AIA’s ongoing expansion across the Asia-Pacific region, along with its increasingly progressive profit distribution, may lead to higher capital consumption, potentially affecting the insurer’s capital strength, according to a report from S&P Global Ratings.
The ratings agency notes that while AIA has bolstered its capital buffers, which now meet a 99.99% confidence level under S&P’s assessment, the insurer could see an upgrade in its ratings over the next two years if it continues to sustain its enhanced capital position.
As of the end of 2023, following the implementation of the IFRS 17 accounting standards, AIA’s combined contractual service margins (CSM) and after-tax risk adjustments amounted to approximately $47 billion.
However, S&P highlighted that fluctuations in interest rates could introduce volatility to AIA’s capitalization. Additionally, the insurer’s continued reliance on debt issuance for capital efficiency remains a point of focus, with 22 outstanding public debt issuances recorded by late 2024.
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