AXA announces with profits bonus rates

AXA has announced new with profits bonus rates, awarding £268 million in bonuses on approximately 1.4m with profits policies. The bonus rates announced today apply to customers investing in either the AXA Sun Life (ASL) With Profits Fund or the Sun Life Assurance Society (SLAS) With Profits Fund.

1 March 2006

Posted in Innovation

by Daniel O’Byrne (see media contact)

Regular bonus levels have been increased by between 0.25% and 0.75% from last year's levels on a range of AXA Sun Life's policies. Market Value Reductions (MVRs) have been reduced by between 5% and 7% on most policies. Most terminal bonuses remain unchanged or have been increased, with just a small proportion being reduced.

Commenting on the announcement, Peter Shelley, With Profits Actuary at AXA, said: "2005 was a good year for our with profits customers. The ASL with profits fund produced an investment return of 16%. Many regular bonus rates have increased for the first time for several years. MVRs have been reduced - by 5% or more. Long term returns on maturing policies remain good - over 7% pa on 20/25 year policies."

AXA With Profits Bonus Declaration 2006

1. Regular bonus rates

Regular bonus rates on AXA's principal policy types are as follows:

AXA Sun Life (ASL)

Product type From 28/02/2005 From 27/02/2006
Mortgage Endowment1 3.00% 3.00%
Bond 1.50% 1.75%
Personal Pension 1.50% 1.75%
New World (stakeholder) Pension 2.75% 3.50%

1 The rate shown for Mortgage Endowments includes a guaranteed interest rate of 3%

Product type 1/1/2004 - 31/12/2004 1/1/2005 - 31/12/20052 Interim from 1/1/2006
Conventional Life2 1.0% 1.0% 1.0%
Conventional Pension2 1.0% 0.0% 0.0%

2 The regular bonus rate declared today is retrospective and applies for the past year from 1/1/2005 to 31/12/2005.

Sun Life Assurance Society (SLAS)

Product type 1/1/2004 - 31/12/2004 1/1/2005 - 31/12/20053 Interim from 1/1/2006
Conventional Life 1.25% 1.25% 1.25%
Mortgage Endowment 1.75% 1.75% 2.25%
Bond 1.75% 1.75% 2.25%
Personal Pension 2.25% 2.25% 3.00%

3 The regular bonus rates declared today are retrospective and apply for the past year from 1/1/2005 to 31/12/2005.

2. Payout Values

The following maturity payout examples show the position of policies in 2006 compared with their position in 2005. The 1 March 2005 figures allow for any reduction in value due to surrender/transfer.

Note that for regular premium contracts the percentage change over the year excludes the extra premiums paid over the year i.e. the extra premiums are not being included as growth.

ASL Endowment:

(Male aged 30, monthly premium of £50)

Type of Contract Surrender Value 1 March 2005 Maturity Value 1 March 2006 Percentage change over year Average annual growth
Conventional mortgage endowment £34,844 (24-year term) £39,255 (25-year term) 10.8% 7.0%
Unitised mortgage endowment £5,363 (9-year term) £7,085 (10-year term) 18.8% 3.3%

ASL Personal Pension:

(Male aged 45, paying a monthly premium of £200)

Type of Contract Transfer Value 1 March 2005 Maturity Value 1 March 2006 Percentage change over year Average annual growth
Unitised £89,151 (19-year term) £105,728 (20-year term) 15.5% 7.4%

ASL Bond:

(Male aged 30, paying a single premium of £10,000)

Type of Contract Surrender Value 1 March 2005 Surrender Value 1 March 2006 Percentage change over year Average annual growth
Unitised £8,851 (4-year term) £9,970 (5-year term) 12.6% 0.0%
Unitised £13,154 (9-year term) £14,594 (10-year term) 10.9% 3.9%

SLAS Endowment:

(Male aged 30, monthly premium of £50)

Type of Contract Surrender Value 1 March 2005 Maturity Value 1 March 2006 Percentage change over year Average annual growth
Conventional mortgage endowment £34,429 (24-year term) £41,645 (25-year term) 18.9% 7.4%
Unitised mortgage endowment £5,537 (9-year term) £6,583 (10-year term) 7.3% 1.8%

SLAS Personal Pension:

(Male aged 45, paying a monthly premium of £200)

Type of Contract Transfer Value 1 March 2005 Maturity Value 1 March 2006 Percentage change over year Average annual growth
Conventional £109,888 (19-year term) £129,091 (20-year term) 15.0% 9.0%

SLAS Bond:

(Male aged 30, paying a single premium of £10,000)

Type of Contract Surrender Value 1 March 2005 Surrender Value 1 March 2006 Percentage change over year Average annual growth
Unitised £14,992 (9-year term) £16,491 (10-year term) 10.0% 5.1%

3. Market Value Reductions

Market Value Reductions (MVRs) have been reduced on most policies by between 5% and 7%. No MVRs have been increased. This has been made possible by the improved asset performance of the with profits funds in the last year. MVRs are applied in certain circumstances, such as when a customer chooses to exit the fund outside their maturity date. MVRs are applied to ensure that all customers receive a fair share of the fund's asset performance, whether they are staying in the fund or exiting it. MVRs do not apply at life maturities, on death, or on any conventional with profits policies.

The average MVR amongst bonds in the ASL with profits fund has been reduced from 10% in 2005 to 5% in 2006. In the SLAS with profits fund, the average bond MVR has been reduced from 4% to 1%.

4. Asset Mix

The overall asset mix of AXA's with profits funds has been as follows:

ASL Fund:

Class % at end 2004 % at end 2005
Equities 41% 44%
Property 17% 16%
Fixed Interest 35% 38%
Cash 7% 2%

SLAS Fund:

Class % at end 2004 % at end 2005
Equities 39% 42%
Property 9% 10%
Fixed Interest 43% 45%
Cash 9% 3%

All asset mix figures are approximate, and vary by policy type.

5. Investment Return and With Profits Fund Size

The return for AXA's ASL with profits fund over 2005 was 16.0%, compared to 11.8% in 2004. The return on the SLAS with profits fund was 13.9% in 2005, whereas in 2004 it was 11.1%.

The size of the ASL with profits fund is £10.1bn. The size of the SLAS with profits fund is £6.4bn.