AXA Record Pre-tax Loss

Axa Affin Life Insurance Berhad recorded a pre-tax loss of MYR 20.6 million for the nine-month period ended 30 September, 2016. The period under review was impacted by lower yield in MGS (Malaysia Government Securities), increased overhead expenses and higher claims incurred.

Impact on Policyholders - when a life insurance company makes profit (surplus), it is supposed to distribute a part of that profit to its policyholders, in the form of bonus payments and/or dividends. When a life insurance company makes loses - life insurance policyholders will stand to receive less benefits (Bonus/Dividend) compared to the sales illustration (projection). Life insurers losses will have the greatest impact on non-guaranteed benefits including Bonus and Dividend.  

Dividend - participating policies are usually conventional policy that pays dividends. The dividend is a portion of the insurance company's profits that are paid to policyholders (as if you were an investor or stockholder).

Bonus - refers to an extra payment received over and above the assured income. In life insurance, the concept of bonus is somewhat similar. One is entitled to the amount of sum assured (expected income) and over and above that there may be bonus payments. Various types of Bonus in the policy will be affected including - Simple Reversionary Bonus, Compound Reversionary Bonus, Interim Bonus (premature death) and Terminal Bonus (policy matures).

Top Life Insurers - over a 10-year period from 2006 to 2015, the average annualised net investment returns showed that AIA Singapore, Great Eastern Life and Prudential Singapore had the most number of top quartiles (top 25 per cent) of the 10 major life players in the market (source - Life Insurance Association Singapore). 

Be cautious when life insurer is running at a loss. Insurer must achieve good investment returns for their par funds consistently in-order to deliver the projected returns promised to their par policyholders in the long run.