Fulfillment ratios and Total Cash Value ratios of respective products

Sun Life HK launched below ESG-focused savings plans to the market that actively integrates ESG concepts into its own investment strategies, managing the risks and optimizing opportunities through focusing investment on those assets with high ESG ratings.

1. Sun Life Financial is ranked number 32 in the top 100 asset managers in the world by Assets Under Management (AUM) by ADV Ratings, as of March 31, 2022. Source: https://www.advratings.com/top-asset-management-firms
2. Ratings are for Sun Life Assurance Company of Canada.
3. As of December 31, 2022
4. As of September 30, 2022, including life insurance, pensions and group insurance clients.
5. Fraser Pension Universe Report (based on year-end December 2020.)
6. As of December 31, 2022. Based on Year 2022 Annual Report of Sun Life 
7. MSCI ESG as of July 31, 2023.
8. Source:《厚生利群：香港保險史（1841-2008 ）》, Joint Publishing HK.
9. As of December 31, 2022. Based on Year 2022 Annual Report of Sun Life
10. As at 31 March 2023, rounded to the nearest trillion. On a non-IFRS basis, this calculation should not be considered as a proxy under IFRS.
11. Source: https://www.forbes.com/global2000./#742feb224aa2
12. 10Life is a large-scale insurance comparison platform in Hong Kong, covering more than 40 insurance companies and over 1,000 life and health insurance products, allowing Hong Kong people to learn about insurance and buy the right insurance. Users can also contact 10Life's insurance consultants directly for enquiry and application.

Sun Life Hong Kong Limited ("Sun Life") has a long history of participating products. We have rich experience in managing participating accounts. Our investment experts and strong financial capabilities, together with a balanced and diversified investment portfolio, and adhere to the customer centric philosophy enable us to optimize the long-term returns for policyholders and maintain the risks at an appropriate level. On top of the guaranteed benefits, the non-guaranteed benefits would provide competitive and stable medium to long term returns:

The type of non-guaranteed dividend/bonus

The dividends or bonuses typically have the features shown in the following table. We put the interests of client first and ensure fair distribution of dividends among various groups of policyholders to protect the rights and reasonable expectations of all policyholders.

Dividends/Bonuses will typically vary based on the performance of a number of factors, with the investment return, including the impact of asset defaults and investment expenses, normally being the main determinant of bonus performance. Other factors include, but are not limited to, claims experience, taxes, expenses and policyholder persistency experience. You could press here to understand more about the dividend/bonus philosophy of Sun Life Hong Kong’s products.

How does Sun Life properly manage participating accounts to meet policyholders' expectations?

1.　Strict regulatory

The projected figures of dividends/bonuses on illustration of each product have been gone through strict and meticulous calculations by forecasting the economic environment and investment returns in the next few decades. Under strict regulatory, Hong Kong insurance companies have strong business integrity and credit, and pay more attention to non-guaranteed dividends/bonuses.

External regulatory – Insurance Authority’s Guideline 16

Sun Life complies with Article 2.6 under Guideline 16 issued by Insurance Authority. The Board, on the advice of the Appointed Actuary, is ultimately responsible for interpretation of the policyholders’ reasonable expectation, and deciding the dividends/bonuses declaration, taking into account the principle of fair treatment of customers, and the issue of equity between shareholders and policyholders.

Internal regulatory

Sun Life reviews its dividend/bonus and accumulation interest rate of the policy at least once a year in accordance with the company’s dividend/bonus philosophy. Sun Life also follows the AGN9 guidelines of the Hong Kong Actuarial Society and appoints actuaries to determine best estimate assumptions with reference to past experience to determine dividends/bonuses in illustration.

2. Investment capabilities and risk management

Most participating products will invest in stocks, bonds, etc. in mature markets, and will change the investment asset allocation according to market conditions. Plans with higher guaranteed returns have a lower proportion of high-risk, high-yield assets; plans with lower guaranteed returns and higher expected returns have a higher proportion of high-risk, high-yield assets. At the same time, we will use derivatives to manage risks and add some alternative investment varieties to make the investment portfolio balanced and diversified.

