Mapfre MSV Life plc declares 2019 bonuses

On 3 March, Mapfre MSV Life plc announced the bonus rates for With Profits policies for the year ended 31 December 2019.

A Regular Bonus Rate of 2.85% was declared on the company’s core products namely the Comprehensive Flexi Plan (regular and single premium policies), the Single Premium Plan and on the With Profits options of the Investment Bond, Retirement Plan and the Personal Pension Plan.

A Regular Bonus Rate of 2.75% was declared on the Comprehensive Life Plan (regular and single premium policies) while on the “Old Series” Endowment and Whole Life policies, a Regular Bonus of 2% of the basic sum assured plus bonuses was declared.

The 2019 Regular Bonus Rates represent an increase of 0.50% from the 2018 declaration.

In addition, the Board also announced the declaration of a Final Bonus in respect of Comprehensive Life Plans (Single and Regular Premium), Comprehensive Flexi Plans (Single and Regular Premium) and Single Premium Plans that have been in force for more than 10 years. For the Comprehensive Life Plan (Regular Premium), a Final Bonus of 1.10% has been declared for every year in force after the 10th year of the policy while for the Comprehensive Flexi Plan (Regular Premium), a Final Bonus of 1% has been declared for every year in force after the 10th year of the policy.

For Single Premium policies the Final Bonus is, for the first time, expressed as a combination of a flat percentage plus an additional percentage for every year in force after the 10th year of the policy. For the Single Premium Plan and the Comprehensive Flexi Plan (Single Premium) a flat Final Bonus Rate of 12.5% will be paid on the value of the policy account plus an additional percentage of 1% for every year in force after the 10th year of the policy, while for the Comprehensive Life Plan (Single Premium), a flat Final Bonus Rate of 12.5% will be paid on the value of the policy account plus an additional percentage of 2% for every year in force after the 10th year of the policy.

Final bonuses will be paid on the value of the Policy Account as at the date of death or maturity between 1 April and 31 March 2021.

The Board also approved a Regular Bonus of 2.75% on those Secure Growth policies which formed part of the portfolio of business transferred to Mapfre MSV Life from Assicurazioni Generali S.p.A. during 2000. Finally the Board also approved a Regular Bonus of 1.35% on the Alico 78 policies and a Regular

Bonus of 1.6% on the Alico 66 policies which formed part of the portfolio of business transferred to Mapfre MSV Life in 2011 from American Life Insurance Company (“Alico”).

The Mapfre MSV With-Profits Fund increased by 13.8% from €1.89bn in 2018 to €2.15bn at 31 December 2019. The total investment return of the Fund amounted to €222.9m recovering strongly from the negative €43.1m downturn in 2018.

Notwithstanding the prudent investment policy adopted by Mapfre MSV Life, past performance is no guarantee for the future. Although Mapfre MSV Life’s with-profits investments have generally provided policyholders with stable and satisfactory returns when compared with other similar investment products, in the light of the current uncertainty in the capital markets, investment returns could fluctuate further. Fair value movements and investment returns impinge directly on the rates of bonuses declared by the company. Regular Bbonuses are therefore expected to vary over the lifetime of the policy while Final bonuses are likely to be highly volatile and very dependent on the investment performance of the company.

The chairman of Mapfre MSV Life, John Cassar White stated: “2019 turned out to be a very good year for investors. The Mapfre MSV With-Profits Fund returned a net return of 11.71% reflecting strong gains in most asset classes in its portfolio. Considering the Fund’s conservative nature and balanced allocation, we consider the 2019 return highly satisfactory. Notwithstanding the positive investment returns registered in 2019, difficult investment markets feature heavily in the outlook for the life insurance industry. We see signs of economic stabilization in the year ahead and we expect investors to have to contend with many unforeseen events and market swings as policy uncertainty remains high and geopolitical risk is an ongoing concern. Monetary policy is likely to remain accommodative and interest rates low to negative. Amid slow global economic growth, rising political uncertainty and low yield environment we will consider whether to diversify the asset allocation of the Mapfre With Profits Fund further beyond the comfort of conventional asset classes, tilted towards areas of extra return with a cautious approach aiming for better risk-adjusted returns. Going forward, Regular bonuses are therefore expected to vary over the lifetime of the policy while Final bonuses are likely to be highly volatile and very dependent on the investment performance of the company.”

The chief Executive officer of Mapfre MSV Life, David G. Curmi, stated: “The money of our With Profits policyholders is invested in the Mapfre MSV Life With Profits Fund. With assets under management of over €2.15bn and over 78,000 With Profits policies in force, the Mapfre MSV Life With Profits Fund is one of the largest managed savings funds in Malta. The size and strength of our Fund allows us to invest in a very wide range of global assets. The objective of the Mapfre MSV Life With Profits Fund is to offer competitive longterm real returns by smoothing the peaks and troughs of day-today market movements while at the same time providing an underlying capital guarantee. This means that With Profits investments remain a good choice for investors seeking steady growth from a spread of investments over the longer term with some downside protection. In uncertain times, the benefits of smoothing and guarantees can provide advantages to With Profits policyholders over other forms of investment.”

Curmi concluded: “With Profits policies contain four important features that are not generally found in other comparable investments. Firstly, the amount invested, after product charges, is guaranteed to be repaid on maturity or death if it occurs earlier. Secondly, Regular bonuses are added to the investment each year. Once paid, Regular bonuses are guaranteed and cannot be withdrawn. Thirdly, if the investment is kept for more than 10 years a Final bonus may be paid at maturity or death depending on the performance of the Fund and lastly With Profits policies are tax efficient. Our wider message is that Mapfre MSV Life With Profits policyholders have the added confidence of knowing they hold a safe, time-tested and tax-efficient investment through participation in the Mapfre MSV Life With Profits Fund, a conservative and diversified portfolio of assets that embraces a robust investment management process and which has delivered consistent returns that compare well with those achieved from alternative investments but with relatively lower levels of volatility.”

Tax treatment depends on individual circumstances and is based on current Tax legislation which may change in the future. Investment returns can go down as well as up and the past is not necessarily a guide to future performance. Changes in the rate of exchange of currencies may also affect the value of investments