Ceilli English

CEILLI
(Investment-linked Examination)
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| 2
INTRODUCTION TO INVESTMENTLINKED LIFE INSURANCE
AIA confidential
confidential and
and proprietary
proprietary information.
information. Not
Not for
for distribution.
distribution.
AIA
Chapter 1: Introduction to Investment-Linked Life Insurance
pay premium
Fund Managed
By Insurer
Protection
Capital Gain
Protection
Policyholder
Investment
3
Value of
policy
Linked
UNITS
UNITS
Special
unitised fund
Value
fluctuates
Directly linked
Investment
Performance
4
Malaysia
United Kingdom
U.S.A.
InvestmentLinked
Unit-Linked
Variable Life
Refers to the same thing
| 6
KEY CONSIDERATIONS IN
INVESTMENT
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confidential and
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information. Not
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for distribution.
distribution.
AIA
Chapter 2 Key Considerations in Investment
2.1
Investment Objectives
2.2
Funds Available
2.3
Risk or Security
2.4
Investment Horizon
2.5
2.6
2.7
2.8
Accessibility of Funds
Taxation Treatment
Performance of the Investment
Diversification
2.1 Investment Objectives

Funds for
dependents
Comfortable
standard of
living
Pay expenses
& taxes upon
death
Why do
people
invest?
Retirement
income
Education &
up-bringing
Improve
financial
position
2.1 Investment Objectives

What should I
invest in?
Depends on what
you want!
Regular
Income Flow
or
Capital Gains
9
2.2 Funds Available

Level or Amount
of Funds
Available
Source of
Available Funds
More free funds
Fixed surplus
current income set
aside
Wider choice of
investment
Certain types of
investment e.g.
insurance policies
or unit trusts
10
2.3 Risk or Security

3 Considerations in Investment
1.Individuals Need
for Security
Investment
Risk
Loss of
Initial
Investment
Rate of Return
is Not Up to
Expectation
11

2. Attitude
Towards Risk
Risk Tolerance
Low Risk,
Low Potential Return
Risk Adverse
High Risk,
High Potential Return
Risk Neutral
Risk Taker
12

Investments
3. Type of Investment with
Higher
risk
&
Certain Inherent Risk
uncertainty
Capital and
income growth
potential
Risk
Higher
potential for
capital &
income growth
13
2.4 Investment Horizon

How long
are you
willing to
lock into an
investment?
Investment Objectives
Investors Age
Current Financial
Condition
Important
Important
Match your investment horizon with
the maturity of the investment asset
14
2.5 Accessibility of Funds
Early
withdrawal
cost or penalty ?
Liquidity :
short term
vs.
long term investment ?
Initial cost in
setting or buying
the investment ?
15
2.6 Taxation Treatment

Different types of
investment
Different tax
treatment
The tax status

of investment
linked life
insurance is the
same as
traditional with
profit life
insurance
To be discussed in Chapter 10
16
2.7 Performance of the Investment

Countrys economic
factors
Life cycle
of investment
Performance
depends on
Invested companys
past experience & history
Competencies &
capabilities
of management
team
Invested companys
level of costs
17
2.8 Diversification
Spreading of risks
Effective in reducing risk
without sacrificing returns
Invest in different assets
classes and across different
market environments
18
2.8 Diversification
Spreading of risks by :
1. Categories of investment
e.g. shares, bonds,
money market
instruments
3.Shares at
different
countries
2.Different type
of shares
19
| 20
TYPES OF INVESTMENT ASSETS
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confidential and
and proprietary
information. Not
Not for
for distribution.
distribution.
AIA
20
Chapter 3: Types of Investment Assets
3.1 Cash and Deposit
3.6
Properties
3.2 Fixed Income

Securities
3.7
Derivatives
3.8
Exchange
Trade Funds
3.9
Sukuk Bonds
3.3 Shares
3.4 Unit Trusts
3.5 Investment
Trusts
3.10 Capital
Guaranteed Fund
21
3.1 Cash and Deposits

Refers to all liquid instruments
Carry little or no risk of losing principal amount
Cash
- Not an investment
Capital value wont increase

No additional income
generated
- Only a medium of exchange

22
3.1 Cash and Deposits (continue)

The definition of cash covers:-
Treasury Bills
Bank Accounts
23
Treasury Bills
issued at
discount rate
Central Bank
Government
discharged
at face value
Institution
No risk : guaranteed by Government

(unless politically unstable)
Short term : < 1 year
24
Bank Accounts
Place fixed/time deposits

Bank
Pay fixed interests
Public
Bad inflation hedge
Penalties on early withdrawal
Low in yield
25
Bank Accounts available (continue)
Offshore
Accounts
Time
Deposits
Savings
Accounts
Current
Accounts
Types of
Account
Fixed
Deposits
Investment
Accounts
26
Bank Accounts (continue)

Factors influencing Choice of Deposits:
funds available for investment

how long fund
can remain
in the account
choices of
deposits
emergency
withdrawal
prevailing
market condition
27
3.2 Fixed Income Securities

Invest principal by buying securities
Public lends money to company or government
Companies
or
government
Public
Pays fixed periodic interest income

At maturity, repayment of principal
Can be bought and sold

anytime before maturity
in secondary market
28
3.2 Fixed Income Securities
Corporate
Bonds
Government
Bonds
Preference
Shares
(continue)
Types of
Fixed
Income
Securities
Money
Market
Instruments
29
Government Bonds
Safest little or no default
or credit risk
Advantages
Easily marketable
Government guarantees to Income for future

pay interest and repay
years guaranteed
principal
Fixed interest rate
Issued when government
needs money to finance
projects
Disadvantage
In times of high
inflation,
capital can be
eroded
30
Government Bonds (continue)
Maturity Period
Short Term
Below 5
years
Medium Term
5 to 10
years
Long Term
Above 15
years
31
Corporate Bonds
Bonds issued by
companies
Debenture stocks
Loan stocks
Convertible Stocks
Advantages
Higher return than
govt. bonds
More marketable
Potential for capital
gains
Disadvantage
More risky
32
Corporate Bonds (continue)

Debenture Stocks
Secured loans
[Fixed charge on companys property or assets
(stocks)]
Fixed rate and term
Trustee appoint
Supervise interest & capital

payment
If default, act for investors
33
How it differs from Government Bonds
Company can repay earlier if wishes
No government guarantee (riskier)
Interest rate higher
34