3. Smoothing mechanism

Smoothing mechanism is applied to prevent dividend/bonuses would completely follow the rise and drop of investment performance in the same degree. In order to provide more stable bonuses to policyholders, the investment returns during good market conditions are actively retained as a buffer for future dividend/bonuses when the investment performance is poor, and unfavourable experience may be smoothed out over time. For products with a terminal/special bonus feature, adjustments to terminal/special bonus scales pass through experience normally with less smoothing applied.

When you purchased participating product, how to measure whether an insurance company is delivering on the projected returns on the illustration at the time of sale?

You could review below two important indicators for the performance of the product you purchased:

1. You could review the overall performance by comparing the ratio of Total Cash Value in anniversary statement versus the projected Total Cash Value upon policy inception (“TCV ratio”)
2. You could review fulfillment ratio to understand the overview of the historical distributed non-guaranteed amount versus the projected non-guaranteed amount at the point of sale 

Important notes when reviewing the TCV ratio and fulfillment ratios:

• Savings insurance products focus on performance of long-term return. The TCV ratios and fulfillment ratios are intended for reference purpose only and should not be taken as an indicator of future performance of the participating products.
• The guaranteed and non-guaranteed ratios as well as the underlying investment strategies vary from plan to plan, and hence different plans have different investment returns. Therefore, the fulfillment ratios of plans are not directly comparable with each other, and it is recommended that financial advisors and clients should also refer to the total cash value ratio for multiple references.
• The proportion of non-guaranteed amounts distributed to premiums paid or guaranteed cash value at the beginning of the policy period is relatively low for participating products. As the proportion of non-guaranteed amounts will gradually increase over the medium- to long-term of the policy, the fulfillment ratio will then serve as an indicator for comparing the distributed amount of past dividends/bonuses with the amount in the sales illustration..
• Dividend/bonus history is not an indicator of future performance of the participating products. Thus, the fulfillment ratio can reflect only the non-guaranteed benefits declaration result for a certain past period of the policies issued; it cannot represent any future declaration plan and strategy.

The following are examples of the total cash value ratio of Sun Life’s participating products (assuming no cash value is withdrawn from the policies):

Note: The above illustrations are for reference only. The rates shown may vary from different policy (e.g., policy issue year, issue age of the insured, gender and smoking habit of the insured, etc.). The projected non-guaranteed benefits are based on the Company's bonus scales determined under a number of assumptions, including, but not limited to, current assumed investment returns (which have also incorporated the Company’s expectation of future investment returns), claims and policy terminations, and are not guaranteed. The actual amount payable may change from time to time with the values being higher or lower than those illustrated.

Total Cash Value (TCV) ratios can reflect the actual accumulated performance of a policy compared to that illustrated at point of sale.

The historical TCV ratios are intended for reference purpose only and should not be taken as an indicator of future performance of the participating products. The future TCV ratios may be lower or higher than the historical TCV ratios as illustrated.

How to interpret TCV ratios?

The TCV ratios indicate how the actual performance of the policies effective in the respective year compare with the illustrated amount at the point of sale. For example, a TCV ratio of 105% means that the actual TCV is 5% higher than the illustrated amount at the point of sale.

It should be noted that the TCV ratio only reflects the performance for a certain past period of the policies issued and are intended for reference only. It does not represent any future bonus plan and strategy over a longer period for the whole policy term and should not be taken as an indicator of future bonus declaration result of the participating products.

The TCV ratio is calculated as the ratio of actual TCV, which includes guaranteed elements (e.g. guaranteed cash value, guaranteed cash coupons, guaranteed incomes, guaranteed annuities and/or guaranteed bonus) and all non-guaranteed elements of the product, against the illustrated TCV at the point of sale for all relevant policies in the reporting year.

Only inforce policies are included in the calculation and hence the TCV in the calculation has not been paid as of the end of the reporting year.

For the purpose of calculation of TCV ratios, it is assumed that:

• All annual dividends and monthly incomes / monthly annuities / cash coupons (if any) declared are left with Sun Life Hong Kong Limited (the "Company") for interest accumulation since policy issuance based on the relevant actual interest rates.
• All premiums are paid in full when due.

Please note that TCV ratio is a good reference for the actual accumulated performance of a policy compared to that illustrated at point of sale but it does not replace the fulfillment ratio and the two calculation bases are different.

Please note the figures in below tables are calculated based on the data as of relevant reporting year and have been rounded to the nearest percent.