respectively are restricted due to local regulatory requirements.

  • (4) Consolidated investment funds reflect 100 per cent of assets and liabilities held by such funds.

33

3 IFRS FINANCIAL INFORMATION (CONTINUED) Financial investments (continued)

Equity securities

Equity securities by type comprise the following:

US$m Policyholder and shareholder
Participating
funds
Other policyholder
and shareholder
FVTPL
FVTPL		 Policyholder and shareholder
Participating
funds
Other policyholder
and shareholder
FVTPL
FVTPL		 Subtotal Unit-linked
FVTPL		 Consolidated
investment
funds(1)
FVTPL		 Total
Participating
funds
FVTPL
30 June 2017
Equity shares
Interests in investment funds
Total
US$m		 4,425
9,218
2,107
1,809
6,532
11,027
Policyholder and shareholder
Participating
funds
Other policyholder
and shareholder
FVTPL
FVTPL		 13,643
3,916
17,559
Subtotal		 4,307
13,268
17,575
Unit-linked
FVTPL		 –
3
3
Consolidated
investment
funds(1)
FVTPL		 17,950
17,187
35,137
Total
Participating
funds
FVTPL
31 December 2017
Equity shares
Interests in investment funds
Total		 4,716
2,269
6,985		 9,797
1,775
11,572		 14,513
4,044
18,557		 4,832
14,690
19,522		 –
–
–		 19,345
18,734
38,079

Note:

(1) Consolidated investment funds reflect 100 per cent of assets and liabilities held by such funds.

Debt and equity securities

Debt and equity securities
US$m As at
30 June
2017		 As at
31 December
2017
102,106
30,763
132,869
21,118
16,961
38,079
Debt securities
Listed
Unlisted
Total
Equity securities
Listed
Unlisted(1)
Total		 94,192
29,159
123,351
19,580
15,557
35,137

Note:

(1) As of 30 June 2017 and 31 December 2017, the balances include US$14,558m and US$15,804m of investment funds respectively which can be redeemed daily.

34

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Financial investments (continued)

Loans and deposits

3
IFRS FINANCIAL INFORMATION (CONTINUED)
Financial investments (continued)
Loans and deposits
US$m As at
30 June
2017		 As at
31 December
2017
2,765
607
44
1,114
(12)
4,518
2,113
1,579
8,210
Policy loans
Mortgage loans on residential real estate
Mortgage loans on commercial real estate
Other loans
Allowance for loan losses
Loans
Term deposits
Promissory notes(1)
Total
Note:		 2,593
570
51
870
(12)
4,072
1,651
1,516
7,239

(1) The promissory notes are issued by a government.

Insurance contract liabilities

The movement of insurance contract liabilities (including liabilities in respect of investment contracts with DPF) is shown as follows:

US$m Twelve months
ended
31 December
2017
128,588
26,424
(15,994)
(1,834)
4,483
7,041
3,363
(596)
151,475
At beginning of year
Valuation premiums and deposits
Liabilities released for policy termination or other policy benefits paid and related expenses
Fees from account balances
Accretion of interest
Foreign exchange movements
Change in net asset values attributable to policyholders
Other movements
At end of year

Insurance contract liabilities (including liabilities in respect of investment contracts with DPF) can also be analysed as follows:

US$m As at
30 June
2017		 As at
31 December
2017
7,213
2,605
8,117
133,540
151,475
Deferred profit
Unearned revenue
Policyholders’ share of participating surplus
Liabilities for future policyholder benefits
Total		 6,408
2,719
7,630
122,936
139,693

35

3 IFRS FINANCIAL INFORMATION (CONTINUED)

Investment contract liabilities

US$m Twelve months
ended
31 December
2017
6,926
178
1,395
(144)
(145)
8,210
At beginning of year
Effect of foreign exchange movements
Investment contract benefits
Fees charged
Net withdrawals and other movements
At end of year(1)
Note:

(1) Of investment contract liabilities, US$475m represented deferred fee income.

Group capital structure

Regulatory Solvency

The capital positions of the Group’s two principal operating companies as of 30 June 2017 and 31 December 2017 are as follows:

US$m 30 June 2017
Total
available
capital
Regulatory
minimum
capital
Solvency
ratio		 31 December 2017
Total
available
capital
Regulatory
minimum
capital
Solvency
ratio
8,395
1,882
446%
7,883
2,511
314%
AIA Co.
AIA International		 7,596
1,755
433%
7,353
2,283
322%

36

4 OTHER FINANCIAL INFORMATION

Net funds to Group Corporate Centre

The movements in working capital are summarised as follows:

US$m Six months
ended
30 June
2017		 Twelve months
ended
31 December
2017
8,404
(32)
952
467
238
192
207
(17)
2,039
514
(10)
(1,376)
175
9,714
Opening working capital
Group Corporate Centre operating results
Capital flows from/(to) business units
Hong Kong
Thailand
Singapore
Malaysia
China
Other Markets
Net funds remitted to Group Corporate Centre
Increase in borrowings
Purchase of shares held by the employee share-based trusts
Payment of dividends
Change in fair value reserve and others
Closing working capital		 8,404
–
602
197
–
192
206
(28)
1,169
508
(5)
(983)
45
9,138

37

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