Ceilli Presentation

GREY
R209
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B212
RED
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WEALTH
MANAGEMENT
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B147
TAKAFUL
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G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
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B174 AIA confidential and proprietary information. Not for distribution.
AIA.COM
GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
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G187
B30
SEA BLUE
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B174
CEILLI
(Investment-linked Examination)

1 |
AIA confidential and proprietary information. Not for distribution.
1
1
INTRODUCTION TO INVESTMENT-
LINKED LIFE INSURANCE
1

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WEALTH
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CITRUS
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LIME
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2
Chapter 1: Introduction to Investment-Linked Life Insurance
Policyholder
Fund Managed
By Insurer
Protection Investment
P
r
o
t
e
c
t
i
o
n

C
a
p
i
t
a
l

G
a
i
n

pay premium

GREY
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RED
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WEALTH
MANAGEMENT
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B63
PLUM
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G0
B88
CITRUS
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LIME
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3
Special
unitised fund
Investment
Performance
Linked
Value
fluctuates
Value of
policy
Directly linked

UNITS

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B63
PLUM
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G0
B88
CITRUS
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LIME
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4
Investment-
Linked
Unit-Linked Variable Life
United Kingdom U.S.A.
Malaysia
Refers to the same thing


5 |
5
2
KEY CONSIDERATIONS IN
INVESTMENT
5

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CITRUS
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LIME
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2.1 Investment Objectives
2.2 Funds Available
2.3 Risk or Security
2.4 Investment Horizon
2.5 Accessibility of Funds
2.6 Taxation Treatment
2.7 Performance of the Investment
2.8 Diversification
Chapter 2 Key Considerations in Investment

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RED
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TAKAFUL
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B63
PLUM
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G0
B88
CITRUS
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LIME
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7
Why do
people
invest?
Retirement
income
Education &
up-bringing
Funds for
dependents
Improve
financial
position
Comfortable
standard of
living
Pay expenses
& taxes upon
death

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RED
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MANAGEMENT
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B63
PLUM
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B88
CITRUS
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LIME
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8
What should I
invest in?
Depends on what
you want!
or
Regular
Income Flow
Capital Gains

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RED
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PLUM
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G0
B88
CITRUS
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LIME
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9

More free funds

Wider choice of
investment
Level or Amount
of Funds
Available

Fixed surplus
current income set
aside

Certain types of
investment e.g.
insurance policies
or unit trusts
Source of
Available Funds
2.2 Funds Available

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CITRUS
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LIME
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10
1.Individuals Need
for Security
Investment
Risk
Loss of
Initial
Investment
Rate of Return
is Not Up to
Expectation
3 Considerations in Investment

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CITRUS
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Risk Tolerance
Low Risk,
Low Potential Return
2. Attitude
Towards Risk
High Risk,
High Potential Return
Risk Adverse Risk Taker Risk Neutral

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PLUM
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CITRUS
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12
3. Type of Investment with
Certain Inherent Risk
Risk
Capital and
income growth
potential
Investments
Higher risk &
uncertainty
Higher
potential for
capital &
income growth

GREY
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RED
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MANAGEMENT
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B147
TAKAFUL
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B63
PLUM
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G0
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CITRUS
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B32
LIME
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B30
SEA BLUE
R0
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13
Match your investment horizon with
the maturity of the investment asset

Investment Objectives
Investors Age
Current Financial
Condition
Important
2.4 Investment Horizon
How long
are you
willing to
lock into an
investment?

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PLUM
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CITRUS
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2.5 Accessibility of Funds
Early
withdrawal
cost or penalty ?
Initial cost in
setting or buying
the investment ?
Liquidity :
short term
vs.
long term investment ?

GREY
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RED
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MANAGEMENT
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B147
TAKAFUL
R109
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B63
PLUM
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G0
B88
CITRUS
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LIME
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B30
SEA BLUE
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Different types of
investment
Different tax
treatment
The tax status
of investment
linked life
insurance is the
same as
traditional with
profit life
insurance
To be discussed in Chapter 10
2.6 Taxation Treatment

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
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B174
16
Performance
depends on
Competencies &
capabilities
of management
team
Invested companys
level of costs
Invested companys
past experience & history
Countrys economic
factors
Life cycle
of investment
2.7 Performance of the Investment

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B212
RED
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WEALTH
MANAGEMENT
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G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
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G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
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17
2.8 Diversification
Invest in different assets
classes and across different
market environments
Spreading of risks
Effective in reducing risk
without sacrificing returns

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RED
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B147
TAKAFUL
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B63
PLUM
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CITRUS
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LIME
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3.Shares at
different
countries
2.Different type
of shares
Spreading of risks by :
1. Categories of investment
e.g. shares, bonds,
money market
instruments
2.8 Diversification

19 |
19
3
TYPES OF INVESTMENT ASSETS
19

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B147
TAKAFUL
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B63
PLUM
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G0
B88
CITRUS
R248
G152
B32
LIME
R178
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B30
SEA BLUE
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3.1 Cash and Deposit
3.2 Fixed Income
Securities
3.3 Shares
3.4 Unit Trusts
3.5 Investment
Trusts
3.6 Properties
3.7 Derivatives
3.8 Exchange
Trade Funds
3.9 Sukuk Bonds
3.10 Capital
Guaranteed Fund
Chapter 3: Types of Investment Assets

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PLUM
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CITRUS
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LIME
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B30
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21
Refers to all liquid instruments
Carry little or no risk of losing principal amount
Cash
- Not an investment Capital value wont increase
No additional income
generated
- Only a medium of exchange
3.1 Cash and Deposits

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RED
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B147
TAKAFUL
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B63
PLUM
R156
G0
B88
CITRUS
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G152
B32
LIME
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The definition of cash covers:-
3.1 Cash and Deposits (continue)
Treasury Bills
Bank Accounts

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RED
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WEALTH
MANAGEMENT
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B147
TAKAFUL
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B63
PLUM
R156
G0
B88
CITRUS
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B32
LIME
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B30
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23
Treasury Bills
Central Bank
Government
Institution
issued at
discount rate
discharged
at face value
No risk : guaranteed by Government
(unless politically unstable)
Short term : < 1 year

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RED
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B147
TAKAFUL
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B63
PLUM
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G0
B88
CITRUS
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LIME
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Bank Accounts

Place fixed/time deposits

Bank

Pay fixed interests

Public

Bad inflation hedge
Penalties on early withdrawal
Low in yield

GREY
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B212
RED
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G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
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G152
B32
LIME
R178
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B30
SEA BLUE
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25
Types of
Account
Savings
Accounts
Current
Accounts
Fixed
Deposits
Investment
Accounts
Time
Deposits
Offshore
Accounts
Bank Accounts available (continue)

