BonusGuide-KPMG.PDF

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Version Date Updates Done by Reviewed by

2 18-Aug-2005

Update based on eBao context & combined all information in one

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Bonus Guide

I. General Information

Bonus is declared on participating policies based on the performance of the Life Fund. Non-participating policies include Investment-linked and Term policies.

Bonus is declared usually on 31st March for policies in force as at 31st Dec of the previous year, based on finalised accounts as at 31 Dec of previous year. e.g. Bonus for the year ended 31st Dec 2001 will be declared on 31st Mar 2002.

Declared bonus will be added to the accumulated bonus account upon 1st Apr of the year or the policy anniversary of the year, whichever is later.

Declared bonus will only vest after 2nd policy anniversary.

Bonuses, once vested, are guaranteed.

1. Income's participating bonus series are as follows:

1.1 Traditional Participating Life Policies:

Bonus Series Bonus Code Low Premium Series (LP Series)* L, LH, LG Compound Bonus Series (CB Series) C Deferred Bonus Series (DP Series) D Simple Bonus Series (SB Series) S

*There are 3 sub-bonus code under LP Series, where LH is for Harvest Policies, LG is for Growth Policies and L is for all other products under LP Series.

Note that currently only "LP Series is available for new business.

For policies converted to Paid-up, different bonus rates will be applied instead of the original bonus series.

1.2 Participating Annuity

Bonus Series Bonus Code Y Series Y H Series H K Series K

Note that currently only "H" series is available for new business.

1.3 Anniversary Bonus for Traditional Participating Life Policies

In addition, Income has declared anniversary bonus in the following years (31st Mar of)

Year 1990 - 20th anniversary bonus, added to bonus for the year 1989 Year 1995 - 25th anniversary bonus, added to bonus for the year 1994 Year 2000 - 30th anniversary bonus, added to bonus for the year 1999 Year 2005 - 35th anniversary bonus, added to bonus for the year 2004

For 25th and 30th anniversary bonus, Income policyholders were allowed to encash these bonuses during a pre-specified period (eg. Within 6 months). After this period, the anniversary would be added to the accumulated bonus.


There was no such arrangement for 20th and 35th anniversary bonus. Anniversary bonus was added to the accumulated bonus immediately after declaration.

1.4 All of our Bonus Series are compound bonus and are reversionary. There are some exceptions and special cases:

- For the S series, the compounding of the bonus takes effect only on policies that have completed 10 years.

- For the Special Endowment Plan and the Pioneer Plan, the bonus is calculated on 20% and 50% of the sum assured respectively

- For the D series, the bonus takes effect only on policies in force for more than 10 years.

Refer Annex 1-3 contains a summary of Income bonus declaration history.


II. How to verify if the Accumulated Bonus in the system for traditional participating policies?

1. The Accumulated bonus per $1000 sum assured can be found in the accumulated bonus tables:

- Bonus Tables for LP Series, CB Series, DP Series, SB Series, Growth LP Series, Harvest LP Series

- There are up to 4 tables for each categories: Use Table 1: For All Reversionary Bonus and all anniversary bonuses Use Table 2: For 25th Anniversary Bonus encashed Use Table 3: For 30th Anniversary Bonus encashed Use Table 4: For 25th and 30th Anniversary Bonus encashed

2. To verify the accumulated bonus for a policy in the system, the following information must be collected:

- Bonus Series - Entry Year - Sum Assured

3. Look up the accumulated bonus per $1000 sum assured in the bonus tables, based on Bonus Series, Entry Year, Bonus Series, Year up to which bonus are accumulated. Normally, table 1 can be used for majority of the policies.