Loan Stocks
Unsecured loans
Fixed interest rate
and term
Risk losing capital
Less secure than
debenture stocks.
Therefore, higher
interest rate
Risk-Return
Risk
Debenture
Stocks
Loan
Stocks
Government
Bonds
Return
35

Convertible Stocks
Can be converted to ordinary shares
of a company on a fixed date
Become part owner and

entitled to profits through
dividends declared
36
Factors affecting decision to convert:

(i) Dividend income
(ii) Capital appreciation in
share price
Whether are
better than fixed
interest given
37
Risk-Return
Risk
Loan Stocks
Debenture Stocks
Government Bonds
Return
38
3.3 Shares
Shareholder = part owner of a company
Share certificate = evidence of title
Not liable for companys debt
Can attend Annual General Meeting
(AGM) vote for major issues and
appointment of directors
39
3.3 Shares (continue)

Company
Public Company
Shares quoted
on KLSE
Available to
ordinary investors
Private company
Not listed on
stock exchange
Not available to
ordinary investors
40

Currency
performanc
e
Companys
earning
Inflation
rate
Share price
influenced
by:
Markets
view on
compan
y
Countrys
economy
Interest
rate levels
41

Ordinary Share
Preference Share
May or may not receive Right to a fixed

dividend provided that
dividends
enough profit has
Dividend rates
been made
fluctuates according to
Dividend is fixed
companys profits
Ranks ahead of
ordinary
shareholders when
company winds up
42
3.4 Unit Trusts

Purchase in units
Buy at Offer Price (selling price)
Sell back at Bid Price

(buying price)
43
3.4 Unit Trusts (continue)

Value of units based on performance of
investment
Funds managed by professional
fund managers in well diversified
range
Unit trust are authorized &
supervised by the Securities
Commission
44
Open-ended fund
No fixed redemption date
Fund manager can create units if required,

and cancel units if encashment exceeds
new purchases
45

If too many investors cash-in,
may have to sell funds assets
All unit trusts are required to
state investment objectives in
prospectus
Medium to long term
investment (> 3 years)
46

Advantages
Spread of investments
Lower risk compared to shares
Professional service from fund

managers
Minimises paperwork of
investors
Income from dividend can be

reinvested
Disadvantages
Bewildering array of
funds
Extra costs for switching
47

Three Way
Arrangement
Select &
Manage
fund
Investors
Trust
Deed
Fund
Manager
Invest
capital
Hold pool
of money
in trust on
behalf
investors
Trustee
48

Trust deed sets out:
Fund managers investment powers
Price structure
Registration of unit-holders
Remuneration of fund managers
Accounting and auditing rules
49
3.5 Investment Trusts
Investor
shares
Investment Trust
company
managed by
specialist fund
manager
Investment fund
Shares value fluctuate according to
whether loss or profit made from the
investment fund
50

Investment Trust
(continue)
Unit Trust
Registered Under
Companies Act
Formed by Trust Deed
Purchasing shares in
company
Purchase units in trust,

not shares in company
Closed-end funds
Open-ended fund
No asset disposals if
large numbers of
investors cash-in
Disposes assets
when large numbers
of investors cash-in
51

Advantage
Flexible
investors can
borrow to finance
purchases of
investment trusts
(continue)
Disadvantage
Greater risk
exposures due
to price volatility
Higher risk/reward
profile than unit trusts
52
3.6 Properties
3 types
Agricultural
Property
Domestic
Property
Commercial/
Industrial
Property
Price depends on:

Quality of land
profitability of crops
Location of land
Value of buildings on land
Price depends on
location and types
of buildings on the
land
53
3.6 Properties (continue)

Advantages
Disadvantages
Good capital
appreciation
Difficult to be
disposed off
Steady flow of income during recession
Low risk
By mortgaging,
capital can be free
54
3.7 Derivatives
What are derivatives?
Financial
instruments whose
values are linked to
the price of underlying
instruments in the
cash markets
Two
popular
derivatives are
stock options and
financial futures
55
3.7 Derivatives (continue)
Stock Options
Options
Warrants
Financial Futures
Futures
56
Options
Call
(A right to buy)
Put
(A right to sell)
A right, not an obligation

To purchase or sell security within a
specified time period
At a fixed price
Duration usually 3, 6 or 9 months
57
Options (continue)
Call options are bought in hope of price
increase. Sellers want reverse to happen
Put options are bought in anticipating a
decline in price. Sellers want reverse to
happen
58
Call Option
Share Price = RM10,000 per lot
Price of Call Option = RM200 (expires after 6 months)
January: Share Price = RM10,000 per lot
February: Share Price = RM11,000 per lot
Gain = RM1,000 - RM200 = RM800
59
Put Option
Share Price = RM10,000 per lot
Price of Put Option = RM300 (expires after 6 months)
January: Share Price = RM10,000 per lot
February: Share Price = RM9,000 per lot
Gain = RM1,000 - RM300 = RM700
60
Warrants
Transferable Subscription Rights (TSR)
Corporate-created option
Holder has right to subscribe shares in the
company
At pre-determined ratio (conversion

ratio)
At pre-determined subscription price

(exercise price)
Within a specified time period (fixed at

beginning)
61
Warrants (continue)
Corporation
issues
warrants
Investors
Similar to call option

Option to purchase,within a specified time,
a stated number of shares at a specified
price
Attach free with loan stock or rights
Often issue free
62
Warrants (continue)
Advantages
Small initial outlay buy warrant, pay exercise price
later, and convert warrant to the underlying share
Capital gains from sale of warrants
Disadvantages
On expiry, warrants not exercised lose value
completely no chance for price recovery
No interests or dividends
Carry no voting rights
63
Futures
Physical
commodities
& financial
instruments
Traded in
cash market
Spot markets
Current market price
of item available for
immediate delivery
Cannot be
cancelled
unless both
parties agree
Forward markets
Price of an item
for deferred
delivery
Future markets
64
Futures (continue)
Future
markets
Set price today for

an instrument that
will be delivered
on a specified
future date
Futures exchange
determines:
Contract size
Delivery date
Conditions
Obligation,
not an
option
Trader
determines:
Price
Number of
contracts
E.g. Stock
index
futures
65
Futures (continue)
Stock index
futures
Based on a particulars share price index
Settlement
Made in cash without the actual delivery of the
securities covered by the index
Profit
Derived from price difference of original
contract value and value at time of settlement
66
Futures (continue)
Advantages
Enable investors to protect
their investments (hedging)
Must have clear

understanding of
hedging
Shifts risk of price fluctuations

to those who are willing
Price discovery futures price
reflects current expectations
Speculative trading
potential large gains
Disadvantages
High risk may
face huge losses
if wrongly
speculated
67
3.8 Exchange Trade Funds
Also known as Exchange-trade product

