SEOUL, Korea, April 16, 2014 (Korea Bizwire) –Variable life insurance funds, the bread-and-butter of life insurance companies, are recording a very low rate of return. Over the last year, their average yield was 0.81 percent with about 40.6 percent of the funds having recorded deficit.
On April 15, the Korea Finance Consumer Federation (KFCF) reported that 325 in 801 variable insurance funds have been losing money upon analysis of the rate of return of all those funds.
KFCF looked into 801 funds which have lasted for more than one year (as of April 1, 2014) out of the entire 892 funds and found that the average yield of the funds was only 0.81 percent with the effective yield to be 0.71 percent for the last one year.
The annualized rate of return which is the cumulative return of all funds from their initiation to the present converted into annual rate is 4.43 percent (effective yield of 4.38%), a drop of 0.63 percentage point since the last study in October 2013.
The fund recording the highest yield was AIA’s “European Index Fund” with about a 21.85 percent return. The runner-up was ING’s “Global Climate Change ETF Fund” with a 21.73 percent return while BNP Paribas Cadif’s “Gold Riche ETF Fund” with a negative return of 25.77 percent. The difference between the best earner and the worst was 47.52 percent.
Prudential’s “Long-term Value Equity Fund” recorded the highest annualized rate of return of 20.74 percent, and Metlife’s “Gold Investment Fund” recorded the lowest annualized rate of return of -16.09 percent.
Only 54 funds (6.7%) managed to record an annualized rate of return greater than 10.0 percent, while 100 funds (12.5%) recorded deficit. According to the analysis, run-down funds with an annualized rate of return less than 5 percent accounted for 52.1 percent.
KFCF Insurance Commissioner Lee Ki-wook said, “The fact that 40 percent of variable insurance funds sold by life insurance companies have been losing money means they have lost their confidence as an effective financial instrument.”
Written by Robin Koo (firstname.lastname@example.org)