29/09/2006

Article on How Insurers Invest in Their Par Funds in The Business Times (27 September 2006)

There is an article entitled, “A peek at how insurers invest” in The Business Times on Wednesday, 27 September 2006. The journalist, Genevieve Cua, reported on what insurers invest in their Par funds. Her article included a table of asset allocation for Par funds and the capital adequacy rates of all life insurers. We would like to draw your attention to the following in relation to the article.

Capital adequacy ratio of Par fund

The capital adequacy ratio of a Par fund is not an indicator of the Par fund’s ability to pay future bonus. It is also not an indicator of the investment return of the Par fund. The ratio is highly dependent on the structure of participating products sold under the Par fund, as correctly pointed out by the journalist:

“What is interesting is the capital adequacy ratio that specifically applies to the participating funds. AIA’s is the highest at 523 per cent. Income’s ratio stands at about 152 per cent.

What exactly does that mean? A high ratio does not mean a good rate of return. It reflects product structure, for one. High levels of guarantees result in lower ratios. High terminal bonuses far into the future results in high ratios...”

Our Par fund is the largest in Singapore. It is financially sound and is well above the minimum regulatory level of 100%.

The relatively low capital adequacy ratio of our Par fund is because of the relatively high guarantees provided in our participating policies, particularly from single premium participating endowment products that we have successfully sold over the years.

We are committed to managing the Par fund prudently so as to meet future guaranteed benefits as well as to support future bonuses of all participating policies.

Capital adequacy ratio (for all funds)

The article’s table also showed the aggregate capital adequacy ratio of each insurer (i.e. combined ratios of all insurance funds and the shareholder’s fund).

Our aggregate capital adequacy ratio is relatively lower because of the lower capital adequacy ratio of our Par fund due to the relatively high guarantees provided in our participating products, as explained above.

Based on MAS’s definition of financial resources (excluding allowance for Par fund’s non-guaranteed benefits), which is a measure of the available capital in excess of what is needed to meet all liabilities, we have the highest level of financial resources of S$1.29 billion (as at 31 December 2005) among all insurers in Singapore.

Great Eastern is the largest insurance group in Singapore and the region with more than 98 years of history. Backed by our financial strength and dependability, we are able to provide sound insurance products.

Par funds’ asset allocation

The article’s table also showed the total assets as well as asset allocation of Par funds of all life insurers in Singapore.

Our Par fund has the highest total asset of S$14.6 billion (as at 31 December 2005).

We have a well-balanced mix of growth assets (e.g. equities) and stable return assets (e.g. bonds) to support guaranteed benefits as well as future bonuses of all our participating policies.

Call your life planners

If you have any queries, please call your life planners for a better understanding of your policy. Our life planners are trained to provide you with sound advice and quality service to help you with your life planning needs.

Alternatively, you may wish to e-mail to wecare@lifeisgreat.com.sg (Customer Service Department) or marketing@lifeisgreat.com.sg (Marketing Department).