GREY
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choices of
deposits
prevailing
market condition
funds available for investment
how long fund
can remain
in the account
emergency
withdrawal
Bank Accounts (continue)

Factors influencing Choice of Deposits:

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B63
PLUM
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G0
B88
CITRUS
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G152
B32
LIME
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Companies
or
government
Public
3.2 Fixed Income Securities
Invest principal by buying securities
Public lends money to company or government
Pays fixed periodic interest income
At maturity, repayment of principal
Can be bought and sold
anytime before maturity
in secondary market

GREY
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G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
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28
Government
Bonds
Money
Market
Instruments
Corporate
Bonds
Preference
Shares
3.2 Fixed Income Securities (continue)
Types of
Fixed
Income
Securities

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RED
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B147
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PLUM
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G0
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CITRUS
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B32
LIME
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Government Bonds
Safest little or no default
or credit risk
Government guarantees to
pay interest and repay
principal
Fixed interest rate
Issued when government
needs money to finance
projects
Advantages
Easily marketable
Income for future
years guaranteed
Disadvantage
In times of high
inflation,
capital can be
eroded

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
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B30
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Maturity Period
Medium Term
5 to 10
years
Long Term
Above 15
years
Short Term
Below 5
years
Government Bonds (continue)

GREY
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G211
B212
RED
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G17
B69
WEALTH
MANAGEMENT
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G155
B147
TAKAFUL
R109
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B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
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B30
SEA BLUE
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31
Corporate Bonds
Advantages
Higher return than
govt. bonds
More marketable
Potential for capital
gains
Disadvantage
More risky
Debenture stocks
Loan stocks
Convertible Stocks
Bonds issued by
companies

GREY
R209
G211
B212
RED
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G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
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B63
PLUM
R156
G0
B88
CITRUS
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B32
LIME
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32
Debenture Stocks

Secured loans
[Fixed charge on companys property or assets
(stocks)]

Fixed rate and term

Trustee appoint Supervise interest & capital
payment
If default, act for investors

Corporate Bonds (continue)

GREY
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G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
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Company can repay earlier if wishes

No government guarantee (riskier)

Interest rate higher
How it differs from Government Bonds

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B212
RED
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G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
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G152
B32
LIME
R178
G187
B30
SEA BLUE
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34
Loan Stocks
Unsecured loans
Fixed interest rate
and term
Risk losing capital
Less secure than
debenture stocks.
Therefore, higher
interest rate
Risk-Return
Government
Bonds
Debenture
Stocks
Loan
Stocks
Risk
Return

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
35
Convertible Stocks
Can be converted to ordinary
shares of a company on a fixed date
Become part owner and
entitled to profits through
dividends declared

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
36

Factors affecting decision to convert:

(i) Dividend income

(ii) Capital appreciation in
share price

Whether are
better than fixed
interest given

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
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B174
37
Government Bonds
Debenture Stocks
Loan Stocks
Return
Risk-Return
Risk

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G211
B212
RED
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WEALTH
MANAGEMENT
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G155
B147
TAKAFUL
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B63
PLUM
R156
G0
B88
CITRUS
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B32
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Shareholder = part owner of a company
Not liable for companys debt
Can attend Annual General Meeting
(AGM) vote for major issues and
appointment of directors
3.3 Shares
Share certificate = evidence of title

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B147
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B63
PLUM
R156
G0
B88
CITRUS
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G152
B32
LIME
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B30
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R0
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39
Company
Private company Public Company
Shares quoted
on KLSE
Available to
ordinary investors
Not listed on
stock exchange
Not available to
ordinary investors
3.3 Shares (continue)

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B147
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B63
PLUM
R156
G0
B88
CITRUS
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G152
B32
LIME
R178
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B30
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40
Markets
view on
compan
y
Currency
performanc
e
Inflation
rate
Country
s
economy
Company
s earning
Interest
rate levels
Share price
influenced
by:

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B212
RED
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G17
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WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
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41
Ordinary Share Preference Share
May or may not receive
dividends
Right to a fixed
dividend provided that
enough profit has
been made
Dividend is fixed
Ranks ahead of
ordinary
shareholders when
company winds up
Dividend rates
fluctuates according to
companys profits

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
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42
3.4 Unit Trusts

Purchase in units

Buy at Offer Price (selling price)
Sell back at Bid Price
(buying price)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
43
3.4 Unit Trusts (continue)
Funds managed by professional
fund managers in well diversified
range

Unit trust are authorized &
supervised by the Securities
Commission
Value of units based on performance of
investment

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
44
Open-ended fund

No fixed redemption date

Fund manager can create units if required,
and cancel units if encashment exceeds
new purchases

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
45
If too many investors cash-in,
may have to sell funds assets

All unit trusts are required to
state investment objectives in
prospectus

Medium to long term
investment (> 3 years)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
46
Advantages
Spread of investments
Lower risk compared to shares
Professional service from fund
managers
Minimises paperwork of
investors
Income from dividend can be
reinvested
Disadvantages
Bewildering array of
funds
Extra costs for switching

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
47
Three Way
Arrangement
Investors
Trust
Deed
Fund
Manager
Trustee
Invest
capital
Select &
Manage
fund
Hold pool
of money
in trust on
behalf
investors

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
48
Trust deed sets out:
Fund managers investment powers
Price structure
Registration of unit-holders
Remuneration of fund managers
Accounting and auditing rules

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
49
Investment Trust
company
Investment fund
managed by
specialist fund
manager
Shares value fluctuate according to
whether loss or profit made from the
investment fund
3.5 Investment Trusts
shares
Investor

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
50
Purchasing shares in
company
Purchase units in trust,
not shares in company
Closed-end funds Open-ended fund
No asset disposals if
large numbers of
investors cash-in
Disposes assets
when large numbers
of investors cash-in
Investment Trust Unit Trust
Registered Under
Companies Act
Formed by Trust Deed
3.5 Investment Trusts (continue)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
51
Advantage
Flexible
investors can
borrow to finance
purchases of
investment trusts
Disadvantage
Greater risk
exposures due
to price volatility
Higher risk/reward
profile than unit trusts
3.5 Investment Trusts (continue)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
52
3.6 Properties
3 types
Price depends on:
Quality of land
profitability of crops
Location of land
Value of buildings on land
Agricultural
Property
Commercial/
Industrial
Property
Domestic
Property
Price depends on
location and types
of buildings on the
land

