Life Insurers' Par Fund Performance - Key Takeaway !

 

Points To Note:

• Par Fund bonus levels are not guaranteed, insurers generally try to avoid large fluctuations in the bonus declared from year to year, by smoothing bonuses over time. This means that bonuses may be held back in years when the performance of the fund has been good, so that they can be maintained when conditions are less favourable.
  
• 90:10 rule Insurance Act, which states that the profits that the insurer can take out of the participating fund in any year are limited to 1/9 of the amount allocated to policy owners as bonus for that year. It is referred to as the 90:10 rule, because it means that 90% of any surplus determined to be distributable, as bonus goes to policy owners in the participating fund, and 10%goes to the insurer. 
• Bonuses are determined (or “declared”) on an annual basis and most commonly expressed in the form of an addition to the sum assured.
• Non-guaranteed benefits or bonuses are not guaranteed, because the level of non guarantee bonuses depends on the value of the assets backing the policies, which in turn depends, among other things, on the following key factors:

1. Investment performance (this is usually by far the most important factor);
2. The level of expenses incurred by or allocated to the participating fund; and
3. The amounts paid out to meet claims on policies in the participating fund.

 From the Above Singapore Insurers' Par Fund Performance Analysis, my key Takeaway : 

•  Last 10 Years Top 5 Par Fund Performance Life Insurers

1. AIA
2. Prudential
3. AXA 
4. GE Life
   
5. TM
   

• Last 3 Years Top 3 Par Fund Performance Life Insurers

1. Manulife
2. AXA
3. TM
   
4. AIA 
5. Prudential 

• TM Par performance look great but Ratio of non-Guaranteed Benefits Reserve drop from Y2017 32.4% to Y2019 26.2%. Not a good sign, suggest may be due to increase on Claim or Cost...

• Y2019 Top 5 Ratio of non-Guaranteed Benefits Reserve

1. Prudential
2. AIA
3. Income
4. GE Life
5. Aviva
   

In conclusion, with the current low interest rate environment, if you like to invest in any Par Fund Insurance Policies, an Insurer which a higher Ratio of non-Guaranteed Benefits Reserve looks like is a better choice to meet the projected return!

What Other Important Information You Should Look Into Before Invest In Any Life and Endowment Insurance Policy - Update

Update for the post https://jimmytradingroom.blogspot.com/2020/07/what-other-important-information-you.html

Good Summary of Life Insurance 2019 Par Fund Performance :

What Other Important Information You Should Look Into Before Invest In Any Life and Endowment Insurance Policy

Before you decided to invest in any Life or Endowment Insurance Policy. On top of  your insurance agent or Financial Planner shared with you the detail of the policy you plan to invest. You should look into the following information and compare with other similar policy from other Insurance company :

1) Investment Return %

All the Life/Endowment policy will indicate the projected return based on around 3.25% and 4.75% ( Different Insurance companies may indicate slightly different % return )

Please take note, if you like to compare it with the saving bank interest rate. This is not the info you looking for. You should zoom into to small Note below the Benefit Illustration table looking for the yield at maturity % p. a return to compare it with the bank saving interest rate or other investment returns.

Example as below

2) Participating Fund Performance

This information is important as from the information you can judge whether the Insurance company can meet the higher projected investment return E.g 4.5% (Maturity yield of 3.44%)  using the above example.

Following are the Participating Fund Performance for Some of the Singapore Insurance Companies :

a) GE

b) Manulife

c) Tokio Marine

d) NTUC

From the above four Insurance companies fund performance analysis, Manulife's average 3 years return is the worst. NTUC is the only Insurance company in Y2018 that generated positive returns.

3) Expense Ratios 

Expanse rations are the cost of managing the participating fund, so the lowest the % the better.

Following are the Expense Rations for some of the Singapore Insurance Companies :

a) GE

b) Manulife

c) Tokio Marine

d) NTUC

 

 

From the above four Insurance companies Expense Ratios analysis, Manulife's is the worst as it incurred higher costs. NTUC incurred the lowest costs.


4) Total Distribution Cost

The Total distribution cost is how much you are paying for the distribution cost. The lowest cost the better.

E,g a) You dived the distribution cost by the Premium paid ($12376/$180073) you get 6.87% which is a very high cost!

E.g b) $5828/$160000 only 3.6% !!!

In Summary, do your homework, no need to rush,  take your time to find out all the similar policies from all insurance companies, did the analysis , and invest in the most value for money policy.