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Strong performance by Middlesea Valletta Life during 2005 has prompted the board of the company to approve a resolution whereby increased reversionary bonus rates were declared on policyholders’ with-profits investments held with MSV for the year ending 31 December 2005.
The bonus rates declared are: Comprehensive Life Policies, 3.85% (Single and Regular Premium Policies), Comprehensive Flexi Plan, 4.25% (Single and Regular Premium Policies), MSV Single Premium Plan, 4.50% and MSV Investment Bond, 4.50% on the with-profits option of the product.
The Board also approved the declaration of a Terminal Bonus in respect of Comprehensive Life Plan (Single and Regular Premium Policies) that have been in force for more than 10 years. The Terminal Bonus will be paid on claims payable as a result of death or maturity in 2006, at a rate of 1.5% for every year after the 10th year of the policy, subject to a maximum of 5%. This Terminal Bonus will be paid on the value of the Policy Account as at the date of death or maturity.
The Chairman of MSV, Mr. Roderick E.D. Chalmers stated: “the most important factor that affects bonus rates on with-profits investments is the underlying investment performance of the funds invested. In 2005 MSV was successful in achieving a very strong investment return. We were therefore in a position to increase Bonus Rates to all our with-profits policyholders. In addition, MSV has declared a Terminal Bonus on its Comprehensive Life Plan portfolio, and this is in line with the promise made to our policyholders that we may consider the declaration of a Terminal Bonus after the end of a policy’s tenth year.
“The investment strategy of MSV is to hold a diversified range of assets to help reduce the investment risk that arises from holding any single type of asset. Our asset and currency mix, geographical spread and asset quality mean that we were well placed to capture an upturn in investment markets. ”
On the ‘Old Series’ Endowment and Whole of Life policies, a Reversionary Bonus of 2.20% of the basic sum assured plus bonuses was declared, an increase of 0.20% on the bonus rate of 2.00% declared for 2004. Although no Terminal Bonus has been declared for policies on claims arising out of death or maturity during 2006, any Terminal Bonus declared on the “Old Series” policies accumulated over previous years to date, shall remain payable on such claims occurring in 2006.
The Board also approved a Reversionary Bonus of 3.45% on the Secure Growth policies that were part of the portfolio of business transferred from Assicurazioni Generali S.p.A. This represents an increase of 0.20% on the bonus rate of 3.25% declared for 2004.
Mario C. Grech, Deputy Chairman and CEO stated: “Investment returns in 2005 were favourable and we have reflected this in our bonus declaration. Our policy is to achieve a fair, consistent and equitable distribution of these investment returns among the different generations and types of with-profits policies. With-profits policies are valuable medium to long-term investment instruments because in addition to the lump sum at maturity these can provide life insurance protection which is rarely available with other forms of regular savings plans. MSV continues to emphasize the importance of individual life protection through its products. Furthermore, with -profits policyholders are not liable to pay any personal or capital gains tax on bonuses declared since an Exit Tax is paid by the company on surrenders and maturities of contracts in force to date. Similarly beneficiaries will not be liable to any tax if they receive payment under a with-profits policy arising from a death claim.”
The CEO added that it is the company’s policy to smooth returns under their with-profits policies over the term of the policy.
“Smoothing entails establishing reserves from certain favourable years to compensate for unfavourable investment returns in certain other years during the policy term. Notwithstanding the prudent investment policy adopted by MSV, past performance is no guarantee for the future, and, in the light of uncertainties that surround the capital markets the investment return may fluctuate positively as well as negatively. Fluctuations in investment returns impinge directly on the rates of bonuses declared by MSV. Reversionary Bonus rates are therefore likely to vary over the lifetime of a policy.”
Grech also pointed out that although for 2005 the company declared a Terminal Bonus in respect of its Comprehensive Life Plan portfolio, policyholders should be aware that future Terminal Bonus Rates are likely to be highly volatile and very dependent on the investment performance of the company.
MSV is committed to continue to focus on product innovation to fulfill the evolving demands of its customers. MSV’s strategy is to offer its customers innovative products that offer protection and the highest long term returns commensurate with an acceptable level of risk and backed by high-quality service.
MSV will shortly be sending Policy Account and Bonus Statements to all policyholders holding with-profits investments with the company.
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