Committed to meeting our customers' needs by continually striving to provide long-term value, AIA will at least annually review the actual product experience (including but not limited to investment yields, expenses, claims and termination) against the long-term assumptions. As a result of a recent review, annual dividends of some of the participating policies have been revised with effect from 1 August 2016. The annual dividend or paid-up additions (if applicable) declared for your insurance policy can be found in the Financial Statement section of your policy anniversary statement.
Please contact our AIA representative or our Customer Service Hotline at (852) 2232 8888 (Hong Kong) / (853) 8988 1822 (Macau) to request an updated accumulated policy values projection. Please refer to “About Policy Dividend and Bonus” to know more about our dividend and bonus policy.
About policy dividend and bonus
AIA (hereinafter "the Company") provides a full range of life insurance products to suit your needs. One type of product we offer are participating policies. Our participating policies share the divisible surplus from the Company's profits from the relevant group of products (as determined by the Company) by distributing different forms of dividends/bonuses*, as follows:
- Annual dividends come from the share of divisible surplus (if any) determined by the Company every year. Once declared by the Company, the amount of annual dividend declared for the year in question is not subject to change, and as it is a cash dividend, policyholders may choose to withdraw the dividend payment or leave it on deposit with the Company for further potential growth. Annual dividends left with the Company accumulate interest at such non-guaranteed interest rates as may be declared by the Company from time to time.
- A terminal dividend may be payable depending on the product selected. A terminal dividend is a once-only entitlement to a share in any remaining divisible surplus of the Company (after distribution of annual dividends), which is payable on maturity or, in certain cases (depending on the product), upon insured's death and/or surrender occurring after a pre-defined period. The terminal dividend reflects the market value of the underlying assets of the relevant group of products and is determined by the Company at the relevant time according to the prevailing terminal dividend rate (as the case may be). The applicable rate in either case is adjusted by the Company from time to time in light of relevant investment market conditions.
Since the stated policy dividend and bonus is distributed based on the divisible surplus of the Company and the divisible surplus is unpredictable, the corresponding dividend/bonus is not guaranteed.
- Reversionary bonus comes from the share of divisible surplus (if any) determined by the Company every year. Once declared by the Company, the face value of reversionary bonus forms a permanent addition to the policy, which will be payable upon insured's death or maturity depending on policy condition. Policyholders may choose to cash out the reversionary bonus in the form of non-guaranteed reversionary bonus cash value or leave it with the Company for further potential growth.
- Terminal bonus is an additional entitlement to a share in any remaining divisible surplus of the Company (after distribution of reversionary bonus), which is payable on insured's death or maturity, depending on the product occurring, after a pre-defined period. Terminal bonus cash value which is non-guaranteed is payable when the policyholder chooses to surrender the policy. In case the policyholder reduces the sum assured/principal amount of the policy or cash out the reversionary bonus of the policy, the corresponding terminal bonus will also be paid in the form of non-guaranteed terminal bonus cash value. The terminal bonus reflects the market value of the underlying assets of the relevant group of products and is determined by the Company at the relevant time according to the prevailing terminal bonus rate. The applicable rate in either case is adjusted by the Company from time to time in light of relevant investment market conditions.
Please note that the insurance terminology that is currently used in policy provision, illustration document, product brochure and other relevant policy correspondence may be renamed and replaced by the standardised industry terminology. Please refer to the link below for the summary of changes:
* Except as otherwise indicated, references to "dividends"/"bonuses" herein shall refer to all forms of dividends/bonuses paid by the Company (including annual dividends, terminal dividend, reversionary bonuses and terminal bonus, if applicable), and references to "dividend rates"/”bonus rates” shall refer to annual dividend rates, terminal dividend rates, reversionary bonus rates and terminal bonus rates (as the case may be).
How are dividend rates and bonus rates determined?
