On March 23, MAPFRE MSV Life plc approved the bonus rates for With-Profits policies for the year ended December 31, 2020.
A regular bonus rate of 1.50 per cent 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 per cent 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 per cent from the 2019 declaration.
On the ‘old series’ endowment and whole life policies, a regular bonus of one per cent of the basic sum assured plus bonuses was declared. The 2020 regular bonus rates for these contracts represent a reduction of one per cent 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 per cent 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 five per cent will be paid on the value of the policy account plus an additional percentage of 2.50 per cent 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 March 24, 2021, and March 31, 2022.
The board also approved a regular bonus of 1.40 per cent on those secure growth policies which formed part of the portfolio of business transferred to MAPFRE MSV Life from Assicurazioni Generali SpA during 2000.
Finally, the board also approved a regular bonus of one per cent on the ALICO 78 policies and a regular bonus of one per cent 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).
There still remains plenty of uncertainty with the renewed waves and new variants
The MAPFRE MSV With-Profits Fund increased by 1.9 per cent from €2.14 billion in 2019 to €2.18 billion at December 31, 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, while final bonuses are likely to be highly volatile and very dependent on the investment performance of the company.
The CEO of MAPFRE MSV Life, Felipe Navarro Lopez de Chicheri, said: “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 WHO declared a global pandemic. 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.”
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 the 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 three per cent 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.”