On 23 March 2021, MAPFRE MSV Life p.l.c. approved the bonus rates for With-Profits policies for the year ended 31 December 2020.
A Regular Bonus Rate of 1.50% 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 1.40% was declared on the Comprehensive Life Plan (regular and single premium policies). The 2020 Regular Bonus Rates for these contracts represent a reduction of 1.35% from the 2019 declaration.
On the ‘Old Series’ Endowment and Whole Life policies, a Regular Bonus of 1% of the basic sum assured plus bonuses was declared. The 2020 Regular Bonus Rates for these contracts represent a reduction of 1.00% from the 2019 declaration.
In addition, for plans that have been in force for more than 10 years, 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. For the Comprehensive Life Plan (Regular Premium) and Comprehensive Flexi Plan (Regular Premium), a Final Bonus of 1.25% has been declared for every year in force after the 10th year of the policy.
For Single Premium policies the Final Bonus is 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, Comprehensive Flexi Plan (Single Premium) and Comprehensive Life Plan (Single Premium), a flat Final Bonus Rate of 5.00% will be paid on the value of the policy account plus an additional percentage of 2.50 % for every year in force after the 10th year of the policy. Unless the Final Bonus rates change in the meantime, these Final Bonuses will be paid on the value of the Policy Account as at the date of death or maturity between 24 March 2021 and 31 March 2022.
The Board also approved a Regular Bonus of 1.40% 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 1.00% on the ALICO 78 policies and a Regular Bonus of 1.00% 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 1.9% from €2.14 billion in 2019 to €2.18 billion at 31 December 2020. The total investment return of the Fund amounted to €60.2 million, representing a strong recovery from the adverse impact on financial markets following the declaration of the COVID-19 virus as a pandemic in March 2020. This compares to a total investment return of €222.1 million in 2019.
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 and the deepening of the low interest rate environment, investment returns could fluctuate further. Fair value movements and investment returns impinge directly on the rates of bonuses declared by the Company. Regular Bonuses are therefore expected to vary over the lifetime of the policy whilst Final Bonuses are likely to be highly volatile and very dependent on the investment performance of the Company.
The CEO of MAPFRE MSV Life, Mr. Felipe Navarro Lopez de Chicheri stated, “The year 2020 proved to be a very eventful year, marked by a number of unprecedented developments. At the turn of the year, the financial markets were still under pressure from the trade war between the US and China. Everything turned out differently in Q1 as concerns grew with more countries reporting their first cases of COVID-19. Infections multiplied around the world through February, and by early March, the World Health Organization declared a global pandemic as the spread of the virus reached more than 100 countries. In Spring we saw a spike in cases and a global economic contraction as people stayed home, and another surge of infections would come during the summer. Government and central banks throughout the world worked to mitigate the situation providing financial support for individuals and businesses”.
For investors, the year was characterised by sharp swings for stocks. March saw an upwards spike in volatility and a large drop in all major indices as the pandemic worsened. This was followed by a rally in April, and stocks reaching their previous highs by August. Both Developed market equities and Emerging Market group gained in Q4 as vaccine breakthroughs fostered hopes for normality.
Within this context, the MAPFRE MSV Life With-Profits Fund returned a net return of 3.00% which is considered to be a satisfactory performance within the context of the unprecedented global environment that characterised 2020.
Commenting on the outlook for the future, Navarro Lopez de Chicheri said, “The response of the developed world to the coronavirus involving monetary and fiscal stimulus, potential for effective vaccines rollout and expectations of economic recovery paint a positive picture for 2021. This notwithstanding, however, it is clear that there still remains plenty of uncertainty with the renewed waves and new variants of the virus posing concerns for the economic and investment outlook. Indeed, transitioning out of the pandemic may be slower and more painful than expected, leading to downside risks, which would in turn affect the timing and strength of the recovery“.
The MAPFRE MSV Life With-Profits Fund
The money of MAPFRE MSV Life With-Profits policyholders is invested in the MAPFRE MSV Life With-Profits Fund. With assets under management of €2.18 billion and approximately 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 the Fund allow for investing in a very wide range of global assets. The objective of the MAPFRE MSV Life With-Profits Fund is to offer competitive long-term real returns by smoothing the peaks and troughs of day-to-day market movements whilst 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.
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.