SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of March, 2010
PRUDENTIAL PUBLIC LIMITED COMPANY
(Translation of registrant's name into English)
LAURENCE POUNTNEY HILL,
LONDON, EC4R 0HH, ENGLAND
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-
Enclosures: Prudential plc: Acquisition of AIA Pt5
APPENDIX VI: AIA GROUP UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2009
Consolidated Income Statement
Year ended 30 November | Year ended 30 November | Year ended 30 November | ||
US$m | Notes | 2007 | 2008 | 2009 |
Revenue | ||||
Turnover | ||||
Premiums and fee income | 9,573 | 10,674 | 10,433 | |
Premiums ceded to reinsurers | (833) | (392) | (331) | |
Net premiums and fee income | 8,740 | 10,282 | 10,102 | |
Investment return | 8 | 6,409 | (6,998) | 8,843 |
Other operating revenue | 8 | 77 | 526 | 71 |
Total revenue | 15,226 | 3,810 | 19,016 | |
Expenses | ||||
Insurance and investment contract benefits | 11,016 | 1,457 | 13,814 | |
Insurance and investment contract benefits ceded | (653) | (248) | (251) | |
Net insurance and investment contract benefits | 10,363 | 1,209 | 13,563 | |
Commission and other acquisition expenses | 947 | 1,563 | 1,648 | |
Operating expenses | 962 | 1,089 | 981 | |
Restructuring and separation costs | - | 10 | 89 | |
Investment management expenses | 92 | 103 | 89 | |
Finance costs | 203 | 159 | 50 | |
Change in third party interests in consolidated investment funds | 80 | (319) | 164 | |
Total expenses | 9 | 12,647 | 3,814 | 16,584 |
Profit before share of loss from associates and joint ventures | 2,579 | (4) | 2,432 | |
Share of loss from associates and joint ventures | - | (28) | (21) | |
Profit/(loss) before tax | 2,579 | (32) | 2,411 | |
Income tax (expense)/credit attributable to policyholders' returns | (70) | 90 | (137) | |
Profit before tax attributable to shareholders' profits | 2,509 | 58 | 2,274 | |
Tax (expense)/credit | 10 | (651) | 445 | (654) |
Less: tax attributable to policyholders' returns | 70 | (90) | 137 | |
Tax (expense)/credit attributable to shareholders' profits | (581) | 355 | (517) | |
Net profit | 1,928 | 413 | 1,757 | |
Net profit attributable to: | ||||
Shareholders of AIA Group Limited | 1,914 | 408 | 1,754 | |
Non-controlling interests | 14 | 5 | 3 | |
Earnings per share (US$) | ||||
Basic and diluted | 12 | 0.16 | 0.03 | 0.15 |
Consolidated Statement of Comprehensive Income
Year ended 30 November | Year ended 30 November | Year ended 30 November | ||
US$m | 2007 | 2008 | 2009 | |
Net profit | 1,928 | 413 | 1,757 | |
Fair value gains/(losses) on available for sale financial assets (net of tax of: 2007: US$181m; 2008: US$(22)m; 2009 US$(139)m) | (1,233) | (4,801) | 2,915 | |
Fair value (gains)/losses on available for sale financial assets transferred to income on disposal and impairment (net of tax of: 2007: nil; 2008: US$10m; 2009: US$6m) | (1) | 222 | 223 | |
Foreign currency translation adjustments | 344 | (796) | 764 | |
Other comprehensive income | (890) | (5,375) | 3,902 | |
Total comprehensive income | 1,038 | (4,962) | 5,659 | |
Total comprehensive income attributable to: | ||||
Shareholders of AIA Group Limited | 1,021 | (4,922) | 5,611 | |
Non-controlling interests | 17 | (40) | 48 |
Consolidated Statement of Financial Position
1 December | 30 November | 30 November | 30 November | ||
US$m | Notes | 2006 | 2007 | 2008 | 2009 |
Assets | |||||
Intangible assets | 14 | 185 | 200 | 232 | 233 |
Investments in associates and joint ventures | 15 | 267 | 63 | 47 | 53 |
Property, plant and equipment | 16 | 309 | 352 | 332 | 326 |
Investment property | 17, 18 | 95 | 190 | 217 | 244 |
Reinsurance assets | 19 | 2,427 | 2,668 | 147 | 284 |
Deferred acquisition and origination costs | 20 | 8,135 | 10,044 | 10,047 | 10,976 |
Financial investments: | 21, 23 | ||||
Loans and receivables | 5,006 | 5,665 | 4,002 | 4,648 | |
Available for sale | |||||
Debt securities | 27,688 | 30,955 | 29,934 | 37,722 | |
Equity securities - shares in AIG | 3,048 | 2,520 | 87 | 62 | |
At fair value through profit or loss | |||||
Debt securities | 11,083 | 13,449 | 12,389 | 14,479 | |
Equity securities | 10,755 | 17,619 | 8,660 | 16,116 | |
Derivative financial instruments | 22 | 294 | 422 | 252 | 453 |
57,874 | 70,630 | 55,324 | 73,480 | ||
Other assets | 24 | 680 | 1,462 | 1,499 | 1,600 |
Cash and cash equivalents | 25 | 1,035 | 2,583 | 4,164 | 3,405 |
Assets of disposal groups held for sale | 11 | - | - | - | 58 |
Total assets | 71,007 | 88,192 | 72,009 | 90,659 | |
Liabilities | |||||
Insurance contract liabilities | 26 | 46,960 | 57,161 | 52,158 | 63,255 |
Investment contract liabilities | 27 | 3,482 | 6,505 | 4,898 | 7,780 |
Borrowings | 29 | 812 | 1,461 | 661 | 688 |
Obligations under securities lending and repurchase agreements | 30 | 3,742 | 5,395 | 2,718 | 284 |
Derivative financial instruments | 22 | 30 | 47 | 138 | 71 |
Provisions | 32 | 135 | 142 | 166 | 250 |
Deferred tax liabilities | 10 | 1,343 | 1,427 | 547 | 1,087 |
Current tax liabilities | 221 | 269 | 218 | 185 | |
Other liabilities | 33 | 1,663 | 2,294 | 1,587 | 2,012 |
Liabilities of disposal groups held for sale | 11 | - | - | - | 58 |
Total liabilities | 58,388 | 74,701 | 63,091 | 75,670 | |
Equity | |||||
Issued share capital and shares yet to be issued | 34 | 12,000 | 12,000 | 12,000 | 12,044 |
Share premium | 34 | 1,914 | 1,914 | 1,914 | 1,914 |
Other reserves | (13,376) | (13,215) | (12,480) | (12,080) | |
Retained earnings | 7,810 | 9,431 | 9,494 | 11,223 | |
Fair value reserve | 4,194 | 2,969 | (1,565) | 1,528 | |
Foreign currency translation reserve | - | 341 | (455) | 309 | |
Amounts reflected in other comprehensive income | 4,194 | 3,310 | (2,020) | 1,837 | |
Total equity attributable to: | |||||
Shareholders of AIA Group Limited | 12,542 | 13,440 | 8,908 | 14,938 | |
Non-controlling interests | 35 | 77 | 51 | 10 | 51 |
Total equity | 12,619 | 13,491 | 8,918 | 14,989 | |
Total liabilities and equity | 71,007 | 88,192 | 72,009 | 90,659 | |
Consolidated Statement of Changes in Equity
US$m | Issued share capital, shares yet to be issued and share premium | Other reserves | Retained earnings | Fair value reserve | Foreign currency translation reserve | Non-controlling interests | Total Equity | |
Notes | ||||||||
Balance at 1 December 2006 | 13,914 | (13,376) | 7,810 | 4,194 | - | 77 | 12,619 | |
Net profit | - | - | 1,914 | - | - | 14 | 1,928 | |
Other comprehensive income | - | - | - | (1,237) | 344 | 3 | (890) | |
Capital contributions | - | 164 | - | - | - | - | 164 | |
Dividends | 13 | - | - | (259) | - | - | (2) | (261) |
Acquisition of non-controlling interest | - | - | (34) | 12 | (3) | (41) | (66) | |
Share based compensation | - | (3) | - | - | - | - | (3) | |
Balance at 30 November 2007 | 13,914 | (13,215) | 9,431 | 2,969 | 341 | 51 | 13,491 | |
Net profit | - | - | 408 | - | - | 5 | 413 | |
Other comprehensive income | - | - | - | (4,534) | (796) | (45) | (5,375) | |
Capital contributions | - | 731 | - | - | - | - | 731 | |
Dividends | 13 | - | - | (345) | - | - | (1) | (346) |
Share based compensation | - | 4 | - | - | - | - | 4 | |
Balance at 30 November 2008 | 13,914 | (12,480) | 9,494 | (1,565) | (455) | 10 | 8,918 | |
Net profit | - | - | 1,754 | - | - | 3 | 1,757 | |
Other comprehensive income | - | - | - | 3,093 | 764 | 45 | 3,902 | |
Capital contributions | 44 | 394 | - | - | - | - | 438 | |
Dividends | 13 | - | - | (25) | - | - | - | (25) |
Acquisition of subsidiary | - | - | - | - | - | 44 | 44 | |
Disposal of subsidiary | - | - | - | - | - | (51) | (51) | |
Share based compensation | - | 6 | - | - | - | - | 6 | |
Balance at 30 November 2009 | 13,958 | (12,080) | 11,223 | 1,528 | 309 | 51 | 14,989 |
Consolidated Statement of Cash Flows
Year ended 30 November | Year ended 30 November | Year ended 30 November | ||
US$m | Notes | 2007 | 2008 | 2009 |
Cash flows from operating activities | ||||
Profit/(loss) before tax | 2,579 | (32) | 2,411 | |
Gain on reinsurance recapture | 5 | - | (447) | - |
Financial instruments | 21 | (11,934) | 10,054 | (11,044) |
Insurance and investment contract liabilities | 26 | 9,572 | (2,974) | 10,132 |
Obligations under securities lending and repurchase agreements | 30 | 1,609 | (3,162) | (2,505) |
Other non-cash operating items, including investment income | (2,190) | (3,709) | (2,619) | |
Operating cash items: | ||||
Interest received | 2,462 | 2,933 | 2,798 | |
Dividends received | 185 | 201 | 147 | |
Interest paid | (203) | (159) | (50) | |
Tax paid | (446) | (418) | (371) | |
Net cash (used in)/provided by operating activities | 1,634 | 2,287 | (1,101) | |
Cash flows from investing activities | ||||
Payments for investments in associates | 15 | (8) | (48) | (24) |
Disposals of investments in associates | 15 | 217 | 17 | 1 |
Acquisitions of subsidiaries, net of cash acquired | 4 | (207) | - | (28) |
Disposal of a subsidiary, net of cash disposed | - | - | (2) | |
Payments for investment property and property, plant and equipment | 16, 17 | (61) | (114) | (39) |
Proceeds from sale of investment property and property, plant and equipment | 9 | 15 | 8 | |
Payments for intangible assets | 14 | (22) | (38) | (37) |
Proceeds from sale of intangible assets | - | - | 23 | |
Net cash used in investing activities | (72) | (168) | (98) | |
Cash flows from financing activities | ||||
Dividends paid during the year | 13 | (261) | (346) | (25) |
Proceeds from borrowings | 29 | 101 | 50 | 21 |
Repayment of borrowings | 29 | - | (849) | (49) |
Purchase of non-controlling interest | (66) | - | - | |
Capital contributions | 164 | 731 | 401 | |
Net cash (used in)/provided by financing activities | (62) | (414) | 348 | |
Net (decrease)/increase in cash held | 1,500 | 1,705 | (851) | |
Cash and cash equivalents at beginning of the financial year | 1,035 | 2,583 | 4,164 | |
Effect of exchange rate changes on cash | 48 | (124) | 92 | |
Cash and cash equivalents at the end of the financial year | 25 | 2,583 | 4,164 | 3,405 |
Notes to the Consolidated Financial Statements and Significant Accounting Policies
1. Corporate information and group reorganisation
The components of the Group previously produced published financial statements on a variety of different bases, including Hong Kong Financial Reporting Standards ('HKFRS'), International Financial Reporting Standards ('IFRS') and Philippines Financial Reporting Standards ('PFRS'). For the purposes of the group reorganisation and business combinations arising from transfers of entities under common control, the Directors of the Company have prepared consolidated financial statements of the Group for the three years ended 30 November 2007, 2008 and 2009 ('the relevant periods') in accordance with IFRS, as issued by the International Accounting Standards Board, and HKFRS, as issued by the Hong Kong Institute of Certified Public Accountants ('HKICPA'), based on the previously published financial statements of the component entities for the relevant periods, after making such adjustments as are appropriate to comply with the Group's IFRS and HKFRS accounting policies.
2. Significant accounting policies
2.1 Basis of preparation and statement of compliance
2. Significant accounting policies (continued)
The following amendments to standards have no material impact for the Group:
2.2 Operating profit
2. Significant accounting policies (continued)
2.3 Critical accounting policies and the use of estimates
Critical accounting policies
Product classification
Insurance contract liabilities (including liabilities in respect of investment contracts with DPF)
2.
Significant accounting policies (continued)
Deferred policy acquisition and origination costs
2.
Significant accounting policies (continued)
Liability adequacy testing
Financial assets at fair value through profit or loss
Available for sale financial assets
Fair values of financial assets
2. Significant accounting policies (continued)
Impairment of
financial assets
Use of estimates
Item | Accounting policy |
Insurance and investment contract liabilities | 2.5 |
Deferred acquisition and origination costs | 2.5 |
Liability adequacy testing | 2.5.1 |
Impairment of financial instruments classified as available for sale | 2.6.3 |
Fair value of financial instruments not traded in active markets | 2.6.2 |
2.4 Basis of consolidation
Subsidiaries
2. Significant accounting policies (continued)
Investment funds
Non-controlling interests
Group reorganisations and business combinations
Associates and joint ventures
2. Significant accounting policies (continued)
The Company's investments
2.5 Insurance and investment contracts
Product classification
Country | Current policyholder participation |
Singapore | 90% |
Malaysia | 90% |
China | 70% |
Australia | 80% |
Brunei | 80% |
Policy type | Description of benefits payable | Basis of accounting for: | ||
Insurance contract liabilities | Investment contract liabilities | |||
Traditional participating life assurance with DPF | Participating funds | Participating products combine protection with a savings element. The basic sum assured, payable on death or maturity, may be enhanced by dividends or bonuses, the aggregate amount of which is determined by the performance of a distinct fund of assets and liabilities The timing of dividend and bonus declarations is at the discretion of the insurer. Local regulations generally prescribe a minimum proportion of policyholder participation in declared dividends | Insurance contract liabilities make provision for the present value of guaranteed benefits less estimated future net premiums to be collected from policyholders. In addition, an insurance liability is recorded for the proportion of the net assets of the participating fund that would be allocated to policyholders, assuming all performance would be declared as a dividend based upon local regulations | Not applicable, as IFRS 4 permits contracts with DPF to be accounted for as insurance contracts |
Other participating business | Participating products combine protection with a savings element. The basic sum assured, payable on death or maturity, may be enhanced by dividends or bonuses, the timing or amount of which are at the discretion of the insurer taking into account factors such as investment experience | Insurance contract liabilities make provision for the present value of guaranteed benefits and non-guaranteed participation less estimated future net premiums to be collected from policyholders | Not applicable, as IFRS 4 permits contracts with DPF to be accounted for as insurance contracts | |
Non-participating life assurance, annuities and other protection products | Benefits payable are not at the discretion of the insurer | Insurance contract liabilities reflect the present value of future policy benefits to be paid less the present value of estimated future net premiums to be collected from policyholders. In addition, deferred profit liabilities for limited payment contracts are recognised | Investment contract liabilities are measured at amortised cost | |
Universal life | Benefits are based on an account balance, credited with interest at a rate set by the insurer, and a death benefit, which may be varied by the customer | Insurance contract liabilities reflect the accumulation value, representing premiums received and investment return credited, less deductions for front end loads, mortality and morbidity costs and expense charges. In addition, liabilities for unearned revenue and additional insurance benefits are recorded | Not applicable as such contracts generally contain significant insurance risk | |
Investment-linked | These may be primarily savings products or may combine savings with an element of protection. | Insurance contract liabilities reflect the accumulation value, representing premiums received and investment return credited, less deductions for front end loads, mortality and morbidity costs and expense charges. In addition, liabilities for unearned revenue and additional insurance benefits are recorded | Investment contract liabilities are measured at fair value (determined with reference to the accumulation value) |
2. Significant accounting policies (continued)
Premiums
Unearned revenue liability
Deferred acquisition costs
2. Significant accounting policies (continued)
Deferred sales inducements
Unbundling
Bifurcation
Benefits and claims
Insurance contract liabilities (including liabilities in respect of investment contracts with DPF)
2. Significant accounting policies (continued)
Liability adequacy testing
Financial guarantees
2. Significant accounting policies (continued)
Investment contract fee revenue
Deferred origination costs
Investment contract liabilities
2. Significant accounting policies (continued)
Reinsurance
Value of business acquired ('VOBA')
Shadow accounting
Other assessments and levies
2. Significant accounting policies (continued)
2.6 Financial instruments
Financial instruments at fair value through profit or loss
Transaction costs in respect of financial instruments at fair value through profit or loss are expensed as they are incurred.
