AIA expansion may temper capital buffer strength

It’s interest rate fluctuations may introduce volatility to its capitalisation. 

AIA’s expansion across Asia-Pacific, joined with progressive profit distribution could hike capital consumption, S&P Global Ratings said.

The agency also sees a potential for an upgrade over the next two years if AIA sustains its strengthened capital buffers, which now meet the 99.99% confidence level under S&P's assessment.

Following the adoption of IFRS 17 accounting standards, the insurer's combined contractual service margins (CSM) and risk adjustments after-tax totalled approximately $47b as of year-end 2023.  

Despite financial gains, S&P cautions that AIA interest rate fluctuations may introduce volatility to its capitalisation. 

Additionally, the group’s continued reliance on debt issuance for capital efficiency remains a key focus, with 22 outstanding public debt issuances as of late 2024.