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
53
Advantages
Good capital
appreciation
Steady flow of income
Low risk
Disadvantages
Difficult to be
disposed off
during recession
By mortgaging,
capital can be free
3.6 Properties (continue)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
54
3.7 Derivatives
What are derivatives?
Two
popular
derivatives are
stock options and
financial futures
Financial
instruments whose
values are linked to
the price of underlying
instruments in the
cash markets

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
55
3.7 Derivatives (continue)
Stock Options Financial Futures
Options Warrants Futures

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
56
Options
Duration usually 3, 6 or 9 months
To purchase or sell security within a
specified time period
A right, not an obligation
At a fixed price
Call
(A right to buy)
Put
(A right to sell)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
57
Options (continue)

Call options are bought in hope of price

increase. Sellers want reverse to happen

Put options are bought in anticipating a

decline in price. Sellers want reverse to

happen

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
58
Call Option

Share Price = RM10,000 per lot

Price of Call Option = RM200 (expires after 6 months)

January: Share Price = RM10,000 per lot

February: Share Price = RM11,000 per lot

Gain = RM1,000 - RM200 = RM800

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
59
Put Option

Share Price = RM10,000 per lot

Price of Put Option = RM300 (expires after 6 months)

January: Share Price = RM10,000 per lot

February: Share Price = RM9,000 per lot

Gain = RM1,000 - RM300 = RM700

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
60
Transferable Subscription Rights (TSR)
Holder has right to subscribe shares in the
company
At pre-determined ratio (conversion
ratio)
At pre-determined subscription price
(exercise price)
Within a specified time period (fixed at
beginning)
Corporate-created option
Warrants

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
61
Warrants (continue)
Corporation
issues
warrants
Investors
Similar to call option
Option to purchase,within a specified time,
a stated number of shares at a specified
price
Attach free with loan stock or rights
Often issue free

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
62
Advantages
Small initial outlay buy warrant, pay exercise price
later, and convert warrant to the underlying share
Capital gains from sale of warrants
Disadvantages
On expiry, warrants not exercised lose value
completely no chance for price recovery
No interests or dividends
Carry no voting rights
Warrants (continue)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
63
Futures
Physical
commodities
& financial
instruments
Future markets
Traded in
cash market
Cannot be
cancelled
unless both
parties agree
Forward markets
Price of an item
for deferred
delivery
Current market price
of item available for
immediate delivery
Spot markets

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
64
Future
markets
Futures exchange
determines:
Contract size
Delivery date
Conditions
Trader
determines:
Price
Number of
contracts
Set price today for
an instrument that
will be delivered
on a specified
future date
Obligation,
not an
option
E.g. Stock
index
futures
Futures (continue)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
65
Stock index
futures
Based on a particulars share price index
Settlement
Made in cash without the actual delivery of the
securities covered by the index
Profit
Derived from price difference of original
contract value and value at time of settlement
Futures (continue)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
66
Advantages
Enable investors to protect
their investments (hedging)
Shifts risk of price fluctuations
to those who are willing
Price discovery futures price
reflects current expectations
Speculative trading
potential large gains
High risk may
face huge losses
if wrongly
speculated
Disadvantages
Must have clear
understanding of
hedging
Futures (continue)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
67
3.8 Exchange Trade Funds
Also known as Exchange-trade product
(ETP)

Traded in Stock exchanges

Underlying asset ie stocks, bonds and
trades

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
68

Attractive as an investments instrument :

Low costs

Tax efficiency

Stock like features

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
69
Traditionally an index funds

An actively managed fund since 2008

ETFs - USA since 1993
- Europe since 1999

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
70
Index ETFs
Commodity ETFs or ETCs
Bond ETFs
Currency ETFs or ETCs
Actively managed ETFs
Exchange-traded grantor trusts
Leveraged ETFs

Types of ETFs

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
71
3.9 SUKUK BONDS
- An Arabic name equivalent of Bonds

- Structured to comply with Islamic Law and its
investment principles

- Over $ 1.2 Trillion of asset are managed according to
the Islamic Investment Principles

- Not a Bond because it isnt based on
debt

- Regards as commercial paper that
give ownership to investor

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
72
3.9 SUKUK BONDS
Characteristics of Sukuk :

1. Pooled of funds
2. Based on hard assets that generate steady income and
expectations
3. Maybe guaranteed or not by their originators
4. Investors received a fee equal to the income
5. Issued by Special Purpose Vehicles (SPV)
6. Sukuk issued in dollars
7. Different from conventional bonds as its
based on tangible asset that debt
8. 14 types of Sukuk Sukuk Al Ijara
and Sukuk Al Mucharaka

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
73
3.10 Capital Guaranteed Fund

Definition

- Guaranteed the investors capital investment from losses

- Didnt redeem investment before maturity date

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
74

Features

- High asset allocation 80% to 90% of total fund size

- Benchmark against Fixed Deposit

- Investment Horizon 3 to 5 years

- Offered during an offer period. Once closed, no new
investors

- Normal unit RM 1

- Higher initial investment then Unit Trust. Minimum RM 5,000

- Lower Front end. Service charge id 1.5%

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
75

Features (Cont)

- Redemption fee before maturity ranging from 03% to 1.5%

- Guaranteed capital preservation

76 |
76
4
INVESTMENT-LINKED LIFE
INSURANCE PRODUCT: WORLD
SCENARIO
76

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
77
Chapter 4: Investment-Linked Life Insurance Product - A
World Scenario

4.1 In United Kingdom
4.2 In USA
4.3 In Singapore
4.4 In Malaysia

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
78
4.1 In United Kingdom
1957
First investment-linked life
insurance contract in UK
Individual retirement annuity
for self-employed
By London & Manchester
Assurance Company Limited
Linked to an external unit
trust

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
79
4.1 In United Kingdom (continue)

Investment-linked life insurance business
has been transacted for more than 30
years
Allow the policyowner total flexibility to
alter his needs for investment and
protection in accordance to his wishes
In 1986 approximately 130 companies were
writing investment-linked life insurance
business

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
80
4.2 In the United States of America

More commonly called Variable Life Insurance in
USA
Offered for sale to the general public in the US in 1976
Only after the product had been successfully marketed
in the Netherlands, United Kingdom and Canada
Very much affected by regulations
State insurance laws and regulations
Federal Securities laws (Securities & Exchange
Commission)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
81
4.3 In Singapore

The first single premium investment-linked policy
introduced in Singapore was in 1973
Enhanced Investment Scheme (EIS) was introduced by
the Central Provident Fund (CPF) in 1993
This contributed to the expansion of the life insurance
industry, including investment-linked life insurance
business
Allowed CPF members to invest 80% of the excess of
S$50,000 in their ordinary account in eligible investment
instruments

