NTN Ths
PREC ey aig
* Alife insurance policy with an investment
‘component attached to it
+ ALSO KNOWN AS UNIT LINKED PRODUCT
(ULP), INVESTMENT LINKED PRODUCT (ILP),
VARIABLE UNIVERSAL LIFE (VUL)
Pee
* Capital Appreciation - increase in value of
assets
x 1000 shares bought @ $4.00/share
‘1000 shares sold @ $1.10/share
* Dividends - income being « business owner thru
stocks if insurance
* Interest - profit from lending money
x. Banks, lending institutions
* Capital Gains - prot from sate of assets
Ex Real estate
A komo
hae
Deposits or Cash we
. eones
Securities - ho
* Properties/Real Estate a
Ded
DEPOSIT/casH
All iquid instruments that cary litle or no risk that the
principal amount invested can be lost
‘es of an Accounts:
PP ne imme he
+ Tinea miran Sop wm holing io
1 Feeney Omen oF) ea te eng en cnecy
end
Medea
‘SECURES
Written evidences of ownership, interest
‘or participation, in_an enterprise, oF
‘written evidence of indebtedness of a
person or enterprise
Types of Securities:
1. Credit/Fixed Income Securities
2. Stocks /Equities
3. Common Trust Fund (CTF) Unit Trust
4, Mutual Fund
Credit/Fixed income securities
+ Group of investment vohicles that offered pero return,
"Regarded 251 One You" or promissory notes issued by
companies or the government to raise funds.
1+ Maybe short cong tem
1 Safe typ0 of investment
Types
‘A. Commercial papers (CPs)
B. Bonds
C. Government securitiesTypes of Fixed Income securtties:
fn
‘A. Commercial papers (CPs)
+ Promissory notes issued by big firms (Blue chip
companies) of unquestionable credit standing
‘and reputation
+ Can be bought directly from company ot
Investment houses.
Credit/Fixed income securities:
B. Bonds
* Cortfcates of indebtedness with fixed interest rate
‘and maturity date
Can be issued by government or private companies
+ Borrowers get funds while investors get Interest
‘earnings.
Classification of Bonds:
arsenessoncom — EUS)
as away to raise funds by bor
‘money from the public.
2. Corporate/commercial bonds - Issued for
project funding or capital accumulation.
Credit/Fixed income securities
. Government Securities
Debt instruments issued
by the government
Foums:
1 TWeasury bis (ie) mature in ss than &
year They ae fered in thee tens =
‘91.182 and 364 days
2, Treasury Sond - mature beyond one year
Types of Securities:
1. Credit/Fixed Income Securities
2. Stocks/Equities
3. Common Trust Fund (CTF) Unit Trust
4, Mutual Fund
‘STOCKS/EQUITIES
"Acquisition of shares of stocks of other
corporations to realize profit their sale and
for periodic income (divider
‘= Units of ownership
= Regulated by SEC
Highly volatile/fluctuating
‘Typesof Stocks/Equities
41. Common stocks (ordinary shares)
basic ownership, voting right, 2 priority In payments
2. Proferred stocks (preferred shares)
Tight to receive amount equal to Uauaton val,
{pony oon dation and denddebation
meas
of) Ne
tet
A ‘ee.
