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 securitiesTypes 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 FundCOMMON 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, PropetMore 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 investmentComparison 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 BreDual 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.