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
82
4.4 In Malaysia

Investment-linked life insurance products are very
new in Malaysia
Syarikat Takaful Malaysia Sdn Bhd (now Syarikat
Takaful Malaysia Bhd) was first to sell a simplified product to
the public in August 1985
In July 1997, Berjaya Prudential Assurance Bhd became the
first traditional insurance company to launch the investment-
linked life insurance product
Then onwards Mayban Life Assurance Bhd was given approval
in February 1998, followed by Malaysian Assurance Allied Bhd

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
83
Single Premium/ Top-up
Life Office
Units which belong
to policyowner
Unallocated
premium
(To meet marketing
and set-up expenses)
Allocated premium
used to buy units
from investment-
linked funds at
offer price

Surrender claim
Withdrawals
Death claim
(Pay value of units)
(Pay value of units withdrawn)
(Pay value of units and/ or
sum assured)
Or
Top-up
Cancel unit (To pay mortality
charge & policy fee)

84 |
84
5
TYPES OF INVESTMENT-LINKED
LIFE INSURANCE PRODUCTS
84

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
85
Chapter 5: Types of Investment-Linked Life Insurance Products
5.2 Comparing Investment-Linked and Traditional
With-Profit Life Insurance
5.3 Definitions
5.4 Characteristics of Investment-Linked Life
Insurance Policies
5.1 How do Investment-Linked Life Insurance
Policies Work?
5.5 Types of Investment-Linked Life Insurance
Policies
5.6 Loans and Withdrawals

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
86
Operate on similar principle as Unit Trusts

Returns not guaranteed

Linked to performance of investment fund

Unit price depends on net asset value of the
fund

Value fluctuates as market prices rise and fall
lacks smoothing process
5.1 How do Investment-Linked Life Insurance Policies Work?

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
87
Investment
Used to purchase
units in fund
managed by life
office
Mortality
Protection
PREMIUMS
5.1 How do Investment-Linked Life Insurance Policies Work? (cont)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
88
Single premium/Top-Up
Life office
marketing &
set-up expenses
Policyowners units
Surrender
Withdrawals
Death Claim
Cancel units
Mortality charge
& policy fee
5.1 How do Investment-Linked Life Insurance Policies Work? (cont)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
89
Policy charges and
investment content
are more identifiable
Potential for higher
returns
but higher risk (equity
funds)
Traditional With-
Profit Life Insurance
Investment-linked
Produce steady
return by smoothing
out short term market
fluctuation
Charges not
specifically
detailed in
the policy
5.2 The Fundamental Differences

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
90
Traditional With-
Investment-linked
Offers more choice
of investment funds
Choice of Investment
is Insurers discretion
Benefit & risks
immediately passed
to policyowner
Most of risk passed
to insurer

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
91
Traditional With-
Investment-linked
Investment element
is made known to
policyowner at outset
Investment element
is NOT made known
to policyowner at
outset
Value of policy
fluctuate depends on
value of units held
Never reduce in value
provided life office is
solvent

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
92

Charges levied on investment-linked life
insurance policies:
- Policy fees
- Annual fund management fee
- Bid-offer spread
- Reduction in allocation of units - Unallocated
premiums
- Initial units
- Mortality charges
- Surrender charges
5.3 Definitions

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
93
Policy Fee
Administrative expenses of setting up the policy
Annual Fund Management Fee
Investment management charges.
Deduction of between 0.5% to 2% per year from
fund accumulated
5.3 Definitions (continue)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
94
Offer Price
Selling price of units by the life office
Bid Price
Price at which the units are cashed when the
policy matures, or surrendered, or used to pay
charges
Bid price is always lower than offer price at the
published date

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
95
Bid-Offer Spread
Bid-Offer Spread
Initial charge 5% to 6% on every
premium made to cover expenses in
setting up the policy
Offer price
Bid Price Minus (-)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
96
Reduction in Allocation of Units
Unallocated Premiums
Not all of a policyowners premium is
allocated to buying investment units
Unallocated premium used to meet
marketing and setting-up expenses of the
policy
Some insurers make nil allocation to units
until expenses recouped

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
97
Initial Units
All of a policyowners premium allocated to buy
investment units
Units allocated in early years known as initial
units have higher annual management charges,
e.g. 6% p.a., throughout term of the policy contract
Bears heavy discontinuance charges
Cash value much lower than face value for years
Less common nowadays

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
98
Mortality Charges
Dependent on age
Covers mortality cost of the policy
Can be a recurrent charge (e.g. monthly) funded
by cancellation of units on a regular basis
Allows policyowner to vary sum assured over time

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
99
Surrender Charges
Charge deducted from value of units at surrender

Represents initial expenses incurred but yet to be
recovered

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
100
Insurance Policies

Can have larger
exposure to
equity
Investment
Protection
Life cover
TPD
PA benefit
Health

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
101
Investment
performance of
underlying assets
Prices of the units
Reflects
Protection
benefits
Cash value
Affects
Affects
Insurance Policies

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
102
Protection costs are explicit
Met by cancellation of units
For single premium plan, met by flat
initial charge
Commission and office expenses are met
explicitly
May vary, but must give 6 months
notice prior to change
Insurance Policies

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
103
Cash
Value
Value of units
allocated to
policyowner,
calculated at
bid price
Insurance Policies

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
104
5.5 Type of Investment-linked
Life Insurance Policies
1. Single Premium investment-Linked
Whole Life Insurance Plan
2. Regular Premium Investment-linked
Whole Life Plan
4. Investment-linked Permanent Health
Insurance
5. Investment-linked Dread Diseases
Insurance
3. Investment-Linked Individual Pension Plan

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
105
Single Premium Investment-Linked
Whole Life Insurance Plan
One-off premium contribution
Protection is 125% of total single premium paid, subject to
a minimum of RM5,000
Minimum premium is RM3,000
Emphasize on long-term savings and investment offers
only nominal life protection
Life Insurance Policies (continue)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
106
Top up or single premium injection is allowed
Policy
fees
Other
admin
charges
Mortality
charges
Admin
and
insurance
charges
Investment
management
fee (0.5% to
2% p.a)
Single Premium Investment-Linked Life
Insurance Plan

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
107
Features
Premium
holidays
Top-ups
Withdrawals
Surrenders
Regular Premium Investment-
Linked Whole Life Insurance Plan
Regular
Premiums
Monthly
Quarterly
Annually
Purpose
Life
protection
(main)
Investment
Regular
Premiums
Purpose

