Universal life

A universal life insurance plan is designed to be held long term. Your premiums, after applicable charges of the product, will be deposited to a cash accumulation account. The account value will be invested in a variety of assets according to our investment strategy and will accrue interest at a declared interest rate determined by us. The account value of your policy is subject to the applicable fees and charges of the product. We aim to ensure a fair interest determined from the underlying investment and among different groups of policy owners.
Future investment performance is unpredictable. Through our smoothing process, we aim to deliver more stable crediting interest rate by spreading out the gains and losses over a longer period of time. Stable interest will ease your financial planning.
We will review and determine the crediting interest rate to be declared to policy owners at least annually, or more frequently, and we reserve the right to declare such crediting interest rate from time to time. The actual crediting interest rate declared may be different from the crediting interest rates illustrated in any product information provided (e.g. benefit illustrations). If there are any changes in the actual crediting interest rate against the illustration or in the assumed future crediting interest rate, such changes will be reflected in the policy anniversary statement.
A committee has been set up to provide independent advice on the determination of crediting interest rates and other non-guaranteed benefits and policy charges to the Board of the Company. The committee is comprised of members from different control functions or departments within the organisation both at AIA Group level as well as Hong Kong local level, such as office of the Chief Executive, legal, compliance, finance and risk management. Each member of the committee will exercise due care, diligence and skill in the performance of his or her duties as a member. The committee will utilise the knowledge, experience, and perspectives of each individual member to assist the Board in the discharge of its duty to make independent decision and to manage the risk of conflict of interests, in order to ensure a fair interest determined from the underlying investment and among different groups of policy owners. The actual crediting interest rate, other non-guaranteed benefits and policy charges, which are recommended by the Appointed Actuary, will be decided upon the deliberation of the committee and finally approved by the Board of Directors of the Company, including one or more Independent Non-Executive Directors, and with written declaration by the Chairman of the Board, an Independent Non-Executive Director and the Appointed Actuary on the management of fair treatment between policy owners and shareholders.
To determine the crediting interest rate of the policy, we consider both past experiences and the future outlook for all the factors including, but not limited to, the following:
Investment returns: include interest earnings, dividends and any changes in the market value of the product’s backing assets. Depending on the asset allocation adopted for the product, investment returns could be affected by fluctuations in interest income (both interest earnings and the outlook for interest rates) and various market risks, including credit spread and default risk, fluctuations in equity prices, property prices and foreign exchange currency fluctuation of the backing asset against the policy currency.
Surrenders: include policy surrenders, partial surrenders and policy lapses; and the corresponding impact on the investments backing the product(s).

This product also has policy charges and fees which will be reviewed regularly and may be adjusted if necessary. In addition to the conditions stated in the schedule of policy charges, and the above-mentioned investment returns and surrenders factors, the review of policy charges and fees may also be subject to the following factors:
Claims: include the cost of providing the death benefits and other insured benefits under the product(s).
Expenses: include both expenses directly related to the policy (e.g. commission, underwriting, issue and premium collection expenses) and indirect expenses allocated to the product group (e.g. general administrative costs).

Investment Philosophy, Policy and Strategy

Our investment philosophy is to deliver stable returns in line with the product’s investment objectives and AIA’s business and financial objectives.
Our investment policy aims to achieve the targeted long-term investment results and minimise volatility in investment returns over time. It also aims to control and diversify risk exposures, maintain adequate liquidity and manage the assets with respect to the liabilities.
Our current long-term target strategy is to allocate assets attributed to our products into bonds and other fixed income instruments or growth assets. The range of target asset mix is different among universal life products.
The bonds and other fixed income instruments predominantly include government and corporate bonds, and are mainly invested in the geographic region of the United States and Asia-Pacific. Growth assets may include private credit funds, listed equity, equity mutual funds, physical real estate, real estate funds and private equity funds, which are mainly invested in the United States, Asia-Pacific and Europe. Returns of growth assets are generally more volatile than bonds and other fixed income instruments. Subject to our investment policy, derivatives may be utilised to manage our investment risk exposure and for matching between assets and liabilities.
Our currency strategy is to minimise currency mismatches. For bonds or other fixed income instruments, our current practice is to currency-match their bond purchases with the underlying policy denomination on best-efforts basis (i.e.: US Dollar assets will be used to support US Dollar liabilities and RMB assets will be used to support RMB liabilities). Subject to market availability and opportunity, bonds may be invested in currency other than the underlying policy denomination and currency swap will be used to minimise the currency risks. Growth assets may be invested in currency other than the underlying policy denomination, and the currency exposure depends on the geographic location of the underlying investment where the selection is done according to our investment philosophy, investment policy and mandate.
We will pool the investment returns from other long term insurance products (excluding investment linked assurance schemes and pension schemes) together with this universal life insurance plan for determining the actual investment and the return will subsequently be allocated with reference to the target asset mix of the respective universal life products. Actual investments (e.g. geographical mix, currency mix) would depend on market opportunities at the time of purchase. Hence it may differ from the target asset mix.
The investment strategy may be subject to change depending on the market conditions and economic outlook. Should there be any material changes in the investment strategy, we will inform policy owners of the changes, with underlying reasons and impact to the policies.