Available for sale financial assets
Realised gains and losses on financial assets
Recognition of financial instruments
2. Significant accounting policies (continued)
Derecognition and offset of financial assets
Loans and receivables
Term deposits
Cash and cash equivalents
2. Significant accounting policies (continued)
General
Available for sale financial instruments
2. Significant accounting policies (continued)
Loans and receivables
Derivative instruments for economic hedging
Embedded derivatives
2.7 Segment reporting
2.8 Foreign currency translation
2. Significant accounting policies (continued)
2.9 Property, plant and equipment
Furniture, fixtures and office equipment | 5 years | |||
Buildings | 20-40 years | |||
Other assets | 3-5 years | |||
Freehold land | No depreciation |
2.10 Investment properties
2. Significant accounting policies (continued)
2.11 Goodwill and other intangible assets
Goodwill
2.12 Impairment of non-financial assets
2.13 Securities lending including repurchase agreements
Assets sold under repurchase agreements (repos)
Assets purchased under agreements to resell (reverse repos)
2. Significant accounting policies (continued)
Collateral
2.14 Borrowings
2.15 Income taxes
2. Significant accounting policies (continued)
2.16 Revenue
Investment return
Other fee and commission income
2.17 Employee benefits
Annual leave and long service leave
Post retirement benefit obligations
2. Significant accounting policies (continued)
Share based compensation and cash incentive plans
2.18 Provisions and contingencies
2.19 Leases
2. Significant accounting policies (continued)
2.20 Share capital
Share issue costs
Dividends
2.21 Disposal groups classified as held for sale
2.22 Presentation of the consolidated statement of financial position
2.23 Earnings per share
2.24 Fiduciary activities
2. Significant accounting policies (continued)
2.25 Consolidated cash flow statement
2.26 Related party transactions
2.27 IFRS 1 - Adoption of IFRS
Cumulative translation differences
Share based payment plans
Employee post retirement benefits
Designation of previously recognised financial instruments
3. Exchange rates
US dollar exchange rates | |||
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
2007 | 2008 | 2009 | |
Hong Kong | 7.80 | 7.79 | 7.75 |
Thailand | 34.69 | 33.21 | 34.47 |
Singapore | 1.52 | 1.42 | 1.46 |
Malaysia | 3.46 | 3.31 | 3.53 |
China | 7.65 | 6.99 | 6.83 |
Korea | 929.37 | 1,047.12 | 1,287.00 |
US dollar exchange rates | |||
As at 30 November | As at 30 November | As at 30 November | |
2007 | 2008 | 2009 | |
Hong Kong | 7.79 | 7.75 | 7.75 |
Thailand | 33.85 | 35.52 | 33.24 |
Singapore | 1.45 | 1.51 | 1.38 |
Malaysia | 3.36 | 3.62 | 3.39 |
China | 7.39 | 6.83 | 6.83 |
Korea | 920.81 | 1,468.43 | 1,162.79 |
US$m | Fair value | Carrying amount |
BPLAC | ||
Intangible assets | 15 | - |
Deferred acquisition costs (value of business acquired) | 31 | - |
Property, plant and equipment | 8 | 9 |
Investment property | 13 | 13 |
Loans and receivables | 67 | 65 |
Investment securities | 246 | 246 |
Other assets | 5 | 5 |
Cash and cash equivalents | 2 | 2 |
Insurance and investment contract liabilities | (281) | (281) |
Deferred tax assets / (liabilities) | (17) | 3 |
Other liabilities | (6) | (6) |
Total net assets acquired | 83 | 56 |
Less: non-controlling interests acquired | (44) | |
Net assets acquired | 39 | |
Fair value of purchase consideration | 46 | |
Acquisition costs | 1 | |
Total purchase consideration | 47 | |
Goodwill arising on acquisition | 8 | |
Fair value of purchase consideration | 47 | |
Less: deferred consideration and purchase price adjustment | (17) | |
Less: cash and cash equivalents in acquired subsidiary | (2) | |
Net cash outflow | 28 |
US$m | Fair value | Carrying amount |
Grand Design | ||
Property, plant and equipment | 19 | 17 |
Investment property | 89 | 78 |
Loans and receivables | 3 | 7 |
Other assets | 639 | 383 |
Cash and cash equivalents | 26 | 26 |
Borrowings | (544) | (544) |
Deferred tax liabilities | (2) | - |
Other liabilities | (11) | (11) |
Net assets acquired | 219 | (44) |
Repayment of shareholders' loans | 14 | |
Fair value of purchase consideration | 233 | |
Less: cash and cash equivalents in acquired subsidiaries | (26) | |
Net cash outflow | 207 |
Year ended 30 November | Year ended 30 November | Year ended 30 November | ||
US$m | Note | 2007 | 2008 | 2009 |
Operating profit | 7 | 1,742 | 1,943 | 1,835 |
Non-operating investment return: | ||||
Investment experience | 3,640 | (10,222) | 5,716 | |
Investment income related to investment-linked contracts | 63 | 80 | 68 | |
Investment management expenses related to investment-linked contracts | (9) | (10) | (16) | |
Corresponding changes in insurance and investment contract liabilities for investment-linked contracts | (2,469) | 5,919 | (4,166) | |
Corresponding changes in insurance contract liabilities for participating funds | (308) | 1,502 | (773) | |
Corresponding changes in third party interests in consolidated investment funds | (80) | 319 | (164) | |
Non-operating investment return | 837 | (2,412) | 665 | |
Other non-operating items: | ||||
Gain on recapture of reinsurance from former parent company | - | 447 | - | |
Restructuring and separation costs | - | (10) | (89) | |
Non-operating items | 837 | (1,975) | 576 | |
Profit/(loss) before tax | 2,579 | (32) | 2,411 | |
Tax on operating profit | (461) | (348) | (392) | |
Tax on non-operating investment return | (190) | 518 | (262) | |
Other non-operating tax items: | ||||
Release of withholding tax provision | - | 275 | - | |
Tax (expense)/credit | (651) | 445 | (654) | |
Net profit | 1,928 | 413 | 1,757 | |
Operating profit | 1,742 | 1,943 | 1,835 | |
Tax on operating profit | (461) | (348) | (392) | |
Operating profit after tax | 1,281 | 1,595 | 1,443 | |
Operating profit after tax attributable to: | ||||
Shareholders of AIA Group Limited | 1,270 | 1,588 | 1,438 | |
Non-controlling interests | 11 | 7 | 5 |
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Total weighted premium income by geography | |||
Hong Kong | 2,845 | 2,916 | 2,861 |
Thailand | 2,164 | 2,351 | 2,373 |
Singapore | 1,514 | 1,641 | 1,524 |
Malaysia | 667 | 727 | 707 |
China | 806 | 934 | 1,018 |
Korea | 2,178 | 2,268 | 1,759 |
Other Markets | 1,184 | 1,366 | 1,390 |
Total | 11,358 | 12,203 | 11,632 |
First year premiums by geography | |||
Hong Kong | 482 | 414 | 357 |
Thailand | 301 | 326 | 337 |
Singapore | 115 | 139 | 111 |
Malaysia | 78 | 91 | 93 |
China | 161 | 160 | 166 |
Korea | 683 | 664 | 322 |
Other Markets | 296 | 325 | 358 |
Total | 2,116 | 2,119 | 1,744 |
Single premiums by geography | |||
Hong Kong | 893 | 475 | 175 |
Thailand | 99 | 158 | 121 |
Singapore | 1,187 | 952 | 400 |
Malaysia | 107 | 93 | 32 |
China | 380 | 193 | 166 |
Korea | 740 | 457 | 77 |
Other Markets | 273 | 247 | 119 |
Total | 3,679 | 2,575 | 1,090 |
6. Total weighted premium income (continued)
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Renewal premiums by geography | |||
Hong Kong | 2,274 | 2,455 | 2,487 |
Thailand | 1,853 | 2,009 | 2,024 |
Singapore | 1,280 | 1,407 | 1,373 |
Malaysia | 578 | 627 | 611 |
China | 607 | 755 | 835 |
Korea | 1,421 | 1,559 | 1,429 |
Other Markets | 861 | 1,015 | 1,020 |
Total | 8,874 | 9,827 | 9,779 |
7.
Segment information
7. Segment information (continued)
Key markets | ||||||||||
US$m | Hong Kong | Thailand | Singapore | Malaysia | China | Korea | Other Markets | Corporate and Other | Total | |
Year ended 30 November 2009 | ||||||||||
Total weighted premium income | 2,861 | 2,373 | 1,524 | 707 | 1,018 | 1,759 | 1,390 | - | 11,632 | |
Net premiums, fee income and other operating revenue (net of reinsurance ceded) | 2,232 | 2,374 | 1,506 | 656 | 999 | 1,367 | 1,055 | (16) | 10,173 | |
Investment income1 | 779 | 640 | 609 | 223 | 201 | 217 | 400 | (10) | 3,059 | |
Total revenue | 3,011 | 3,014 | 2,115 | 879 | 1,200 | 1,584 | 1,455 | (26) | 13,232 | |
Net insurance and investment contract benefits2 | 1,700 | 2,107 | 1,495 | 597 | 872 | 1,027 | 843 | (17) | 8,624 | |
Commission and other acquisition expenses | 398 | 391 | 160 | 70 | 55 | 371 | 204 | (1) | 1,648 | |
Operating expenses | 163 | 135 | 91 | 58 | 181 | 101 | 170 | 82 | 981 | |
Investment management expenses and finance costs3 | 52 | 23 | 13 | 5 | 3 | 4 | 25 | (2) | 123 | |
Total expenses | 2,313 | 2,656 | 1,759 | 730 | 1,111 | 1,503 | 1,242 | 62 | 11,376 | |
Share of profit/(loss) from associates and joint ventures | - | - | - | 1 | - | - | (22) | - | (21) | |
Operating profit/(loss) | 698 | 358 | 356 | 150 | 89 | 81 | 191 | (88) | 1,835 | |
Tax on operating profit | (43) | (111) | (92) | (44) | (21) | (16) | (47) | (18) | (392) | |
Operating profit/(loss) after tax | 655 | 247 | 264 | 106 | 68 | 65 | 144 | (106) | 1,443 | |
Operating profit/(loss) after tax attributable to: | ||||||||||
Shareholders of AIA Group Limited | 653 | 251 | 264 | 106 | 68 | 65 | 137 | (106) | 1,438 | |
Non-controlling interests | 2 | (4) | - | - | - | - | 7 | - | 5 | |
Expense ratio | 5.7% | 5.7% | 6.0% | 8.2% | 17.8% | 5.7% | 12.2% | - | 8.4% |
Operating margin | 24.4% | 15.1% | 23.4% | 21.2% | 8.7% | 4.6% | 13.7% | - | 15.8% |
Operating return on allocated equity | 16.9% | 9.4% | 21.1% | 22.5% | 11.2% | 5.3% | 10.9% | - | 12.0% |
Finance costs | 43 | 2 | 6 | 2 | - | - | 3 | (6) | 50 |
Depreciation and amortisation | 4 | 8 | 8 | 8 | 13 | 10 | 9 | 6 | 66 |
Strategic initiative expenses | 10 | 6 | 14 | 2 | 3 | - | 9 | 18 | 62 |
7. Segment information (continued)
Key markets | ||||||||||
US$m | Hong Kong | Thailand | Singapore | Malaysia | China | Korea | Other Markets | Corporate and Other | Total | |
30 November 2009 | ||||||||||
Operating profit/(loss) | 698 | 358 | 356 | 150 | 89 | 81 | 191 | (88) | 1,835 | |
Non-operating items | (32) | 563 | 139 | 35 | 30 | (80) | (40) | (39) | 576 | |
Profit/(loss) before tax | 666 | 921 | 495 | 185 | 119 | 1 | 151 | (127) | 2,411 | |
Tax on operating profit | (43) | (111) | (92) | (44) | (21) | (16) | (47) | (18) | (392) | |
Tax on non-operating items | - | (168) | (75) | (20) | (8) | 15 | (3) | (3) | (262) | |
Tax (expense)/credit | (43) | (279) | (167) | (64) | (29) | (1) | (50) | (21) | (654) | |
Net profit/(loss) | 623 | 642 | 328 | 121 | 90 | - | 101 | (148) | 1,757 | |
Net profit/(loss) attributable to: | ||||||||||
Shareholders of AIA Group Limited | 621 | 646 | 328 | 121 | 90 | - | 94 | (146) | 1,754 | |
Non-controlling interests | 2 | (4) | - | - | - | - | 7 | (2) | 3 |
Key markets | ||||||||||
US$m | Hong Kong | Thailand | Singapore | Malaysia | China | Korea | Other Markets | Corporate and Other | Total | |
30 November 2009 | ||||||||||
Assets before investments in associates and joint ventures | 23,761 | 16,530 | 20,690 | 6,337 | 6,510 | 7,498 | 7,829 | 1,451 | 90,606 | |
Investments in associates and joint ventures | - | 2 | 7 | 4 | - | - | 40 | - | 53 | |
Total assets | 23,761 | 16,532 | 20,697 | 6,341 | 6,510 | 7,498 | 7,869 | 1,451 | 90,659 | |
Total liabilities4 | 19,023 | 12,955 | 18,914 | 5,787 | 5,828 | 6,378 | 6,090 | 695 | 75,670 | |
Total equity | 4,738 | 3,577 | 1,783 | 554 | 682 | 1,120 | 1,779 | 756 | 14,989 | |
Non-controlling interests | 2 | - | - | - | - | - | 48 | 1 | 51 | |
Amounts reflected in other comprehensive income: | ||||||||||
Fair value reserve | 572 | 463 | 108 | 24 | (32) | 49 | 375 | (31) | 1,528 | |
Foreign currency translation reserve | - | 195 | 149 | 26 | 54 | (156) | 40 | 1 | 309 | |
Allocated equity | 4,164 | 2,919 | 1,526 | 504 | 660 | 1,227 | 1,316 | 785 | 13,101 | |
Net capital in/(out) flows | (30) | (175) | 220 | (54) | 16 | 11 | 18 | 413 | 419 | |
7. Segment information (continued)
US$m | Segment information | Investment experience | Investment income related to investment-linked contracts | Investment management expenses related to investment-linked contracts | Related changes in insurance and investment contract benefits | Third party interests in consolidated investment funds | Other non-operating items | Consolidated income statement | ||
Investment-linked contracts | Participating funds | |||||||||
30 November 2009 | ||||||||||
Total revenue | 13,232 | 5,716 | 68 | - | - | - | - | - | 19,016 | Total revenue |
Of which: | ||||||||||
Net premiums, fee income and other operating revenue | 10,173 | - | - | - | - | - | - | - | 10,173 | Net premiums and fee income and other operating revenue |
I nvestment return | 3,059 | 5,716 | 68 | - | - | - | - | - | 8,843 | Investment return |
Total expenses | 11,376 | - | - | 16 | 4,166 | 773 | 164 | 89 | 16,584 | Total segment expenses |
Of which: | ||||||||||
Net insurance and investment contract benefits | 8,624 | - | - | - | 4,166 | 773 | - | - | 13,563 | Net insurance and investment contract benefits |
Restructuring and separation costs | - | - | - | - | - | - | - | 89 | 89 | Restructuring and separation costs |
Investment management expenses and finance costs | 123 | 16 | 139 | Investment management expenses and finance costs | ||||||
Change in third party interests in consolidated investment funds | - | - | - | - | - | - | 164 | - | 164 | Change in third party interests in consolidated investment funds |
Share of loss of associates and joint ventures | (21) | - | - | - | - | - | - | - | (21) | Share of loss of associates and joint ventures |
Operating profit | 1,835 | 5,716 | 68 | (16) | (4,166) | (773) | (164) | (89) | 2,411 | Profit/(loss) before tax |
7. Segment information (continued)
Key markets | ||||||||||
US$m | Hong Kong | Thailand | Singapore | Malaysia | China | Korea | Other Markets | Corporate and Other | Total | |
Year ended 30 November 2008 | ||||||||||
Total weighted premium income | 2,916 | 2,351 | 1,641 | 727 | 934 | 2,268 | 1,366 | - | 12,203 | |
Net premiums, fee income and other operating revenue (net of reinsurance ceded) | 2,023 | 2,403 | 1,658 | 706 | 847 | 1,698 | 1,032 | (6) | 10,361 | |
Investment income1 | 767 | 657 | 616 | 230 | 184 | 248 | 397 | 45 | 3,144 | |
Total revenue | 2,790 | 3,060 | 2,274 | 936 | 1,031 | 1,946 | 1,429 | 39 | 13,505 | |
Net insurance and investment contract benefits2 | 1,540 | 2,101 | 1,551 | 663 | 692 | 1,222 | 860 | 1 | 8,630 | |
Commission and other acquisition expenses | 336 | 381 | 238 | 80 | 76 | 307 | 148 | (3) | 1,563 | |
Operating expenses | 183 | 132 | 129 | 64 | 172 | 132 | 173 | 104 | 1,089 | |
Investment management expenses and finance costs3 | 141 | 23 | 24 | 5 | 6 | 4 | 31 | 18 | 252 | |
Total expenses | 2,200 | 2,637 | 1,942 | 812 | 946 | 1,665 | 1,212 | 120 | 11,534 | |
Share of profit/(loss) from associates and joint ventures | - | 1 | 1 | (1) | - | - | (29) | - | (28) | |
Operating profit/(loss) | 590 | 424 | 333 | 123 | 85 | 281 | 188 | (81) | 1,943 | |
Tax on operating profit/(loss) | (21) | (121) | (100) | (11) | 3 | (63) | (29) | (6) | (348) | |
Operating profit/(loss) after tax | 569 | 303 | 233 | 112 | 88 | 218 | 159 | (87) | 1,595 | |
Operating profit/(loss) after tax attributable to: | ||||||||||
Shareholders of AIA Group Limited | 568 | 303 | 233 | 112 | 88 | 218 | 153 | (87) | 1,588 | |
Non-controlling interests | 1 | - | - | - | - | - | 6 | - | 7 | |
Expense ratio | 6.3% | 5.6% | 7.9% | 8.8% | 18.4% | 5.8% | 12.7% | - | 8.9% |
Operating margin | 20.2% | 18.0% | 20.3% | 16.9% | 9.1% | 12.4% | 13.8% | - | 15.9% |
Operating return on allocated equity | 18.3% | 11.7% | 22.7% | 27.5% | 16.8% | 20.2% | 13.7% | - | 15.1% |
Finance costs | 122 | 2 | 21 | 1 | 1 | - | 2 | 10 | 159 |
Depreciation and amortisation | 1 | 13 | 9 | 7 | 14 | 9 | 6 | 5 | 64 |
Strategic initiative expenses | 4 | 2 | 9 | 1 | - | - | 1 | 8 | 25 |
7. Segment information (continued)
Key markets | |||||||||||
US$m | Hong Kong | Thailand | Singapore | Malaysia | China | Korea | Other Markets | Corporate and Other | Total | ||
30 November 2008 | |||||||||||
Operating profit/(loss) | 590 | 424 | 333 | 123 | 85 | 281 | 188 | (81) | 1,943 | ||
Non-operating items | (326) | (738) | (479) | (74) | (50) | (83) | (102) | (123) | (1,975) | ||
Profit/(loss) before tax | 264 | (314) | (146) | 49 | 35 | 198 | 86 | (204) | (32) | ||
Tax on operating profit | (21) | (121) | (100) | (11) | 3 | (63) | (29) | (6) | (348) | ||
Tax on non-operating items | - | 221 | 193 | 48 | 15 | 29 | 9 | 3 | 518 | ||
Other non-operating tax items | - | - | - | - | - | - | - | 275 | 275 | ||
Tax (expense)/credit | (21) | 100 | 93 | 37 | 18 | (34) | (20) | 272 | 445 | ||
Net profit/(loss) | 243 | (214) | (53) | 86 | 53 | 164 | 66 | 68 | 413 | ||
Net profit/(loss) attributable to: | |||||||||||
Shareholders of AIA Group Limited | 243 | (214) | (53) | 86 | 53 | 164 | 62 | 67 | 408 | ||
Non-controlling interests | - | - | - | - | - | - | 4 | 1 | 5 | ||
Key markets | |||||||||
US$m | Hong Kong | Thailand | Singapore | Malaysia | China | Korea | Other Markets | Corporate and Other | Total |
30 November 2008 | |||||||||
Assets before investments in associates and joint ventures | 19,252 | 13,938 | 15,883 | 5,534 | 5,636 | 5,055 | 5,656 | 1,008 | 71,962 |
Investments in associates and joint ventures | - | 2 | 7 | 2 | - | - | 36 | - | 47 |
Total assets | 19,252 | 13,940 | 15,890 | 5,536 | 5,636 | 5,055 | 5,692 | 1,008 | 72,009 |
Total liabilities4 | 17,416 | 11,030 | 15,003 | 5,075 | 4,953 | 4,424 | 4,716 | 474 | 63,091 |
Total equity | 1,836 | 2,910 | 887 | 461 | 683 | 631 | 976 | 534 | 8,918 |
Non-controlling interests | - | - | - | - | - | - | 10 | - | 10 |
Amounts reflected in other comprehensive income: | |||||||||
Fair value reserve | (1,737) | 457 | (112) | 27 | 76 | (175) | (118) | 17 | (1,565) |
Foreign currency translation reserve | - | 5 | 21 | (3) | 53 | (410) | (120) | (1) | (455) |
Allocated equity | 3,573 | 2,448 | 978 | 437 | 554 | 1,216 | 1,204 | 518 | 10,928 |
Net capital in/(out) flows | 684 | (74) | (45) | (28) | 7 | 105 | 118 | (377) | 390 |
US$m | Segment information | Investment experience | Investment income related to investment-linked contracts | Investment management expenses related to investment-linked contracts | Related changes in insurance and investment contract benefits | Third party interests in consolidated investment funds | Other non-operating items | Consolidated income statement | ||