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
108
Investment-Linked Individual Pension Plan
High allocation of
premium to investments
Accumulate fund to
retirement
Upon retirement
Use fund to
purchase annuity
Basic Plan
Conventionally, no life
cover other than return
of investment funds on
death
Cancelling investments
to fund life cover
Conversion to traditional
with-profit life
New Feature

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
109
Investment-Linked Permanent Health Insurance

Provides health coverage such as
disability income
Contains cash value
- Traditional health products dont have
cash value

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
110
Investment-Linked Dread Disease Insurance
Advances whole of face amount
upon diagnosis with dread
diseases such as heart attack,
stroke, coronary artery by pass,
end stage renal failure or total
permanent disablement

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
111
Loans may be limited to
some percentage of the
cash value
5.6 Loans and withdrawals
Partial surrender
and withdrawal
can be met by cashing the
sufficient units at
the bid price
Reason:
Cash value
fluctuates
on a daily
basis

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
112
5.7 Risk Base Capital Guidelines
Implementation of Risk Based Capital Framework
for Insurers
- Came into effect 1
st
Jan 2009

- better align regulatory capital requirement

- Improve transparency of prudential buffers

- allow greater flexibility for insurers to operate at different
risk level

- Are more granular and risk sensitive

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
113
Example :

- Insurers with asset portfolios on high risk assets are required
to hold more capital

- Insurers with high risk profiles will have higher Capital
Adequacy Ratios (CAR)

- Investment strategies are rebalanced to response to
prevailing market conditions

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
114
- RBC expected to raise the overall level of resilience

- Improvement of quality and depth of statutory

- Have strong capital adequacy, liquidity positions
and risk management practices

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
115
Investment of Insurance Funds
Investment Strategy:

- Investment Objectives, both at Company and fund specific Level

- Risk and Liability of Insurer

- Strategic asset allocation i.e long term asset mix main investment
categories

- Extent holding of certain types of assets is restricted or disallowed

- overall policy of usage of derivatives and structured products

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
116
Requirement of Insurers :

- Established adequate internal controls of management of approved
asset

- Put in place rigorous audit procedures

- Install effective monitoring and managing asset and liability

- Put in place suitable plans to mitigate effect arising from deteriorating
market conditions

- Undertake regular stress testing

- Ensure key staffs are Skills, Experience, Expertise and integrity

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
117
Conclusion

Popularity of Investment-Linked Life Insurance
Policies will continue because:
4) performance of the funds can be monitored
in daily newspapers
1) Its contracts are easier to understand
2) the charges are more transparent
3) It is much more flexible

118 |
118
6
STRUCTURE OF INVESTMENT-
LINKED FUNDS
118

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
119
Chapter 6: Structure of Investment-Linked Funds
6.1 Accumulation Units & Distribution Units

6.2 Types of Investment-linked Funds

6.3 Risk-return Profile

6.4 Fund Switching

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
120
6.1 Accumulation and Distribution Units
- 2 ways to structure investment-linked funds
Unit price
unchanged
Distribution
Fund
Investment
Capital
Income
Purchase
more units
Accumulation
Fund
Investment
Capital
Income
In long term
Unit price

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
121
6.2 Types of Investment-Linked Funds
Types of
Funds
Cash Funds
Equity Funds
Bond Funds
Property
Funds
Specialised
Funds
Balanced
Funds
Managed
Funds

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
122
Equity Funds
Invest in stock, shares
Higher risk equity prices volatile
Aim for capital appreciation
Magnitude of change of unit price
depends on quality of equities held
Cash Funds
Invest in cash and bank deposits
Safe, low risk
6.2 Types of Investment-Linked Funds (continue)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
123
Bond Funds (IOUs)
Fixed income instruments (government/
corporate bonds)
Income-producing
Property Funds
Invest in properties e.g. real estate and
property shares
Safer than equity, but have lower liquidity
Provision allows fund manager to defer
redemption of units up to 12 months

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
124
Specialised Funds
ASEAN
Emerging Markets
International Bond
Geographical
Region
China Fund
US Fund
Particular
Country
Commodities
Mining
Plantation
Public utilities
Industry
Specialised
Offers exposure to different markets,
regions and currencies

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
125
Managed Funds
Invest in wide variety of assets
Asset allocation depends on fund managers
view
Balanced Funds
Invest in fixed proportion of specified assets
e.g
70% 30%
Equity Fixed Securities

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
126
6.3 Risk-Return Profile
Risk
Return
Cash
Funds
Bond Funds
Balanced Funds
Managed Funds
Equity Funds
Higher return, higher risk

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
127
6.4 Switching
Fund A Fund B
Free for limited no.
of switches within a
given period,
subsequently
charges imposed
Free
Switching part or all investment
from one fund to another
Useful for
financial
planning
Specific
charge for
each and
every switch

128 |
128
7
HOW INVESTMENT-LINKED
INSURANCE PRODUCTS WORK
128

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
129
Create new units
Add investment
monies to the
fund
Unit Price
No. of Units
Lump sum (Single premium)
Regular payment (Regular premium)
7: How Investment-linked Insurance products Work
Premium
Value
of the
policy
At any time, policyowner may choose to
Top up to purchase additional units (subject to minimum amount)
Withdrawal sell some units
Surrender sell all the units
determined by

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
Single Pricing
One quoted price
Policyowner buy or sell
units at the same quoted
price
Dual Pricing
Offer Price
policyowner buys units
Bid Price
Policyowner sell units
130
Bid price is always lower than offer price.
Bid-offer spread the difference in the bid and offer price
(explained in chapter 5)
Charges normally deducted are
Policy fee
Administrative charge
Mortality charge
Methods of Calculating Benefits

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
131
Number of Units
purchased
= Premium Charges imposed
Unit Price
Cash Value
= (Number of Units x Unit Price) (Mortality
charges + Policy Fee)
Annual Yield On
Gross Premium
= (RGP)
1/n
- 1; n = No. of Years
Return on Gross
Premium (RGP)
= Ending Value of Investment
Beginning Value of Investment
Single Pricing Method

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
132
Sample Calculations: Single Pricing Method
Premium = RM 4,000

Unit Price = RM 1

Charges = 5% (from total premium)

Mortality Charge = 1% (of fund value)

Policy Fee = RM100

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
133
= RM 4,000 - (RM4,000 x 5%)
RM 1
= RM 4,000 RM 200
RM 1
= RM 3, 800
RM 1
= 3,800 units
Number of Units
purchased
= Premium Charges imposed
Unit Price

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
134
= (3,800units x RM1) [(3800 x RM 1) 1%+RM100]
= RM 3,800 - (RM 38 + RM 100)
= RM 3,800 - RM 138
= RM 3,662

