Endowment policies - attached bonuses described. Revisionary bonuses, terminal bonues explained
Traded Endowments - bonuses attached explained. Revisionary bonuses, terminal bonues are explained

Life Assurance bonuses explained, what are revisionary bonuses ? endowment attached bonuses described, what are special bonuses, what are terminal bonuses, guaranteed sum and basic sum assured, life company bonuses, with profits endowment bonuses paid on maturity, annual with profits bonuses, what is basic sum assured ?

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WHAT ARE ATTACHED BONUSES ?

As TEPs are purchased mid-term the policy already has a guaranteed value made up of the 'Basic Sum Assured' and 'Bonuses Attached' and the initial charges have all been paid by the original policyholder.

The Basic Sum Assured remains constant throughout the term of the policy and is paid on maturity or earlier if the original life assured dies.

In addition bonuses are added to the policy every year and once added they cannot be reduced or taken away. The existing annual (or reversionary) bonuses together with the basic sum assured when the policy is purchased constitute the guaranteed value which is often higher than the purchase price of the TEP, meaning that, provided the policy is kept through to maturity, the new purchaser cannot suffer a financial loss. These attached bonuses are made up of the following.

Reversionary Bonuses:

These bonuses are declared annually as cash values computed as percentages of the basic sum assured and of bonuses declared in previous years. Once granted, these bonuses are guaranteed, cannot be withdrawn and are also known as attaching bonuses.

Special Bonuses:

These are one-off bonuses, granted at the discretion of the life company and are also guaranteed. For example, if a friendly society converts to a public company they may grant such special bonuses to each policy in force, instead of issuing free shares in the new company.

Terminal Bonuses:

Most life companies currently grant an additional bonus at the end of the life of a policy. In essence this is a loyalty bonus designed to encourage the policy holders to keep the policies in force until the maturity date. The size of the terminal bonus is dependent upon the investment conditions prevailing at the time of maturity, as well as upon the investment performance of the life company. Although it can be a large part of the final sum paid out, it is not guaranteed. Bonuses issued by any life company are dependent upon its financial strength which, in turn, relies heavily on its investment performance. It is in the interests of the life companies to even out the vagaries of the investment environment, by declaring bonuses which are reasonably consistent. However, bonuses may be increased or decreased from year to year, thereby affecting the final value of the underlying policy.


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Life assurance latest : Prudential, Resolution, RSA, Aviva, Gartmore

17/08/2010 - Company Reports, Endowments - 0 Comments - 440 words


Insurance firm Resolution intends to continue on the acquisition trail amonst insurance and life assurance companies and indicated that it hopes to add further businesses to its portfolio by the end of 2011.

Resolution bought the AXA UK life assurance business in June for £2.75bn and Friends Provident last year for £1.9bn and indicated that it would like add an asset management capability to its portfolio.

Resolution reported an operating profit of £203m after a £7m loss a year ago as new business profits jumped 153% at Friends Provident. Shareholder cash resources remained around £605m from £510m at the end of 2009.

Resolution added “the results reflect strong performances at Friends Provident International and Lombard while the UK continued to face difficulties, notably in the UK individual protection market. The UK results serve to reinforce the case for consolidation.”

Meanwhile, fund manager Gartmore have reported a 146% improvement in interim earnings before interest, tax, depreciation and amortisation although net sales came in below expectations.

Reflecting stock market investor dash for safety during the credit crunch Gartmore indicated that assets under management at end June were down at £19.9bn from £22.2bn previously. Gartmore earnings before deductions were £38.8m in first half, up from £15.8m at the interim stage of 2009.

Chief executive officer, Jeffrey Meyer added “We are focused on regaining momentum and believe we are attractively positioned to benefit from the continuing demand for absolute return products and the general growth potential of our UK Retail business." The group did not declare a dividend.

After Aviva rejected a £5bn bid interest from RSA last week, in companies general insurance businesses in the UK, Ireland and Canada. RSA has again made it clear that it believes a tie-up would make “strong strategic sense”.

Aviva, previously Norwich Union remains opposed to disinvesting its general and life insurance units and indicated that "highest value to shareholders will be delivered by retaining these businesses within the group”.

Pru chief executive Tidjane Thiam and chairman Harvey McGrath have thus far survived shareholders dissatisfaction after Prudential failed bid for AIG Asian Businesses - AIA cost company £380m in fees.