Investment-linked contracts | Participating funds | |||||||||
30 November 2008 | ||||||||||
Total rev enue | 13,505 | (10,222) | 80 | - | - | - | - | 447 | 3,810 | Total revenue |
Of which: | Of which: | |||||||||
Net premiums, fee income and other operating revenue | 10,361 | - | - | - | - | - | - | 447 | 10,808 | Net premiums and fee income and other operating revenue |
I nvestment return | 3,144 | (10,222) | 80 | - | - | - | - | - | (6,998) | Investment return |
Total expenses | 11,534 | - | - | 10 | (5,919) | (1,502) | (319) | 10 | 3,814 | Total expenses |
Of which: | Of which : | |||||||||
Net insurance and investment contract benefits | 8,630 | - | - | - | (5,919) | (1,502) | - | - | 1,209 | Net insurance and investment contract benefits |
Restructuring and separation costs | - | 10 | 10 | Restructuring and separation costs | ||||||
Investment management expenses and finance costs | 252 | 10 | 262 | Investment management expenses and finance costs | ||||||
Change in third party interests in consolidated investment funds | - | - | - | - | - | - | (319) | - | (319) | Change in third party interests in consolidated investment funds |
Share of loss of associates and joint ventures | (28) | - | - | - | - | - | - | - | (28) | Share of loss of associates and joint ventures |
Operating profit | 1,943 | (10,222) | 80 | (10) | 5,919 | 1,502 | 319 | 437 | (32) | Profit/(loss) before tax |
Key markets | ||||||||||
US$m | Hong Kong | Thailand | Singapore | Malaysia | China | Korea | Other Markets | Corporate and Other | Total | |
Year ended 30 November 2007 | ||||||||||
Total weighted premium income | 2,845 | 2,164 | 1,514 | 667 | 806 | 2,178 | 1,184 | - | 11,358 | |
Net premiums, fee income and other operating revenue (net of reinsurance ceded) | 1,401 | 2,206 | 1,464 | 610 | 723 | 1,506 | 912 | (5) | 8,817 | |
Investment income1 | 607 | 557 | 538 | 200 | 147 | 233 | 352 | 72 | 2,706 | |
Total revenue | 2,008 | 2,763 | 2,002 | 810 | 870 | 1,739 | 1,264 | 67 | 11,523 | |
Net insurance and investment contract benefits2 | 1,124 | 1,928 | 1,434 | 554 | 551 | 1,165 | 829 | 1 | 7,586 | |
Commission and other acquisition expenses | 198 | 293 | 76 | 75 | 68 | 165 | 70 | 2 | 947 | |
Operating expenses | 133 | 114 | 95 | 52 | 127 | 136 | 157 | 148 | 962 | |
Investment management expenses and finance costs3 | 153 | 26 | 49 | 6 | 2 | 4 | 30 | 16 | 286 | |
Total expenses | 1,608 | 2,361 | 1,654 | 687 | 748 | 1,470 | 1,086 | 167 | 9,781 | |
Share of profit/(loss) from associates and joint ventures | 8 | (1) | - | - | - | - | (8) | 1 | - | |
Operating profit/(loss) | 408 | 401 | 348 | 123 | 122 | 269 | 170 | (99) | 1,742 | |
Tax on operating profit | (40) | (126) | (68) | (38) | (11) | (77) | (54) | (47) | (461) | |
Operating profit/(loss) after tax | 368 | 275 | 280 | 85 | 111 | 192 | 116 | (146) | 1,281 | |
Operating profit/(loss) after tax attributable to: | ||||||||||
Shareholders of AIA Group Limited | 368 | 275 | 280 | 85 | 111 | 192 | 105 | (146) | 1,270 | |
Non-controlling interests | - | - | - | - | - | - | 11 | - | 11 | |
Expense ratio | 4.7% | 5.3% | 6.3% | 7.8% | 15.8% | 6.2% | 13.3% | - | 8.5% |
Operating margin | 14.3% | 18.5% | 23.0% | 18.4% | 15.1% | 12.4% | 14.4% | - | 15.3% |
Operating return on allocated equity | 15.5% | 11.0% | 25.9% | 24.3% | 26.9% | 23.8% | 1 1.1 % | - | 13. 7 % |
Finance costs | 141 | - | 42 | 2 | 1 | - | - | 17 | 203 |
Depreciation and amortisation | 6 | 8 | 8 | 4 | 7 | 8 | 6 | 5 | 52 |
Strategic initiative expenses | - | - | - | - | - | - | - | - | - |
Key markets | ||||||||||
US$m | Hong Kong | Thailand | Singapore | Malaysia | China | Korea | Other Markets | Corporate and Other | Total | |
30 November 2007 | ||||||||||
Operating profit/(loss) | 408 | 401 | 348 | 123 | 122 | 269 | 170 | (99) | 1,742 | |
Non-operating items | 203 | 341 | 68 | 55 | 63 | 36 | 42 | 29 | 837 | |
Profit/(loss) before tax | 611 | 742 | 416 | 178 | 185 | 305 | 212 | (70) | 2,579 | |
Tax on operating profit | (40) | (126) | (68) | (38) | (11) | (77) | (54) | (47) | (461) | |
Tax on non-operating items | - | (103) | (36) | (28) | (12) | (11) | (1) | 1 | (190) | |
Tax (expense)/credit | (40) | (229) | (104) | (66) | (23) | (88) | (55) | (46) | (651) | |
Net profit/(loss) | 571 | 513 | 312 | 112 | 162 | 217 | 157 | (116) | 1,928 | |
Net profit/(loss) attributable to: | ||||||||||
Shareholders of AIA Group Limited | 571 | 513 | 312 | 112 | 162 | 217 | 143 | (116) | 1,914 | |
Non-controlling interests | - | - | - | - | - | - | 14 | - | 14 | |
Key markets | |||||||||
US$m | Hong Kong | Thailand | Singapore | Malaysia | China | Korea | Other Markets | Corporate and Other | Total |
30 November 2007 | |||||||||
Assets before investments in associates and joint ventures | 23,623 | 13,730 | 20,535 | 5,790 | 4,544 | 7,763 | 6,815 | 5,329 | 88,129 |
Investments in associates and joint ventures | - | 4 | 17 | - | - | - | 23 | 19 | 63 |
Total assets | 23,623 | 13,734 | 20,552 | 5,790 | 4,544 | 7,763 | 6,838 | 5,348 | 88,192 |
Total liabilities | 20,873 | 10,715 | 19,331 | 5,365 | 4,142 | 6,893 | 5,135 | 2,247 | 74,701 |
Total equity | 2,750 | 3,019 | 1,221 | 425 | 402 | 870 | 1,703 | 3,101 | 13,491 |
Non-controlling interests | - | - | - | - | - | - | 51 | - | 51 |
Amounts reflected in other comprehensive income: | |||||||||
Fair value reserve | 104 | 141 | 70 | 17 | (108) | (85) | 558 | 2,272 | 2,969 |
Foreign currency translation reserve | - | 142 | 75 | 29 | 16 | 8 | 70 | 1 | 341 |
Allocated equity | 2,646 | 2,736 | 1,076 | 379 | 494 | 947 | 1,024 | 828 | 10,130 |
Net capital in/(out) flows | (7) | (61) | (319) | (51) | - | 60 | (1) | 285 | (94) |
US$m | Segment information | Investment experience | Investment income related to investment-linked contracts | Investment management expenses related to investment-linked contracts | Related changes in insurance and investment contract benefits | Third party interests in consolidated investment funds | Other non-operating items | Consolidated income statement | ||
Investment-linked contracts | Participating funds | |||||||||
30 November 2007 | ||||||||||
Total revenue | 11,523 | 3,640 | 63 | - | - | - | - | - | 15,226 | Total revenue |
Of which: | Of which: | |||||||||
Net premiums, fee income and other operating revenue | 8,817 | - | - | - | - | - | - | - | 8,817 | Net premiums and fee income and other operating revenue |
I nvestment return | 2,706 | 3,640 | 63 | - | - | - | - | - | 6,409 | Investment return |
Total expenses | 9,781 | - | - | 9 | 2,469 | 308 | 80 | - | 12,647 | Total expenses |
Of which: | Of which: | |||||||||
Net insurance and investment contract benefits | 7,586 | - | - | - | 2,469 | 308 | - | - | 10,363 | Net insurance and investment contract benefits |
Investment management expenses and finance costs | 286 | 9 | 295 | Investment management expenses and finance costs | ||||||
Change in third party interests in consolidated investment funds | - | - | - | - | - | - | 80 | - | 80 | Change in third party interests in consolidated investment funds |
Operating profit | 1,742 | 3,640 | 63 | (9) | (2,469) | (308) | (80) | - | 2,579 | Profit/(loss) before tax |
8. Revenue
Investment return
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Interest income | 2,560 | 2,958 | 2,913 |
Dividend income | 184 | 203 | 147 |
Rental income | 25 | 63 | 67 |
Investment income | 2,769 | 3,224 | 3,127 |
Available for sale | |||
Net realised gains/(losses) from debt securities | 1 | (90) | (162) |
Impairment of debt securities | - | (142) | (67) |
Net gains/(losses) of available for sale financial assets reflected in the consolidated income statement | 1 | (232) | (229) |
At fair value through profit or loss | |||
Net (losses)/gains of debt securities | (227) | (1,117) | 635 |
Net gains/(losses) of equity securities | 4,030 | (8,968) | 5,506 |
Net fair value movement on derivatives | 100 | (247) | 273 |
Net gains/(losses) in respect of financial assets at fair value through profit or loss | 3,903 | (10,332) | 6,414 |
Net foreign exchange (losses)/gains | (262) | 300 | (426) |
Other realised (losses)/gains | (2) | 42 | (43) |
Investment experience | 3,640 | (10,222) | 5,716 |
Investment return | 6,409 | (6,998) | 8,843 |
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Foreign exchange (loss)/gain | (225) | 227 | (140) |
Other operating revenue
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Gain on recapture of reinsurance from former parent company (see Note 5) | - | 447 | - |
Other revenue | 77 | 79 | 71 |
Total | 77 | 526 | 71 |
9. Expenses
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Insurance contract benefits | 4,555 | 5,402 | 5,375 |
Change in insurance contract liabilities | 5,233 | (1,898) | 6,275 |
Investment contract benefits | 1,228 | (2,047) | 2,164 |
Insurance and investment contract benefits | 11,016 | 1,457 | 13,814 |
Insurance and investment contract benefits ceded | (653) | (248) | (251) |
Insurance and investment contract benefits, net of ceded reinsurance | 10,363 | 1,209 | 13,563 |
Commissions and other acquisition expenses incurred | 2,282 | 2,269 | 1,855 |
Deferral and amortisation of acquisition costs | (1,335) | (706) | (207) |
Commission and other acquisition expenses | 947 | 1,563 | 1,648 |
Employee benefit expenses | 585 | 639 | 610 |
Depreciation | 45 | 61 | 57 |
Amortisation | 7 | 3 | 9 |
Operating lease rentals | 81 | 94 | 90 |
Other operating expenses | 244 | 292 | 215 |
Operating expenses | 962 | 1,089 | 981 |
Restructuring costs | - | 8 | 11 |
Separation costs | - | 2 | 78 |
Restructuring and separation costs | - | 10 | 89 |
Investment management expenses | 92 | 103 | 89 |
Finance costs | 203 | 159 | 50 |
Change in third party interests in consolidated investment funds | 80 | (319) | 164 |
Total | 12,647 | 3,814 | 16,584 |
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Investment management expenses including fees paid to related parties | 88 | 101 | 87 |
Depreciation on investment property | 4 | 2 | 2 |
Total | 92 | 103 | 89 |
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Securities lending and repurchase agreements (see Note 30 for details) | 193 | 134 | 44 |
Bank and other loans | 1 | 18 | 5 |
Related party borrowings (see Note 41) | 9 | 7 | 1 |
Total | 203 | 159 | 50 |
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Wages and salaries | 464 | 497 | 477 |
Share based compensation | 11 | 19 | 8 |
Pension costs - defined contribution plans | 20 | 27 | 30 |
Pension costs - defined benefit plans | 12 | 12 | 14 |
Other employee benefit expenses | 78 | 84 | 81 |
Total | 585 | 639 | 610 |
10. Income tax
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Tax (credited)/charged in the consolidated income statement | |||
Current income tax - Hong Kong Profits Tax | 39 | 37 | 34 |
Current income tax - overseas | 425 | 364 | 287 |
Deferred income tax on temporary differences | 187 | (846) | 333 |
Total | 651 | (445) | 654 |
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
2007 | 2008 | 2009 | |
Thailand | 30% | 30% | 30% |
Singapore | 18% | 18% | 17% |
Korea | 27.50% | 24.20% | 24.2% |
Malaysia | 27% | 26% | 25% |
China | 25%/33% | 25% | 25% |
Hong Kong | 17.50% | 16.50% | 16.50% |
Other | 20% - 35% | 20% - 35% | 20% - 30% |
Year ended 30 November | Year ended 30 November | Year ended 30 November | ||||
US$m | 2007 | 2008 | 2009 | |||
Income tax reconciliation | ||||||
Profit/(loss) before income tax | 2,579 | (32) | 2,411 | |||
Tax calculated at domestic tax rates applicable to profits in the respective countries | 610 | 5 | 549 | |||
Reduction in tax payable from: | ||||||
Release of provision for withholding tax | - | (275) | - | |||
Life insurance tax | - | (108) | - | |||
Exempt investment income | (17) | (33) | (38) | |||
Changes in tax rate and law | (24) | (44) | - | |||
Release of provisions for uncertain tax positions | - | (10) | - | |||
Amounts over provided in prior years | (10) | (3) | (4) | |||
Unrecognised deferred tax assets | - | - | - | |||
Other | - | (4) | - | |||
(51) | (477) | (42) | ||||
Increase in tax payable from: | ||||||
Life insurance tax | 19 | - | 70 | |||
Withholding taxes | 37 | - | 12 | |||
Disallowed expenses | 3 | 20 | 43 | |||
Unrecognised deferred tax assets | 13 | 7 | 4 | |||
Provisions for uncertain tax positions | 3 | - | 3 | |||
Other | 17 | - | 15 | |||
92 | 27 | 147 | ||||
Total income tax expense/(credit) | 651 | (445) | 654 | |||
Deferred tax | ||||||
Temporary differences not recognised in the consolidated statement of financial position are: | ||||||
Tax losses | 144 | 148 | 148 | |||
Insurance contract liabilities | 117 | 89 | 52 | |||
Total | 261 | 237 | 200 | |||
There are no current tax assets recoverable in more than one year. All jurisdictions are either in a net deferred tax liability position or there is no recognition of deferred tax assets.
The movement in deferred tax liabilities in the period may be analysed as set out below:
US$m | Net deferred tax asset/(liability) at 1 December | (Charged)/ credited to the income statement | (Charged)/credited to other comprehensive income | Net deferred tax asset/(liability) at 30 November | |
Fair value reserve | Foreign exchange | ||||
30 November 2009 | |||||
Revaluation of financial instruments | (415) | (721) | (133) | (161) | (1,430) |
Deferred acquisition costs | (1,244) | (187) | - | (42) | (1,473) |
Insurance and investment contract liabilities | 1,387 | 711 | - | 157 | 2,255 |
Withholding taxes | (48) | (12) | - | (3) | (63) |
Provision for expenses | 7 | (11) | - | (2) | (6) |
Losses available for offset against future taxable income | 4 | - | - | - | 4 |
Life surplus | (255) | (118) | - | (26) | (399) |
Other | 17 | 5 | - | 3 | 25 |
Total | (547) | (333) | (133) 1 | (74) | (1,087) |
30 November 2008 | |||||
Revaluation of financial instruments | (1,226) | 755 | (12) | 68 | (415) |
Deferred acquisition costs | (1,620) | 345 | - | 31 | (1,244) |
Insurance and investment contract liabilities | 2,142 | (693) | - | (62) | 1,387 |
Withholding taxes | (304) | 261 | - | (5) | (48) |
Provision for expenses | 59 | (48) | - | (4) | 7 |
Losses available for offset against future taxable income | 6 | (2) | - | - | 4 |
Life surplus | (431) | 161 | - | 15 | (255) |
Other | (53) | 67 | - | 3 | 17 |
Total | (1,427) | 846 | (12) 1 | 46 | (547) |
30 November 2007 | |||||
Revaluation of financial instruments | (1,379) | (20) | 181 | (8) | (1,226) |
Deferred acquisition costs | (1,484) | (98) | - | (38) | (1,620) |
Insurance and investment contract liabilities | 1,683 | 331 | - | 128 | 2,142 |
Withholding taxes | (256) | (34) | - | (14) | (304) |
Provision for expenses | 150 | (66) | - | (25) | 59 |
Losses available for offset against future taxable income | 67 | (44) | - | (17) | 6 |
Life surplus | (36) | (285) | - | (110) | (431) |
Other | (88) | 29 | - | 6 | (53) |
Total | (1,343) | (187) | 1811 | (78) | (1,427) |
11. Disposal groups held for sale
US$m | 30 November 2009 |
Available for sale - debt securities | 50 |
Other assets | 5 |
Cash and cash equivalents | 3 |
Total assets | 58 |
Insurance contract liabilities | 57 |
Other liabilities | 1 |
Total liabilities | 58 |
12. Earnings per share
Basic
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
2007 | 2008 | 2009 | |
Net profit attributable to shareholders of AIA Group Limited (US$m) | 1,914 | 408 | 1,754 |
Weighted average number of ordinary shares in issue (million) | 12,000 | 12,000 | 12,000 |
Basic earnings per share (cents per share) | 16 | 3 | 15 |
Diluted
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
2007 | 2008 | 2009 | |
Net profit attributable to shareholders of AIA Group Limited (US$m) | 1,914 | 408 | 1,754 |
Weighted average number of ordinary shares for diluted earnings per share (million) | 12,000 | 12,000 | 12,000 |
Diluted earnings per share (cents per share) | 16 | 3 | 15 |
Operating profit per share
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
2007 | 2008 | 2009 | |
Basic and fully diluted (cents per share) | 11 | 13 | 12 |
13. Dividends
Year ended 30 November 2007 | Year ended 30 November 2008 | Year ended 30 November 2009 | |
US$m | US$m | US$m | |
Ordinary dividends declared and charged to equity in the period | 261 | 346 | 25 |
14. Intangible assets
US$m | Goodwill | Computer software | Distribution and other rights | Total | |||
Cost | |||||||
At 1 December 2006 | 144 | 81 | 5 | 230 | |||
Additions | - | 22 | - | 22 | |||
Foreign exchange movements | 1 | - | - | 1 | |||
At 30 November 2007 | 145 | 103 | 5 | 253 | |||
Additions | - | 20 | 18 | 38 | |||
Disposals | - | (8) | - | (8) | |||
Foreign exchange movements | (1) | (5) | - | (6) | |||
At 30 November 2008 | 144 | 110 | 23 | 277 | |||
Additions | 8 | 23 | 5 | 36 | |||
Acquisition of a subsidiary | - | - | 15 | 15 | |||
Disposals | - | (4) | (18) | (22) | |||
Disposal of a subsidiary | (23) | (1) | - | (24) | |||
Foreign exchange movements | - | 8 | (1) | 7 | |||
At 30 November 2009 | 129 | 136 | 24 | 289 | |||
Accumulated amortisation | |||||||
At 1 December 2006 | (6) | (39) | - | (45) | |||
Amortisation charge for the year | - | (7) | - | (7) | |||
Foreign exchange movements | - | (1) | - | (1) | |||
At 30 November 2007 | (6) | (47) | - | (53) | |||
Amortisation charge for the year | - | (3) | - | (3) | |||
Disposals | - | 8 | - | 8 | |||
Foreign exchange rate movements | - | 3 | - | 3 | |||
At 30 November 2008 | (6) | (39) | - | (45) | |||
Amortisation charge for the year | - | (8) | (1) | (9) | |||
Disposal of a subsidiary | - | 1 | - | 1 | |||
Foreign exchange rate movements | - | (3) | - | (3) | |||
At 30 November 2009 | (6) | (49) | (1) | (56) | |||
Net book value | |||||||
At 30 November 2007 | 139 | 56 | 5 | 200 | |||
At 30 November 2008 | 138 | 71 | 23 | 232 | |||
At 30 November 2009 | 123 | 87 | 23 | 233 | |||
14. Intangible assets (continued)
15.