Cash Value
= (Number of Units x Unit Price)
(Mortality charges + Policy Fee)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
135
Annual Yield On Gross Premium
Suppose Unit Price after 10 Years = RM 1.97
Annual Yield On
Gross Premium
= (RGP)
1/n
Return on Gross
Premium (RGP)
End Value of
Investment

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
136
= (3,800 units x RM1.97) [(3800 x RM1.97) 1% + RM100)]
= RM 7,486 - (RM 74.86 + RM 100)
= RM 7311.14
End Value of
Investment
Return on Gross
Premium (RGP)
= RM 7311.14 = 1.828
RM4000
The annual yield = (1.828)
1/10
-1
= 1.062 - 1 = 0.062 or 6.2%

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
137
Number of Units
purchased
= Premium
Offer Price
Cash Value
= (Number of Units x Bid Price) (Mortality
Annual Yield On
Gross Premium
= (RGP)
1/n
Return on Gross
Premium (RGP)
Dual Pricing Method

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
138
Sample Calculations: Dual Pricing Method
Premium = RM 4,000

Offer Price = RM 1

Bid-Offer Spread = 5% (from total premium)

Mortality Charge = 1% (of fund value)

Policy Fee = RM100

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
139
= RM 4,000
RM 1
= 4,000 units
Number of Units
purchased
= Premium
Offer Price
Cashed in or
Claim
= No. of Unit
Bid Price
Bid Price = RM 1 x 95% (bid offer spread = 5%)
= RM 0.95
Claim amount = RM 3,800 (4,000 units x RM0.95)

If unit price increased to RM 1.20, bid price = RM 1.14 (RM 1.20x95%)
Claim amount = RM 4,560 (4,000 units x RM1.14)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
140
= (4,000 units x RM0.95) [(4000 x RM0.95) 1% + RM100]

= RM 3,800 - (RM 38 + RM 100)

= RM 3,800 - RM 138

= RM 3,662
Cash Value

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
141
Suppose Offer Price after 10 Years = RM 1.97

Bid Price = RM 1.97 x 95%
= RM 1.8715
Annual Yield On
Gross Premium
= (RGP)
1/n
Return on Gross
Premium (RGP)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
142
= (4000 units x RM1.8715) [(4000 x RM 1.8715) 1% + RM100]
= RM 7,486 - (RM 74.86 + RM 100)
= RM 7,486 - RM 174.86
= RM 7311.14
End value of
investment
Beginning value of investment = RM 4,000 (4,000 units x RM 1)
= RM 7,311.14
RM 4,000
= RM 1.828
Return on Gross
Premium (RGP)
Annual Yield
= (RM 1.828)
1/10
-1
= 1.062 1
= 0.062 or 6.2%


GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
143
Withdrawal Option
No. of Units
Money receive = No. of units x
Unit/ Bid Price
Fixed Monetary
Units Cancel = Fixed Monetary
Unit/ Bid Price
Eg:
No. of Unit = 500
Unit/ Bid Price= RM 2
Money receive
= 500 units x RM 2
= RM 1,000
Eg:
Fixed Monetary = RM 3,000
Unit/ Bid Price = RM 2
Units cancel = RM 3,000
RM 2
= 1,500 units
Withdrawal Benefits
*Surrender value calculation is similar to withdrawal

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
144
2 types of Death Benefit
Unit Value + Sum Assured
Unit Value or Sum Assured
(Whichever is higher)
Death Benefits
Death Cover /
Sum Assured
Value of Unit
Death Benefit
Years
RM
Value of
Units
Death Cover /
Sum Assured
Years
RM
Time t

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
145
Single Pricing
Death Benefits = (No. of Units x Unit Price) + Sum Assured

E.g: Suppose Sum assured = RM 5,000; Unit price = RM 1.22 at the time
of death
Death Benefits = 3,800 unit x RM 1.22 + RM 5,000
= RM 9,636
Death Benefits
Unit Value + Sum Assured
Dual Pricing
= (No. of Units x Bid Price) + Sum Assured

E.g: Suppose Sum assured = RM 5,000; Offer price = RM 1.22 at the
time of death
Bid price = RM 1.159 (RM 1.22 x 95%)
Death Benefits = 3,800 unit x RM 1.159 + RM 5,000
= RM 9,636

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
146
Single Pricing
Death Benefits = (No. of Units x Unit Price)

Dual Pricing
= (No. of Units x Bid Price)

Death Benefits for both calculation = RM 4,636

Death Benefits payable will be RM 5,000
(Death Cover / Sum Assured)
Death Benefits
Unit Value or Sum Assured, (Whichever is higher)

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
147
Regular Premium Policies
Policyowner:
Are required to pay premiums regularly but enjoy the
flexibility of:
Being able to vary the level of premium
Doing single top up
Taking premium holidays
May surrender all or part of his unit
May vary the sum assured without changing his premium
May also increase or reduce his regular premium

*Note: Check out more scenarios from The MII text book

148 |
148
8
BENEFITS AND RISKS OF
INVESTING IN INVESTMENT-LINKED
FUNDS
148

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
149
8: Benefits and Risks of Investing In Investments-
Linked Funds
Investment-linked
Insurance Plan
Protection Investment
Premium
to be allocated to
protection or
investment
to invest in the funds
that you choose

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
150
Pooling or
Diversification
Flexibility
Expertise
Access
Administration
BENEFITS
Linked Funds
Policyowner can access to a pooled or
diversified portfolio of investment.
Policyowner can easily change the level of his
premium payment.
The funds are managed by professional fund
managers in accordance with the investment
objectives.
Policyowner can get access to a well diversified
investment-linked funds.
Policyowner is relieved of the day-to-day
administration of his investment, just has to keep
track through the unit statement provided regularly.