(ETP)
Traded in Stock exchanges
Underlying asset ie stocks, bonds and
trades
68
Attractive as an investments instrument :

Low costs
Tax efficiency
Stock like features
69
Traditionally an index funds

An actively managed fund since 2008
ETFs - USA since 1993
- Europe since 1999
70

Types of ETFs
Index ETFs
Commodity ETFs or ETCs
Bond ETFs
Currency ETFs or ETCs
Actively managed ETFs
Exchange-traded grantor trusts
Leveraged ETFs
71
3.9 SUKUK BONDS

- An Arabic name equivalent of Bonds
- Structured to comply with Islamic Law and its
investment principles
- Over $ 1.2 Trillion of asset are managed according to
the Islamic Investment Principles
- Not a Bond because it isnt based on
debt
- Regards as commercial paper that
give ownership to investor
72
3.9 SUKUK BONDS

Characteristics of Sukuk :
1. Pooled of funds
2. Based on hard assets that generate steady income and
expectations
3. Maybe guaranteed or not by their originators
4. Investors received a fee equal to the income
5. Issued by Special Purpose Vehicles (SPV)
6. Sukuk issued in dollars
7. Different from conventional bonds as its
based on tangible asset that debt
8. 14 types of Sukuk Sukuk Al Ijara
and Sukuk Al Mucharaka
73
3.10 Capital Guaranteed Fund
Definition
- Guaranteed the investors capital investment from losses
- Didnt redeem investment before maturity date
74

Features
- High asset allocation 80% to 90% of total fund size
- Benchmark against Fixed Deposit
- Investment Horizon 3 to 5 years
- Offered during an offer period. Once closed, no new
investors
- Normal unit RM 1
- Higher initial investment then Unit Trust. Minimum RM 5,000
- Lower Front end. Service charge id 1.5%
75
Features (Cont)
- Redemption fee before maturity ranging from 03% to 1.5%
- Guaranteed capital preservation
76
| 77
INVESTMENT-LINKED LIFE
INSURANCE PRODUCT: WORLD
SCENARIO
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confidential and
and proprietary
information. Not
Not for
for distribution.
distribution.
AIA
77
Chapter 4: Investment-Linked Life Insurance Product - A

World Scenario
4.1 In United Kingdom

4.2 In USA
4.3 In Singapore
4.4 In Malaysia
78
4.1 In United Kingdom

1957
First investment-linked life

insurance contract in UK
Individual retirement annuity
for self-employed
By London & Manchester
Assurance Company Limited
Linked to an external unit
trust
79
4.1 In United Kingdom (continue)
Investment-linked life insurance business

has been transacted for more than 30
years
Allow the policyowner total flexibility to

alter his needs for investment and
protection in accordance to his wishes
In 1986 approximately 130 companies were

writing investment-linked life insurance
business
80
4.2 In the United States of America
More commonly called Variable Life Insurance in

USA
Offered for sale to the general public in the US in 1976
Only after the product had been successfully marketed

in the Netherlands, United Kingdom and Canada
Very much affected by regulations

State insurance laws and regulations
Federal Securities laws (Securities & Exchange
Commission)
81
4.3 In Singapore
The first single premium investment-linked policy

introduced in Singapore was in 1973
Enhanced Investment Scheme (EIS) was introduced by

the Central Provident Fund (CPF) in 1993
This contributed to the expansion of the life insurance

industry, including investment-linked life insurance
business
Allowed CPF members to invest 80% of the excess of

S$50,000 in their ordinary account in eligible investment
instruments
82
4.4 In Malaysia
Investment-linked life insurance products are very

new in Malaysia
Syarikat Takaful Malaysia Sdn Bhd (now Syarikat

Takaful Malaysia Bhd) was first to sell a simplified product to
the public in August 1985
In July 1997, Berjaya Prudential Assurance Bhd became the

first traditional insurance company to launch the investmentlinked life insurance product
Then onwards Mayban Life Assurance Bhd was given approval

in February 1998, followed by Malaysian Assurance Allied Bhd
83
Single Premium/ Top-up

Allocated premium
used to buy units
from investmentlinked funds at
offer price
Unallocated
premium
Or
Top-up
Surrender claim
(To meet marketing

and set-up expenses)
(Pay value of units)
Withdrawals
(Pay value of units withdrawn)
Death claim
(Pay value of units and/ or
sum assured)
Life Office
Units which belong

to policyowner
Cancel unit (To pay mortality
charge & policy fee)
84
| 85
TYPES OF INVESTMENT-LINKED
LIFE INSURANCE PRODUCTS
AIA confidential
confidential and
and proprietary
information. Not
Not for
for distribution.
distribution.
AIA
85
Chapter 5: Types of Investment-Linked Life Insurance Products
5.1 How do Investment-Linked Life Insurance

Policies Work?
5.2 Comparing Investment-Linked and Traditional
With-Profit Life Insurance
5.3 Definitions
5.4 Characteristics of Investment-Linked Life
Insurance Policies
5.5 Types of Investment-Linked Life Insurance
Policies
5.6 Loans and Withdrawals
86
5.1 How do Investment-Linked Life Insurance Policies Work?
Operate on similar principle as Unit Trusts

Returns not guaranteed
Linked to performance of investment fund
Unit price depends on net asset value of the
fund
Value fluctuates as market prices rise and fall
lacks smoothing process
87
5.1 How do Investment-Linked Life Insurance Policies Work? (cont)
Investment
Used to purchase
units in fund
managed by life
office
Mortality
Protection
PREMIUMS
88
5.1 How do Investment-Linked Life Insurance Policies Work? (cont)
Single premium/Top-Up
Policyowners units
Surrender
Life office
marketing &
set-up expenses
Withdrawals
Death Claim
Cancel units
Mortality charge
& policy fee
89
5.2 The Fundamental Differences
Investment-linked
Potential for higher
returns
but higher risk (equity
funds)
Policy charges and
investment content
are more identifiable
Traditional WithProfit Life Insurance

Produce steady
return by smoothing
out short term market
fluctuation
Charges not
specifically
detailed in
the policy
90