4. The Accumulated Bonus to-date will be: Sum Assured x Accumulated Bonus per $1000 SA / 1000

5. The following is applicable for HP System only: To verify if PH has done a 25th/30th annivesary bonus encashment,check "Q" screen. If "AB" dated 01/05/1995 => 25th anniversary bonus encashed If "AB" dated between 01/04/2000 to 31/11/2000 => 30th anniversary bonus encashed (Sample: PN 60269881)

6. Under what circumstances will it not equal to the above? - When there has been a bonus encashment before. The bonus transaction file will reflect bonus encashment done. the "Q" screen will reflect BE flag. - There are a variety of other reasons, including if the policy was put on PRS/SRS, or Other alterations have been made before.

7. The following is applicable for HP System only: What are the other relevant information of the bonus transaction file in HP ("Q" screen)?

The common ones are: A - Adjustment of bonus due to policy alteration B Yearly Bonus declaration, if transaction date was 01/04/XXXX B 30th anniversary bonus, if transaction date was 01/11/2000 BE Bonus Encashment made (this will show the amount of bonus encashed and its cash value). This can be encashment of either reversionary bonus or anniversary or both. BL Audited Bonus balance of status 3 policies, as at date of audit. PL Audited Bonus balance of paid-up policies, as at date of audit.

The less common ones are: AB- Encashment of 25th or 30th ann. Bonus; note that 20th anniversary bonus was not encashable; Some encashment of the 30th anniversary bonus will be reflected as BE usually with transaction date 1/11/2000.

XD Adjustment in bonus, normally due to backdating, being added back to the policy. This could be passed in during the bonus audit exercise, if it was inadvertently missed out in at the policy alterations stage.


XX Amount that have been partially surrendered b/4 bonus audit file was set up in 1995. PE Created on 22/3/98 to reflect the Expected Total Bonus computed in an bonus audit exercise. This record is kept for reference only and it does not form part of the calculation of the bonus in the system.

W A special code used for Bonus Encashment of Foundation policy only; same nature as BE.

/End


Annex 1: Bonus History of Traditional Participating Plans

Bonus Series L

Year Bonus Rate 1993 - 1996 2.8% of sum assured compounded at 3.5% 1997 - 2000 2.5% of sum assured compounded at 2.5% 2001 2.0% of sum assured compounded at 1.75% 2002 1.0% of sum assured compounded at 1.5% (not for Growth Policy) 2003 1.5% of sum assured compounded at 1.5%

(not for Growth & Harvest Policy) 2004 1.8% of sum assured compounded at 1.5%

(not for Growth & Harvest Policy)

Bonus Series C

Year Bonus Rate 1970 - 1989 3.2% of sum assured compounded at 3.5% 1990 - 1996 3.5% of sum assured compounded at 3.5% 1997 - 2000 3.2% of sum assured compounded at 2.5% 2001 2.7% of sum assured compounded at 1.75% 2002 1.5% of sum assured compounded at 1.5% (not for Growth Policy) 2003 2.0% of sum assured compounded at 1.5%

(not for Growth & Harvest Policy) 2004 2.3% of sum assured compounded at 1.5%

(not for Growth & Harvest Policy)

Bonus Series D (Bonus will only be declared starting from the end of 10th year, credited on 11th policy anniversary)

Year Bonus Rate 1980 - 1994 2.0% of sum assured compounded at 2.0% 1995 - 1996 2.0% of sum assured compounded at 3.5% 1997 - 2000 1.6% of sum assured compounded at 2.5% 2001 1.1% of sum assured compounded at 1.75% 2002 0.5% of sum assured compounded at 1.5% 2003 0.8% of sum assured compounded at 1.5% 2004 1.0% of sum assured compounded at 1.5%

Bonus Series S (Bonus will only compound starting from the end of 10th duration (based on accumulated for the 9th year)

Year Bonus Rate 1970 - 1973 3.0% of sum assured compounded at 2.0% 1974 - 1976 3.2% of sum assured compounded at 2.0% 1977 - 1978 3.4% of sum assured compounded at 2.0% 1979 - 1981 3.8% of sum assured compounded at 2.0% 1982 - 1996 4.0% of sum assured compounded at 2.0% 1997 - 2000 3.6% of sum assured compounded at 1.0% 2001 2.9% of sum assured compounded at 1.0% 2002 1.2% of sum assured compounded at 1.5% 2003 1.9% of sum assured compounded at 1.5% 2004 2.2% of sum assured compounded at 1.5%