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
151
Linked Funds
Cash and maturity values will rise and
fall based on the fund invested
With equity fund, policyowner may
expect to achieve higher return than
traditional product over long term
The administrative fee, insurance
charge, fund management fee etc are
usually not guaranteed
They are subject to regular review and
can be changed by insurance company

Investment
Risk
Charges
RISKS

152 |
152
9
COMPARISON BETWEEN
INSURANCE AND TRADITIONAL
WITH PROFIT LIFE INSURANCE
PRODUCTS
152

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
153
Comparison Criteria
Investment Returns
and Risks
Premium
Computation
Surrender Value
Death Benefit Option to Top-up
9: Comparison between Investment-linked and
Traditional with Profit Life Insurance Products

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
154
Traditional Guaranteed
without Profit Products
Traditional with-profit
Products
Investment-linked
Products
Guaranteed a fixed rate
of return
E.g: Term Insurance, non
participating insurance
Similar to without profit
insurance but profit are
added to the sum
assured
E.g: whole life,
endowment insurance
Wholly or partly
determined by reference
to the value of invested
property/ index
Introduction

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
155
Products
Investment-linked
Products
A fixed amount is made
when the insured dies
within the term or period
of assurance
The amount payable
does not depend on the
investment performance
of the company
No investment risks
except he risk of
insolvency of the
company
Bonuses can be
allocated as an addition
to the sum assured
Bonus are not directly
linked to the investment
performance, it has been
smoothened by the life
office
E.g: Cash bonus,
reversionary bonus,
terminal bonus
Policy values vary
according to the values
of the underlying assets
that the policy tied to.
The investment returns
and risk are directly
transferred to the
policyowners.
Investment Returns and Risks

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
156
Products
Investment-linked
Products
Premium is determined
and fixed at inception
Life company may not
alter the terms and
conditions without the
agreement of
policyowner
Sum assured driven
Premium is determined
and fixed at inception
alter the terms and
agreement of
policyowner
Sum assured driven
Policyowner has the
flexibility in changing
their premium payments,
top up or take premium
holiday
Life office may also
retain certain right to
alter charges, like
monthly policy fees
Account driven

Premium Computation

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
157
Products
Investment-linked
Products
Death benefit (sum
assured) is determined at
inception
alter the terms and
agreement of
policyowner
Death benefits is fixed
sum assured plus
accumulated bonuses
less any outstanding
policy loans and
automatic premium loans
(inclusive of interest)
Maturity benefits is fixed
sum assured plus
bonuses accumulated
less any outstanding
policy loans and
automatic premium loans
(inclusive of interest)
Single Premium plans
Minimum sum
assured or value of
units at bid price,
whichever higher
Minimum sum
assured plus value
of units
Regular Premium Plans
Sum assured or
value of units at bid
price
Sum assured plus
value of units at bid
price
Death Benefits

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
158
Products
Investment-linked
Products
No surrender value
except plan with terms
more than 20 years

Cash surrender value
includes surrender value
reversionary bonus
Usually higher than the
without profit policy
Surrender value is
market price x unit / bid
price
Depends on policies
Sum assured can be
increased each year by a
set percentage of the
original sum assured

Very few with profit
policies allow the option
to top up
Similar to the without
profit policies
Allow policyowner to buy
additional number of
units without taking out a
new policy
Surrender Value & Option to Top up

159 |
159
10
TAXATION AND LAW COVERING
INSURANCE PRODUCTS
159

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
160
Taxation are treated
same manner as other Insurance policies
Companies
Act 1965
Contract
Act 1950
Insurance
Act 1996
Common
Law
10: Taxation And Law Covering Investment-Linked Life
Insurance Products
Investment-linked business governed by

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
161
The premium is allowable for tax relief when
the life Insurance or deferred annuity is:
a. on the individuals life
b. on the life of the
spouse of the individual
c. on the joint lives of the
individual and his/her spouse
Insurance Products
Income Tax Act 1967

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
162
+
All life
insurance
premiums
Approved Fund
(e.g. EPF)
Education and
medical insurance
premium
Total Relief Allowable
RM6000 per year

Additional Tax Relief
RM3000

From 1996 budget
Insurance Products
* No longer subject to
7% limit

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
163
Insurance companies
Taxed at 8% of chargeable income
and realized capital gain of a life
fund
Insurance Products
Proceeds distributed to policyowners
are tax-free

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
164
The main purposes of regulation included:-
I) The protection of public interest
II) The promotion of fairness and equity
III) The fostering of competence
IV) The playing a developmental role
Insurance act, 1996 & regulations
Ensuring the insurer is financially solvent and able to meet its obligations
Ensuring that the insurers, insurance brokers adjusters are fair and
equitable in their dealings with clients and claimants
By insisting a high level of professionalism competence and integrity
To in the take an active part economy development of the country
Insurance Products

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
165
Investment-Linked Insurance Business
Section 7(2)(b) defines as
Effecting and carrying out of a contract of
insurance on human life or annuity where the
benefits are, wholly or partly, to be determined
by reference to the value of, or the income
from, property of any description or by
reference to fluctuations in, or in an index of,
the value of property of any description
Insurance Products

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
166
Insurance Act 1996 Section 7(1)(b)
To carry out the investment-linked life insurance business:
1) Prior written approval by Bank Negara Malaysia
2) Detailed business plan to be submitted to BNM
Insurers are also required to maintain separate funds in respect
each inv link funds
Insurance Products

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
167
Investment Limits
BNM Circular JPI:1/1997
Specification of Assets for the purpose of a Licensed Insurer Margin of
Solvency which specifies that Investment-linked funds :
are not applicable to licensed insurers margin of solvency
could be invested 100% in equity
are subject to the general restrictions to reduce the risk exposure to any
once company

Insurance Products

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
168
Investment in securities in any one investee should not
exceed:
5% paid up capital of the investee Company
5% of the total value of the assets of the fund

whichever is lower
Investment Limits general restriction
Investment in loans or debentures to anyone borrower
or group of borrowers should not exceed 5% of the total
value of the assets of the fund

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
169
At least 18 years old
Policyowner may cancel the policy
and get premium refunded within 15
days after delivery of policy
Age limit of
Policyowner
Free Look
provision
Insurance Products

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
170
RM5,000 or 125% of single
premium, whichever is higher
At least RM3,000 payment
Minimum Death Benefits & Premium Payment for
Single Premium
Minimum Death
Benefits

Minimum Premium
Payment

Basic qualification: CEILLI exam
Specifically trained & equipped with the
product knowledge

Intermediation

Insurance Products

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
171
Disclosure of Information
Sales Materials/Illustrations must contain
1) General description of the investment policy and objective
of the fund and the manner investment income distributed
2) Policy benefit based on the performance the funds and
factors affecting the policy Benefits
3) Investment risks solely borne by policyowner must clearly
informed
4) Max amount of initial charge, management
fee, mortality cost and any other charges must be stated
Insurance Products

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
172
Disclosure of Information (Continued)
5) The basis of computation for benefits, bid and offer price,
units allocation and unit cancellation
6) The basis and frequency of valuation of underlying assets
7) All guarantees and non guarantees facts and benefits
8) Statement of fund performance for past 5 years
9) Clear worded warning that policy value may rise or fall,
results shown for illustration, fund performance is not
guaranteed
10)Any information Bank Negara deemed necessary
Disclosure of Information
Sales Materials/Illustrations must contain

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
173
Statement to policy owners
Fund performance report to policyowners

