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UNIVERSAL LIFE INTRODUCTION

UNIVERSAL LIFE INTRODUCTION. CONTENT. INVESTMENT PRODUCT. UNIVERSAL LIFE PRODUCT. UL VS. TRADITIONAL PRODUCT. CATHAY UL PRODUCT. Q&A. INVESTMENT PRODUCT. Investment product is a combination of. Investment product. Investment. Insurance. Insurance Part: Provide insurance protection.

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UNIVERSAL LIFE INTRODUCTION

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  1. UNIVERSAL LIFE INTRODUCTION

  2. CONTENT INVESTMENT PRODUCT UNIVERSAL LIFE PRODUCT UL VS. TRADITIONAL PRODUCT CATHAY UL PRODUCT Q&A

  3. INVESTMENT PRODUCT Investment product is a combination of Investment product Investment Insurance Insurance Part: Provide insurance protection Investment part: provide investment tool to get profit

  4. INVESTMENT PRODUCT Unit Link Universal life • Interest is declared and base on monthly investment result. • Guaranteed rate • Interest is from difference • on bid price and ask price • Many fund options for • customer Profit is safer because UL fund invest on safe assets Higher profit when customer select higher risk funds • Investment products has same features: • Expense clear • Flexible payment • PO get investment result Investment product includes:

  5. CONTENT INVESTMENT PRODUCT UNIVERSAL LIFE PRODUCT UL VS. TRADITIONAL PRODUCT CATHAY UL PRODUCT Q&A

  6. UNIVERSAL LIFE PRODUCT ACCOUNT VALUE ACCOUNT VALUE • Account value of UL product is similar to bank account: • Store premiums (“deposits“) collected from customer. • Earn monthly interest on allocated premium from investment result • Pay charge/cost as requirements or withdraw (bank account could be deducted bank fee/ withdrawn).

  7. UNIVERSAL LIFE PRODUCT UNIVERSAL LIFE PRODUCT Premium Payment PREMIUM PAYMENT Basic Premium Basic protection Top Up Premium Increase investment return

  8. UNIVERSAL LIFE PRODUCT Initial cost & Allocated premium Initial cost is deducted from collected premium to pay for service expenses Initial Cost Allocated Premium Premium allocates to account value after deducting initial cost from collected premium PREMIUM PAYMENT Basic Premium Initial cost Allocated premium Top up Premium Initial cost Allocated premium

  9. UNIVERSAL LIFE PRODUCT Increasing ACCOUNT VALUE Interest ACCOUNT VALUE Allocated premium Bonus Bonus is due to product design (maturity bonus, maintenance bonus…) Bonus Bonus Interest from investment activities of UL fund. Interest Initial Cost

  10. UNIVERSAL LIFE PRODUCT Decreasing ACCOUNT VALUE FMC Deduct from investment rate to get declared rate COI ACCOUNT VALUE Automatically deduct from AV monthly PMC Deduct when customer surrender policy Surrender charge Withdrawal cost Surrender value Insurance benefit

  11. UNIVERSAL LIFE PRODUCT Decreasing ACCOUNT VALUE The amount Company uses for activities to maintain policy and provide policy information Policy management cost (PMC) Cost of Insurance (COI) Premium is used to pay for death benefit /TPD benefit Fund management cost (FMC) Used to pay for investment activities expense and UL fund management expense Surrender charge Used to pay for surrender policy activities

  12. UNIVERSAL LIFE PRODUCT Decreasing ACCOUNT VALUE FMC COI ACCOUNT VALUE PMC Surrender charge Withdrawal cost Surrender value Insurance benefit

  13. UNIVERSAL LIFE PRODUCT Decreasing ACCOUNT VALUE the amount that the Policy Owner must pay when withdrawing a portion from the Surrender Value Withdrawal Cost Surrender value PO could apply to get surrender value (if any) Insurance benefit Insurance benefit of UL product

  14. UNIVERSAL LIFE PRODUCT Investment procedure 3 Declared rate = investment rate – FMC Interest ACCOUNT VALUE Decreasing AV Increasing AV 1 2 Procedure: ①Values Increasing AV are allocated to Account value. ②Account Value deducts cost/fee/ payment decreasing Account value ③Remaining Account value is invested and get monthly investment result: - Monthly, Company announces declare rate as customer’s investment result.