Investment-linked
Offers more choice

of investment funds
Choice of Investment
is Insurers discretion
Benefit & risks

immediately passed
to policyowner
Most of risk passed

to insurer
91

Investment-linked
Investment element
is made known to
policyowner at outset
Investment element
is NOT made known
to policyowner at
outset
Value of policy
fluctuate depends on
value of units held
Never reduce in value

provided life office is
solvent
92
5.3 Definitions
Charges levied on investment-linked life
insurance policies:
- Policy fees
- Annual fund management fee
- Bid-offer spread
- Reduction in allocation of units - Unallocated
premiums
- Initial units
- Mortality charges
- Surrender charges
93
5.3 Definitions (continue)

Policy Fee
Administrative expenses of setting up the policy
Annual Fund Management Fee

Investment management charges.
Deduction of between 0.5% to 2% per year from
fund accumulated
94

Offer Price
Selling price of units by the life office
Bid Price
Price at which the units are cashed when the
policy matures, or surrendered, or used to pay
charges
Bid price is always lower than offer price at the
published date
95

Bid-Offer Spread
Offer price
Minus (-)
Bid Price
Bid-Offer Spread
Initial charge 5% to 6% on every

premium made to cover expenses in
setting up the policy
96

Reduction in Allocation of Units
Unallocated Premiums
Not all of a policyowners premium is
allocated to buying investment units
Unallocated premium used to meet
marketing and setting-up expenses of the
policy
Some insurers make nil allocation to units
until expenses recouped
97

Initial Units
All of a policyowners premium allocated to buy
investment units
Units allocated in early years known as initial
units have higher annual management charges,
e.g. 6% p.a., throughout term of the policy contract
Bears heavy discontinuance charges
Cash value much lower than face value for years
Less common nowadays
98

Mortality Charges
Dependent on age
Covers mortality cost of the policy
Can be a recurrent charge (e.g. monthly) funded
by cancellation of units on a regular basis
Allows policyowner to vary sum assured over time
99

Surrender Charges
Charge deducted from value of units at surrender
Represents initial expenses incurred but yet to be
recovered
100

Insurance Policies
Can have larger

exposure to
equity
Protection
Investment
Life cover
TPD
PA benefit
Health
101

Insurance Policies
Cash value
Affects
Protection
benefits
Prices of the units
Affects
Reflects
Investment
performance of
underlying assets
102

Insurance Policies
Protection costs are explicit

Met by cancellation of units
For single premium plan, met by flat
initial charge
Commission and office expenses are met
explicitly
May vary, but must give 6 months
notice prior to change
103

Insurance Policies
Cash
Value
Value of units
allocated to
policyowner,
calculated at
bid price
104
5.5 Type of Investment-linked

Life Insurance Policies
1. Single Premium investment-Linked

Whole Life Insurance Plan
2. Regular Premium Investment-linked
Whole Life Plan
3. Investment-Linked Individual Pension Plan
4. Investment-linked Permanent Health
Insurance
5. Investment-linked Dread Diseases
Insurance
105

Life Insurance Policies (continue)
Single Premium Investment-Linked
Whole Life Insurance Plan
One-off premium contribution
Minimum premium is RM3,000
Protection is 125% of total single premium paid, subject to
a minimum of RM5,000
Emphasize on long-term savings and investment offers
only nominal life protection
106

Single Premium Investment-Linked Life
Insurance Plan
Investment
Other
management
admin
Admin
fee (0.5% to
charges
2% p.a)
and
Mortality
charges
insurance
charges
Policy
fees
Top up or single premium injection is allowed

107

Regular Premium InvestmentLinked Whole Life Insurance Plan
Regular
Regular
Premiums
Premiums
Monthly
Quarterly
Annually
Features
Premium
holidays
Top-ups
Withdrawals
Purpose
Purpose
Life
protection
(main)
Investment
Surrenders
108
Investment-Linked Individual Pension Plan

Basic Plan
Conventionally, no life
cover other than return
High allocation of
premium to investments of investment funds on
death
Accumulate fund to
retirement
Upon retirement
Use fund to
purchase annuity
New Feature
Cancelling investments
to fund life cover
Conversion to traditional
with-profit life
109
Investment-Linked Permanent Health Insurance
Provides health coverage such as

disability income
Contains cash value
- Traditional health products dont have

cash value
110
Investment-Linked Dread Disease Insurance
Advances whole of face amount

upon diagnosis with dread
diseases such as heart attack,
stroke, coronary artery by pass,
end stage renal failure or total
permanent disablement
111
5.6 Loans and withdrawals
Loans may be limited to

some percentage of the
cash value
Reason:
Cash value
fluctuates
on a daily
basis
Partial surrender
and withdrawal
can be met by cashing the
sufficient units at
the bid price
112
5.7 Risk Base Capital Guidelines

Implementation of Risk Based Capital Framework
for Insurers
- Came
into effect 1st Jan 2009
- better align regulatory capital requirement

- Improve transparency of prudential buffers
- allow greater flexibility for insurers to operate at different
risk level
- Are more granular and risk sensitive
113

Example :
- Insurers with asset portfolios on high risk assets are required
to hold more capital
- Insurers with high risk profiles will have higher Capital
Adequacy Ratios (CAR)
- Investment strategies are rebalanced to response to
prevailing market conditions
114

- RBC expected to raise the overall level of resilience
- Improvement of quality and depth of statutory
- Have strong capital adequacy, liquidity positions
and risk management practices
115

Investment of Insurance Funds
Investment Strategy:
- Investment Objectives, both at Company and fund specific Level
- Risk and Liability of Insurer
- Strategic asset allocation i.e long term asset mix main investment
categories
- Extent holding of certain types of assets is restricted or disallowed
- overall policy of usage of derivatives and structured products
116

Requirement of Insurers :
- Established adequate internal controls of management of approved
asset
- Put in place rigorous audit procedures
- Install effective monitoring and managing asset and liability
- Put in place suitable plans to mitigate effect arising from deteriorating
market conditions
- Undertake regular stress testing
- Ensure key staffs are Skills, Experience, Expertise and integrity
117
Conclusion
Popularity of Investment-Linked Life Insurance
Policies will continue because:
1) Its contracts are easier to

understand
2) the charges are more
transparent
3) It is much more
flexible
4) performance of the funds can be
monitored
in daily newspapers
118
| 119
STRUCTURE OF INVESTMENTLINKED FUNDS
AIA confidential
confidential and
and proprietary
information. Not
Not for
for distribution.
distribution.
AIA
119
Chapter 6: Structure of Investment-Linked Funds
6.1 Accumulation Units & Distribution Units