Investments in associates and joint ventures
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Group | |||
At 1 December | 267 | 63 | 47 |
Cash distributions (see Note 4 for details) | (190) | - | - |
Additions | 8 | 48 | 24 |
Disposals | (27) | (17) | (1) |
Share of net (loss)/profit | - | (28) | (21) |
Foreign exchange movements | 5 | (19) | 4 |
At 30 November | 63 | 47 | 53 |
Percentage interest held | ||||||
As at 30 November | As at 30 November | As at 30 November | ||||
Country of incorporation | Type of shares held | Principal activity | 2007 | 2008 | 2009 | |
AIG Card (Thailand) Company Limited | Thailand | Ordinary | Credit card business | 39% | 39% | - |
AIG Consulting Services Company Limited | China | Ordinary | Consultancy service | 50% | - | - |
AIG Credit Card Co. (HK) Limited | Hong Kong | Ordinary | Credit card business | 50% | - | - |
Beacon Property Ventures, Inc | Philippines | Ordinary | Property management | 40% | 40% | 40% |
Chelshire Investments Private Limited | Singapore | Ordinary | Property management | 50% | 50% | 50% |
Chelville Investments Private Limited | Singapore | Ordinary | Property management | 50% | 50% | 50% |
Deeptro Private Limited | Singapore | Ordinary | Property management | 50% | 50% | 50% |
Grange Development Private Limited | Singapore | Ordinary | Property development | 23.25% | - | - |
ICCP Holdings Inc | Philippines | Ordinary | Investment holding | 20% | 20% | 20% |
Manila Exposition Complex, Inc | Philippines | Ordinary | Hotel | 10% | 10% | 10% |
NaiLert Park Hotel Co. Limited | Thailand | Ordinary | Property management | 20% | 20% | 20% |
Panareno Sendrian Berhad | Malaysia | Ordinary and preference | Property management | 35% | 35% | 35% |
Philam Realty | Philippines | Ordinary | Property management | 40% | 40% | 40% |
Science Park of the Philippines | Philippines | Ordinary | Property management | 17% | 17% | 17% |
Tata AIG Life Insurance Company Limited | India | Ordinary | Insurance | 26% | 26% | 26% |
Winfame Investments Private Limited | Singapore | Ordinary | Property management | 50% | 50% | 50% |
Winwave Investments Private Limited | Singapore | Ordinary | Property management | 50% | 50% | 50% |
15.
Investments in associates and joint ventures (continued)
Aggregated financial information of associates and joint ventures
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Share of income | 142 | 65 | 146 |
Share of expenses | (142) | (93) | (167) |
Share of profit/(loss) | - | (28) | (21) |
Share of current assets | 265 | 221 | 425 |
Share of long term assets | 161 | 195 | 186 |
Share of current liabilities | (239) | (73) | (30) |
Share of long term liabilities | (124) | (296) | (528) |
Share of net assets | 63 | 47 | 53 |
Investments in associates and joint ventures are held for their long term contribution to the Group's performance and so all amounts are expected to be realised more than 12 months after the end of the reporting period.
16.
Property, plant and equipment
US$m | Property held for use | Fixtures and fittings | Computer hardware | Total |
Cost | ||||
At 1 December 2006 | 339 | 194 | 133 | 666 |
Additions | 3 | 27 | 28 | 58 |
Disposals | - | (7) | (7) | (14) |
Transfers from investment property | 19 | - | - | 19 |
Foreign exchange movements | 24 | - | (1) | 23 |
At 30 November 2007 | 385 | 214 | 153 | 752 |
Additions | 4 | 45 | 18 | 67 |
Disposals | (10) | (8) | (6) | (24) |
Transfers from investment property | 4 | - | - | 4 |
Foreign exchange movements | (19) | (19) | (12) | (50) |
At 30 November 2008 | 364 | 232 | 153 | 749 |
Additions | 2 | 15 | 20 | 37 |
Disposals | - | (19) | (16) | (35) |
Transfers to investment property | (10) | - | - | (10) |
Acquisition of a subsidiary | 7 | - | 1 | 8 |
Disposal of a subsidiary | (1) | (3) | (1) | (5) |
Foreign exchange movements | 23 | 15 | 9 | 47 |
At 30 November 2009 | 385 | 240 | 166 | 791 |
Accumulated depreciation | ||||
At 1 December 2006 | (118) | (135) | (104) | (357) |
Depreciation charge | (11) | (18) | (16) | (45) |
Disposals | - | 4 | 4 | 8 |
Foreign exchange movements | (7) | - | 1 | (6) |
At 30 November 2007 | (136) | (149) | (115) | (400) |
Depreciation charge | (13) | (26) | (22) | (61) |
Disposals | 5 | 4 | 5 | 14 |
Transfers from investment property | (1) | - | - | (1) |
Foreign exchange movements | 8 | 12 | 11 | 31 |
At 30 November 2008 | (137) | (159) | (121) | (417) |
Depreciation charge | (11) | (23) | (23) | (57) |
Disposals | - | 14 | 15 | 29 |
Transfers to investment property | 1 | - | - | 1 |
Disposal of a subsidiary | - | 3 | 1 | 4 |
Foreign exchange movements | (9) | (9) | (7) | (25) |
At 30 November 2009 | (156) | (174) | (135) | (465) |
Net book value | ||||
At 30 November 2007 | 249 | 65 | 38 | 352 |
At 30 November 2008 | 227 | 73 | 32 | 332 |
At 30 November 2009 | 229 | 66 | 31 | 326 |
17.
Investment property
US$m | Investment Property |
Cost | |
At 1 December 2006 | 136 |
Additions | 111 |
Transfers to property, plant and equipment | (19) |
Foreign exchange movements | 13 |
At 30 November 2007 | 241 |
Additions | 47 |
Disposals | (10) |
Transfers to property, plant and equipment | (4) |
Foreign exchange movements | (11) |
At 30 November 2008 | 263 |
Additions | 2 |
Disposals | (2) |
Transfers from property, plant and equipment | 10 |
Acquisition of a subsidiary | 13 |
Foreign exchange movements | 8 |
At 30 November 2009 | 294 |
Accumulated depreciation | |
At 1 December 2006 | (41) |
Charge for the year | (4) |
Foreign exchange movements | (6) |
At 30 November 2007 | (51) |
Charge for the year | (2) |
Disposals | 4 |
Transfers to property, plant and equipment | 1 |
Foreign exchange movements | 2 |
At 30 November 2008 | (46) |
Charge for the year | (2) |
Transfers from property, plant and equipment | (1) |
Foreign exchange movements | (1) |
At 30 November 2009 | (50) |
Net book value | |
At 30 November 2007 | 190 |
At 30 November 2008 | 217 |
At 30 November 2009 | 244 |
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Leases of investment property | |||
Expiring no later than one year | 42 | 47 | 56 |
Expiring later than one year and no less than five years | 100 | 95 | 104 |
Expiring after five years or more | 23 | 21 | 12 |
Total | 165 | 163 | 172 |
18. Fair value of investment property and property held for use
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Carrying value 1 | |||
Investment properties | 190 | 217 | 244 |
Property held for use (classified as property, plant and equipment) | 249 | 227 | 229 |
Leasehold land (classified as prepayments in other assets) | 693 | 686 | 690 |
Total | 1,132 | 1,130 | 1,163 |
Fair value 1 | |||
Investment properties (including land) | 1,445 | 1,407 | 1,593 |
Properties held for use (including land) | 827 | 748 | 870 |
Total | 2,272 | 2,155 | 2,463 |
Note: (1) Carrying and fair values are presented before non-controlling interests and, for assets held in participating funds, before allocation to policyholders.
19. Reinsurance assets
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Amounts recoverable from reinsurers | 87 | 19 | 29 |
Ceded insurance and investment contract liabilities | 2,581 | 128 | 255 |
Total | 2,668 | 147 | 284 |
20. Deferred acquisition and origination costs
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Carrying amount | |||
Deferred acquisition costs on insurance contracts | 9,188 | 9,082 | 10,123 |
Deferred origination costs on investment contracts | 856 | 965 | 853 |
Total | 10,044 | 10,047 | 10,976 |
Year ended 30 November 2007 | Year ended 30 November 2008 | Year ended 30 November 2009 | |
Movements in the period | |||
At 1 December | 8,135 | 10,044 | 10,047 |
Deferral and amortisation of acquisition costs | 1,249 | 695 | 308 |
Foreign exchange movements | 336 | (1,150) | 827 |
Recapture of reinsurance treaty (see Note 5) | - | 505 | - |
Impact of assumption changes | 86 | 11 | (101) |
Acquisition of a subsidiary | - | - | 31 |
Disposal of a subsidiary | - | - | (70) |
Other movements | 238 | (58) | (66) |
At 30 November | 10,044 | 10,047 | 10,976 |
21. Financial investments
External ratings | Internal ratings | Reported as | |
Standard and Poor's | Moody's | ||
AAA | Aaa | +1/-1 | AAA |
AA+ to AA- | Aa1 to Aa3 | +2/-2 | AA |
A+ to A- | A1 to A3 | +3/-3 | A |
BBB+ to BBB- | Baa1 to Baa3 | +4/-4 | BBB |
BB+ and below | Ba1 and below | +5 and below | Below investment grade |
Policyholder and shareholder | |||||||
Participating funds | Other policyholder and shareholder | Investment-linked | |||||
US$'m | Rating | FVTPL | FVTPL | AFS | Sub-total | FVTPL | Total |
30 November 2009 | |||||||
Government bonds - issued in local currency | |||||||
Singapore | AAA | 1,496 | - | 759 | 2,255 | 70 | 2,325 |
Thailand | A | - | - | 7,374 | 7,374 | - | 7,374 |
Philippines | BB | - | - | 1,309 | 1,309 | 22 | 1,331 |
Malaysia | A | 953 | - | 196 | 1,149 | 1 | 1,150 |
China | A | 271 | - | 836 | 1,107 | 3 | 1,110 |
Indonesia | BB | - | - | 494 | 494 | 115 | 609 |
Korea | A | - | - | 1,539 | 1,539 | 4 | 1,543 |
Other (1) | 1 | 4 | 312 | 317 | - | 317 | |
Sub-total | 2,721 | 4 | 12,819 | 15,544 | 215 | 15,759 | |
Government bonds -foreign currency | |||||||
Mexico | BBB | 9 | 15 | 135 | 159 | 2 | 161 |
South Africa | BBB | - | 2 | 164 | 166 | 2 | 168 |
Philippines | BB | 2 | 10 | 749 | 761 | 46 | 807 |
Malaysia | A | 11 | - | 77 | 88 | 1 | 89 |
Indonesia | BB | 48 | 10 | 210 | 268 | - | 268 |
Korea | A | 16 | 1 | 205 | 222 | 2 | 224 |
China | A | - | - | 46 | 46 | 2 | 48 |
Other(1) | 53 | 92 | 291 | 436 | 10 | 446 | |
Sub-total | 139 | 130 | 1,877 | 2,146 | 65 | 2,211 | |
Government agency bonds2 | |||||||
AAA | 542 | - | 694 | 1,236 | 64 | 1,300 | |
AA | 1 | - | 194 | 195 | 64 | 259 | |
A | 611 | - | 2,797 | 3,408 | 116 | 3,524 | |
BBB | 873 | - | 1,583 | 2,456 | 4 | 2,460 | |
Below investment grade | - | - | 346 | 346 | - | 346 | |
Not rated | - | - | - | - | 8 | 8 | |
Sub-total | 2,027 | - | 5,614 | 7,641 | 256 | 7,897 |
Policyholder and shareholder | |||||||
Participating funds | Other policyholder and shareholder | Investment-linked | |||||
US$'m | Rating | FVTPL | FVTPL | AFS | Sub-total | FVTPL | Total |
30 November 2009 | |||||||
Corporate bonds | |||||||
AAA | 237 | - | 296 | 533 | 34 | 567 | |
AA | 1,397 | 79 | 1,757 | 3,233 | 253 | 3,486 | |
A | 2,960 | 188 | 8,149 | 11,297 | 454 | 11,751 | |
BBB | 1,656 | 348 | 5,726 | 7,730 | 198 | 7,928 | |
Below investment grade | 198 | 32 | 876 | 1,106 | 41 | 1,147 | |
Not rated | 127 | 70 | 51 | 248 | 190 | 438 | |
Sub-total | 6,575 | 717 | 16,855 | 24,147 | 1,170 | 25,317 | |
Structured securities | |||||||
AAA | 7 | 22 | - | 29 | - | 29 | |
AA | - | - | - | - | - | - | |
A | 39 | - | 424 | 463 | - | 463 | |
BBB | 247 | 20 | 90 | 357 | 5 | 362 | |
Below investment grade | 51 | 51 | 41 | 143 | 15 | 158 | |
Not rated | 3 | - | 2 | 5 | - | 5 | |
Sub-total | 347 | 93 | 557 | 997 | 20 | 1,017 | |
Total | 11,809 | 944 | 37,722 | 50,475 | 1,726 | 52,201 |
Policyholder and shareholder | |||||||
Participating funds | Other policyholder and shareholder | Investment-linked | |||||
US$'m | Rating | FVTPL | FVTPL | AFS | Sub-total | FVTPL | Total |
30 November 2008 | |||||||
Government bonds - issued in local currency | |||||||
Singapore | AAA | 1,166 | - | 547 | 1,713 | 69 | 1,782 |
Thailand | A | - | - | 6,377 | 6,377 | - | 6,377 |
Philippines | BB | - | - | 862 | 862 | 12 | 874 |
Malaysia | A | 1,192 | - | 290 | 1,482 | 3 | 1,485 |
China | A | 244 | - | 723 | 967 | 70 | 1,037 |
Indonesia | BB | - | - | 315 | 315 | 59 | 374 |
Korea | A | - | - | 857 | 857 | 6 | 863 |
Other 1 | 11 | 2 | 231 | 244 | - | 244 | |
Sub-total | 2,613 | 2 | 10,202 | 12,817 | 219 | 13,036 | |
Government bonds -foreign currency | |||||||
Mexico | BBB | 15 | 11 | 141 | 167 | 3 | 170 |
South Africa | BBB | - | 1 | 115 | 116 | 2 | 118 |
Philippines | BB | 1 | 12 | 452 | 465 | 18 | 483 |
Malaysia | A | 80 | - | 186 | 266 | 2 | 268 |
Indonesia | BB | 39 | 7 | 206 | 252 | 5 | 257 |
Korea | A | - | - | 67 | 67 | 2 | 69 |
China | A | 10 | - | 49 | 59 | 2 | 61 |
Other 1 | 49 | 95 | 310 | 454 | 8 | 462 | |
Sub-total | 194 | 126 | 1,526 | 1,846 | 42 | 1,888 | |
Government agency bonds2 | |||||||
AAA | 654 | - | 536 | 1,190 | 15 | 1,205 | |
AA | 17 | - | 378 | 395 | 65 | 460 | |
A | 610 | - | 2,459 | 3,069 | 100 | 3,169 | |
BBB | 509 | - | 1,868 | 2,377 | 6 | 2,383 | |
Below investment grade | 1 | 2 | 261 | 264 | 1 | 265 | |
Not rated | - | - | - | - | 33 | 33 | |
Sub-total | 1,791 | 2 | 5,502 | 7,295 | 220 | 7,515 | |
Corporate bonds | |||||||
AAA | 47 | - | 178 | 225 | 78 | 303 | |
AA | 1,630 | 55 | 1,586 | 3,271 | 298 | 3,569 | |
A | 2,113 | 150 | 5,718 | 7,981 | 292 | 8,273 | |
BBB | 1,227 | 132 | 4,038 | 5,397 | 211 | 5,608 | |
Below investment grade | 199 | 250 | 548 | 997 | 45 | 1,042 | |
Not rated | 19 | 65 | 1 | 85 | 47 | 132 | |
Sub-total | 5,235 | 652 | 12,069 | 17,956 | 971 | 18,927 |
Policyholder and shareholder | |||||||
Participating funds | Other policyholder and shareholder | Investment-linked | |||||
US$m | FVTPL | FVTPL | AFS | Sub-total | FVTPL | Total | |
30 November 2008 | |||||||
Structured securities | |||||||
AAA | 15 | 30 | 434 | 479 | - | 479 | |
AA | 35 | 37 | - | 72 | - | 72 | |
A | 22 | 2 | 54 | 78 | - | 78 | |
BBB | 141 | - | 77 | 218 | 1 | 219 | |
Below investment grade | 24 | 1 | 70 | 95 | 14 | 109 | |
Sub-total | 237 | 70 | 635 | 942 | 15 | 957 | |
Total | 10,070 | 852 | 29,934 | 40,856 | 1,467 | 42,323 |
Policyholder and shareholder | |||||||
Participating funds | Other policyholder and shareholder | Investment-linked | |||||
US$'m | Rating | FVTPL | FVTPL | AFS | Sub-total | FVTPL | Total |
30 November 2007 | |||||||
Government bonds - issued in local currency | |||||||
Singapore | AAA | 1,374 | - | 472 | 1,846 | 51 | 1,897 |
Thailand | A | - | - | 5,826 | 5,826 | - | 5,826 |
Philippines | BB | - | - | 1,200 | 1,200 | 30 | 1,230 |
Malaysia | A | 1,154 | - | 220 | 1,374 | 1 | 1,375 |
China | A | 220 | - | 675 | 895 | 30 | 925 |
Indonesia | BB | - | - | 514 | 514 | 86 | 600 |
Korea | A | - | - | 1,399 | 1,399 | 16 | 1,415 |
Other 1 | 36 | 33 | 244 | 313 | - | 313 | |
Sub-total | 2,784 | 33 | 10,550 | 13,367 | 214 | 13,581 | |
Government bonds -foreign currency | |||||||
Mexico | BBB | 1 | 15 | 152 | 168 | - | 168 |
South Africa | BBB | - | 2 | 101 | 103 | 1 | 104 |
Philippines | BB | 4 | 22 | 606 | 632 | 39 | 671 |
Malaysia | A | 115 | - | 192 | 307 | 1 | 308 |
Indonesia | BB | 63 | 9 | 288 | 360 | 17 | 377 |
Korea | A | 101 | - | 264 | 365 | 1 | 366 |
China | A | 9 | - | 44 | 53 | 1 | 54 |
Other 1 | 86 | 173 | 197 | 456 | 12 | 468 | |
Sub-total | 379 | 221 | 1,844 | 2,444 | 72 | 2,516 | |
Government agency bonds2 | |||||||
AAA | 898 | - | 438 | 1,336 | 31 | 1,367 | |
AA | 45 | - | 245 | 290 | 35 | 325 | |
A | 437 | - | 2,728 | 3,165 | 63 | 3,228 | |
BBB | 533 | - | 1,351 | 1,884 | 16 | 1,900 | |
Below investment grade | 7 | 2 | 76 | 85 | 3 | 88 | |
Not rated | - | - | 102 | 102 | 16 | 118 | |
Sub-total | 1,920 | 2 | 4,940 | 6,862 | 164 | 7,026 | |
Corporate bonds | |||||||
AAA | 72 | - | 229 | 301 | 59 | 360 | |
AA | 1,773 | 66 | 1,657 | 3,496 | 281 | 3,777 | |
A | 2,034 | 175 | 5,887 | 8,096 | 292 | 8,388 | |
BBB | 1,091 | 108 | 3,865 | 5,064 | 200 | 5,264 | |
Below investment grade | 319 | 227 | 625 | 1,171 | 151 | 1,322 | |
Not rated | - | 53 | 29 | 82 | 37 | 119 | |
Sub-total | 5,289 | 629 | 12,292 | 18,210 | 1,020 | 19,230 |
Policyholder and shareholder | |||||||
Participating funds | Other policyholder and shareholder | Investment-linked | |||||
US$m | FVTPL | FVTPL | AFS | Sub-total | FVTPL | Total | |
30 November 2007 | |||||||
Structured securities | |||||||
AAA | 32 | 79 | 887 | 998 | - | 998 | |
AA | 115 | 120 | 33 | 268 | - | 268 | |
A | 122 | 41 | 277 | 440 | - | 440 | |
BBB | 133 | - | 87 | 220 | 3 | 223 | |
Below investment grade | 22 | 14 | 35 | 71 | 15 | 86 | |
Not rated | 17 | 9 | 10 | 36 | - | 36 | |
Sub-total | 441 | 263 | 1,329 | 2,033 | 18 | 2,051 | |
Total | 10,813 | 1,148 | 30,955 | 42,916 | 1,488 | 44,404 |
Policyholder and shareholder | ||||||||
Participating funds | Other policyholder and shareholder | Investment-linked | ||||||
US$m | FVTPL | FVTPL | AFS | Subtotal | FVTPL | Total | ||
30 November 2009 | ||||||||
Ordinary shares | 1,685 | 2,008 | - | 3,693 | 2,738 | 6,431 | ||
