Policy dividend - Participating products

Hang Seng Insurance Company Limited (“Hang Seng Insurance”) issues participating policies, which are life insurance contracts providing both guaranteed and non-guaranteed benefits. The guaranteed benefits may include the following: 1) guaranteed death benefits, 2) guaranteed cash values, 3) guaranteed annuity payments, 4) guaranteed maturity values and 5) endowment coupon. The non-guaranteed benefits include policy dividends, which may be paid or varied at the discretion of “Hang Seng Insurance”. The policy dividends, if any, are in form of:

1. Annual Dividends^[1] which are declared by the “Hang Seng Insurance” on an annual basis. Once declared, the amount of Annual Dividends^[1] for the year becomes vested and will be credited to your policy.
2. Monthly Income^[2] which is declared by the “Hang Seng Insurance” on a monthly basis. Once declared, the amount of Monthly Income for that month becomes vested and will be credited to your policy.
3. Terminal Dividend^[3] which is a one-off entitlement declared at maturity or upon early termination of the policy (e.g. death, surrender etc.) before maturity. The amount of Terminal Dividend^[3] may change from time to time based on the performance over the entire period before such declaration as well as the prevailing market condition and the actual amount will not be determined until it is payable.
   
4. Special Dividend^[4] which is a one-off entitlement declared at maturity (if applicable), or upon the death of the Life Insured (unless there is a Contingent Insured on the Company’s record who becomes the new Life Insured pursuant to policy provision), or early termination of the policy (e.g. surrender, except if it is due to exercise of the Policy Split Option) before maturity (if applicable) or special event^[5] before termination of the policy (e.g. the total claims paid reaches 100% Sum Insured). Special Dividend may also be partially declared when Policy Value Management Option^[6][7] or Regular Withdrawal Option is exercised, or upon any payment of Mental Incapacity Benefit or Family Mental Care Benefit, or partial surrender. The amount of Special Dividend^[4] may change from time to time based on the performance over the entire period before such declaration as well as the prevailing market condition and the actual amount will not be determined until it is payable.
   

The key feature of participating policies over other forms of insurance policies is that in addition to the guaranteed benefits receivable, policyholders will also benefit from additional dividend payments if the performance of relevant participating policies is better than that required to support the underlying guarantees. The better the performance, the greater the Annual Dividends^[1] and/or Monthly Income^[2] and/or Terminal Dividend^[3] and/or Special Dividend^[4] payments, and, conversely, the worse the performance, the lower the Annual Dividends^[1] and/or Monthly Income^[2] and/or Terminal Dividend^[3] and/or Special Dividend^[4] payments.

Annual Dividends^[1], Monthly Income^[2], Terminal Dividend^[3] and Special Dividend^[4] allow policyholders to participate in the financial performance of the life insurance operations. Whether Annual Dividends^[1], Monthly Income^[2], Terminal Dividend^[3] and Special Dividend^[4] are payable and the size of these dividends which “Hang Seng Insurance” distributes or pays depend on the performance of relevant participating policies with regard to investment returns on the assets and currency hedging instruments (if any) supporting the policies, as well as other factors including but not limited to claims, persistency, expenses, and the long-term future performance outlook (both economic and non-economic factors). Performance of policies managed similarly are pooled together when deciding the amount of Annual Dividends^[1], Monthly Income^[2], Terminal Dividend^[3] and Special Dividend^[4] to be paid. Please refer to section “Product risks - Risk affecting Non-guaranteed benefit determination” on the product brochure for the detail of key risk factors.

“Hang Seng Insurance” regularly reviews the level of Annual Dividends^[1], Monthly Income^[2], Terminal Dividend^[3] and Special Dividend^[4] payable to policyholders. Both the past actual performance and management's expectations of the long-term future performance will be assessed against the expected level. If variances arise, “Hang Seng Insurance” may consider sharing such variances with policyholders through the adjustment of Annual Dividends^[1], Monthly Income^[2], Terminal Dividend^[3] and Special Dividend^[4] scales. If the performance over the long term is better than expected, then the dividend amount paid would increase. If performance is below expectation, then dividend amount paid would decrease.

When considering the adjustment of Annual Dividends^[1], Monthly Income^[2], Terminal Dividend^[3] and Special Dividend^[4] scales, “Hang Seng Insurance” strives to maintain a more stable payout to the policyholders by smoothing. This means that the Annual Dividends^[1], Monthly Income^[2], Terminal Dividend^[3] and Special Dividend^[4] level will only be changed if the actual performance is significantly different from the expected level over a certain period of time or if management’s long-term future performance expectations change substantially.

In order to achieve broad fairness between policyholders of participating products, “Hang Seng Insurance” will carefully consider the experiences of different groups of policies so that each group of policies will receive a fair return reflecting mostly its own performance. “Hang Seng Insurance” has also established a dedicated committee to review the fairness of treatment to policyholders and to provide independent advice on the management of the participating policies and the determination of dividend level.

"Hang Seng Insurance" operates an investment strategy with key objectives as follows:

1. Ensure that we can meet the guaranteed benefits that we have committed to you;
2. Deliver to your competitive long-term returns through the non-guaranteed policy dividends; and
3. Abide by a pre-defined set of risk appetite.