Refer to the book

174 |
174
11
IDENTIFYING AND SATISFYING
CUSTOMERS NEEDS
174

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
175
11: Identifying And Satisfying Customers Needs
a) Establishing Relationship with the Client
b) Gathering all relevant Financial Data
c) Establishing current Financial Position and Goals
d) Developing plans and strategies to meet the goals
e) Discuss possible recommendations
f) Implementation of the agreed recommendation
g) Monitoring the portfolio

The process of providing advice involves 7 stages :
Structured approach is important for an effective advice

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
176
Stage 1 Establishing Relationship with the Client
- Convince client that he is able to assist the client to fulfil financial goals
- Do a preliminary screening of clients financial objectives and goals
Stage 2 Gathering all relevant financial data
To obtain all relevant information about the
customer in order to do an analysis
Customers Personal and Dependents details
Life and Financial Priorities and Goals
Risk Profile
Net Worth Analysis
Cash Flow Analysis
Recommendations and Record of Advice
The process of providing advice

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
177
Stage 3 Establishing Current Financial Position and Goals
- After gathering all relevant data, agents to analyse and establish clients
financial position and also future goals
- This will allow agents to come up with a blue print for a recommendation
Stage 4 Developing Plans and Strategies to meet the Goals
Adequate Insurance Coverage for
Liability cancellation, basic Protection and medical cover, disability
cover, dread diseases cover etc
Planning for Childrens
Education
Retirement
Planning
Asset
Accumulation
Estate
Planning

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
178
Explaining the
recommendations
Provides options
and alternatives
open
Reviews
Recommendations
Stage 5 Discuss Possible Recommendations
Stage 6 Implementation of the agreed recommendations
- Once agreed, agents put into effect all recommendations
- Implementation is done
- Any changes must be communicated with client before putting it through

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
179
Step 7 Monitoring the portfolio
- Regular monitoring of clients portfolio
- Ensure clients are informed of the progress of their policy
- Ensure client get quarterly or half year report by Insurer
- Assist client to make necessary switching and adjustment to ensure
the clients gets the best returns from the policy
- Ensure policy review is done half year or yearly basis, adhoc review
can be done if there is a special need
- Allow agents to obtain quality referrals and cross sell

180 |
180
12
MARKETING AND AFTER SALES
SERVICES, ETHICS & CODE OF
CONDUCT
180

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
181
12.1 Marketing
In the past, role is strictly to sell company
developed products
hard sales technique are frequently used to
stimulate customers interest
Customers do not understand, meet their needs,
or not afford to pay
12: Marketing And After Sales Services,
Ethics And Code of Conduct
Definition: the management process responsible for identifying,
anticipating satisfying customers requirements profitably
Sales
Orientated

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
182
12.1 Marketing
Role of the sales & marketing dept is to
determine the needs of customers and satisfying
these needs by dev and distributing appropriate
policies
Market
Orientated
Generally functions
Planning & control dev marketing plan and controling its results
against the plan by making necessary changes
Market identification selection of segments of the market
Product development develop appropriate policies to meet the
needs of the segments
Selection of distribution channel identify and select the suitable
channel for distributing the policies to the customers
Promotion suitable promotional activities including advertisement,
sales promotion etc

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
183
12.2.1 A Market Oriented Agent
Objectives: To satisfying customers' requirements and
needs, and at the same time earn an income for himself
Sales Plan which allows planning and controlling
Objectives: Target market
Strategy
Implementation
and control

Sales goal

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
184
1. Problem
recognition
2. Information search
3. Evaluation of alternative
policies
4. Purchase
5. Post- purchase
evaluation
12.2.2 Customer Buying Decision Process

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
185
1.Locating prospective
customer
2. Create sales
presentation
3. Conducting sales
interview
4. Handling
objections
5. Closing the sales
12.2.3 The Selling Process

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
186
Agents role after closing the sale:
a. Application is complete and all the proposer's answers
have been recorded accurately clearly;
b. Providing timely response to any applicant or company
questions or requests.

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
187
Delivery of a policy gives the agent an opportunity to perform the
following :-
a) Dispel the customer's cognitive dissonance
b) Provide a basis for future sales by reminding the policyowner about
any currently unmet or future financial needs or expectations;
c) Re-emphasize the insurance agent's commitment to providing the
policyowner quality service;
d) Encourage the policyowner to call the agent
e) Explain the policy's provisions, terms and conditions
f) Obtain names of referred leads and other prospects
g) Strengthen the customer relationship and help encourage
persistency

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
188
Ethics & Conducts

Ethics should include :-

a)Behaving with Complete Integrity in an Insurance Agent's Professional
Life
b)Complying with the Law and with the Best Principles and Practice relating
to Financial Advice
c)Behaving in a Professional and Honourable Manner towards client,
customer and whoever the Isurance Agent is in Contact in Business
d)Observing and Applying the Relevant Codes of Good Practices

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
189
12.3.1 LIAMS GUIDELINES ON THE CODE OF CONDUCT
Part I - Guidelines on the Code of Conduct.
Part II Life Insurance Selling.
Part III Statement of Life Insurance Practice.

Part I - Guidelines on the Code of Conduct.

Statement of Philosophy.
Coverage.
Monitoring Devices.
Seven Principles of the Guidelines.
Code of Conduct.


GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
190
Part II Life Insurance Selling.
Introduction.
General Sales Principles.
Explanation.
Disclosure of Underwriting Information.
Accounts and Financial Aspects.

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
191
General Sales Principles
The intermediary shall :
Produce Registered Intermediary Authorization Card
Ensure the policy proposed is suitable to the needs
Give advice only
Treat all information as completely confidential
Make comparisons with other types of policies, make
clear different characteristics of each policy
Render continuous service to the policy holder

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
192
Make inaccurate or unfair criticism of any insurers
Attempt to persuade a prospective policy holder to cancel any
existing policies unless these are clearly unsuited to the policy
holders needs

The intermediary shall not:
Twisting
To discontinue a policy or to have a policy made
paid-up and replace a new one in another company
or the same company
General Sales Principles

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
193
Part III Statement of Life Insurance Practice.
Introduction.
Claims.
Proposal Forms.
Policies and Accompanying Documents.
Sales Materials/Advertisements.

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
194 194
Important Chapters in Exam
Focus on..

GREY
R209
G211
B212
RED
R211
G17
B69
WEALTH
MANAGEMENT
R139
G155
B147
TAKAFUL
R109
G179
B63
PLUM
R156
G0
B88
CITRUS
R248
G152
B32
LIME
R178
G187
B30
SEA BLUE
R0
G115
B174
195 195
Exam Questions Analysis
Thank You

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