Friday, July 21, 2006

AIA Participating Fund Commentary

America International Assurance, more commonly known as AIA, has for the first time published a commentary of AIA's Participating Fund, commonly referred to as the Par Fund. This is supposedly an industry first by AIA as insurance companies are not required to and typically do not reveal details of how they invest the premiums of the policyholders.

The AIA Participating Fund commentary that I got my hands on has provides information on the asset mix, net assets, etc. This increased transparency by AIA is, I believe, an effort to address the bad publicy that it had been getting from media coverage recently. By being transparent, AIA will be able to show if its Par Fund is performing in accordance with the general market and hence justify the quantums of bonuses and dividends.

Personally, I find that while AIA's Participating Fund is a laudable effort. It is quite irrelevant to people who are mainly holding insurance for protection. Only when one holds endowment or investment oriented policies will the performance of the AIA Participating Fund be important since it directly impacts the returns at policy maturity.

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