Regulatory Disclosures

DownloadHistorical Fulfillment Ratios for Participating Products
 
DownloadHistorical Crediting Interest Rates for Universal Life Products
 
DownloadGlossary for Insurance Terminology

Bonus Declaration Philosophy

Crediting Interest Rate Philosophy

Bonus Declaration Philosophy

Participating insurance plans are designed to be held long-term, giving policyholders an opportunity to participate in the financial performance of our life insurance participating business by way of non-guaranteed bonus (i.e. annual dividends, terminal dividends, interest on dividend/coupon accumulation, if applicable for the product) with the prospect of potential attractive long-term return.

To determine our bonus scales, we consider both past experience and long-term assumptions of factors pertaining to the product groups, in which the policies belong to. The factors include, without limitation, the following:

  • Investment factors: include the interests, dividends and the capital gains and losses generated from the products’ backing assets. As we invest in different types of assets in the financial market, we are exposed to various investment risks, such as interest rate risk, credit risk, equity risk, liquidity risk and currency risk.

  • Claim factors: include the cost of providing insurance benefits for the product, e.g. death benefits, critical illness benefits (where applicable)

  • Persistency factors: include the lapse or surrender of policies, reduction in sum assured / principal amount; and the corresponding impact on investments

  • Expense factors: include the direct expenses which are specifically related to a policy (e.g. commission, underwriting, issue and premium collection expense) and indirect expenses which are allocated to the product groups (e.g. general overhead costs)

If the actual experiences and/or latest outlook are more favorable than previously expected, the bonus scales would increase; if the actual experiences and/or latest outlook are less favorable, the bonus scales would decrease. At times, the actual experiences and/ or latest outlook are volatile and unpredictable, so the impact on bonus scales may be smoothed out over a few years such that a more stable bonus scales can be achieved.

With the Appointed Actuary’s recommendation, the Board of Directors, which includes at least one Independent Non-Executive Director, will review and declare the bonus scales at least annually. The actual declared bonus scales may be different from those illustrated previously. Should there be any changes in the bonus scales, the policyholders will be informed about the details and the potential impact of the changes.

For the historical fulfillment ratio, please visit our website at https://www.fwdlife.hk/pdf/regulatory-disclosures/historical-fulfillment-ratios.pdf.

Investment Philosophy

We employ a balanced investment approach for the underlying portfolio of the Participating products, with the objective to deliver long-term value to policyholders and the company.

The current long-term strategy is to allocate assets in fixed income instruments (e.g. commercial mortgage related instruments, corporate bonds and government bonds), and equity-like instruments (e.g. equity funds, hedge funds and private equities). The objective is to invest a portion of collected premium to equity-like instruments. The remaining premium will be invested in fixed income instruments. The majority of the asset is invested in the Unit States, Europe and Asia to achieve geographic diversification. The fixed income portfolio invests mainly in investment grade bonds, while high yield bonds may be invested in with limited exposure to enhance the long-term portfolio return. In addition, other market instruments (such as securities lending) may be utilized to generate additional returns.

Currency risk of the portfolio is mitigated by closely matching either through direct investments in the same currency denomination or the use of currency hedging instruments. On top of hedging, the portfolio may also use derivative instruments for efficient portfolio management purposes.

Investment for insurance products with similar characteristics will be pooled together to achieve higher efficiency. Depending on the market conditions (e.g. availability of assets, liquidity, market outlook) at the time of the purchase of asset, the actual asset mix may differ from the target asset mix temporarily.

To cope with the changing financial environment and in reflection of emerging experiences, we will review the investment strategy regularly. Should there be any material change in the long-term investment strategy, policyholders will be informed about the details and the potential impact of the changes.

Crediting Interest Rate Philosophy

Universal life insurance plans are designed to be held long-term, giving policyholders an opportunity to participate in the financial performance of our universal life insurance business by way of non-guaranteed crediting interest with the prospect of potential attractive long-term return.

To determine our crediting interest rates, we consider both past experience and long-term assumptions of factors pertaining to the product groups in which the policies belong to. The factors include, without limitation, the following:

  • Investment factors: include the interest, dividends and the capital gains and losses generated from the products’ backing assets. As we invest in different types of assets in the financial market, we are exposed to various investment risks, such as interest rate risk, credit risk, liquidity risk and currency risk.

  • Persistency factors: include the lapse or surrender of policies, reduction in sum assured; withdrawal and the corresponding impact on investments

  • Expense factors: include the direct expenses which are specifically related to a policy (e.g. commission, underwriting, issue and premium collection expense) and indirect expenses which are allocated to the product groups (e.g. general overhead costs)

If the actual experiences and/or latest outlook are more favorable than previously expected, the crediting interest rates would increase; if the actual experiences and/or latest outlook are less favorable, the crediting interest rates would decrease. At times, the actual experiences and/or latest outlook are volatile and unpredictable, so the impact on crediting interest rates may be smoothed out over a few years such that a more stable crediting interest rates can be achieved.

With the Appointed Actuary’s recommendation, the Board of Directors, which includes at least one Independent Non-Executive Director, will review and declare the crediting interest rates at least annually. The actual declared crediting interest rates may be different from those illustrated previously. Should there be any changes in the crediting interest rates, the policyholders will be informed about the details and the potential impact of the changes.

For the historical crediting rates, please visit our website at https://www.fwdlife.hk/pdf/regulatory-disclosures/historical-crediting-interest-rate.pdf.

Investment Philosophy of Universal Life

We employ a balanced investment approach for the underlying portfolio of the Universal Life products, with the objective to deliver long-term value to policyholders and the Company.

The current long-term strategy is to allocate assets in fixed income instruments (e.g. government bonds, corporate bonds and commercial mortgage related instruments). The majority of the asset is invested in the Unit States, Europe and Asia to achieve geographic diversification. The portfolio invests mainly in investment grade bonds, while high yield bonds may be invested in with limited exposure to enhance the long-term portfolio return. In addition, other market instruments (such as securities lending) may be utilized to generate additional returns.

Currency risk of the portfolio is mitigated by closely matching either through direct investments in the same currency denomination or the use of currency hedging instruments. On top of hedging, the portfolio may also use derivative instruments for efficient portfolio management purposes.

Investment for insurance products with similar characteristics will be pooled together to achieve higher efficiency. Depending on the market conditions (e.g. availability of assets, liquidity, market outlook) at the time of the purchase of asset, the actual asset mix may differ from the target asset mix temporarily.

To cope with the changing financial environment and in reflection of emerging experiences, the Company will review the investment strategy regularly. Should there be any material change in the long-term investment strategy, policyholders will be informed about the details and the potential impact of the changes.