Securities held by consolidated mutual funds managed by AIG | 167 | 494 | - | 661 | 1,333 | 1,994 | ||
Interests in investment funds | ||||||||
AIG managed | 116 | 132 | - | 248 | 1,232 | 1,480 | ||
Non-AIG managed | 241 | 193 | - | 434 | 5,777 | 6,211 | ||
357 | 325 | - | 682 | 7,009 | 7,691 | |||
Shares in AIG | - | - | 62 | 62 | - | 62 | ||
Total | 2,209 | 2,827 | 62 | 5,098 | 11,080 | 16,178 |
Policyholder and shareholder | ||||||||
Participating funds | Other policyholder and shareholder | Investment-linked | ||||||
US$m | FVTPL | FVTPL | AFS | Subtotal | FVTPL | Total | ||
30 November 2008 | ||||||||
Ordinary shares | 705 | 1,000 | - | 1,705 | 1,211 | 2,916 | ||
Securities held by consolidated mutual funds managed by AIG | 109 | 619 | - | 728 | 805 | 1,533 | ||
Interests in investment funds | ||||||||
AIG managed | 158 | 197 | - | 355 | 851 | 1,206 | ||
Non-AIG managed | 151 | 39 | - | 190 | 2,815 | 3,005 | ||
309 | 236 | - | 545 | 3,666 | 4,211 | |||
Shares in AIG | - | - | 87 | 87 | - | 87 | ||
Total | 1,123 | 1,855 | 87 | 3,065 | 5,682 | 8,747 |
Policyholder and shareholder | |||||||
Participating funds | Other policyholder and shareholder | Investment-linked | |||||
US$m | FVTPL | FVTPL | AFS | Subtotal | FVTPL | Total | |
30 November 2007 | |||||||
Ordinary shares | 1,629 | 2,817 | - | 4,446 | 2,268 | 6,714 | |
Securities held by consolidated mutual funds managed by AIG | 107 | 1,047 | - | 1,154 | 1,558 | 2,712 | |
Interests in investment funds | |||||||
AIG managed | 364 | 352 | - | 716 | 1,380 | 2,096 | |
Non-AIG managed | 221 | 42 | - | 263 | 5,834 | 6,097 | |
585 | 394 | - | 979 | 7,214 | 8,193 | ||
Shares in AIG | - | - | 2,520 | 2,520 | - | 2,520 | |
Total | 2,321 | 4,258 | 2,520 | 9,099 | 11,040 | 20,139 |
As at 30 November | As at 30 November | As at 30 November | ||
US$m | 2007 | 2008 | 2009 | |
Debt securities | ||||
Listed | ||||
Hong Kong | 377 | 421 | 394 | |
Overseas | 25,344 | 20,010 | 30,663 | |
25,721 | 20,431 | 31,057 | ||
Unlisted | 18,683 | 21,892 | 21,144 | |
Total | 44,404 | 42,323 | 52,201 | |
Equity securities | ||||
Listed | ||||
Hong Kong | 238 | 47 | 399 | |
Overseas | 12,675 | 3,093 | 6,606 | |
12,913 | 3,140 | 7,005 | ||
Unlisted | 7,226 | 5,607 | 9,173 | |
Total | 20,139 | 8,747 | 16,178 | |
Loans and receivables
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Policy loans | 1,327 | 1,437 | 1,644 |
Mortgage loans on residential real estate | 609 | 587 | 527 |
Mortgage loans on commercial real estate | 112 | 105 | 48 |
Intercompany loans to fellow subsidiaries of AIG (see Note 41) | 1,589 | 29 | 87 |
Other loans | 182 | 242 | 446 |
Allowance for loan losses | (15) | (7) | (12) |
Loans | 3,804 | 2,393 | 2,740 |
Due from insurance and investment contract holders | 471 | 536 | 546 |
Due from agents, brokers and intermediaries | 9 | 13 | 39 |
Insurance receivables | 480 | 549 | 585 |
Related party receivables | 95 | 33 | 1 |
Receivables from sales of investments | 329 | 86 | 34 |
Other receivables | 362 | 285 | 396 |
Receivables | 1,266 | 953 | 1,016 |
Term deposits | 595 | 656 | 892 |
Total1 | 5,665 | 4,002 | 4,648 |
22. Derivative financial instruments
US$m | Fair value | |||
Notional Amount | (1)(2) Assets | (1) Liabilities | ||
30 November 2009 | ||||
Foreign exchange contracts: | ||||
Forwards | 222 | 1 | - | |
Cross currency swaps | 8,390 | 439 | (69) | |
Total foreign exchange contracts | 8,612 | 440 | (69) | |
Interest rate contracts | ||||
Interest rate swaps | 1,092 | 13 | - | |
Other | ||||
Commodity index swaps | 20 | - | (2) | |
Total | 9,724 | 453 | (71) | |
30 November 2008 | ||||
Foreign exchange contracts: | ||||
Forwards | 333 | - | (4) | |
Cross currency swaps | 7,423 | 228 | (131) | |
Total foreign exchange contracts | 7,756 | 228 | (135) | |
Interest rate contracts | ||||
Interest rate swaps | 1,086 | 24 | - | |
Other | ||||
Commodity index swaps | 20 | - | (3) | |
Total | 8,862 | 252 | (138) | |
30 November 2007 | ||||
Foreign exchange contracts: | ||||
Forwards | 17 | - | - | |
Cross currency swaps | 6,492 | 415 | (37) | |
Total foreign exchange contracts | 6,509 | 415 | (37) | |
Interest rate contracts | ||||
Interest rate swaps | 978 | 4 | (10) | |
Other | ||||
Commodity index swaps | 2 | 3 | - | |
Total | 7,489 | 422 | (47) | |
22. Derivative financial instruments (continued)
Foreign exchange contracts
Interest rate swaps
23. Fair value of financial instruments
Fair value | ||||||
US$m | Notes | Fair value through profit or loss | Available for sale | Cost/ amortised cost | Total carrying value | Total fair value |
30 November 2009 | ||||||
Financial investments: | 21 | |||||
Loans and receivables | - | - | 4,648 | 4,648 | 4,688 | |
Debt securities | 14,479 | 37,722 | - | 52,201 | 52,201 | |
Equity securities | 16,116 | 62 | - | 16,178 | 16,178 | |
Derivative financial instruments | 22 | 453 | - | - | 453 | 453 |
Reinsurance receivables | 19 | - | - | 29 | 29 | 29 |
Cash and cash equivalents | 25 | - | - | 3,405 | 3,405 | 3,405 |
Financial assets | 31,048 | 37,784 | 8,082 | 76,914 | 76,954 |
Notes | Fair value through profit or loss | Cost/ amortised cost | Total carrying value | Total fair value | |
Financial liabilities: | |||||
Investment contract liabilities | 27 | 6,669 | 1,111 | 7,780 | 7,780 |
Borrowings | 29 | - | 688 | 688 | 688 |
Obligations under securities lending and repurchase agreements | 30 | - | 284 | 284 | 284 |
Derivative financial instruments | 22 | 71 | - | 71 | 71 |
Other liabilities and current tax liabilities1 | - | 1,800 | 1,800 | 1,800 | |
Financial liabilities | 6,740 | 3,883 | 10,623 | 10,623 |
Fair value | ||||||
US$m | Notes | Fair value through profit or loss | Available for sale | Cost/ amortised cost | Total carrying value | Total fair value |
30 November 2008 | ||||||
Financial investments | 21 | |||||
Loans and receivables | - | - | 4,002 | 4,002 | 3,990 | |
Debt securities | 12,389 | 29,934 | - | 42,323 | 42,323 | |
Equity securities | 8,660 | 87 | - | 8,747 | 8,747 | |
Derivative financial instruments | 22 | 252 | - | - | 252 | 252 |
Reinsurance receivables | 19 | - | - | 19 | 19 | 19 |
Cash and cash equivalents | 25 | - | - | 4,164 | 4,164 | 4,164 |
Financial assets | 21,301 | 30,021 | 8,185 | 59,507 | 59,495 |
Notes | Fair value through profit or loss | Cost/ amortised cost | Total carrying value | Total fair value | |
Financial liabilities | |||||
Investment contract liabilities | 27 | 4,226 | 672 | 4,898 | 4,898 |
Borrowings | 29 | - | 661 | 661 | 661 |
Obligations under securities lending and repurchase agreements | 30 | - | 2,718 | 2,718 | 2,718 |
Derivative financial instruments | 22 | 138 | - | 138 | 138 |
Other liabilities and current tax liabilities1 | - | 1,407 | 1,407 | 1,407 | |
Financial liabilities | 4,364 | 5,458 | 9,822 | 9,822 |
23. Fair value of financial instruments (continued)
Fair value | ||||||
US$m | Notes | Fair value through profit or loss | Available for sale | Cost/ amortised cost | Total carrying value | Total fair value |
30 November 2007 | ||||||
Financial investments | 21 | |||||
Loans and receivables | - | - | 5,665 | 5,665 | 5,686 | |
Debt securities | 13,449 | 30,955 | - | 44,404 | 44,404 | |
Equity securities | 17,619 | 2,520 | - | 20,139 | 20,139 | |
Derivative financial instruments | 22 | 422 | - | - | 422 | 422 |
Reinsurance receivables | 19 | - | - | 87 | 87 | 87 |
Cash and cash equivalents | 25 | - | - | 2,583 | 2,583 | 2,583 |
Financial assets | 31,490 | 33,475 | 8,335 | 73,300 | 73,321 |
Notes | Fair value through profit or loss | Cost/ amortised cost | Total carrying value | Total fair value | |
Financial liabilities | |||||
Investment contract liabilities | 27 | 5,926 | 579 | 6,505 | 6,505 |
Borrowings | 29 | - | 1,461 | 1,461 | 1,461 |
Obligations under securities lending and repurchase agreements | 30 | - | 5,395 | 5,395 | 5,395 |
Derivative financial instruments | 22 | 47 | - | 47 | 47 |
Other liabilities and current tax liabilities1 | - | 1,843 | 1,843 | 1,843 | |
Financial liabilities | 5,973 | 9,278 | 15,251 | 15,251 |
Fair value measurements on a recurring basis
23. Fair value of financial instruments (continued)
Financial assets and liabilities
Loans and receivables
Debt securities and equity securities
Derivative financial instruments
Cash and cash equivalents
Reinsurance receivables
Fair value of securities lending invested collateral and securities lending payables
23. Fair value of financial instruments (continued)
Other assets
Investment contract liabilities
Borrowings
Other liabilities
Fair value hierarchy
23. Fair value of financial instruments (continued)
US$m | Fair value hierarchy | |||
Level 1 | Level 2 | Level 3 | Total | |
30 November 2009 | ||||
Financial assets | ||||
Available for sale | ||||
Debt securities | 21 | 37,533 | 168 | 37,722 |
Equity securities - shares in ultimate parent | 62 | - | - | 62 |
At fair value through profit or loss | ||||
Debt securities | ||||
Participating funds | - | 11,605 | 204 | 11,809 |
Investment-linked | - | 1,726 | - | 1,726 |
Other policyholder and shareholder | 1 | 665 | 278 | 944 |
Equity securities | ||||
Participating funds | 2,088 | 15 | 106 | 2,209 |
Investment-linked | 10,384 | 696 | - | 11,080 |
Other policyholder and shareholder | 2,607 | 91 | 129 | 2,827 |
Derivative financial assets | - | 453 | - | 453 |
Total | 15,163 | 52,784 | 885 | 68,832 |
Total % | 22.0 | 76.7 | 1.3 | 100.0 |
Financial liabilities | ||||
Investment contract liabilities | - | - | 6,669 | 6,669 |
Derivative financial instruments | - | 69 | 2 | 71 |
Total | - | 69 | 6,671 | 6,740 |
Total % | - | 1.0 | 99.0 | 100.0 |
23. Fair value of financial instruments (continued)
US$m | Fair value hierarchy | |||
Level 1 | Level 2 | Level 3 | Total | |
30 November 2008 | ||||
Financial assets | ||||
Available for sale | ||||
Debt securities | - | 29,665 | 269 | 29,934 |
Equity securities - shares in ultimate parent | 87 | - | - | 87 |
At fair value through profit or loss | ||||
Debt securities | ||||
Participating funds | - | 9,835 | 235 | 10,070 |
Investment-linked | - | 1,467 | - | 1,467 |
Other policyholder and shareholder | - | 682 | 170 | 852 |
Equity securities | ||||
Participating funds | 895 | 97 | 131 | 1,123 |
Investment-linked | 5,158 | 506 | 18 | 5,682 |
Other policyholder and shareholder | 1,541 | 165 | 149 | 1,855 |
Derivative financial assets | - | 238 | 14 | 252 |
Total | 7,681 | 42,655 | 986 | 51,322 |
Total % | 15.0 | 83.1 | 1.9 | 100.0 |
Financial liabilities | ||||
Investment contract liabilities | - | - | 4,226 | 4,226 |
Derivative financial instruments | - | 132 | 6 | 138 |
Total | - | 132 | 4,232 | 4,364 |
Total % | - | 3.0 | 97.0 | 100.0 |
Level 3 financial assets and liabilities
US$m | Debt securities | Equity securities | Derivative financial assets | Derivative financial liabilities | Investment contracts |
At 1 December 2008 | 674 | 298 | 14 | (6) | (4,226) |
Realised gains/(losses) | (134) | (33) | (4) | (2) | - |
Net movement on investment contract liabilities | - | - | - | - | (2,443) |
Unrealised gains/(losses) relating to instruments still held at the reporting date | |||||
Reported in the consolidated income statement | 73 | (23) | - | - | - |
Reported in the consolidated statement of comprehensive income | 245 | - | - | - | - |
Purchases, issues and settlements | (84) | 5 | - | - | - |
Transfers in to/(out of) Level 3 | (124) | (12) | (10) | 6 | - |
At 30 November 2009 | 650 | 235 | - | (2) | (6,669) |
23. Fair value of financial instruments (continued)
Level 3 financial assets and liabilities
US$m | Debt securities | Equity securities | Derivative financial assets | Derivative financial liabilities | Investment contracts |
At 1 December 2007 | 1,364 | 131 | 4 | (12) | (5,926) |
Realised gains/(losses) | (61) | (7) | 5 | 14 | - |
Net movement on investment contract liabilities | - | - | - | - | 1,700 |
Unrealised gains/l(losses) relating to instruments held at the reporting date | |||||
Reported in the consolidated income statement | (319) | (21) | - | - | - |
Reported in the consolidated statement of comprehensive income | (174) | - | - | - | - |
Purchases, issues and settlements | 121 | 149 | (1) | - | - |
Transfers in to/(out of) Level 3 | (257) | 46 | 6 | (8) | - |
At 30 November 2008 | 674 | 298 | 14 | (6) | (4,226) |
24. Other assets
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Prepayments | |||
Operating leases of leasehold land | 693 | 686 | 690 |
Other | 44 | 44 | 51 |
Accrued investment income | 725 | 766 | 854 |
Pension scheme assets | |||
Defined benefit pension scheme surpluses (Note 38) | - | 3 | 5 |
Total | 1,462 | 1,499 | 1,600 |
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Land held in Hong Kong | |||
Long-term leases (>50 years) | 641 | 636 | 635 |
Medium-term leases (10 - 50 years) | - | - | - |
Short-term leases (<10 years) | - | - | - |
Land held outside Hong Kong | |||
Freehold | - | - | - |
Long-term leases (>50 years) | 50 | 48 | 53 |
Medium-term leases (10 - 50 years) | 2 | 2 | 2 |
Short-term leases (<10 years) | - | - | - |
Total | 693 | 686 | 690 |
25. Cash and cash equivalents
Cash and deposits
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Cash | 586 | 802 | 1,217 |
Cash equivalents | 1,997 | 3,362 | 2,188 |
Total1 | 2,583 | 4,164 | 3,405 |
26. Insurance contract liabilities
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
At 1 December | 46,960 | 57,161 | 52,158 |
Valuation premiums | 8,758 | 9,676 | 8,522 |
Liabilities released for death or other termination and related expenses | (4,161) | (6,180) | (4,639) |
Fees deducted from account balances | (229) | (320) | (542) |
Accretion of interest | 1,871 | 1,948 | 2,080 |
Foreign exchange movements | 2,171 | (4,165) | 4,005 |
Change in asset values attributable to policyholders | 1,264 | (3,762) | 2,082 |
Transfer to liabilities of the disposal group classified as held for sale | - | - | (57) |
Acquisition of subsidiary | - | - | 281 |
Disposal of subsidiary | - | - | (657) |
Other movements | 527 | (2,200) | 22 |
At 30 November | 57,161 | 52,158 | 63,255 |
26. Insurance contract liabilities (continued)
Business description
Type of contract | Material terms and conditions | Nature of benefits and compensation for claims | Factors affecting contract cash flows | Key reportable segments | |
Traditional participating life assurance with DPF | Participating funds | Participating products combine protection with a savings element. The basic sum assured, payable on death or maturity, may be enhanced by dividends, the aggregate amount of which is determined by the performance of a distinct fund of assets and liabilities. The timing of dividend declarations is at the discretion of the insurer. Local regulations generally prescribe a minimum proportion of policyholder participation in declared dividends | Minimum guaranteed benefits may be enhanced based on investment experience and other considerations | · Investment performance · Expenses · Mortality · Surrenders | Singapore, China, Malaysia |
Other participating business | Participating products combine protection with a savings element. The basic sum assured, payable on death or maturity, may be enhanced by dividends the timing or amount of which is at the discretion of the insurer taking into account factors such as investment experience | Minimum guaranteed benefits may be enhanced based on investment experience and other considerations | · Investment performance · Expenses · Mortality · Surrenders | Hong Kong, Thailand, Other Markets | |
Traditional non-participating life | Benefits paid on death, maturity, sickness or disability that are fixed and guaranteed and not at the discretion of the insurer | Benefits, defined in the insurance contract, are determined by the contract and are not affected by investment performance or the performance of the contract as a whole | · Mortality · Morbidity · Lapses · Expenses | All1 | |
Accident and health | These products provide morbidity or sickness benefits and include health, disability, critical illness and accident cover | Benefits, defined in the insurance contract are determined by the contract and are not affected investment performance or the performance of the contract as a whole | · Mortality · Morbidity · Lapses · Expenses | All1 | |