6.2 Types of Investment-linked Funds
6.3 Risk-return Profile
6.4 Fund Switching
120
6.1 Accumulation and Distribution Units

- 2 ways to structure investment-linked funds
Accumulation
Capital
Capital
Fund
Distribution
Investment
Fund
Investment
Income
Income
In long term
Unit price
Unit price
unchanged
Purchase
more units
121
6.2 Types of Investment-Linked Funds
Balanced
Funds
Managed
Funds
Specialised
Funds
Cash Funds
Equity Funds
Types of
Funds
Bond Funds
Property
Funds
122
6.2 Types of Investment-Linked Funds (continue)
Cash Funds
Invest in cash and bank deposits
Safe, low risk
Equity Funds
Invest in stock, shares
Higher risk equity prices volatile
Aim for capital appreciation
Magnitude of change of unit price
depends on quality of equities held
123
Bond Funds (IOUs)
Fixed income instruments (government/

corporate bonds)
Income-producing
Property Funds
Invest in properties e.g. real estate and
property shares
Safer than equity, but have lower liquidity
Provision allows fund manager to defer
redemption of units up to 12 months
124
Specialised Funds
Offers exposure to different markets,
regions and currencies
Particular
Country
Geographical
Region
ASEAN
Emerging Markets
International Bond
China Fund
US Fund
Industry
Specialised
Commodities
Mining
Plantation
Public utilities
125
Managed Funds
Invest in wide variety of assets
Asset allocation depends on fund managers
view
Balanced Funds
Invest in fixed proportion of specified assets
e.g Equity
70%
Fixed Securities
30%
126
6.3 Risk-Return Profile

Risk
Higher return, higher risk
Equity Funds
Balanced Funds
Managed Funds
Cash
Funds
Bond Funds
Return
127
6.4 Switching
Fund A
Fund B
Useful for
financial
planning
Switching part or all investment

from one fund to another
Free
Free for limited no.

of switches within a
given period,
subsequently
charges imposed
Specific
charge for
each and
every switch
128
| 129
HOW INVESTMENT-LINKED
INSURANCE PRODUCTS WORK
AIA confidential
confidential and
and proprietary
information. Not
Not for
for distribution.
distribution.
AIA
129
7: How Investment-linked Insurance products Work

Lump sum (Single premium)
Premium Regular payment (Regular premium)
No. of Units
Create new units
Add investment
monies to the
fund
Value
of the
policy
Unit Price
determined by
At any time, policyowner may choose to

Top up to purchase additional units (subject to minimum amount)
Withdrawal sell some units
Surrender sell all the units
130

Methods of Calculating Benefits
Single Pricing
One quoted price
Policyowner buy or sell
units at the same quoted
price
Dual Pricing
Offer Price
policyowner buys units
Bid Price
Policyowner sell units
Bid price is always lower than offer price.

Bid-offer spread the difference in the bid and offer price
(explained in chapter 5)
Charges normally deducted are

Policy fee
Administrative charge
Mortality charge
131
Single Pricing Method

Number of Units = Premium Charges imposed
purchased
Unit Price
Cash Value
= (Number of Units x Unit Price) (Mortality

charges + Policy Fee)
Annual Yield On
Gross Premium
= (RGP)1/n - 1; n = No. of Years
Return on Gross = Ending Value of Investment

Premium (RGP)
Beginning Value of Investment
132
Sample Calculations: Single Pricing Method

Premium
Unit Price
= RM 4,000
= RM 1
Charges
= 5% (from total premium)
Mortality Charge
= 1% (of fund value)
Policy Fee
= RM100
133

Number of Units
purchased
= Premium Charges imposed

Unit Price
= RM 4,000 - (RM4,000 x 5%)

RM 1
= RM 4,000 RM 200
RM 1
= RM 3, 800
RM 1
= 3,800 units
134
Cash Value
= (Number of Units x Unit Price)

(Mortality charges + Policy Fee)
= (3,800units x RM1) [(3800 x RM 1) 1%+RM100]

= RM 3,800 - (RM 38 + RM 100)
= RM 3,800 - RM 138
= RM 3,662
135

Annual Yield On Gross Premium
Suppose Unit Price after 10 Years = RM 1.97
Annual Yield On
Gross Premium
Return on Gross
Premium (RGP)
End Value of
Investment

Ending Value of Investment

136

End Value of
Investment

= (3,800 units x RM1.97) [(3800 x RM1.97) 1% + RM100)]

= RM 7,486 - (RM 74.86 + RM 100)
= RM 7311.14
Return on Gross
Premium (RGP)
= RM 7311.14
RM4000
Ending Value of Investment

= 1.828
The annual yield = (1.828)1/10 -1

= 1.062 - 1 = 0.062 or 6.2%
137
Dual Pricing Method

Number of Units = Premium
purchased
Offer Price
Cash Value
= (Number of Units x Bid Price) (Mortality

Annual Yield On
Gross Premium

Premium (RGP)
138
Sample Calculations: Dual Pricing Method
Premium
= RM 4,000
Offer Price
= RM 1
Bid-Offer Spread
= 5% (from total premium)
Mortality Charge
= 1% (of fund value)
Policy Fee
= RM100
139

Number of Units
purchased
= Premium
Offer Price
= RM 4,000
RM 1
= 4,000 units
Cashed in or
Claim
Bid Price
Claim amount
= No. of Unit
Bid Price
= RM 1 x 95% (bid offer spread = 5%)
= RM 0.95
= RM 3,800 (4,000 units x RM0.95)
If unit price increased to RM 1.20, bid price = RM 1.14 (RM 1.20x95%)

Claim amount = RM 4,560 (4,000 units x RM1.14)
140

Cash Value

= (4,000 units x RM0.95) [(4000 x RM0.95) 1% + RM100]

= RM 3,800 - (RM 38 + RM 100)
= RM 3,800 - RM 138
= RM 3,662
141

Suppose Offer Price after 10 Years = RM 1.97
Bid Price = RM 1.97 x 95%
= RM 1.8715
Annual Yield On
Gross Premium

Premium (RGP)
142

End value of
investment

= (4000 units x RM1.8715) [(4000 x RM 1.8715) 1% + RM100]

= RM 7,486 - (RM 74.86 + RM 100)
= RM 7,486 - RM 174.86
= RM 7311.14
Beginning value of investment = RM 4,000 (4,000 units x RM 1)
Premium (RGP)
= RM 7,311.14
RM 4,000
= RM 1.828
Annual Yield
= (RM 1.828) 1/10 -1
= 1.062 1
= 0.062 or 6.2%
143