  15. UNIVERSAL LIFE PRODUCT Increasing AV Decreasing AV Interest FMC Allocatedpremium COI ACCOUNT VALUE PMC Bonus Surrender charge Withdrawal cost Surrender value Death/TPD

  16. INSURANCE BENEFIT =SA INSURANCE BENEFIT = SA+AV Sum Assured Account Value Account Value SUM ASSURED UNIVERSAL LIFE PRODUCT BENEFITS OF UL PRODUCT SA> AV SA<AV SA INSURANCE BENEFIT =AV SA

  17. CONTENT INVESTMENT PRODUCT UNIVERSAL LIFE PRODUCT UL VS. TRADITIONAL PRODUCT CATHAY UL PRODUCT Q&A

  18. COMPARE UL LIFE Vs. TRADITIONAL PRODUCT

  19. CONTENT INVESTMENT PRODUCT UNIVERSAL LIFE PRODUCT UL VS. TRADITIONAL PRODUCT CATHAY UL PRODUCT Q&A

  20. DEATH/TPD BENEFIT Sum Assured Account Value Account Value SUM ASSURED UL WHOLE LIFE I01 AND I02 I01 I02 DEATH/TPD BENEFIT Death/ TPD Long Life Age 99 Age 99

  21. UL WHOLE LIFE I01 AND I02 FEATURE I02 I01 Age at entry 0~60 0~50* Policy Term Until 99 years old SA 100 M ► 800 M (≤age 14) 100 M ► 2.5 B (>age 14 ) Guaranteed Interest Rate • 4% /year for first 10 years and • 3% /year for next years Rider All (except R05 and R06) (*) premium of I02 in age 51~60 is too high, so Company doesn’t sell it

  22. UL WHOLE LIFE I01 AND I02 Initial cost An Tâm Hưng Thịnh 2014 (Dai-ichi) I01 & I02 Policy year + Service expenses and fix cost in 1st and 2nd year are high, so initial cost is high in early years.

  23. UL WHOLE LIFE I01 AND I02 Surrender charge An Tâm Hưng Thịnh 2014 (Dai-ichi) I01 & I02 Policy year ~ + Surrender charge only applies for basic premium when customer surrender policy

  24. DEATH/TPD BENEFIT Sum Assured Account Value Sum assured Account Value CATHAY TERM UL I03 AND I04 I04 I03 BONUS BONUS DEATH/TPD BENEFIT 20 YEARS 20 YEARS Death/ TPD Maturity Maturity bonus

  25. CATHAY TERM UL I03 AND I04 FEATURE I03 I04 Age at entry 0~60 Policy Term 20 years SA 100 M ► 800 M (≤age 14) 100 M ► 2.5 B (>age 14 ) Guaranteed Interest Rate 4% /year Rider All (except R05 and R06 )

  26. CATHAY TERM UL I03 AND I04 Initial cost An Khang Tai Loc (Hanwha) I03 & I04 Policy year + Service expenses in 1st and 2nd year are high, so initial cost is high in early years.

  27. CATHAY TERM UL I03 AND I04 Surrender charge An Khang Tai Loc (Hanwha) I03 & I04 Policy year ~ + Surrender charge only applies for basic premium when customer surrender policy

  28. GENERAL PRINCIPLE OF ALL CATHAY UL PRODUCT Item Note FMC 2% / year PMC 15.000 VND / month COI Base on risk premium Premium Payment • First premium: one annual basic premium must be paid and total premium must not be less than 3M • Top up premium doesn’t exceed 5 times of FY base premium and not over SA • Customer must pay enough basic premiums for the first 2 policy years to avoid policy suspending.

  29. GENERAL PRINCIPLE OF ALL CATHAY UL PRODUCT Item Note Withdrawal cost • Can withdraw after 1st year. • Free for amount of 20% Surrender Value or below for 1st withdrawal during each policy year. • Cost for excess amount of 20% Surrender Value for 1st withdrawal: max( 2%(withdrawal -20% SV), 100000) • Cost full amount of 2nd withdraw onward: max (2% amount, 100,000VND). • Min withdrawal: 500,000 VND. • Max withdrawal: 85% Surrender Value SA of I01& I03 • when customer withdraws money, SA could be deducted by withdrawal to maintain Risk SA to guarantee benefit for customer

  30. COMMISSION AND PFYP (%) + Policy year PFYP Basic premium Top up premium Example: Mr. B, 35 years old, purchased I01 with premium 10M (basic premium 6M, top up premium 4M). Calculate FYC?

  31. CONTENT INVESTMENT PRODUCT UNIVERSAL LIFE PRODUCT UL VS. TRADITIONAL PRODUCT CATHAY UL PRODUCT Q&A

  32. Q&A (BASIC INFORMATION) • Mr.Nguyen Van B, 35 years old, purchased Whole Life Universal Life with the information as follow: • Sum Assured: 300 millions; Assume investment rate 6.0% • Premium Payment Period: 20 years • Total Annual Premium: 10 M including: Basic (I01) Basic (I01) Advanced (I02) Advanced (I02) Account Value