Investment-linked | Investment-linked contracts combine savings with protection, the cash value of the policy depending on the value of unitised funds | Benefits are based on the value of the unitised funds and death benefits | · Investment performance · Lapses · Expenses · Mortality | All1 | |
Universal life | The customer pays flexible premiums subject to specified limits accumulated in an account balance which are credited with interest at a rate set by the insurer, and a death benefit which may be varied by the customer | Benefits are based on the account balance and death benefit | · Investment performance · Crediting rates · Lapses · Expenses · Mortality | All1 |
26. Insurance contract liabilities (continued)
Methodology and assumptions
Market and credit risk | Significant insurance and lapse risks | ||||
Direct exposure | Indirect exposure | ||||
Type of contract | Insurance and investment contract liabilities | Risks associated with related investment portfolio | |||
Traditional participating life assurance with DPF | Participating funds | · Net neutral except for the insurer's share of participating investment performance | · Net neutral except for the insurer's share of participating investment performance | · Investment performance subject to smoothing through dividend declarations | · Impact of persistency on future dividends · Mortality |
· Guarantees | · Guarantees | ||||
Other participating business | |||||
· Net neutral except for the insurer's share of participating investment performance | · Net neutral except for the insurer's share of participating investment performance | · Investment performance | · Impact of persistency on future dividends · Mortality | ||
· Guarantees | · Guarantees | ||||
Traditional non-participating life assurance | · Investment performance · Credit risk | · Guarantees | · Not applicable | · Mortality · Persistency · Morbidity | |
· Asset liability mismatch risk | |||||
Accident and health | |||||
· Loss ratio | · Investment performance · Credit risk | · Not applicable | · Claims experience · Morbidity · Persistency | ||
· Asset liability mismatch risk | |||||
Pensions | |||||
· Net neutral | · Net neutral | · Performance related investment management fees | · Persistency | ||
· Asset liability mismatch risk | |||||
Investment-linked | |||||
· Net neutral | · Net neutral | · Performance related investment management fees | · Persistency · Mortality | ||
Universal life | · Guarantees | · Investment performance · Credit risk | · Spread between earned rate and crediting rate to policyholders | · Mortality · Persistency · Withdrawals | |
· Asset liability mismatch risk |
27. Investment contract liabilities
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
At 1 December | 3,482 | 6,505 | 4,898 |
Effect of foreign exchange translation | 20 | (33) | 102 |
Investment contract benefits | 1,228 | (2,047) | 2,164 |
Fees charged | (222) | (174) | (326) |
Net deposits/(withdrawals) and other movements | 1,997 | 647 | 942 |
At 30 November | 6,505 | 4,898 | 7,780 |
28. Effect of changes in assumptions and estimates
US$m | As at 30 November 2007 | As at 30 November 2008 | As at 30 November 2009 |
(Increase)/decrease in insurance contract liabilities, equity and profit before tax | |||
Interest rates + 0.5% | 7 | 7 | 4 |
Interest rates - 0.5% | (8) | (7) | (4) |
Expenses +10% | (1) | (3) | (2) |
Mortality +10% | (5) | (8) | (10) |
Lapse rates +5% | (19) | (21) | (12) |
29. Borrowings
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Bank loans | 546 | 548 | 549 |
Bank overdrafts | 71 | 88 | 85 |
Loans from fellow subsidiaries of AIG | 812 | 20 | 50 |
Other loans | 32 | 5 | 4 |
Total | 1,461 | 661 | 688 |
30. Obligations under securities lending and repurchase agreements
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Debt securities: | |||
Repurchase agreements | 1,620 | 831 | 315 |
Securities lending | |||
Related parties | 1,231 | 578 | - |
Others | 2,446 | 1,691 | - |
Total | 5,297 | 3,100 | 315 |
Collateral
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Debt securities | |||
Related parties | - | 390 | - |
Others | - | - | - |
Total | - | 390 | - |
Collateral available for pledge/sale | - | - | - |
As at 30 November | As at 30 November | As at 30 November | |||||
US$m | 2007 | 2008 | 2009 | ||||
Securities lending | |||||||
Related parties | 1,291 | 657 | - | ||||
Others | 2,523 | 1,306 | - | ||||
Repurchase agreements | 1,581 | 755 | 284 | ||||
Total | 5,395 | 2,718 | 284 | ||||
On 10 November 2008, the Group entered into an agreement with AIG Funding, Inc. ('AIGF') whereby the Group can borrow from AIGF to return cash collateral to securities borrowers in connection with a portfolio of securities loans of which AIG Securities Lending (Ireland) Ltd ('AIGSL') is the agent.
The Group can only borrow under this facility if the collateral investment account maintained on behalf of the Group does not have sufficient cash at the time to satisfy the Group's obligations to repay the third party borrowers.
Under the terms of this agreement, interest accrues on the outstanding borrowings at three months US$ LIBOR-BBA plus 1% per annum. Either party may terminate the agreement at any time upon 30 business days prior written notice to the other party.
The Group has not drawn down on this agreement at any time. Effective 30 November 2009, the Group terminated AIGSL's ability to make additional loans on behalf of the Group. As there are no outstanding loans under the programme, the Group no longer has the ability to draw down under this agreement.
31. Impairment of financial assets
Impairment of financial assets
Loans and receivables
32. Provisions
US$m | Employee benefits | Other | Total |
At 1 December 2006 | 50 | 85 | 135 |
Charged to the consolidated income statement | 11 | 4 | 15 |
Exchange differences | 1 | 1 | 2 |
Utilised during the period | (7) | (3) | (10) |
At 30 November 2007 | 55 | 87 | 142 |
Charged to the consolidated income statement | 11 | 31 | 42 |
Exchange differences | (10) | (3) | (13) |
Utilised during the period | (3) | (2) | (5) |
At 30 November 2008 | 53 | 113 | 166 |
Charged to the consolidated income statement 1 | 16 | 131 | 147 |
Exchange differences | 3 | 9 | 12 |
Contributions | (2) | - | (2) |
Utilised during the period | - | (73) | (73) |
At 30 November 2009 | 70 | 180 | 250 |
Other provisions
33. Other liabilities
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Trade and other payables | 1,389 | 1,082 | 1,162 |
Third party interests in consolidated investment funds | 720 | 398 | 397 |
Payables from purchases of investments | 84 | 72 | 396 |
Reinsurance payables | 101 | 35 | 57 |
Total | 2,294 | 1,587 | 2,012 |
34. Share capital and reserves
Share capital
As at 30 November 2007 | As at 30 November 2008 | As at 30 November 2009 | ||||
Million shares | US$m | Million shares | US$m | Million shares | US$m | |
Authorised | ||||||
Ordinary shares of US$1 each | 20,000 | 20,000 | 20,000 | 20,000 | 20,000 | 20,000 |
Issued and fully paid | ||||||
At start of the reporting period | 12,000 | 12,000 | 12,000 | 12,000 | 12,000 | 12,000 |
At end of the reporting period | 12,000 | 12,000 | 12,000 | 12,000 | 12,000 | 12,000 |
Shares yet to be issued | - | - | - | - | 44 | 44 |
Share premium | 1,914 | 1,914 | 1,914 |
Reserves
Fair value reserve
Foreign currency translation reserve
Other reserves
35.
Non-controlling interests
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Equity shares in subsidiaries | 6 | 6 | 51 |
Share of earnings | 35 | 25 | - |
Share of other reserves | 10 | (21) | - |
Total | 51 | 10 | 51 |
36. Group capital structure
Externally imposed capital requirements
30 November | 30 November | 30 November | |||||||
US$m | 2007 | 2008 | 2009 | ||||||
Total available capital | Required capital | Solvency margin ratio | Total available capital | Required capital | Solvency margin ratio | Total available capital | Required capital | Solvency margin ratio | |
AIA | 2,551 | 1,357 | 188 | 2,751 | 1,316 | 209 | 4,811 | 1,547 | 311 |
AIA-B | 2,519 | 648 | 389 | 1,469 | 684 | 215 | 2,742 | 911 | 301 |
37.
Risk management
Risk management framework
Insurance and financial risk exposures
Insurance risk
Product design risk
Pricing and underwriting risk
Claims risk
Lapse risk
Concentrations of insurance risk
Credit risk
Market risk
Interest rate risk
Exposure to interest rate risk
US$m | Variable interest rate | Fixed interest rate | Non-interest bearing | Total |
30 November 2009 | ||||
Financial assets | ||||
Loans and receivables | 904 | 2,825 | 919 | 4,648 |
Debt securities | 4,715 | 47,486 | - | 52,201 |
Equity securities | - | - | 16,178 | 16,178 |
Reinsurance receivables | - | - | 29 | 29 |
Derivative financial instruments | - | - | 453 | 453 |
Cash and cash equivalents | 3,144 | - | 261 | 3,405 |
Total financial assets | 8,763 | 50,311 | 17,840 | 76,914 |
Financial liabilities | ||||
Insurance contract liabilities (net of reinsurance) | - | - | 63,000 | 63,000 |
Investment contract liabilities | - | - | 7,780 | 7,780 |
Borrowings | 603 | - | 85 | 688 |
Obligations under securities lending and repurchase agreements | 284 | - | - | 284 |
Derivative financial liabilities | - | - | 71 | 71 |
Other financial liabilities including tax payable | - | - | 1,800 | 1,800 |
Total financial liabilities | 887 | - | 72,736 | 73,623 |
Net financial assets and liabilities | 7,876 | 50,311 | (54,896) | 3,291 |
US$m | Variable interest rate | Fixed interest rate | Non-interest bearing | Total | |
30 November 2008 | |||||
Financial assets | |||||
Loans and receivables | 1,423 | 1,563 | 1,016 | 4,002 | |
Debt securities | 3,723 | 38,600 | - | 42,323 | |
Equity securities | - | - | 8,747 | 8,747 | |
Derivative financial instruments | - | - | 252 | 252 | |
Reinsurance receivables | - | - | 19 | 19 | |
Cash and cash equivalents | 4,116 | - | 48 | 4,164 | |
Total financial assets | 9,262 | 40,163 | 10,082 | 59,507 | |
Financial liabilities | |||||
Insurance contract liabilities (net of reinsurance) | - | - | 52,030 | 52,030 | |
Investment contract liabilities | - | - | 4,898 | 4,898 | |
Borrowings | 546 | 26 | 89 | 661 | |
Obligations under securities lending agreements | 2,718 | - | - | 2,718 | |
Derivative financial liabilities | - | - | 138 | 138 | |
Other financial liabilities including tax payable | - | - | 1,407 | 1,407 | |
Total financial liabilities | 3,264 | 26 | 58,562 | 61,852 | |
Net financial assets and liabilities | 5,998 | 40,137 | (48,480) | (2,345) | |
30 November 2007 | |||||
Financial assets | |||||
Loans and receivables | 2,009 | 1,543 | 2,113 | 5,665 | |
Debt securities | 4,578 | 39,826 | - | 44,404 | |
Equity securities | - | - | 20,139 | 20,139 | |
Derivative financial instruments | - | - | 422 | 422 | |
Reinsurance receivables | - | - | 87 | 87 | |
Cash and cash equivalents | 2,529 | - | 54 | 2,583 | |
Total financial assets | 9,116 | 41,369 | 22,815 | 73,300 | |
Financial liabilities | |||||
Insurance contract liabilities (net of reinsurance) | - | - | 54,580 | 54,580 | |
Investment contract liabilities | - | - | 6,505 | 6,505 | |
Borrowings | 543 | 846 | 72 | 1,461 | |
Obligations under securities lending agreements | 5,395 | - | - | 5,395 | |
Derivative financial liabilities | - | - | 47 | 47 | |
Other financial liabilities including tax payable | - | 785 | 1,058 | 1,843 | |
Total financial liabilities | 5,938 | 1,631 | 62,262 | 69,831 | |
Net financial assets and liabilities | 3,178 | 39,738 | (39,447) | 3,469 |
Foreign exchange rate risk
Net exposure
US$m | United States Dollar | Hong Kong Dollar | Thai Baht | Singapore Dollar | Malaysian Ringgit | China Renminbi | Korean Won |
30 November 2009 | |||||||
Equity analysed by original currency | 11,824 | (410) | 2,448 | (1,922) | 563 | 704 | 924 |
Net notional amounts of currency derivative positions | (3,845) | - | 1,256 | 3,031 | - | - | 100 |
Currency exposure | 7,979 | (410) | 3,704 | 1,109 | 563 | 704 | 1,024 |
5% strengthening of original currency | |||||||
Impact on profit before tax | 103 | (63) | 1 | 11 | 1 | 9 | 2 |
5% strengthening of the US dollar | |||||||
Impact on shareholders' equity | (103) | (9) | (184) | (54) | (28) | (30) | (50) |
30 November 2008 | |||||||
Equity analysed by original currency | 7,085 | (502) | 2,113 | (1,887) | 482 | 628 | 598 |
Net notional amounts of currency derivative positions | (3,316) | - | 1,039 | 2,776 | - | - | (96) |
Currency exposure | 3,769 | (502) | 3,152 | 889 | 482 | 628 | 502 |
5% strengthening of original currency | |||||||
Impact on profit before tax | 31 | (66) | 1 | 6 | - | 7 | 1 |
5% strengthening of the US dollar | |||||||
Impact on shareholders' equity | (31) | (5) | (156) | (42) | (24) | (28) | (25) |
US$m | United States Dollar | Hong Kong Dollar | Thai Baht | Singapore Dollar | Malaysian Ringgit | China Renminbi | Korean Won |
30 November 2007 | |||||||
Equity analysed by original currency | 11,387 | (15) | 2,141 | (2,370) | 318 | 355 | 831 |
Net notional amounts of currency derivative positions | (2,818) | - | 686 | 2,728 | - | - | - |
Currency exposure | 8,569 | (15) | 2,827 | 358 | 318 | 355 | 831 |
5% strengthening of original currency | |||||||
Impact on profit before tax | 128 | (41) | (14) | 8 | 2 | 8 | 8 |
5% strengthening of the US dollar | |||||||
Impact on shareholders' equity | (128) | (9) | (141) | (16) | (15) | (14) | (35) |
Equity market price risk
Sensitivity analysis
30 November 2007 | 30 November 2008 | 30 November 2009 | ||||
US$m | Impact on profit before tax | Impact on net assets (before the effects of taxation) | Impact on profit before tax | Impact on net assets (before the effects of taxation) | Impact on profit before tax | Impact on net assets (before the effects of taxation) |
Interest rate risk | ||||||
+ 50 basis points shift in yield curves | (45) | (1,130) | (53) | (1,096) | (64) | (1,492) |
- 50 basis points shift in yield curves | 45 | 1,130 | 53 | 1,096 | 64 | 1,492 |
Equity risk | ||||||
10 per cent increase in equity prices | 464 | 716 | 204 | 214 | 308 | 314 |
10 per cent decrease in equity prices | (464) | (716) | (204) | (214) | (308) | (314) |
Liquidity risk
US$m | Total | No fixed maturity | Due in one year or less | Due after one year through five years | Due after five years through 10 years | Due after 10 years |
30 November 2009 | ||||||
Financial assets: | ||||||
Loans and receivables | 4,648 | 1,814 | 1,508 | 209 | 626 | 491 |
Debt securities | 52,201 | - | 1,624 | 11,825 | 14,806 | 23,946 |
Equity securities | 16,178 | 16,178 | - | - | - | - |
Derivative financial instruments | 453 | - | 12 | 308 | 133 | - |
Reinsurance receivables | 29 | - | 29 | - | - | - |
Cash and cash equivalents | 3,405 | - | 3,405 | - | - | - |
Total | 76,914 | 17,992 | 6,578 | 12,342 | 15,565 | 24,437 |
Financial liabilities and insurance contracts: | ||||||
Insurance contract liabilities (net of reinsurance) | 63,000 | - | (726) | (885) | 4,064 | 60,547 |
Investment contract liabilities | 7,780 | - | 39 | 1,807 | 2,564 | 3,370 |
Borrowings | 688 | 139 | 7 | 1 542 | - | - |
Obligations under securities lending and repurchase agreements | 284 | - | 284 | - | - | - |
Derivative financial instruments | 71 | - | 10 | 46 | 14 | 1 |
Other liabilities including tax payable | 1,800 | - | 1,800 | - | - | - |
Total | 73,623 | 139 | 1,414 | 1,510 | 6,642 | 63,918 |
Note: (1) Includes amounts of US$542m (2008: US$542m; 2007: US$546m) falling due after 2 years through 5 years |
US$m | Total | No fixed maturity | Due in one year or less | Due after one year through five years | Due after five years through 10 years | Due after 10 years |
30 November 2008 | ||||||
Financial assets: | ||||||
Loans and receivables | 4,002 | 232 | 2,220 | 736 | 637 | 177 |
Debt securities | 42,323 | - | 1,842 | 9,568 | 13,661 | 17,252 |
Equity securities | 8,747 | 8,747 | - | - | - | - |
Derivative financial instruments | 252 | - | 2 | 160 | 90 | - |
Reinsurance receivables | 19 | - | 19 | - | - | - |
Cash and cash equivalents | 4,164 | - | 4,164 | - | - | - |
Total | 59,507 | 8,979 | 8,247 | 10,464 | 14,388 | 17,429 |
Financial liabilities and insurance contracts: | ||||||
Insurance contract liabilities (net of reinsurance) | 52,030 | 46 | (1,278) | (2,039) | 2,451 | 52,850 |
Investment contract liabilities | 4,898 | - | 126 | 686 | 887 | 3,199 |
Borrowings | 661 | 4 | 108 | 5491 | - | - |