‘Types of Securities:
1. Credit/Fixed income Securities
2, Stocks/Equities
3. Common Trust Fund (CTF) Unit Trust
4, Mutual FundCOMMON TRUST FUNDS (CTF)/ UNIT TRUSTS
*+ Form of collective investment whereby money Is
poole, giving a portfolio of funds at minimal cost
+ Advantageous for a private
portfolio of funds at minimal
iBgula income at prevaling ates
(as CPs bonds)
2. Equity fund = mainly stock issues
3. Balanced fund = oth fied income instruments and equity
lesvee
‘Types of Securities:
1. Credit/Fixed Income Securities
2. Stocks/Equities
3. Common Trust Fund (CTF) Unit Trust
4, Mutual Fund
‘MUTUAL FUNDS
[A stock corporation that pools money trom numerous
Investors by Issuing shares, and investing the pooled
funds in accordance with the objectives and policies
‘ea meer apa
‘Opumend cmp om
Sey te tt a A)
‘Semin yo he sek octaggn spor
‘Sorear nea PSE hy ods ae pars os
Difference between Mutual Fundand Common Trust Fund (CTF)
vtual Fund a
Isuirgentty Investment ompary | ust department of
the bank
Units f poison
Repulto body [secre and Exchange |Banko Sentral rg
Inserts | Caron shares
‘Maia | Phe 000 Phet00.000
reared
Refer to land and all permanent improvements
thereon including buildings
‘ype o Rea Estate investments:
4 Domesteresdent
{cation se andy of suture andrea
potent
2. Gommercia/industl
{cation se ype enduse ot structures
‘entalpotenta|
3. Agvoutural
att of so/suteniy ot cxop, eatin,
ftnciono sructaresanaproxmiyo water
Key considerations in investing
Accessibility of funds
A
Withdrawal or liquidation at a short
period of time
* Cost or penalty for early wthdramgly,
= Initial cost
5
Short term <4 year
Medi orm 9 yea a
Long term 4 ys and up ¢
Level of risk tolerance
e
risk.
High Risk isitin. | ON ISK
High Return Low Return
+ Conservative Till Time
epost
1 Aggessie Equities, PropetMore funds, more choices
More funds
More choi
Taxation treatment
T
Knowledge of taxes on
different investments
Investment objectives
Purpose of Investing
Investment objectives
| Basic Objectives of an Investment
+Income
+ Liquidity
+Safety
Performance of investment
Pp
Depends on a
country's economic
factors,
competencies &
capabilities of the
managementteam
and profitability
Investment horizon
Investment period
depends:
+ Objectives
ge
rent financial condition
* No. of dependents
Diversification
ee
v
‘Never put allyoureggs in one basket”
Account value
The value of the variable
life policy basedon the
Performance of the
variable fund at the time
of valuation.Variable life insurance
Itis a policy that provides
for life insurance where the
account value at anytime
varies according to the
performance of the fund
chosen by the policyholder.
Unit pricing
The value of the
underlying assets
at the separate
" account(s) divided
by the number of
units issued.
‘No of Units issued
Forward pricing
of unitsare determined at the
‘next valuation date
Comparison between
Traditional life and Variable life
Death enent
Ortionto True
C ashvatue
TT arzet market
| nvestmont return andrisk
Pp
P romiumnotiay
Comparison between
Traditional life and Variable life
oo
‘enefc whichever higher
21 INCREASING (Sur nsured +
‘Account Value or Minimum
higher
2 LEVEL [sum insured Account
‘Value Minimum Dest
Beneft whichever bigest)
Variable life insurance
Regular Pay Death Benefit
A. Increasing Death Benefit
Variable life insurance
Regular Pay Death Benefit Options
B. Level Death Benefit
Comparison between
Traditional life and Variable life
O ption to Top-up
“TOP UPS are adaonal premium
Injection whieh canbe ued to buy
‘sonal units.
rea) Variable
Must apply for another | Anytime pay additional
poly premiums to inerease the
‘éeath benefit and
investmentComparison between
Traditional life and Variable life
Cash value Vs. Account Value
Jain cash upeneancelaien of
of the variable te poley based on
Wo
Cos Pecans
* Guaranteed ‘= Account value depends
+ Pre-computed on investment
+ Starts on the 3year | performance
+ May start on Day 4
Comparison between
‘Traditional life and Variable life
Target Market
Conservative risk |» Different risk profiles
averse) (conservative, moderate,
aggressive)
Comparison between
Traditional life and Variable life
| nvestmentreturn and risk
arn
Comparison between
Traditional life and Variable life
Premium
nd en
* Charges are not * Charges are fully
disclosed (ati te, disclosed transparent
rmorabycharge) (poleyte, moral charge
(Beet managementeho
Comparison between
Traditional life and Variable |i
pnts ion,
fers tothe ceseation of premium payments ona variable
Insurance contac fra perld, with aie to continua it ter on
Goa
long as there is account
value incurres
* Nay be availed of for as
long as account value Is
suffeient
How units are created
oorses
then CANCEL units by
the CHAR
oeover
cuances Gp
then buy UNITS “See
Methods
What can a policyholder do with his UNITS?