Withdrawal Benefits
Withdrawal Option
No. of Units
Money receive = No. of units x
Unit/ Bid Price
Fixed Monetary
Units Cancel = Fixed Monetary
Unit/ Bid Price
Eg:
Eg:
No. of Unit = 500

Unit/ Bid Price= RM 2
Fixed Monetary = RM 3,000

Unit/ Bid Price = RM 2
Money receive
= 500 units x RM 2
= RM 1,000
Units cancel
= RM 3,000
RM 2
= 1,500 units
*Surrender value calculation is similar to withdrawal

144

Death Benefits
2 types of Death Benefit
Unit Value or Sum Assured
(Whichever is higher)
Unit Value + Sum Assured

RM
RM
Death Benefit
Value of
Units
Value of Unit
Time t
Death Cover /
Sum Assured
Death Cover /
Sum Assured
Years
Years
145

Death Benefits
Unit Value + Sum Assured
Single Pricing
Death Benefits = (No. of Units x Unit Price) + Sum Assured
E.g: Suppose Sum assured = RM 5,000; Unit price = RM 1.22 at the time
of death
Death Benefits = 3,800 unit x RM 1.22 + RM 5,000
= RM 9,636
Dual Pricing
= (No. of Units x Bid Price) + Sum Assured
E.g: Suppose Sum assured = RM 5,000; Offer price = RM 1.22 at the
time of death
Bid price = RM 1.159 (RM 1.22 x 95%)
Death Benefits = 3,800 unit x RM 1.159 + RM 5,000
= RM 9,636
146

Death Benefits
Unit Value or Sum Assured, (Whichever is higher)
Single Pricing
Death Benefits = (No. of Units x Unit Price)
Dual Pricing
= (No. of Units x Bid Price)
Death Benefits for both calculation = RM 4,636
Death Benefits payable will be RM 5,000
(Death Cover / Sum Assured)
147

Regular Premium Policies
Policyowner:
Are required to pay premiums regularly but enjoy the
flexibility of:
Being able to vary the level of premium
Doing single top up
Taking premium holidays
May surrender all or part of his unit
May vary the sum assured without changing his premium
May also increase or reduce his regular premium
*Note: Check out more scenarios from The MII text book
148
| 149
BENEFITS AND RISKS OF

INVESTING IN INVESTMENT-LINKED
FUNDS
AIA confidential
confidential and
and proprietary
information. Not
Not for
for distribution.
distribution.
AIA
149
8: Benefits and Risks of Investing In InvestmentsLinked Funds
Investment-linked
Insurance Plan
Protection
Premium
to be allocated to
protection or
investment
Investment
to invest in the funds
that you choose
150
Policyowner can access to a pooled or

diversified portfolio of investment.
Policyowner can easily change the level of his
premium payment.
The funds are managed by professional fund
managers in accordance with the investment
objectives.
Policyowner can get access to a well diversified

investment-linked funds.
Policyowner is relieved of the day-to-day
administration of his investment, just has to keep
track through the unit statement provided regularly.
151
Cash and maturity values will rise and

fall based on the fund invested
With equity fund, policyowner may
expect to achieve higher return than
traditional product over long term
The administrative fee, insurance
charge, fund management fee etc are
usually not guaranteed
They are subject to regular review and
can be changed by insurance company
152
| 153
COMPARISON BETWEEN
INSURANCE AND TRADITIONAL
WITH PROFIT LIFE INSURANCE
PRODUCTS
AIA confidential
confidential and
and proprietary
information. Not
Not for
for distribution.
distribution.
AIA
153
9: Comparison between Investment-linked and

Traditional with Profit Life Insurance Products
Comparison Criteria
Investment Returns
and Risks
Death Benefit
Premium
Computation
Option to Top-up
Surrender Value
154

Introduction
Traditional Guaranteed
without Profit Products
Guaranteed a fixed rate
of return
E.g: Term Insurance, non
participating insurance
Traditional with-profit
Products
Similar to without profit
insurance but profit are
added to the sum
assured
E.g: whole life,
endowment insurance
Investment-linked
Products
Wholly or partly
determined by reference
to the value of invested
property/ index
155

Investment Returns and Risks

A fixed amount is made
when the insured dies
within the term or period
of assurance
The amount payable
does not depend on the
investment performance
of the company
No investment risks
except he risk of
insolvency of the
company
Products
Bonuses can be
allocated as an addition
to the sum assured
Bonus are not directly
linked to the investment
performance, it has been
smoothened by the life
office
E.g: Cash bonus,
reversionary bonus,
terminal bonus
Investment-linked
Products
Policy values vary
according to the values
of the underlying assets
that the policy tied to.
The investment returns
and risk are directly
transferred to the
policyowners.
156

Premium Computation
Premium is determined
and fixed at inception
Life company may not
alter the terms and
conditions without the
agreement of
policyowner
Sum assured driven
Products
Premium is determined
and fixed at inception
alter the terms and
agreement of
policyowner
Sum assured driven
Investment-linked
Products
Policyowner has the
flexibility in changing
their premium payments,
top up or take premium
holiday
Life office may also retain
certain right to alter
charges, like monthly
policy fees
Account driven
157

Death Benefits
Products
Death benefit (sum

Death benefits is fixed
assured) is determined at
sum assured plus
inception
accumulated bonuses
less any outstanding
policy loans and
alter the terms and
automatic premium loans
(inclusive of interest)
agreement of
policyowner
Maturity benefits is fixed
sum assured plus
bonuses accumulated
less any outstanding
policy loans and
automatic premium loans
(inclusive of interest)
Investment-linked
Products
Single Premium plans
Minimum sum
assured or value of
units at bid price,
whichever higher
Minimum sum
assured plus value
of units
Regular Premium Plans
Sum assured or
value of units at bid
price
Sum assured plus
value of units at bid
price
158

Surrender Value & Option to Top up

Products
Investment-linked
Products
No surrender value
except plan with terms
more than 20 years
Cash surrender value

includes surrender value
reversionary bonus
Usually higher than the
without profit policy
Surrender value is
market price x unit / bid
price
Depends on policies
Sum assured can be
increased each year by a
set percentage of the
original sum assured
Very few with profit

policies allow the option
to top up
Similar to the without
profit policies
Allow policyowner to buy

additional number of
units without taking out a
new policy
159
| 160
10
TAXATION AND LAW COVERING