Obligations under securities lending and repurchase agreements | 2,718 | - | 2,718 | - | - | - |
Derivative financial instruments | 138 | - | 19 | 53 | 58 | 8 |
Other liabilities including tax payable | 1,407 | - | 1,407 | - | - | - |
Total | 61,852 | 50 | 3,100 | (751) | 3,396 | 56,057 |
30 November 2007 | ||||||
Financial assets: | ||||||
Loans and receivables | 5,665 | 204 | 4,165 | 392 | 427 | 477 |
Debt securities | 44,404 | - | 1,925 | 8,983 | 15,168 | 18,328 |
Equity securities | 20,139 | 20,139 | - | - | - | - |
Derivative financial instruments | 422 | - | 14 | 107 | 301 | - |
Reinsurance receivables | 87 | - | 87 | - | - | - |
Cash and cash equivalents | 2,583 | - | 2,583 | - | - | - |
Total | 73,300 | 20,343 | 8,774 | 9,482 | 15,896 | 18,805 |
Financial liabilities and insurance contracts: | ||||||
Insurance contract liabilities (net of reinsurance) | 54,580 | 43 | (1,318) | (1,352) | 3,702 | 53,505 |
Investment contract liabilities | 6,505 | - | 179 | 961 | 1,244 | 4,121 |
Borrowings | 1,461 | 4 | 911 | 5461 | - | - |
Obligations under securities lending and repurchase agreements | 5,395 | - | 5,395 | - | - | - |
Derivative financial instruments | 47 | - | 1 | 12 | 34 | - |
Other liabilities including tax payable | 1,843 | - | 1,843 | - | - | - |
Total | 69,831 | 47 | 7,011 | 167 | 4,980 | 57,626 |
Note: (1)
Includes amounts of US$
542
m (2008: US$542m; 2007: US$546m) falling due after 2 years through 5 years
38. Employee benefits
Defined benefit plans
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Present value of unfunded obligations | 40 | 64 | 58 |
Present value of funded obligations | 61 | 37 | 52 |
Total present value of obligations | 101 | 101 | 110 |
Fair value of plan assets | (56) | (50) | (53) |
Present value of net obligations | 45 | 51 | 57 |
Unrecognised actuarial (losses)/gains | 10 | - | 9 |
Unrecognised past service (cost)/benefit | - | (1) | (1) |
Net recognised defined benefit obligations | 55 | 50 | 65 |
Recognised defined benefit deficits | 55 | 53 | 70 |
Recognised defined benefit surpluses | - | (3) | (5) |
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Equity securities | 3 | 2 | 1 |
Debt securities | 1 | - | 1 |
Real estate | 40 | 38 | 39 |
Investment contracts issued by third party financial institutions | 10 | 9 | 12 |
Bank deposits | 2 | 1 | - |
Total | 56 | 50 | 53 |
Movement in the present value of defined benefit obligations
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
At 1 December | 86 | 101 | 101 |
Benefits paid by the plan | (3) | (6) | (6) |
Current service costs and interest (see next page) | 15 | 17 | 19 |
Actuarial losses/(gains) | (3) | 2 | (11) |
Plan settlement, curtailment or amendment | - | 1 | (1) |
Foreign exchange movements | 6 | (14) | 8 |
At 30 November | 101 | 101 | 110 |
38. Employee benefits (continued)
Movement in the fair value of plan assets
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
At 1 December | 37 | 56 | 50 |
Contributions paid into the plan | 6 | 7 | 4 |
Benefits paid by the plan | (3) | (6) | (7) |
Expected return on plan assets | 3 | 5 | 5 |
Actuarial gains/(losses) | 7 | (2) | (2) |
Foreign exchange movements | 6 | (10) | 4 |
Asset distributed on settlement | - | - | (1) |
At 30 November | 56 | 50 | 53 |
Expense recognised in consolidated income statement
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Current service costs | 10 | 11 | 13 |
Interest on obligation | 5 | 6 | 6 |
Expected return on plan assets | (3) | (5) | (5) |
Settlement/curtailment (gains)/losses recognised | - | - | - |
Total | 12 | 12 | 14 |
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Operating expenses | 12 | 12 | 14 |
Actuarial assumptions
As at 30 November | As at 30 November | As at 30 November | |
2007 | 2008 | 2009 | |
Expected return on plan assets at the start of the reporting period | 2.5 - 10.5% | 2.75 - 9.75% | 2.75 - 12.5% |
Future salary increases | 3.0 - 9.0% | 3.0 - 10.0% | 3.0 - 10.0% |
Healthcare trend rate: | |||
Immediate trend rate | 4.0 - 12.5% | 4.0 - 12.5% | 4.0 - 10.5% |
Ultimate trend rate | 4.0 - 10.5% | 4.0 - 10.5% | 4.0 - 10.5% |
Year in which the ultimate trend rate is reached | 2008 - 2013 | 2009 - 2013 | 2010 - 2013 |
Discount rate at the end of the reporting period | 2.75 - 11.0% | 1.5 - 15.0% | 1.5 - 15.0% |
38. Employee benefits (continued)
Hong Kong | Singapore | Thailand | Malaysia | Philippines | |
Retirement age | 65 | 62 | 60 | 55 - 60 | 65 |
Average life expectancy on retirement | |||||
Males | 18.5 years | 21.5 years | 18.1 years | 19.2 - 23.3 years | 17.3 years |
Females | 20.4 years | 24.1 years | 21.2 years | 25.5 - 29.9 years | 20.8 years |
US$m | 1% increase | 1% decrease | ||||
2007 | 2008 | 2009 | 2007 | 2008 | 2009 | |
Effect on the aggregate service and interest cost | - | - | 1 | - | (1) | (1) |
Effect on defined benefit obligation | 1 | 7 | 4 | (1) | (5) | (3) |
Historical information
As at 30 November | As at 30 November | As at 30 November | |
US$m | 2007 | 2008 | 2009 |
Present value of the defined benefit obligation | 101 | 101 | 110 |
Fair value of plan assets | (56) | (50) | (53) |
Deficits of the plans | 45 | 51 | 57 |
Experience gain/(loss) arising on plan liabilities | (2) | (14) | (7) |
Experience gain/(loss) arising on plan assets | 6 | (2) | (2) |
Defined contribution plans
39. Share based compensation
Stock compensation plans
Year ended | Year ended | Year ended | ||||
30 November 2007 | 30 November 2008 | 30 November 2009 | ||||
Number of shares | Weighted average exercise price | Number of shares | Weighted average exercise price | Number of shares | Weighted average exercise price | |
Options | ||||||
Outstanding at 1 December | 47,622 | $1,222.63 | 46,769 | $1,240.01 | 47,539 | $1,232.40 |
Granted | 3,800 | $1,413.45 | 3,750 | $1,132.66 | - | - |
Transfers in | 6,795 | $1,221.91 | 2,325 | $1,237.60 | 1,264 | $1,237.04 |
Exercised | (1,047) | $1,126.07 | - | - | - | - |
Transfers out | (8,695) | $1,221.67 | (3,451) | $1,235.41 | (2,411) | $1,224.94 |
Forfeited or expired | (1,706) | $1,238.86 | (1,854) | $1,223.14 | (4,873) | $1,139.50 |
Outstanding at 30 November | 46,769 | $1,239.78 | 47,539 | $1,232.42 | 41,519 | $1,232.47 |
Options exercisable at 30 November | 27,459 | $1,194.24 | 33,678 | $1,216.39 | 35,742 | $1,226.56 |
Weighted average fair value per share of options granted during the year | $468.93 | $415.81 | N/A |
39. Share based compensation (continued)
Options outstanding | Options exercisable | |||||
Range of exercise prices | Number outstanding | Weighted average remaining contractual life (years) | Weighted average exercise price US$ | Number outstanding | Weighted average remaining contractual life (years) | Weighted average exercise price US$ |
30 November 2009 | ||||||
Range of exercise prices: | ||||||
Less than or equal to US$1,000 | 4,728 | 3.25 | 940.00 | 4,728 | 3.25 | 940.00 |
US$1,000.01 - US$1,100.00 | 224 | 8.25 | 1,028.39 | 56 | 8.25 | 1,028.39 |
US$1,100.01 - US$1,200.00 | 8,921 | 6.65 | 1,169.69 | 6,628 | 6.15 | 1,179.59 |
US$1,200.01 - US$1,300.00 | 16,838 | 4.17 | 1,267.57 | 16,838 | 4.17 | 1,267.57 |
US$1,300.01 - US$1,400.00 | 6,902 | 6.19 | 1,323.43 | 5,111 | 6.15 | 1,322.24 |
More than US$1,400.01 | 3,906 | 6.59 | 1,429.49 | 2,381 | 6.28 | 1,435.57 |
Total | 41,519 | 5.18 | 1,232.47 | 35,742 | 4.85 | 1,226.56 |
30 November 2008 | ||||||
Range of exercise prices: | ||||||
Less than or equal to US$1,000 | 5,411 | 4.25 | 940.00 | 5,411 | 4.25 | 940.00 |
US$1,000.01 - US$1,100.00 | 237 | 8.96 | 1,029.96 | 12 | 3.67 | 1,058.00 |
US$1,100.01 - US$1,200.00 | 9,789 | 7.59 | 1,171.48 | 4,821 | 6.83 | 1,186.97 |
US$1,200.01 - US$1,300.00 | 19,938 | 5.18 | 1,268.01 | 17,954 | 5.09 | 1,265.70 |
US$1,300.01 - US$1,400.00 | 8,255 | 7.17 | 1,322.85 | 4,046 | 7.13 | 1,321.36 |
More than US$1,400.01 | 3,909 | 7.59 | 1,429.55 | 1,434 | 6.74 | 1,446.05 |
Total | 47,539 | 6.13 | 1,232.42 | 33,678 | 5.52 | 1,216.39 |
30 November 2007 | ||||||
Range of exercise prices: | ||||||
Less than or equal to US$1,000 | 5,663 | 5.25 | 940.00 | 5,663 | 5.25 | 940.00 |
US$1,000.01 - US$1,100.00 | 12 | 4.67 | 1,058.00 | 12 | 4.67 | 1,058.00 |
US$1,100.01 - US$1,200.00 | 7,104 | 7.83 | 1,186.98 | 3,589 | 7.83 | 1,186.97 |
US$1,200.01 - US$1,300.00 | 21,301 | 6.19 | 1,268.20 | 15,522 | 5.97 | 1,261.51 |
US$1,300.01 - US$1,400.00 | 8,780 | 8.16 | 1,322.67 | 2,164 | 8.08 | 1,319.80 |
More than US$1,400.01 | 3,909 | 8.59 | 1,429.55 | 509 | 5.74 | 1,492.73 |
Total | 46,769 | 6.90 | 1,239.78 | 27,459 | 6.22 | 1,194.24 |
39. Share based compensation (continued)
AIG Stock Purchase Plans
The 1996 plan
The 2007 plan
SICO plans
DCPPP
39. Share based compensation (continued)
Partners Plan
Valuation methodology
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
% | 2007 | 2008 | 2009 |
Expected annual dividend yield | 1.39% | 3.77% | N/A |
Expected volatility | 32.82% | 53.27% | N/A |
Risk free interest rate | 4.08% | 4.43% | N/A |
Expected term | 7 years | 4 years | N/A |
39. Share based compensation (continued)
Number of shares | Weighted average grant date fair value (US$) | |||||||
2007 plan | SICO | DCPPP | Partners Plan | 2007 plan | SICO | DCPPP | Partners Plan | |
Year ended 30 November 2009 | ||||||||
At 1 December | 22,776 | 5,560 | 12,217 | 21,248 | 1,198.80 | 1,248.80 | 1,173.60 | 1,125.60 |
Granted | - | - | 2,851 | - | - | - | 1,131.95 | - |
Transfers in | 1,705 | 220 | 448 | 1,010 | 1,193.62 | 1,175.27 | 1,147.78 | 1,097.40 |
Issued/exercised | (4,054) | (750) | (8,310) | (395) | 1,252.97 | 1,277.28 | 1,157.70 | 1,132.78 |
Transfers out | (1,948) | (400) | (647) | (1,645) | 1,206.05 | 1,235.13 | 1,159.08 | 1,101.89 |
Forfeited | (3,520) | (1,240) | (1,779) | (9,134) | 1,243.14 | 1,189.50 | 1,146.87 | 1,129.60 |
At 30 November | 14,959 | 3,390 | 4,780 | 11,084 | 1,182.33 | 1,208.53 | 1,142.31 | 1,107.19 |
Year ended 30 November 2008 | ||||||||
At 1 December | 12,935 | 6,102 | 12,307 | 13,164 | 1,329.51 | 1,259.98 | 1,148.09 | 1,149.65 |
Granted | 13,654 | - | - | 10,532 | 1,082.54 | - | - | 1,085.36 |
Transfers in | 1,039 | 1,648 | 1,030 | 1,054 | 1,315.40 | 1,217.33 | 1,154.07 | 1,138.48 |
Issued/exercised | (390) | (1,325) | - | - | 1,286.67 | 1,294.40 | - | - |
Transfers out | (1,084) | (345) | (360) | (878) | 1,321.62 | 1,198.53 | 1,152.27 | 1,108.50 |
Forfeited | (3,378) | (520) | (760) | (2,624) | 1,215.81 | 1,193.07 | 1,151.25 | 1,113.34 |
At 30 November | 22,776 | 5,560 | 12,217 | 21,248 | 1,198.77 | 1,248.82 | 1,173.52 | 1,125.62 |
Year ended 30 November 2007 | ||||||||
At 1 December | 5,614 | 10,388 | 13,100 | 13,409 | 1,256.03 | 1,241.63 | 1,103.68 | 1,138.25 |
Granted | 7,779 | - | 1,288 | 838 | 1,387.28 | - | 1,122.44 | 1,295.85 |
Transfers in | 1,741 | - | - | 2,210 | 1,280.74 | - | - | 1,127.80 |
Issued/exercised | (282) | (1,775) | - | - | 1,233.02 | 1,291.07 | - | - |
Transfers out | (645) | (2,361) | (1,901) | (2,865) | 1,324.91 | 1,230.00 | 1,089.60 | 1,128.41 |
Forfeited | (1,272) | (150) | (180) | (428) | 1,315.55 | 1,209.00 | 1,093.80 | 1,126.12 |
At 30 November | 12,935 | 6,102 | 12,307 | 13,164 | 1,329.51 | 1,259.98 | 1,148.09 | 1,149.65 |
39. Share based compensation (continued)
Recognised compensation cost
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
1999 plan | 3 | 2 | 1 |
2007 plan | 4 | 10 | 7 |
DCPPP | 3 | 3 | - |
Partners Plan | - | 4 | - |
SICO Plans | 1 | - | - |
Total | 11 | 19 | 8 |
Unrecognised compensation cost
Remaining weighted average vesting period at 30 November 2009 | Unrecognised compensation costs at 30 November 2009 | |
US$m | ||
1999 plan | 3 years | - |
2007 plan | Within 1 year | 6 |
DCPPP | Within 1 year | 1 |
Partners Plan | Within 1 year | 1 |
Total AIG plans | 3 years | 8 |
SICO plans | 5 years | 2 |
Total | 10 |
40. Remuneration of directors and key management personnel
Directors' remuneration
US$ | Directors' fees | Salaries, allowances and benefits in kind | Bonuses 1 | Pension scheme contributions | Post employment benefits | Share based payments | Inducement fees | Termination fees | Total |
30 November 2009 | |||||||||
Executive directors | |||||||||
Mark Wilson | - | 1,647,180 | 1,594,000 | 28,680 | 5,665 | 489,569 | - | - | 3,765,094 |
Steve Roder | - | 998,949 | 800,779 | 31,500 | 7,669 | 197,645 | - | - | 2,036,542 |
Total | - | 2,646,129 | 2,394,779 | 60,180 | 13,334 | 687,214 | - | - | 5,801,636 |
Note: (1)
Bonuses for 2009 are presented on an estimated basis as they are subject to approval by the Special Master for TARP Executive Compensation. The actual bonuses to be awarded may therefore differ from the amounts presented above
US$ | Directors' fees | Salaries, allowances and benefits in kind | Bonuses | Pension scheme contributions | Post employment benefits | Share based payments | Inducement fees | Termination fees | Total |
30 November 2008 | |||||||||
Executive directors | |||||||||
Mark Wilson | - | 867,792 | 275,000 | 28,580 | 5,526 | 510,932 | - | - | 1,687,830 |
Steve Roder | - | 548,115 | 200,000 | 31,500 | 7,481 | 181,242 | - | - | 968,338 |
Total | - | 1,415,907 | 475,000 | 60,080 | 13,007 | 692,174 | - | - | 2,656,168 |
US$ | Directors' fees | Salaries, allowances and benefits in kind | Bonuses | Pension scheme contributions | Post employment benefits | Share based payments | Inducement fees | Termination fees | Total |
30 November 2007 | |||||||||
Executive directors | |||||||||
Mark Wilson | - | 1,009,373 | 300,000 | 27,480 | 5,412 | 126,035 | - | - | 1,468,300 |
Steve Roder 1 | - | 417,335 | 840,000 | 18,381 | 4,274 | - | - | - | 1,279,990 |
Total | - | 1,426,708 | 1,140,000 | 45,861 | 9,686 | 126,035 | - | - | 2,748,290 |
Note: (1)
Mr. Roder joined the Group on 1 May 2007 and amounts presented relate to the period 1 May 2007 to 30 November 2007
40. Remuneration of directors and key management personnel (continued)
Remuneration of five highest paid individuals
US$ | Salaries, allowances and benefits in kind | Bonuses 1 | Pension scheme contributions | Post employment benefits | Share based payments | Inducement fees | Termination fees | Total |
30 November 2009 | 6,142,871 | 3,723,783 | 196,954 | 20,931 | 2,075,004 | - | - | 12,159,543 |
30 November 2008 | 5,429,952 | 1,047,409 | 283,843 | 5,835 | 4,937,231 | - | - | 11,704,270 |
30 November 2007 | 4,950,027 | 6,876,053 | 231,254 | 9,686 | 7,363,993 | - | - | 19,431,013 |
Note: (1)
Bonuses to certain individuals relating to 2009 are presented on an estimated basis as they are subject to approval by the Special Master for TARP
Executive Compensation. The actual bonuses to be awarded may therefore differ from the amounts presented above
40. Remuneration of directors and key management personnel (continued)
Remuneration of five highest paid individuals (continued)
HK$ | Year ended 30 November | Year ended 30 November | Year ended 30 November |
2009 | 2008 | 2007 | |
9,00,001 to 9,500,000 | - | - | 1 |
9,500,001 to 10,000,000 | - | - | 1 |
11,000,001 to 11,500,000 | - | 1 | 1 |
11,500,001 to 12,000,000 | - | 1 | - |
12,000,001 to 12,500,000 | - | 1 | - |
13,000,001 to 13,500,000 | - | 1 | 1 |
14,500,001 to 15,000,000 | 1 | - | - |
15,000,001 to 15,500,000 | 1 | - | - |
15,500,001 to 16,000,000 | 1 | - | - |
19,000,001 to 19,500,000 | 1 | - | - |
29,000,001 to 29,500,000 | 1 | - | - |
42,500,001 to 43,000,000 | - | 1 | - |
107,000,001 to 107,500,000 | - | - | 1 |
Key management personnel remuneration
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$ | 2009 | 2008 | 2007 |
Key management compensation and other expenses | |||
Salaries and other short term employee benefits 1 | 14,900,774 | 7,793,734 | 7,108,733 |
Termination benefits | - | - | - |
Post employment benefits - defined contribution | 315,858 | 372,026 | 277,866 |
Post employment benefits - defined benefit | 29,517 | 12,511 | 10,676 |
Post employment benefits - medical & life | 40,159 | 38,981 | 30,100 |
Other long term benefits | 2,864,052 | - | - |
Share based payment | 1,541,169 | 1,967,126 | 1,406,197 |
Total | 19,691,529 | 10,184,378 | 8,833,572 |
Note: (1)
Bonuses to certain individuals relating to 2009 are presented on an estimated basis as they are subject to approval by the Special Master for TARP Executive Compensation. The actual bonuses to be awarded may therefore differ from the amounts presented above
41.