FULL WITHDRAWAL
‘The total amount avaiable to the
policyholder in cash upon
redemption of all units
PARTIAL WITHDRAWAL
Surrender of some units owned
by the policyholder
Pricing of variable life insurance
? ?
Ly
‘Single Pricing Dual Pricing
After deducting charges, The price used to buy
‘the difference is used to UNITS (offer price) is
‘buy units higher than the price used
Only ONE price fs quoted to sell units (bid price),
‘whether the polieyholder ‘The difference between
is buying or selling offer price and the bid
price is called the bid-otfer
spread,Single Pricing
SinglePrieingusing MethodA increatingunits
STEP Deduct Initial Charge
4.4: Compute the inital charge
44.8: Deduct Initial charge
STEP2 Buy Units
STEP3 Cancel some units to pay for Mortality Charge
3.4 Compute Mortality Charge
‘3.8: Convert Morality Charge into Units
3.6: Cancel Mortality Charge in Units from
teitian
‘numberof units bought Step 2
Given:
VLpremium $10,000
Unit price +4
Initial charge ‘5% of single premium
Mortality charge 4.6% of single premium
BES conpuntrtnenmins
Se units, Rememberto use
Method
‘Sean aa ee Sei no
ve Sermo
Shuzo) 2- asa =
Given:
‘VL premium $5,000
Unit price $2
Initia change 5% of single premium
Mortality charge 4.5% of single premium
ea ni@ Computeforthe number ot
units. Remomberte use
» ‘Method a
sr aves cctiemt inne
SinglePricingusing Method in creatingunits
STEP Buy Units
STEP2 Cancel Units to pay for the charges
2.A: Combine Initial & Mortality charges
2.B: Calculate the Charges
2.6: Convert to units
21D: Deduct the number of units fr the
mortality charge from the units bought
Giver
VLpremium $10,000
Unit price +4
Initial charge ‘5% of single premium
Mortality charge 4.6% of single premium
Computoforthe number ot
=f Seen
~_ ee
"pron vt Fee Sonne ia arpa ettyoa
tower odes ous ‘sie ay oe
"Sombra
BreDual Pricing - Offer and Bid
OFFER PRICE
ae
BID PRICE
Ta pewter
Folsoteranest cash
oranda’ te pote.
kom emaees
Redemption hee
BID OFFER SPREAD
“The spread or diforence between the oer and bid pice.
Conversion of Units
The total amount vasbie Sonencert some ute
{othe poleyheleerin cash cred he
ponredemptonot al unite paleyole
DEATH BENEFITS
Payment of insurance benefits upon
death of the insured depending on
‘options: Level Death Benefit or
Increasing Death Benefit
Single Pricing Vs. Dual Pricing
Single Pricing Dual Pricing
‘One price is Buys units at the offer
quoted whether price and sells the units
thepoliylsr tutnetid pee
‘sburingor
setinunts— @_ 21s pce satay toner
‘than the offer price
Risk Vs. Return
le Potential Retom on
Switching
+ While the poli isin fore, the polleyholder
may, subject tothe approval ofthe insurer,
transfer or “switen” any of his or her units in
a particular separate variable account to
another separate varlable account or some
other separate variable accounts which may
hhave been established by the insure.
*switch* wll be effected by the cancellation of the
‘units tobe “switched?” and the creation of new units in
the separate variable account being “switched” to;
nit price will be calculated accordingly.