INSURANCE PRODUCTS
AIA confidential
confidential and
and proprietary
information. Not
Not for
for distribution.
distribution.
AIA
160
10: Taxation And Law Covering Investment-Linked Life

Insurance Products
Taxation are treated

same manner as other Insurance policies
Investment-linked business governed by

Insurance
Act 1996
Contract
Act 1950
Companies
Act 1965
Common
Law
161

Insurance Products
Income Tax Act 1967

The premium is allowable for tax relief when
the life Insurance or deferred annuity is:
a. on the individuals life
b. on the life of the
spouse of the individual
c. on the joint lives of the
individual and his/her spouse
162

Insurance Products
Total Relief Allowable

RM6000 per year
* No longer subject to
7% limit
Additional Tax Relief

RM3000
From 1996 budget
All
Alllife
life
insurance
insurance
premiums
premiums
Approved
ApprovedFund
Fund
(e.g.
(e.g.EPF)
EPF)
Education
Educationand
and
medical
medicalinsurance
insurance
premium
premium
163

Insurance Products
Insurance companies
Taxed at 8% of chargeable income
and realized capital gain of a life
fund
Proceeds distributed to policyowners
are tax-free
164

Insurance Products
Insurance act, 1996 & regulations
The main purposes of regulation included:I) The protection of public interest

Ensuring the insurer is financially solvent and able to meet its obligations
II) The promotion of fairness and equity
Ensuring that the insurers, insurance brokers adjusters are fair and
equitable in their dealings with clients and claimants
III) The fostering of competence

By insisting a high level of professionalism competence and integrity
IV) The playing a developmental role

To in the take an active part economy development of the country
165

Insurance Products
Investment-Linked Insurance Business

Section 7(2)(b) defines as
Effecting and carrying out of a contract of
insurance on human life or annuity where the
benefits are, wholly or partly, to be determined
by reference to the value of, or the income
from, property of any description or by
reference to fluctuations in, or in an index of,
the value of property of any description
166

Insurance Products
Insurance Act 1996 Section 7(1)(b)

To carry out the investment-linked life insurance business:
1)Prior written approval by Bank Negara Malaysia
2)Detailed business plan to be submitted to BNM
Insurers are also required to maintain separate funds in respect

each inv link funds
167

Insurance Products
Investment Limits
BNM Circular JPI:1/1997
Specification of Assets for the purpose of a Licensed Insurer Margin of
Solvency which specifies that Investment-linked funds :
are not applicable to licensed insurers margin of solvency
could be invested 100% in equity
are subject to the general restrictions to reduce the risk exposure to any
once company
168
Investment Limits general restriction

Investment in securities in any one investee should not
exceed:
5% paid up capital of the investee Company
5% of the total value of the assets of the fund
whichever is lower
Investment in loans or debentures to anyone borrower
or group of borrowers should not exceed 5% of the total
value of the assets of the fund
169

Insurance Products
Age limit of
Policyowner
Free Look
provision
At least 18 years old
Policyowner may cancel the policy

and get premium refunded within 15
days after delivery of policy
170

Insurance Products
Minimum Death Benefits & Premium Payment for
Single Premium
Minimum Death Benefits
RM5,000 or 125% of single

premium, whichever is higher
Minimum Premium Payment
At least RM3,000 payment
Intermediation
Basic qualification: CEILLI exam

Specifically trained & equipped with the
product knowledge
171

Insurance Products
Disclosure of Information
Sales Materials/Illustrations must contain
1) General description of the investment policy and objective
of the fund and the manner investment income distributed
2) Policy benefit based on the performance the funds and
factors affecting the policy Benefits
3) Investment risks solely borne by policyowner must clearly
informed
4) Max amount of initial charge, management
fee, mortality cost and any other charges must be stated
172
Disclosure of Information (Continued)

Disclosure of Information
Sales Materials/Illustrations must contain
5) The basis of computation for benefits, bid and offer price,
units allocation and unit cancellation
6) The basis and frequency of valuation of underlying assets
7) All guarantees and non guarantees facts and benefits
8) Statement of fund performance for past 5 years
9) Clear worded warning that policy value may rise or fall,
results shown for illustration, fund performance is not
guaranteed
10)Any information Bank Negara deemed necessary
173
Statement to policy owners

Fund performance report to policyowners
Refer to the book
174
| 175
11
IDENTIFYING AND SATISFYING

CUSTOMERS NEEDS
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AIA
175
11: Identifying And Satisfying Customers Needs

Structured approach is important for an effective advice
The process of providing advice involves 7 stages :
a)
b)
c)
d)
e)
f)
g)
Establishing Relationship with the Client

Gathering all relevant Financial Data
Establishing current Financial Position and Goals
Developing plans and strategies to meet the goals
Discuss possible recommendations
Implementation of the agreed recommendation
Monitoring the portfolio
176

The process of providing advice
Stage 1 Establishing Relationship with the Client
- Convince client that he is able to assist the client to fulfil financial goals
- Do a preliminary screening of clients financial objectives and goals
Stage 2 Gathering all relevant financial data
To obtain all relevant information about the
customer in order to do an analysis
Customers Personal and Dependents details
Life and Financial Priorities and Goals
Risk Profile
Net Worth Analysis
Cash Flow Analysis
Recommendations and Record of Advice
177

Stage 3 Establishing Current Financial Position and Goals
- After gathering all relevant data, agents to analyse and establish clients
financial position and also future goals
- This will allow agents to come up with a blue print for a recommendation
Stage 4 Developing Plans and Strategies to meet the Goals
Adequate Insurance Coverage for
Liability cancellation, basic Protection and medical cover, disability
cover, dread diseases cover etc
178

Stage 5 Discuss Possible Recommendations
Explaining the
recommendations
Provides options
and alternatives
open
Reviews
Recommendations
Stage 6 Implementation of the agreed recommendations

- Once agreed, agents put into effect all recommendations
- Implementation is done
- Any changes must be communicated with client before putting it through
179

Step 7 Monitoring the portfolio
- Regular monitoring of clients portfolio
- Ensure clients are informed of the progress of their policy
- Ensure client get quarterly or half year report by Insurer
- Assist client to make necessary switching and adjustment to ensure
the clients gets the best returns from the policy
-Ensure policy review is done half year or yearly basis, adhoc review
can be done if there is a special need
- Allow agents to obtain quality referrals and cross sell
180
| 181
12
MARKETING AND AFTER SALES

