Prudential is the latest insurer to offer a universal life product, PruUniversal Vantage.

This comes just after Great Eastern Life launched their own universal life product, Prestige Legacy some weeks ago. AIA also has their own universal life product, AIA Platinum Legacy.

For those who are not familiar with universal life (UL), this class of product might seem confusing at first.

An universal life product is used to provide for a large (mega) sum assured.

Premiums are usually paid in a single lump sum or spread over a few years.

Technically, the easiest way to understand how a universal life works is to relate it to a single premium investment-linked plan (ILP).

The main difference is that instead of being invested into funds, the UL will provide for a crediting rate (or interest) on the lump sum. So, it is like an ILP invested into interest generating instruments.

Prudential’s PruUniversal Vantage offers a guaranteed minimum of 3% interest.

Of course, we should never compare the interest rate we can obtain from a UL with a simple bank deposit because you need to factor in all the charges within the plan. After netting off the charges, the returns will be less than what you will receive from the guaranteed rates.

Other universal life products sold here include Manulife’s Heritage, HSBC’s Jade Global Select and Transamerica Life’s TransAce and TransUltra series.

Most universal life products are denominated in USD as the assets are usually used to buy USD denominated bonds in order to provide for a decent crediting rate.

AIA Complete Critical Cover is a new plan launched recently by AIA to provide insurance coverage against various severities of critical illnesses.

The typical 30 critical illness (CI) cover that most people have provides for a claim of 100% of the insured amount in the event a critical illness occurs. The critical illness must be included in the list of 30 CI under the plan and also fit the definition of the medical condition.

While the definitions are standardized across different insurers, meeting the definition of the medical condition would usually mean that the illness is already at a fairly developed stage.

The AIA Complete Critical Cover helps to bridge this gap by classifying the critical illness into 3 severity levels – early, major and catastrophic paying out 25%, 100% and 200% of the insured amount respectively.

Multiple claims on different critical illnesses are also possible provided the total claimable amount is not more than 200% of the insured amount.

There’s also other terms and conditions to be fulfilled (e.g. Only 1 claim for Early Critical Illness, Major Critical Illness and Catastrophic Critical Illness would be payable from each Critical Illness Group under the Basic Policy) which I will not go into details here.

The minimum age of entry for the plan is 6 months and is renewable up to age 75.

The AIA Complete Critical Care can be said to be a hybrid of Great Eastern’s Early Payout Critical Care and Prudential’s PruMultiple Crisis Cover. Providing such a comprehensive coverage would of course comes at a cost.

Another similar product in the market would be TM Asia’s Cancer Care which is something like Great Eastern’s Early Payout Critical Care but is restricted to providing coverage only for Cancer.

UOB announced yesterday the sale of their life insurance business, UOB Life, to Prudential for S$428 million.

Completion of the Sale is scheduled for 31 January 2010 or such other date as parties may mutually agree.

As part of the sales agreement, UOB will also start offering Prudential’s life, accident and health insurance products through their respective bank branches for an initial term of 12 years. This arrangement is a win-win for both parties as it allows Prudential to strengthen its market share while UOB will be able to grow its bancassurance business by leveraging more on its distribution capabilities rather than product creation.

This sale will not affect the policy terms of existing UOB Life customers. A FAQ that addresses some of the questions UOB Life policy holders might have is shown below:

Who is Prudential?

Headquartered in the UK, Prudential is a leading international financial services group with more than 160 years of history and heritage and operations spanning 13 countries in Asia. Their Singapore businesses, which include both life insurance and asset management, have provided investment, savings and protection products and solutions to Singaporean individuals and families since 1931. You can learn more about Prudential Singapore by visiting www.prudential.com.sg.

What will happen to my UOB Life policy after the sale?

There will be no change to your policy. The issuer of your policy, UOB Life, will continue to honour and service your policy before and after UOB Life is acquired by Prudential. The name of the company, UOB Life, will be changed by Prudential after completion of the sale. Prudential will inform you directly of any relevant change.

Who do I contact if I have questions about my existing UOB Life policy?

Please continue to contact UOB Life. There is no immediate change in customer support, and UOB Life will continue to service your product. Following legal completion of the transaction, Prudential will inform you directly of any relevant change.

Will the value of my UOB Life policy be affected by the sale?

The value of your UOB Life policy will be determined in accordance with the terms of your policy contract, which will be honoured by UOB Life, before and after the sale.

Which company will service my policy and life insurance needs?

You will be serviced by UOB Life. After the sale, Prudential will inform you directly if there is to be any change to this arrangement.

When will completion take place and will I be informed?

The sale is anticipated to be completed within the first half of 2010. Prudential will notify you of the completion of the sale.

Can I terminate my policy?

As the owner of the policy, you have the right to terminate your policy at any time. However, do note that any termination ofyour policy will have to be in accordance with the terms of your policy.

Should I terminate my policy?

This decision should be made in consultation with your relationship manager or financial adviser, who will consider factors like your risk profile, financial objectives, as well as your original reasons for buying the policy

In the past few months, we have seen a number of single premium non-participating insurance plans being launched by different life insurance companies: AIA, NTUC, Prudential, HSBC and TM Asia Life.

The plans are either 2 or 5 year terms offering yields of between 1.4% to 2.75% p.a.

• AIA Wealth Accumulator
• HSBC Guaranteed Saver Plus
• PruInvestor Guaranteed Plus
• TM NestEgg (SP Guaranteed)
• NTUC Capital Plus

The recent trend sees the yield getting lower compared to the series that were launched earlier in the year. For example, HSBC’s current Guaranteed Saver Plus gives a yield of 1.8% to 2.0% p.a. for  a 5-year term, compared to an earlier 2.25% to 2.75%.

However, the take-up rate for these plans remains tremendous. With the plans being of “limited size”, consumers have been quick to take up the plans. The latest offering by TM Asia Life took less than a week to be fully subscribed.

Looks like this is the hot product in our market now. The liquidity fueling these products  is likely to be funds being transferred from banks.

UOB has made a buyback offer to the 4000 customers who purchased Pru Yield 15 or Yield 20 through them.

Investors will be able to redeem back their principal less any interest they have already received if they opt for UOB’s offer by 6 Nov 2009.

This works out to be $0.88 for Pru Yield 15 and US$0.82 for Pru Yield 20.

These 2 funds were mostly sold as capital protected products but had seen their price drop to as low as $0.375 in March 2009 at the height of the credit crisis. The price has since rebounded to $0.815 and US$0.842 respectively.

Investors who do not opt for the buyback offer will have to wait until June 2010 to get a full repayment of their capital. They will have tol continue to bear default risk of the Yield 15 and 20 product.

As of 16th June 2009, there were 14 defaults out of a total of 100 entities making up the notes. The notes can take around 9 more defaults before the capital is adversely affected.

Actually, the buyback offer for the Yield 20 is a purely token one as the price of the notes is currently trading at above the buyback offer price.

Note that the buyback offer only applies to UOB customers who bought the Yield 15 or 20 through them.