The premiums paid by policyholders will be used to pay all guaranteed benefits for the product and expenses of the Company. Part of it will be invested in assets selected by the Company which suit the features of the product. Based on various long-term assumptions pertaining to that product group (including but not limited to investment yields, expenses, claims and termination), the Company will project a set of dividends/bonuses in the proposal which is provided to each prospective policyholder before they apply for a life insurance policy. These dividends/bonuses are calculated with the prevailing dividend rates/bonus rates of the Company. When setting the long-term assumptions, the Company will take into account the past experience of similar policies and consider the likely future development. Thus the dividends/bonuses projected in the proposal reflect the Company's reasonable estimate at the time of application and are not guaranteed.
Why do dividend rates and bonus rates change?
At least one time each year (or more frequently, if applicable), the Company will review the actual experience of the products of the relevant product group (including but not limited to investment yields, expenses, claims and termination) against the long-term assumptions it made when projecting the dividend rates/bonus rates. If the recent actual experience turns out to be different from the long-term assumptions, the Company will decide whether any dividends/bonuses payable need to be adjusted. The adjustment will also depend on the accumulated divisible surplus from previous years on the policies of the relevant product group, such that a period of good or bad experience may not trigger an immediate increase or decrease in the dividend rates/bonus rates due to 'smoothing' of experience provided by the Company to policyholders. In determining the dividend rates/bonus rates of products of the same product group, the Company will use an average profit generated from such products for a few years instead of considering the experience of the latest year. In this way, the impact on dividends/bonuses from variation of actual experience is 'smoothed' over a few years to provide a more stable payment of dividends/bonuses to policyholders. For terminal dividend/terminal bonus, the terminal dividend rate/terminal bonus rate set from time to time would also take into account the current market value of the underlying assets and the rate might be adjusted due to changes in investment market condition.
Due to the different benefit and premium structure of different products, the change in dividend rates/bonus rates will vary for different products. Even where the product is the same, the change in dividend rates/bonus rates will vary among policies denominated in different currencies and policies of different policy classes (e.g. based on age, gender, underwriting class, in-force duration etc.).
Dividend and bonus illustration
Before applying for a participating policy with the Company, each prospective policyholder will receive a proposal from our AIA representatives which outlines the policy benefits and projects the values they may receive under the policy based on stated assumptions. Projected values for annual dividends, terminal dividend, reversionary bonuses or terminal bonus (as the case may be) are based on the then prevailing dividend rates/bonus rates and are not guaranteed. For purposes of the proposal, annual dividends are assumed to be left with the Company and accumulate interest annually at the applicable current accumulation interest rate. The accumulation interest rate used is stated in the proposal but is not guaranteed. Reversionary bonuses are assumed not cashed out. A terminal dividend or terminal bonus is included in the proposal as an addition to the non-guaranteed benefit at the applicable policy year. Annual dividends, reversionary bonuses, terminal bonus, the accumulation interest rate and terminal dividend are all non-guaranteed which are subject to change, and any change in any of them will result in a different actual policy value compared with the illustrated figures in the proposal.
Upon request, an illustration on 'Premium Offset Option' may be included in the proposal or provided to the policyholder subsequently after the policy that pays annual dividends is issued. A 'Premium Offset Option' illustration shows the impact on policy values if the policyholder chooses to stop paying premium to the policy after a certain number of years. Instead, premium due will be deducted from any accumulated annual dividends with interest (and/or accumulated guaranteed cash payments with interest depending on the product selected) and future benefit payments (including future annual dividends and/or guaranteed cash payments etc.), assuming the policyholder makes no withdrawals subsequent to the 'Premium Offset Option' request. As such, any changes to the actual annual dividend payment, accumulation interest rate on annual dividends and/or guaranteed cash payments will affect the policy values illustrated under the 'Premium Offset Option', as will any subsequent withdrawals made against the policy and any changes to the premium payable for any supplementary contract(s) attached to the policy. Where actual annual dividend payment(s) and/or accumulation interest rate on annual dividends and/or guaranteed cash payments are less than originally projected in the Premium Offset Option illustration or where any subsequent withdrawals are made against the policy, the result may be that the policyholder will need to recommence payment of premium, failing which the policy may lapse.