Annex 1 contd:

Bonus Series P (Paid-up)

Year Bonus Rate 1982 - 1996 2.0% of sum assured compounded at 0.0% 1997 - 2000 1.0% of sum assured compounded at 1.0% 2001 2004 Nil

Bonus for Single Premium Growth Plan

(a) Bonus Series L

Year Bonus Rate 1993 1996 2.8% of sum assured compounded at 3.5% 1997 2000 2.5% of sum assured compounded at 2.5% 2001 2.0% of sum assured compounded at 1.75% 2002 0.5% of sum assured compounded at 1.5% 2003 1.2% of sum assured compounded at 1.5% 2004 1.5% of sum assured compounded at 1.5%

(b) Bonus Series C

Year Bonus Rate 1970 1989 3.2% of sum assured compounded at 3.5% 1990 1996 3.5% of sum assured compounded at 3.5% 1997 2000 3.2% of sum assured compounded at 2.5% 2001 2.7% of sum assured compounded at 1.75% 2002 0.5% of sum assured compounded at 1.5% 2003 Nil. All Growth Plan C series has matured. 2004 Nil. All Growth Plan C series has matured.

Bonus for Harvest Plan

(c) Bonus Series L

Year Bonus Rate 1999 2000 2.5% of sum assured compounded at 2.5% 2001 2.0% of sum assured compounded at 1.75% 2002 1.0% of sum assured compounded at 1.5% 2003 1.2% of sum assured compounded at 1.5% 2004 1.5% of sum assured compounded at 1.5%


Annex 2: Bonus History of Participating Annuities

Participating Annuities a) Series Y (Previously known as Series P; sold prior to 1 July 2001) Bonus will only be declared for those with annuity installment has already commenced (i.e. after deferred period)

Year On the Policy Anniversary Bonus Rate 1993 1 April 1994 to 31 March 1995 3.5% 1994 1 April 1995 to 31 March 1996 3.5% 1995 1 April 1996 to 31 March 1997 1.5% 1996 1 April 1997 to 31 March 1998 1.0% 1997 1 April 1998 to 31 March 1999 1.0% 1998 1 April 1999 to 31 March 2000 0.5% 1999 1 April 2000 to 31 March 2001 2.0% 2000 1 April 2001 to 31 March 2002 1.0% 2001 1 April 2002 to 31 March 2003 0.0% 2002 1 April 2003 to 31 March 2004 0.0% 2003 1 April 2004 to 31 March 2005 0.0% 2004 1 April 2005 to 31 March 2006 0.0%

b) Series H (sold from 1 July 2001) Bonus will be declared both during and after deferred period.

Year On the Policy Anniversary Bonus Rate 2001 1 April 2002 to 31 March 2003 1.0% 2002 1 April 2003 to 31 March 2004 0.0% 2003 1 April 2004 to 31 March 2005 0.5% 2004 1 April 2005 to 31 March 2006 1.0%

c) Series K (sold from 1 Nov 2002) Bonus will be declared both during and after deferred period.

Year On the Policy Anniversary Bonus Rate 2002 1 April 2003 to 31 March 2004 0.0% 2003 1 April 2004 to 31 March 2005 2.0% 2004 1 April 2005 to 31 March 2006 2.5%


Annex 3: Anniversary Bonus History of Traditional Participating Plans

Year 1989: 20th Anniversary Bonus Year of Issue Rate per $1000 SA: D Rate per $1000 SA: C, S

< = 1985 $ 10 $ 20 1986 $ 8 $ 16 1987 $ 6 $ 12 1988 $ 4 $ 8 1989 $ 2 $ 4

Year 1994: 25th Anniversary Bonus Year of Issue Rate per $1000 SA < = 1990 $ 10 1991 $ 8 1992 $ 6 1993 $ 4 1994 $ 2



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