SERVICES, ETHICS & CODE OF
CONDUCT
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confidential and
and proprietary
information. Not
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for distribution.
distribution.
AIA
181
12: Marketing And After Sales Services,

Ethics And Code of Conduct
12.1 Marketing
Definition: the management process responsible for identifying,
anticipating satisfying customers requirements profitably
Sales
Orientated
In the past, role is strictly to sell company

developed products
hard sales technique are frequently used to
stimulate customers interest
Customers do not understand, meet their needs,
or not afford to pay
182

12.1 Marketing
Market
Orientated
Role of the sales & marketing dept is to

determine the needs of customers and satisfying
these needs by dev and distributing appropriate
policies
Generally functions
Planning & control dev marketing plan and controling its results
against the plan by making necessary changes
Market identification selection of segments of the market
Product development develop appropriate policies to meet the
needs of the segments
Selection of distribution channel identify and select the suitable
channel for distributing the policies to the customers
Promotion suitable promotional activities including advertisement,
sales promotion etc
183

12.2.1 A Market Oriented Agent

Objectives: To satisfying customers' requirements and
needs, and at the same time earn an income for himself
Sales Plan which allows planning and controlling
Sales goal
Objectives: Target market
Strategy
Implementation
and control
184

12.2.2 Customer Buying Decision Process

1. Problem
recognition
5. Post- purchase
evaluation
4. Purchase
2. Information search
3. Evaluation of alternative
policies
185

12.2.3 The Selling Process

1.Locating prospective
customer
5. Closing the sales
4. Handling
objections
2. Create sales
presentation
3. Conducting sales
interview
186

Agents role after closing the sale:

a. Application is complete and all the proposer's answers
have been recorded accurately clearly;
b. Providing timely response to any applicant or company
questions or requests.
187

Delivery of a policy gives the agent an opportunity to perform the
following :a)Dispel the customer's cognitive dissonance
b)Provide a basis for future sales by reminding the policyowner about
any currently unmet or future financial needs or expectations;
c)Re-emphasize the insurance agent's commitment to providing the
policyowner quality service;
d)Encourage the policyowner to call the agent
e)Explain the policy's provisions, terms and conditions
f)Obtain names of referred leads and other prospects
g)Strengthen the customer relationship and help encourage
persistency
188

Ethics & Conducts
Ethics should include :a)Behaving with Complete Integrity in an Insurance Agent's Professional
Life
b)Complying with the Law and with the Best Principles and Practice relating
to Financial Advice
c)Behaving in a Professional and Honourable Manner towards client,
customer and whoever the Isurance Agent is in Contact in Business
d)Observing and Applying the Relevant Codes of Good Practices
189

12.3.1 LIAMS GUIDELINES ON THE CODE OF CONDUCT

Part I - Guidelines on the Code of Conduct.
Part II Life Insurance Selling.
Part III Statement of Life Insurance Practice.
Part I - Guidelines on the Code of Conduct.
Statement of Philosophy.
Coverage.
Monitoring Devices.
Seven Principles of the Guidelines.
Code of Conduct.
190


Part II Life Insurance Selling.
Introduction.
General Sales Principles.
Explanation.
Disclosure of Underwriting Information.
Accounts and Financial Aspects.
191

General Sales Principles

The intermediary shall :
Produce Registered Intermediary Authorization Card
Ensure the policy proposed is suitable to the needs
Give advice only
Treat all information as completely confidential
Make comparisons with other types of policies, make
clear different characteristics of each policy
Render continuous service to the policy holder
192
General Sales Principles

The intermediary shall not:
Make inaccurate or unfair criticism of any insurers
Attempt to persuade a prospective policy holder to cancel any
existing policies unless these are clearly unsuited to the policy
holders needs
Twisting
To discontinue a policy or to have a policy made

paid-up and replace a new one in another company
or the same company
193


Part III Statement of Life Insurance Practice.
Introduction.
Claims.
Proposal Forms.
Policies and Accompanying Documents.
Sales Materials/Advertisements.
194
Important Chapters in Exam
Focus on..
195
Exam Questions Analysis
196
Thank You

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CEILLI

AIA confidential and proprietary information. Not for distribution.

INTRODUCTION TO INVESTMENTLINKED LIFE INSURANCE

Chapter 1: Introduction to Investment-Linked Life Insurance

AIA confidential and proprietary information. Not for distribution.

Chapter 1: Introduction to Investment-Linked Life Insurance

Chapter 1: Introduction to Investment-Linked Life Insurance

Refers to the same thing

AIA confidential and proprietary information. Not for distribution.

Chapter 2 Key Considerations in Investment

AIA confidential and proprietary information. Not for distribution.

2.1 Investment Objectives

AIA confidential and proprietary information. Not for distribution.

2.1 Investment Objectives

2.2 Funds Available

More free funds

AIA confidential and proprietary information. Not for distribution.

2.3 Risk or Security

2.3 Risk or Security

AIA confidential and proprietary information. Not for distribution.

2.3 Risk or Security

2.4 Investment Horizon

2.5 Accessibility of Funds

AIA confidential and proprietary information. Not for distribution.

2.6 Taxation Treatment

The tax status

2.7 Performance of the Investment

AIA confidential and proprietary information. Not for distribution.

AIA confidential and proprietary information. Not for distribution.

TYPES OF INVESTMENT ASSETS

Chapter 3: Types of Investment Assets

3.1 Cash and Deposit

3.2 Fixed Income

AIA confidential and proprietary information. Not for distribution.

3.1 Cash and Deposits

Capital value wont increase

- Only a medium of exchange

3.1 Cash and Deposits (continue)

AIA confidential and proprietary information. Not for distribution.

No risk : guaranteed by Government

Place fixed/time deposits

AIA confidential and proprietary information. Not for distribution.

Bank Accounts available (continue)

AIA confidential and proprietary information. Not for distribution.

Bank Accounts (continue)

funds available for investment

3.2 Fixed Income Securities

Pays fixed periodic interest income

Can be bought and sold

3.2 Fixed Income Securities

AIA confidential and proprietary information. Not for distribution.

Government guarantees to Income for future

Government Bonds (continue)

Corporate Bonds (continue)

Supervise interest & capital

AIA confidential and proprietary information. Not for distribution.

Corporate Bonds (continue)

How it differs from Government Bonds

Company can repay earlier if wishes

No government guarantee (riskier)

Interest rate higher

AIA confidential and proprietary information. Not for distribution.