Related party transactions
Transactions with related parties
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Transactions with related parties | |||
Reinsurance related parties (income)/expense | |||
Premiums assumed | (9) | (64) | (63) |
Premiums ceded to reinsurers | 607 | 171 | 21 |
Claims recovered from reinsurers | (324) | (75) | (5) |
Claims paid on inwards reinsurance | - | 35 | 48 |
Recapture fee (see Note 5) | - | 190 | - |
Commissions and fee income | (41) | (13) | - |
233 | 244 | 1 | |
Non-insurance related party income | |||
Interest income | (36) | (30) | (3) |
Income from services provided | (45) | (46) | (39) |
(81) | (76) | (42) | |
Non-insurance related party expenses | |||
Interest expense | 9 | 7 | 1 |
Purchases of services | 57 | 68 | 34 |
Corporate service fees | 29 | 33 | 23 |
95 | 108 | 58 | |
Total | 247 | 276 | 17 |
Term deposits held with related parties | 47 | 78 | - |
Amounts due from related parties | |||
Insurance related amounts receivable | 83 | 9 | 1 |
Loans receivable | 1,589 | 29 | 87 |
Other amounts receivable | 95 | 33 | 1 |
Total | 1,767 | 71 | 89 |
Amounts due to related parties | |||
Insurance related amounts payable | 76 | 7 | 3 |
Loans payable | 812 | 20 | 50 |
Other amounts payable | 12 | 29 | 51 |
Total | 900 | 56 | 104 |
42.
Commitments and contingencies
Commitments under operating leases
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Properties and others expiring | |||
Not later than one year | 64 | 69 | 76 |
Later than one and not later than five years | 121 | 136 | 102 |
Later than five years | 117 | 101 | 94 |
Total | 302 | 306 | 272 |
Investment commitments
Year ended 30 November | Year ended 30 November | Year ended 30 November | |
US$m | 2007 | 2008 | 2009 |
Not later than one year | - | 107 | 90 |
Later than one and not later than five years | 143 | 51 | 36 |
Later than five years | - | 131 | 138 |
Total | 143 | 289 | 264 |
Contingencies
43.
Subsidiaries
Place of incorporation and operation | Group's interest % | ||||||
Principal activity | Issued share capital | As at 30 November 2007 | As at 30 November 2008 | As at 30 November 2009 | |||
American International Assurance Company Limited1 ("AIA") | Hong Kong | Insurance | 805,902,610 shares of US$5 each | 100% | 100% | 100% | |
American International Assurance Company (Bermuda) Limited ("AIA-B") | Bermuda | Insurance | 3,000,000 shares of US$1.20 each | 100% | 100% | 100% | |
American International Assurance Company (Australia) Limited | Australia | Insurance | 1,972,800 shares of AUD 1 each and 95,500 redeemable preference shares | 100% | 100% | 100% | |
AIA Pension and Trustee Company Limited | British Virgin Islands | Trusteeship | 1,300,000 ordinary shares of US$1 each | 100% | 100% | 100% | |
American International Assurance Berhad | Malaysia | Insurance | 241,706,000 ordinary shares of RM1 each | - | 100% | 100% | |
PT AIA Financial (formerly known as PT AIG Life) | Indonesia | Insurance | 477,711,032 shares of Rp1,000 each | 100% | 100% | 100% | |
PT Asuransi AIA Indonesia2 | Indonesia | Insurance | 450 shares of Rp10 million each | 60% | 60% | - | |
The Philippine American Life & General Insurance Company | Philippines | Insurance | 200,000,000 shares of P$10 each | 99.78% | 99.78% | 99.78% | |
AIA Life Insurance (Vietnam) Company Limited (formerly known as AIG Life Insurance (Vietnam) Company Limited) | Vietnam | Insurance | Contributed capital of VND 960,902,899,000 | 100% | 100% | 100% | |
Grand Design Development Limited | British Virgin Islands | Investment holding company | 10,000 shares of US$100 each | 100% | 100% | 100% | |
Bayshore Development Group Limited | British Virgin Islands | Investment holding company | 100 shares of US$1 each | 90% | 90% | 90% | |
BPI-Philam Life Assurance Corporation (formerly known as Ayala Life Assurance Inc.) | Philippines | Insurance | 749,993,979 shares of PHPS$1 each | - | - | 51% | |
44. Immediate and ultimate controlling party
45. Events after the reporting period
On 22 December 2009 the Ministry of Finance of the People's Republic of China issued a new standard on accounting for insurance contracts. The Group is in the process of evaluating the impact of this standard and whilst it will not impact the valuation of insurance and investment contract liabilities as presented in the Group's IFRS financial statements, it may have an impact on the recognition of deferred tax assets for net operating losses.
On 27 January 2010, the sale of the disposal group held for sale (see note 11) was completed.
On 4 February 2010, the Company issued 44 million shares to its immediate parent company, AIA Aurora LLC. As of 30 November 2009, these shares were reflected as shares yet to be issued as consideration had been received prior to that date.
Financial statements of the Company
Statement of financial position as at 30 November 2009
30 November | ||
US$m | Notes | 2009 |
Assets | ||
Investments in subsidiaries | 2 | 13,964 |
Cash and cash equivalents | 44 | |
Total assets | 14,008 | |
Liabilities | ||
Borrowings | 4 | 50 |
Total liabilities | 50 | |
Equity | ||
Issued share capital and shares yet to be issued | 5 | 12,044 |
Share premium | 5 | 1,914 |
Retained earnings | 5 | - |
Total equity | 13,958 | |
Total liabilities and equity | 14,008 |
Notes to financial statements of the Company
6. Accounting policies
7. Investments in subsidiaries
Period ended 30 November | |
US$m | 2009 |
On formation | - |
Acquisitions | 13,964 |
Disposals | - |
At 30 November | 13,964 |
8. Cash and cash equivalents
9. Borrowings
10. Share capital and share premium
11. Risk management
12. Related party transactions
Glossary - unaudited
Term | Explanation |
Acquisition cost (of a financial instrument) | The amount of cash or cash equivalents paid or the fair value of other consideration provided, in order to acquire an asset at the date of its acquisition. |
Active market | A market in which all the following conditions exist: · the items traded within the market are homogeneous;· willing buyers and sellers can normally be found at any time; and· prices are available to the public. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. |
Amortised cost | The amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount and the maturity amount, and minus any reduction for impairment or uncollectability. |
Available for sale financial investments | Non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables or as at fair value through profit or loss. Available for sale financial instruments are measured at fair value, with movements in fair value recorded in other comprehensive income. |
Common control | A business combination involving entities under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination. |
Corridor | A range around an entity's best estimate of post employment benefit obligations. |
Credit risk | The risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. |
Currency risk | The risk that asset or liability values, cash flows, income or expenses will be affected by changes in exchange rates. |
Deferred acquisition costs | Deferred acquisition costs are expenses of an insurer which are incurred in connection with the acquisition of new insurance contracts or the renewal of existing insurance policies. They include commissions and other variable sales inducements and the direct costs of issuing the policy, such as underwriting and other policy issue expenses. These costs are deferred and expensed to the consolidated income statement on a systematic basis over the life of the policy. At least annually such assets are tested for recoverability. |
Defined benefit employee benefit plans | Post employment benefit plans under which amounts to be paid or services to be provided as post retirement benefits are determined by reference to a formula usually based on employees' earnings and/or years of service. |
Term | Explanation |
Defined contribution employee benefit plans | Post employment benefit plans under which amounts to be paid as post retirement benefits are determined by contributions to a fund together with earnings thereon. AIA has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay the post retirement benefits. |
Deferred origination costs | Origination costs are expenses which are incurred in connection with the origination of new investment contracts or the renewal of existing investment contracts. For contracts that involve the provision of investment management services these include commissions and other incremental expenses directly related to the issue of each new contract. Origination costs on contracts with investment management services are deferred and recognised as an asset in the consolidated statement of financial position and expensed to the consolidated income statement on a systematic basis in line with the revenue generated by the investment management services provided. |
Discontinued operations | A component of an entity that either has been disposed of or is classified as held for sale and: · represents a separate major line of business or geographical area of operations· is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or· is a subsidiary acquired exclusively with a view to resale. |
Discretionary participation features (DPF) | A contractual right to receive, as a supplement to guaranteed benefits, additional benefits: · that are likely to be a significant portion of the total contractual benefits· whose amount or timing is contractually at the discretion of the issuer or· the profit or loss of the company, fund or other entity that issues the contract. |
Effective interest method | A method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts future cash payments or receipts through the expected life of the financial instrument, or when appropriate, a shorter period, to the net carrying value of the financial asset or financial liability. |
Fair value | The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. |
Fair value through profit or loss | A financial asset or financial liability that is measured at fair value in the statement of financial position with gains and losses arising from movements in fair value being presented in the consolidated income statement as a component of the profit or loss for the year. |
First year premiums | First year premiums are the premiums received in the first year of a recurring premium policy. As such, they provide an indication of the volume of new policies sold. |
Functional currency | The currency of the primary economic environment in which the entity operates. |
Held for sale | A non current asset is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuing use. On the date that a non-current asset meets the criteria as held for sale it is measured at the lower of its carrying amount and fair value less costs to sell. |
IFRS | Standards and interpretations adopted by the International Accounting Standards Board ( ' IASB' ) comprising:· International Financial Reporting Standards;· International Accounting Standards; and· Interpretations developed by the International Financial Reporting Interpretations Committee ('IFRIC') or the former Standing Interpretations Committee (' SIC' ). |
Term | Explanation |
Insurance contract | A contract under which the insurer accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if specified uncertain future events adversely affect the policyholder. |
Insurance risk | Risk, other than financial risk, transferred from the holder of a contract to the issuer. |
Investment contract | An investment contract is an insurance policy that, whilst structured and regulated as a contract of insurance, does not meet the accounting definition of an insurance contract because it does not transfer significant insurance risk. |
Investment experience | Realised and unrealised investment gains and losses recognised in the consolidated income statement. |
Investment income | Investment income comprises interest income, dividends and rental income. |
Investment property | Property (land and/or a building or part of a building) held to earn rentals or for capital appreciation or both rather than for use by the AIA Group. |
Investment return | Investment return consists of investment income plus investment experience. |
Investment-linked products | Investment-linked products are insurance products where the policy value is linked to the value of underlying investments (such as collective investment schemes, internal investment pools or other property) or fluctuations in the value of underlying investment or indices. Investment risk associated with the product is usually borne by the policyholder. Insurance coverage, investment and administration services are provided for which the charges are deducted from the investment fund assets. Benefits payable will depend on the price of the units prevailing at the time of surrender, death or the maturity of the policy, subject to surrender charges. |
Lapse risk | The risk that, having purchased an insurance policy from AIA Group, customers either surrender the policy or cease paying premiums on it and so the expected stream of future premiums ceases. Lapse risk is taken into account in formulating projections of future premium revenues, for example when testing for liability adequacy and the recoverability of deferred acquisition costs. |
Liability adequacy test | An assessment of whether the carrying amount of an insurance liability needs to be increased or the carrying amount of related deferred acquisition costs or related intangible assets decreased based on a review of future cash flows. |
Liquidity risk | The risk that an entity will encounter difficulty in meeting obligations associated with liabilities. |
Market risk | The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. |
Monetary items | Units of currency held and asset and liabilities to be received or paid in a fixed or determinable number of units of currency. |
Non-controlling interests | The equity in a subsidiary not attributable, directly or indirectly, to a parent. Also referred to as 'minority interests'. |
Non-participating life assurance | Contracts of insurance where the policyholder has a guaranteed right to the benefit, which is not at the contractual discretion of the insurer. |
Term | Explanation |
Operating profit | The Group defines operating profit as profit before tax excluding investment experience; investment income related to investment-linked contracts; corresponding changes in insurance and investment contract benefits in respect of investment-linked contracts and participating fund; changes in third party interests in consolidated funds, and other significant items of non-operating income and expenditure. |
Operating segment | A component of an entity that: · engages in business activities from which it may earn revenues and incur expenses· whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and· for which discrete financial information is available. |
Other comprehensive income | Items of income and expense that form part of total comprehensive income but, as required or permitted by IFRS, do not form part of profit or loss for the year, such as fair value gains and losses on available for sale financial assets. |
Participating funds | Participating funds are distinct portfolios where the policyholders have a contractual right to receive at the discretion of the insurer additional benefits based on factors such as the performance of a pool of assets held within the fund, as a supplement to any guaranteed benefits. AIA may either have discretion as to the timing of the allocation of those benefits to participating policyholders or may have discretion as to the timing and the amount of the additional benefits. |
Participating policies | Participating policies are contracts of insurance where the policyholders have a contractual right to receive, at the discretion of the insurer, additional benefits based on investment performance, as a supplement to any guaranteed benefits. AIA Group may either have discretion as to the timing of the allocation of those benefits to participating policyholders or may have discretion as to the timing and the amount of the additional benefits. Participating policies may either be written within participating funds (see above) or may be written within the Company's general account, whereby the investment performance is determined for a group of assets or contracts, or by reference to the Company's overall investment performance and other factors. This is referred to by the Group as 'other participating business,' Whether participating policies are written within a separate participating fund or not largely depends on matters of local practice and regulation. |
Policyholder dividends | Policyholder dividends are the means of participating policyholders receiving the non-guaranteed element of the discretionary benefits, through which they participate in the investment return of the reference portfolio or pool of assets. |
Property held for use | Property held for use in the AIA Group's business. |
Puttable liabilities | A puttable financial instrument is one in which the holder of the instrument has the right to put the instrument back to the issuer for cash (or another financial asset). Units in investment funds such as mutual funds and open ended investment companies are typically puttable instruments. As these can be put back to the issuer for cash, the non-controlling interest in any such funds which have to be consolidated by AIA Group are treated as financial liabilities. |
Recapture | The voluntary termination of a contract of life reinsurance. |
Term | Explanation |
Related parties | Related parties, as disclosed in Note 41, may be related to AIA Group for any of the following reasons: · they are directly or indirectly controlled by an AIA Group entity;· an AIA Group entity has significant influence of the party; · they are in a joint venture arrangement with an AIA Group entity;· they are part of the Group's key management or a close member of the family of any key management or any entity that is controlled by these persons; or they are a post-retirement benefit plan for the employees of AIA Group. |
Renewal premiums | Premiums receivable in subsequent years of a multi-year insurance policy |
Repurchase agreements (repos) | A repurchase transaction involves the sale of financial investments by the AIA Group to a counterparty, subject to a simultaneous agreement to repurchase those securities at a later date at an agreed price. Accordingly, for accounting purposes, the securities are retained on the AIA Group's consolidated statement of financial position for the life of the transaction, valued in accordance with the Group's policy for assets of that nature. The proceeds of the transaction are reported in the caption 'Obligations under securities lending and repurchase agreements'. Interest expense from repo transactions is reported within finance costs in the consolidated income statement. |
Reverse repurchase agreements (reverse repos) | A reverse repurchase transaction (reverse repo) involves the purchase of financial investments with a simultaneous obligation to sell the assets at a future date, at an agreed price. Such transactions are reported within 'Loans and Receivables' in the consolidated statement of financial position. The interest income from reverse repo transactions is reported within investment return in the consolidated income statement. |
Securities lending | S ecurities lending consists of the loan of certain of the group's financial investments to third parties securities on a short term basis. The loaned securities continue to be recognised within the appropriate financial investment classifications in the Group's consolidated statement of financial position. |
Single premiums | Single premium policies of insurance are those that require only a single lump sum payment from the policyholder. |
Shadow accounting | Investment experience (realised and unrealised investment gains and losses) has a direct effect on the measurement of insurance contract liabilities and related deferred acquisition costs and intangible assets, such as VOBA (see below). Shadow accounting permits adjustments to insurance contract liabilities and the related assets to be reflected in other comprehensive income to match the extent to which unrealised investment gains and losses are recognised in other comprehensive income. |
Statement of financial position | Formerly referred to as the balance sheet. |
Total weighted premium income ( 'TWPI') | Total weighted premium income consists of 100% of renewal premiums, 100% of first year premiums and 10% of single premiums. As such it provides an indication of AIA Group's longer term business volumes as it smoothes the peaks and troughs in single premiums. |
Unit linked | Unit linked contracts may combine savings with an element of protection, the cash value of the policy depending on the value of unitised funds. The Group includes unit linked products within investment-linked products. |
Universal life | A type of insurance product where the customer pays flexible premiums, subject to specified limits, which are accumulated in an account balance which are credited with interest at a rate either set by the insurer or reflecting returns on a pool of matching assets. The customer may vary the death benefit and the contract may permit the policyholder to withdraw the account balance, typically subject to a surrender charge. |
Term | Explanation |
Value of business acquired ( ' VOBA ' ) | The VOBA in respect of a portfolio of long term insurance and investment contracts acquired is recognised as an asset, calculated using discounted cash flow techniques, reflecting all future cash flows expected to be realised from the portfolio. VOBA is amortised over the estimated life of the contracts in the acquired portfolio on a systematic basis. The rate of amortisation reflects the profile of the additional value of the business acquired. The carrying value of VOBA is reviewed annually for impairment and any impairment is charged to the consolidated income statement. |
Withholding tax | When a payment is made to a party in another country, the laws of the payer's country may require withholding tax to be applied to the payment. International withholding tax may be required for payments of dividends or interest. A double tax treaty may reduce the amount of withholding tax required, depending upon the jurisdiction in which the recipient is tax resident. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date 01 March, 2010
PRUDENTIAL PUBLIC LIMITED COMPANY | |
By: /s/ | |
Name Susan Henderson | |
Title Deputy Group Secretary |