The assets supporting the participating policies are carefully managed and monitored according to a predefined set of risk appetite. The asset portfolio predominantly consists of fixed income assets issued by government and corporate entities with good credit quality and long term prospects. It may also include a small portion of high-yield fixed income assets to enhance yield. Growth assets, including but not limited to equities, properties, hedge funds and private equities are managed on prudent basis and may be utilized in order to enhance investment performance in the long run. Subject to our investment strategy, financial derivatives may be used for hedging or efficient portfolio management.

The asset portfolio is well diversified in different types of assets, and is invested in global geographical markets (mainly US, Europe, Asia including HK) and industries. Investment for fixed income assets are mainly in HKD, USD and AUD to match the currency of the underlying policies while growth assets are invested in various currencies for diversification.

The assets supporting the participating policies are carefully managed and monitored according to a predefined set of risk appetite. The asset portfolio predominantly consists of fixed income assets (including both onshore bonds in China Inter-bank Bond Market (“CIBM”) and offshore bonds in offshore (“CNH”) Renminbi market). It may also include a small portion of high-yield fixed income assets to enhance yield. Growth assets, including but not limited to equities, properties, hedge funds, and private equities are managed on prudent basis and may be utilized in order to enhance investment performance in the long run. Subject to our investment strategy, financial derivatives may be used for hedging or efficient portfolio management. However, investing in RMB-denominated assets is subject to applicable laws, regulations and guidelines issued by relevant regulatory authorities from time to time. Any change of the applicable laws, regulations and guidelines may lead to an update to the investment strategy and the associated investment performance may be affected.

The asset portfolio is well diversified in different types of assets, and is invested in global geographical markets (mainly US, Europe, Asia including HK) and industries. Investment for fixed income assets are mainly in RMB to match the currency of the underlying policies while growth assets are invested in various currencies for diversification.

The assets supporting the participating policies are carefully managed and monitored according to a predefined set of risk appetite. The asset portfolio predominantly consists of fixed income assets issued by government and corporate entities with good credit quality and long-term prospects. It may also include a small portion of high-yield fixed income assets to enhance yield. Growth assets, including but not limited to equities, properties, hedge funds and private equities are managed on prudent basis and may be utilized in order to enhance investment performance in the long run. Subject to our investment strategy, financial derivatives may be used for hedging or efficient portfolio management.

The asset portfolio is well diversified in different types of assets, and is invested in global geographical markets (mainly US, Europe, Asia including HK) and industries. Both fixed income assets and growth assets may be invested in various currencies, majority with USD, for diversification. If the currency of the assets is different from the policy currency of the underlying policies, currency hedging may be used to manage the currency risk. The actual policy return may be subject to the movement in exchange rates especially when the currency exposure is not fully hedged.

The current long-term target strategy is to allocate assets attributed to this product as follows:

There could be slight deviation from the above range due to market fluctuation.

Actual allocations will take into consideration past investment performance of the assets supporting the policies, prevailing market conditions and future outlook, and the guaranteed and non-guaranteed benefits of the policies. As the performance of the growth assets investment plays an important role in determining the level of non-guaranteed benefits, under normal circumstances and free from any investment and operational constraints, it is expected that the allocation to growth assets will fall within the higher end of the range as specified, in order to optimize the chance of achieving the illustrated level of non-guaranteed benefits. A good part of the growth assets investment is allocated to private equity. Due to the illiquid nature of private equity, there may be divergence in actual asset allocation and actions may be taken to rebalance from time to time. Currency hedging will be exercised by us if the Policy Currency is denominated in the currency that is different from the underlying assets as a way of counteracting the fluctuation effect under currency mismatch. The management and investment strategy of the asset portfolio may be subject to change depending on the market conditions and economic outlook, and we would inform policyholders should there be any material changes.

Policyholders can choose to accept their Annual Dividends^[1], and/or Monthly Income^[2] and/or endowment coupon and/ or annuity payments^[11] either in cash or to leave them with “Hang Seng Insurance” to accumulate with interests (if applicable).

Policyholders can choose to exercise the Policy Value Management Option to lock-in a portion of Net Cash Value^[6] or Guaranteed Cash Value and non-guaranteed Special Dividend (if any)^[7] to the Policy Value Management Balance to accumulate with interests.

Policyholders can submit a written request to “Hang Seng Insurance” to change the default Death Benefit Settlement Option^[12]. If monthly instalments is selected, the remaining balance of any unpaid Death Benefit will be held at a non-guaranteed interest rate until the full amount of the Death Benefit has been paid to the Beneficiary(ies).

The accumulation interest rates are not guaranteed and will be determined by "Hang Seng Insurance" at its discretion from time to time. "Hang Seng Insurance" reviews the accumulation interest rates regularly with reference to the portfolio yields of fixed income assets, prevailing market conditions, the outlook on fixed income asset yields, the cost associated with the provision of the accumulation service, the cost associated with currency hedging (if applicable), and the likelihood of policyholders leaving their payment for accumulation.

The policy in determining the policy dividends and accumulation interest rates may be reviewed and adjusted by “Hang Seng Insurance” from time to time.

• You may visit here to understand the historical fulfilment ratio of dividend distribution for reference purposes.
• You may also visit here to understand the historical total payout ratio of guaranteed and non-guaranteed benefits for reference purposes.
  

However, the past performance or current performance of “Hang Seng Insurance”’s business may not be a guide for future performances.