  33. Q&A (DEATH BENEFIT) • Question 1:Assume Mr. B is death at year 20th.Questions are as following: • With I01, how much is death benefit? • With I02, how much is death benefit? • Answer: • a) With I01, death benefit = max (AV, SA). Base on information in year 20th : • + AV at year 20th : 331.6 M • + SA at year 20th : 300.0 M • b)With I02, death benefit = AV+SA. Base on information in year 20th: • + AV at year 20th : 301.8M • + SA at year 20th : 300.0 M  Death benefit at year 20th : max(AV, SA)= 331.6M  Death benefit at year 20th : SA+ AV = 601.8M

  34. Q&A (WITHDRAWAL CHARGE) Question 2: Mr. Nguyen Van B chose the Term Universal Life-Basic(I01), If Mr. Nguyen Van B withdrew cash at the end of 10th Policy Year with the amount of 10 M. How much withdrawal charge? Answer: + Surrender value at year 10th : 114.6M (Surrender charge is 0) + 20% Surrender value: 20%× 114.6 = 22.9M Hence, Withdrawal 10M is less than 20% Surrender value. Withdrawal charge is Free of charge for this first withdrawal

  35. Q&A (WITHDRAWAL CHARGE) Question 3: If Mr. Nguyen Van B withdrew cash at the end of 10th Policy Year with the amount of 50 M in 1st time. How much is withdrawal charge? Answer: + Surrender value at year 10th : 114.6M (Surrender charge is 0) + 20% Surrender value: 20%× 114.6 = 22.9M => So withdrawal higher than 20% Surrender value + Withdrawal charge = max( 2%(withdrawal -20% SV), 100000) = max ((50 M-22.9M) ×2%, 100,000) = max( 542,000, 100,000) = 542,000

  36. Q&A (WITHDRAWAL CHARGE) Question 4: If Mr. Nguyen Van B withdrew cash at the end of 20th Policy Year with the amount of 30 M in 2nd time. How much is withdrawal charge? • Answer: • The Company will charge the cost at the maximum between: • 2% total amount of withdrawal: 30 M x 2% = 600,000 VND • The amount of: 100,000 VND • So the cost Mr. Nguyen Van B must pay equal to : • MAX(2% total withdrawal amount, 100,000) =600,000 VND

  37. Q&A (ALLOCATE PREMIUM ) Question 5: If Mr. Nguyen Van B buy I01, how much is allocate premium contributed to his account value in 1st policy year? Answer:  Allocate premium is 6.68M

  38. Q&A (SURRENDER VALUE) • Question 6: If Mr. Nguyen Van B buy I01, then he surrender policy(Assume he haven’t withdrawn). How much surrender value does he get at: • End of year 5th • End of year 10th Answer:  Surrender charge only applies on first year basic premium.

  39. Q&A (SA AFTER WITHDRAWING) • Question 7: If Mr. Nguyen Van B made the 1st withdrawal in 10th years with amount 50M. How much is SA after he withdraw if • He buys I01 • He buys I02 Risk SA: The Amount Company is responsible to compensate to death benefit to pay beneficiary Answer: a) he buys I01 • Both SA and AV are deducted 50M to maintain risk SA and • SA after withdrawing is 250M

  40. Q&A (SA AFTER WITHDRAWING) • Question 7: If Mr. Nguyen Van B made the 1st withdrawal in 10th years with amount 50M. How much is SA after he withdraw if • He buys I01 • He buys I02 Answer: b) he buys I02 • The risk SA unchanged after withdrawing and • SA after withdrawing is 300M

  41. Q&A (PREMIUM PAYMENT) Question 8: Could Mr. Nguyen Van B pay premium in 1st policy year with monthly payment mode ? Answer: No. he must pay first premium by annual payment mode and payment must equal to basic premium. Question 9: Mr. Nguyen Van B doesn’t pay premium in 3rd policy year, then he pays 10M premium in 4th policy year. Is that premium put on 3rd policy year or 4th policy year? Answer: that premium is put to 3rd policy year to compensate cost occurred in 3rd policy year.

  42. Q&A (MATURITY BONUS) Question 10: If Mr. Nguyen Van B buy I03 and is alive till the Maturity Date and he withdrew cash at the 10th Policy Year with the amount of 10 M. Basic premium is 6M/year. How much maturity bonus could Mr. B get? • ANSWER: • At the Maturity Date, the Company will pay 15% x total (basic premium – withdrawal) • Basic premium is6M; total basic premium is 120M (Policy term 20 years) • Total withdrawn cash: 10 M • Special Maturity Benefit: 15% x (120 M – 10 M) = 16.5 M

  43. Q&A (Declared interest rate) Question 11: Assume investment rate in Dec 2016 is 9.0%, Fund Management cost (FMC) is 2.0%. How much declared rate does Company declare ? ANSWER: Company get Account value to invest. Monthly, company announce declared rate to customer. In Dec 2016: Declared rate = investment rate – FMC = 9.0% -2.0% = 7.0% Question 12: what is portfolio of UL fund ? ANSWER: portfolio of UL fund includes: + Government bond (High proportion in portfolio) + Term Deposit + Cash

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