The Pru reported last week that Asia was a driving force behind a big increase in first half profit as the giant life assurance company remains confident of momentum being sustained for the rest of 2010.

Pru's operating profit before tax on European Embedded Value EEV basis rose 34% to £1.68bn in the six months to end June as new business profit came in 27% up at £892m and IFRS operating profit was 41% to £968m.



Latest life assurance company reports : Legal & General, Aviva, RSA Insurance Group

05/08/2010 - Company Reports, Endowments - 2 Comments - 534 words


UK second-biggest insurer Aviva has beaten analysts expectations reporting that first-half profit rose 21 percent as the life assurer indicated a consumer return to long-term savings products.

Operating profit rose to £1.27bn beating expectation of £1.17bn as net income rose to £1.08bn from £675mn a year earlier. Chief Executive Officer Andrew Moss added that Aviva “remains alert to the macroeconomic environment and risks in financial markets.”

Aviva indicated that it is increasing sales of life and pension products in Europe and following its main competitors Legal & General Group and Standard Life, selling products with fewer guarantees in an effort to reduce the amount of reserve capital.

Aviva also confirmed that it is renewing its strategic partnership with Royal Bank of Scotland RBS in a new distribution agreement with Aviva where RBS’s distribution network will sell Aviva protection and selective pension products.

RSA Insurance Group have also reported today a ‘resilient’ interim performance against a difficult first half for the insurance industry as profit before tax came in virtually unchanged at £302m from £301m last year.

Insurance industry sales quotient, net written premiums were reported up 9% at £3.80bn from £3.49bn in a comparable period in the first half of 2009 while RSA's combined operating ratio also improved to 94.8% from 93.5%.

The interim dividend was increased by 7% to 3.12p from 2.92p a year ago as Andy Haste, chief executive officer of RSA commented that “As it stands today, we continue to expect to achieve a combined operating ratio of around 95% for the full year... we expect the UK to remain in positive territory for the remainder of 2010 with Emerging Markets to return to double digit growth in 2011.”

Life assurance giant Legal & General LGEN yesterday reported interim figures ahead of expectations despite profit coming £589m in the first half of 2010 but down from £656m previously reported in a comparable period.

The city will react well to the news since Panmure Gordon had a figure of £572m at the top of the range of its market forecast. L&G also indicated that it cash on account at the end of June at £3.3bn, presently ahead of the life insurers regulatory capital requirements. Company also increased the half year dividend to 1.33p from 1.11p.

Legal & General chief executive Tim Breedon added “We remain on track to generate at least £600m of net cash in 2010... ee are optimistic about growth prospects in UK savings and annuities, though there is little evidence of recovery in the UK housing market.”

Meanwhile, there is sign of life back in the TEP market. For those that wish to redeem the value an endowment policy early, it is best to seek a quote from traded endowment brokers who can offer improvement over the life policy surrender value.

The market has recently been supressed with margins squeezed by the low interest environment of the last 18 months. However, TEP's or traded endowment policy surrender values appear to be back on the increase after experiencing a couple of years of stagnation, according to leading TEP brokers.

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Mortgage holders cheered as margins improve in traded endowment market

24/06/2010 - Endowments - 0 Comments - 257 words


Traded Endowment Policies : There exists a way to sell second hand with-profits life assurance policies in which traded endowment brokers find best deals from purchasing market makers.

The point is that the redemption value of old endowment policies mid-term is usually below expectation whilst there are investors who wish to buy old policies which can be transferred between holders and kept running under new ownership until maturity.

Life policy holders have an option to trade policies in before the end of the contract and the policy holders can get improved offers for the policy they hold via competitive bids from the TEP brokers - traded endowment brokers.

This facility of use to home buyers and sellers who need to change their mortgage as they sell and rebuy new homes.

The market has recently been supressed with margins squeezed by the low interest environment of the last 18 months. Brokers have been unable to offer enough margin to warrant trades taking place.

However, TEP's or traded endowment policy surrender values appear to be back on the increase after experiencing a couple of years of stagnation, according to leading TEP brokers.

Now is the time again to try to get increased value your old endowment. The worst you can do with an old policy is usual to simply surrender it back to the original life company to obtain redemption value. But thats what the TEP brokers can do for you - to evaluate your policy and make an improved offer.

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