Insurers’ life funds post muted returns in 2021; no bonus cuts for now

POLICYHOLDERS of traditional with-profits plans can heave a sigh of relief that their plans’ annual bonuses will not be cut for now, despite a generally muted performance among insurance life funds in 2021.

Based on a compilation by The Business Times, the performance in 2021 among insurers’ participating funds ranged between a high of over 5 per cent and a loss of more than 7 per cent. These returns are lower than the returns of 2020 which were in the high single-digit, and 2019 in double-digits. Prudential’s Singapore-dollar life fund posted returns of 5.13 per cent, just a tad below its 2020 return. AXA’s life fund reported minus 7 per cent in returns. It will not cut bonuses this year.

Restraint on bonus cuts reflects par plans’ “smoothing’‘ mechanism at work. Smoothing means that insurers typically do not distribute all the returns in good years, retaining some surpluses as a cushion for distributions in the years when market returns are lower.