| Premier / Premier Ultra - By Friends Provident International by Gary Boal (Originally published in "International Advisor" August 2007. Reproduced with the kind permission of International Advisor. ) Premier, together with its up-market version Premier Ultra, is one of the top-selling offshore regular savings plans on the market today. This article, part of a series of monthly product analyses using LifeBase OnLine, takes a detailed look at Premier to see just why it is so successful. Company Friends Provident plc’s commitment to the offshore market was subsequently strengthened further by the acquisition of another leading offshore insurer, Lombard International, in 2005. Together, the two offshore operations contribute more than 40% of the total life and pension sales of the Friends Provident Group. In 2006, FPI’s new business was £823m1, a 16% increase on 2005. FPI’s business model is heavily focused on the Far East and Middle East, which together comprise 60% of FPI’s total worldwide new business. FPI has branches in Hong Kong, Singapore and Dubai. FPI is a market leader in terms of offshore regular premium business, with “Premier” their key regular premium savings plan, in a highly competitive sector where Zurich International and Royal Skandia are the key competitors. FPI also have a VIP version of the product – Premier Ultra – which is geared to very high premiums, and boasts enhanced allocations. Funds
The range of funds is very geared to FPI’s Asian customers, with regional country funds including:
Using the fund performance tools in LifeBase, past performance in $ over 5 years (to 31 May 2007) includes high performing funds such as: TABLE 1 – 5-YEAR PERFORMANCE: TOP FPI FUNDS
According to the data in LifeBase, the FPI JF India fund (launched in 1993) is the top-performing offshore life fund over this period. The FPI Thames River Eastern European fund is also a top performer, being 8th best in the period. The regional specialisation of FPI’s investment offerings is very much apparent from the list in Table 1, remembering that all of these funds have been linked to FPI for at least 5 years. In the Balanced Managed fund category, performance is understandably more sedate, the star performers (again measured in $) being:
The average performance across all of FPI’s funds over the 5-year period is +102%, which equates to 15.1% pa and is above the average for FPI’s peer group. Design and Charges The % of premium allocated to Initial units (allocation
to Standard units is always 100%) increases considerably
with premium size, and also with premium term, most particularly
for Premier Ultra. The standard allocations are boosted
by special offer terms which have now been extended to
30 September 2007:
Premier’s design is relatively clean, transparent,
and less complicated than some other products in its peer
group. A summary of the charges is outlined in the Table
below.
Fund switching is free (unlimited). Premier and Premier Ultra have two optional rider benefits – Additional Life Cover and Premium Protection Cover. Standard death benefit is 101% of unit value. Projections TABLE – PROJECTIONS
Projections are for a 15-year plan with premium $1,000
pm. Assumes growth at 7% pa before charges (excludes external
fund charges). As can be seen, Premier Ultra and Premier are competitive products, particularly during the latest special offer period. Whenever comparing different regular premium plans and providers, particular care needs to be taken to ensure that value is assessed not just at maturity, but also on early paid-up conversion of a policy or to early surrender. After all, it is a minority of 15-year plans (for example) which run to maturity and pay full premiums throughout. Some product designs subsidise enhanced maturity value projections with less competitive early paid-up values and/or surrender values, so care is needed in interpreting projection figures. A good maturity value projection may often go hand in hand with a poor surrender value projection, and vice versa. In this respect, more detailed analysis by Boal & Co indicates that Premier is very much above average, with paid-up values and surrender values very much at the top end of the peer group. Summary
all provide a clear rationale for Premier’s success. |
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