UK Insurer Declared 8.6% Annual Returns for Endowment plans

UK Insurer made 17.7% returns on with-profit fund and annual returns of 8.6% for Endowment plans Some of you might be doubtful of U.K. insurers’ ability to generate average annual compounded returns of 8% on their Endowment policies when Singapore’s currently only give about 3% to 4% returns on Endowment policies. 

Well, because Singapore insurers generate investment returns of only about 4% to 5% on their with profits fund (note: when a person buys a traditional endowment policy, the money is invested in this “pool” known as the with profits funds of the insurance co.

UK Insurer made 17.7% returns on with-profit fund and annual returns of 8.6% for Endowment plans 

Some of you might be doubtful of U.K. insurers’ ability to generate average annual compounded returns of 8% on their Endowment policies when Singapore’s currently only give about 3% to 4% returns on Endowment policies. 

Well, because Singapore insurers generate investment returns of only about 4% to 5% on their with profits fund (note: when a person buys a traditional endowment policy, the money is invested in this “pool” known as the with profits funds of the insurance co.

 

UK Insurer (Norwich Union Life under AVIVA Group) with profit fund invested about 50% in stocks, 16% in property, 27.7% in bonds and 5.4% in money market (cash). Contrast this in Singapore where insurers are only limited to invest max of 25% in stocks…that’s why U.K. insurers can generate much higher returns than Singapore insurers.

In just announced results, Norwich Union Life announced they made 17.7% returns on their With Profit fund in year 2005. They also said their 25 year Endowment gives annual returns of 8.6%. 

UK Endowment also comes with statutory guarantee of 90%, which S’pore has none.See the announcement yourself at http://www.norwichunion.com/bonus 

17 January 2006 With-profit announcement 2006

·                     Very strong performance from property and equity markets enabled CGNU with-profit fund to achieve an overall return of 17.7% before tax.

·                     Regular bonus rates held with some increasing (announced on 14.12.05) - following the increase in some regular bonus rates in July 2005

·                     Most final bonus rates increased

·                     Bonuses totalling £1.1 billion added during 2005 for around 2.8 million with-profits policies ·                     Market value reductions (MVRs) reduced from 1.1.06 following four cuts in 2005. Money invested in 2001 no longer subject to MVRs

·                     Policy payouts continue to be competitive: Cash-in value for a £10,000 lump sum 10-year bond is £16,797, giving a return of 5.3% p.a., £3,871 above inflation

A 25-year £50 a month mortgage endowment maturing in 2006 will pay £50,295 - 66% (£19,927) over the target amount of £30,368 and gives a return of 8.6% p.a.

A 20-year £200 a month pension maturing in 2006 will pay £110,387 - a return of 7.7% p.a.

Figures for investment and policy returns relate to the CGNU with-profit fund only.

Returns quoted assume the policies mature on 1 January 2006.

Endowment example is for a 29 year old male at the outset of the policy.

John Lister, chief actuary, Norwich Union Life, said:"Following the increases in regular bonus rates on some products announced in 2005, an excellent investment return and a strong fund have enabled us to increase most final bonus rates and deliver good policyholder returns."

"The strength of the fund allows us to have a high proportion of policyholders' money invested in shares and property, which has clearly benefited policyholders in providing the near 18% return. It also allows us to offer our customers valuable guarantees.

"Press office contacts: Norwich Union Life press office: 01904 452791 / 452617 / 452828