AIA S'pore to pay out $494m in policy bonuses

Between 2006 and 2016, AIA's average net investment return for its par fund was estimated at 4.36 per cent. Its one-year average in 2016 was 5.6 per cent.
Between 2006 and 2016, AIA's average net investment return for its par fund was estimated at 4.36 per cent. Its one-year average in 2016 was 5.6 per cent.PHOTO: REUTERS

Higher rates due to favourable performance of products, it says

Buoyed by strong investment performance, AIA yesterday said it will pay out $494 million in bonuses for participating (par) policies for 2018.

Some policies will have higher annual or terminal bonus or dividend rates, and others will be maintained at the current scale.

More than 70,000 policies will benefit from a bonus scale increase, with an average rise of 17 per cent.

Some of these policies are expected to have bonus rates that are higher than illustrated at the point of sale due to "favourable performance" of these products, said AIA in a statement.

AIA will inform par fund policyholders by July.

Par policies are those whose premiums are pooled and invested collectively in a life fund. Par policyholders share in the fund's investment experience. Bonus and dividend declarations are smoothed over the long term.

"As a company, we are committed to manage the long-term performance of our par fund for our policyholders. Over the last decade, we have consistently delivered one of the strongest returns that outperformed industry averages," said AIA Singapore chief executive Patrick Teow.

More than 70,000 policies will benefit from a bonus scale increase, with an average rise of 17 per cent.

"We are confident our par fund is well placed for sustainable, long-term growth."

Last year, AIA set up AIA Investment Management (AIAIM), based in Singapore, to provide investment management services exclusively for AIA business units. The assets under management for AIA Singapore came to US$33.3 billion (S$43.6 billion) as of May last year.

Mr Teow said the establishment of AIAIM reaffirms the group's commitment "to do what's right to maximise the long-term performance of our par fund".

Bonus and dividend declarations depend on many factors, such as historical returns and the future outlook, experience of mortality, morbidity, lapses, surrenders, expenses and other business risks.

A smoothing concept also applies where the aim is to provide stable returns over the life of the par policy, and to avoid large short-term fluctuations in the bonuses declared.

A compilation of insurance fund returns between 2006 and 2016 showed that Prudential and AIA had the greatest number of top quartile performances.

Over the 11-year period, AIA's average net investment return for its par fund was estimated at 4.36 per cent. Its one-year average in 2016 was 5.6 per cent.

A version of this article appeared in the print edition of The Straits Times on April 03, 2018, with the headline 'AIA S'pore to pay out $494m in policy bonuses'. Print Edition | Subscribe