FAQs for AIA Participating Funds

The following are some frequently asked questions pertaining to AIA’s bonus and dividend rates for participating funds.

Frequently Asked Questions on Bonus & Dividend Rates

Q1. When are bonuses and dividends reviewed and declared?

Bonuses and dividends are normally reviewed and declared annually.  Every year, AIA will notify its participating policyholders of the amount of bonus or dividend that may be credited to their policies.  In situations of large market volatility, there may be ad-hoc reviews during the year as well.  Any changes made to the bonus scale will be notified to policyholders. 

Q2. How are bonuses and dividends determined?

When you buy a participating policy, your premiums are paid into the AIA Participating Fund where they are combined with the premiums paid by all other participating policyholders.  We make benefit payments, and deduct expenses, from the Participating Fund, and the balance is invested in assets including fixed income securities and equities.

Each year, we determine the value of the assets in the Par Fund and subtract the value of the guaranteed policy benefits - sums assured and previously declared bonuses, plus any accumulated dividends and coupons left in the Participating Fund - and other liabilities.  The amount left over is available to declare future bonuses and dividends.  We track this performance at a plan level.  As such, depending on the past performance and future outlook of each plan, the bonus adjustment made may be different.  It may be possible that we increase the bonus for one plan and decrease the bonus for another plan.

When we declare bonuses and dividends, we aim to give all policyholders a return that reflects the Participating Fund’s experience over the time they have kept their policy with us, and the future outlook

Currently, as per regulatory requirements, the maximum amount that AIA shareholders can receive from the Participating Fund is based on a fixed ratio of the bonuses and dividends given to the policyholders.  This ratio is currently 9:1, meaning for every S$9 given to policyholders, S$1 can be given to shareholders.  Hence, if policyholders receive lower bonuses and dividends, AIA shareholders will also receive less. 

Q3. What items and expenses are charged to the Participating Fund?

The value of the Participating Fund is affected by a variety of expenses relating to participating policies.  For example, if a participating policyholder should pass away, then any death benefits payable would be charged to the Participating Fund.  There are also investment fees related to the management of the Participating Fund’s assets, marketing and other distribution-related costs, and general management expenses including a share of AIA’s fixed overheads. 

Q4. What does the Participating Fund invest in?

While seeking to maximise investment returns over the long run, we also ensure the security and solvency of the Participating Fund.  The Participating Fund achieves diversification by investing in a mix of assets including bonds, listed equities, private equity and real estate.  Most of the Participating Fund’s assets are invested in fixed income securities, which are considered to be lower risk.  About 28% of the entire portfolio is invested in so-called risk assets such as listed equities, private equity and real estate. 

Q5. What are the risks factors affecting the performance of the Participating Fund?

The key factors affecting the performance of the Participating Fund are investment returns, mortality and morbidity experience, lapse and surrender experience, business risks including but not limited to product design, selling and marketing practices, and demographic changes, and expense experience of the Participating Fund as a whole. 

Q6. How are risks shared?

Your premiums are combined with premiums from other participating policies in the Participating Fund.  The combined assets of the Participating Fund are used to pay policy benefits, as well as to meet expenses and charges incurred in running the Participating Fund.  Investment risks are shared among all the policies within the same group or class of products. Investment risks include foreign exchange risk on equities.  The other key risks affecting the value of the Participating Fund including mortality, morbidity, lapses and surrenders, expenses, and business risks are mostly shared by all the policies in the Participating Fund. 

Q7. Why does my bonus or dividend allocation vary from year to year?

The performance of the Participating Fund is monitored regularly, and bonus allocation is reviewed at least annually.  At each review, we will consider the past performance of the fund as well as future outlook in determining the bonus to be declared.  An increase in bonus allocation can be made if the past returns on the fund and future outlook can support a higher bonus allocation; and a lower bonus scale may be declared if the current bonus allocation is not sustainable given the past returns on the fund and the future outlook.

Investment returns will fluctuate with market dynamics, and may be volatile from year to year.  Other risks on the Participating Fund, described above, can affect the rate of return earned.  AIA tries to provide stable returns over the life of your participating policy, and so we adopt a concept known as smoothing.  For example, if the Participating Fund performance is particularly good in one year, we may hold back a portion of the earnings so that we may be able to maintain bonuses in years when the Participating Fund does not perform so well.  As such the actual adjustment of the bonus scale in any year may not directly correspond to the performance of the fund in that year. 

Q8. I have more than one participating policy.  Why is the bonus and dividend allocation not the same for each policy?

Bonus and dividend declared for a policy will depend on the product design, the performance of the plan it belongs to, based on past and projected future investment returns, and past and projected future experiences such as claims, surrender and expenses of the plan.  Any changes to the bonus and dividend rates for a plan will apply to all policies of that plan.

Each plan’s performance are monitored and tracked separately.  We determine the bonus and dividend scale at a plan level.  As such, depending on the past performance and future outlook of each plan, the bonus adjustment made may be different.  It may be possible that we increase the bonus for one plan and decrease the bonus for another plan.

When we declare bonuses and dividends, we aim to give all policyholders a return that reflects the plan's experience over the time they have kept their policy with us, and the future outlook. 

Q9. Why do I not get a bonus on other AIA policies?

The types of policies that are eligible for bonus and dividend declarations are mainly whole life and endowment participating policies.  All non-participating policies and supplementary contracts, known as riders, including term insurance plans, health insurance, and critical illness riders are not part of the Participating Fund, and do not participate in the profits of the Participating Fund.  As such, they are not eligible for bonuses or dividends.

Investment-linked plans are also non-participating policies that are not entitled to bonuses and dividends from the Participating Fund.  These plans have benefits which depend directly on the investment performance of the underlying investment-linked funds chosen. 

Q10. Will bonuses and dividends be revised?

Future bonuses and dividends, including terminal bonuses and terminal dividends, are not guaranteed, and depend on the experience of the Participating Fund and, in particular, the past and projected future investment returns.  Investment returns can be volatile, and we may vary bonuses and dividends significantly from time to time.  As such, the actual bonuses or dividends credited in a particular year could differ from previous projections or illustrations.  In times of substantial decline in investment returns, we may even reduce bonuses and dividends declared that year to nil.  Conversely, in times of substantial increases in investment returns, we may increase bonuses and dividends declared that year to higher than those originally projected at the time of purchase of your policy.

Any changes to bonus and dividend rates will only be made after a careful review of the Participating Fund’s experience, the prevailing investment returns and the outlook, and other experience factors. 

Q11. How can I find out more about participating policies and bonuses?

If you would like to know how a participating fund operates in general, please refer to “Your Guide to Participating Policies” or request for a hardcopy from me.