How accurate is the report on "net return on life policies"?

QUESTION:

How accurate is the analysis in the Sunday Times on the 10 year net rates of return on life policies?

The net rates of return for NTUC Income is above average. But Income lag behind for-profit insurers - Asia Insurance, AIA and HSBC Insurance.

How did they do better, and pay shareholders more as well? Is it due to better investment returns?

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REPLY:

I believe that the analysis is not accurate. Income earns a better return than AIA. I think that the unrealised gains in equities are not shown (and AIA invest in a low proportion of equities that do not produce this gain).

The figures for HSBC is not reliable. Their business is quite small. They show more than 20% gain in 1 year (probably on a very small fund). This distorts the computation of the "average".

Asia does quite well, but their fund is virtually stagnant. If they grow their business, their results will be closer to the other large insurers.

We will make a more detailed study and give a fuller report.

The report shows that the fund "earns". It does not show what the fund pays out to the policyholders on their maturity. The difference is the profit that is taken away to give to the shareholders.

When an AIA policy matures, they pay out 10% to 20% lower than the maturity of a similar policy with NTUC Income. This has been the case for the past many years.

Tan Kin Lian
CEO, NTUC Income