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Your Participating Fund Update for 2010 - AIA Singapore

Your Participating Fund Update for 2010 - AIA Singapore

Your Participating Fund Update for 2010 - AIA

Top 5 Corporate Bond HoldingsTemasek HoldingsDBSSingapore Power GroupUOBOCBCIssuer Rating(Moody’s/S&P)Aaa/AAAAa1/AA-Aa3/AA-Aa1/A+Aa1/A+Other areas of performanceMortality experience remained stable. Policy terminationsdue to voluntary surrenders were lower than expected whileexpenses were higher than expected. We do not expectmajor fluctuations in these factors that will significantly affectfuture bonuses.Benefits paidThe total amount of benefits paid to policyholders from thePar Fund amounted to just over S$1 billion in 2010, whichwas broadly in line with the S$1.061 billion paid in 2009.S$MillionMaturity Benefits and Coupons paid 718Value of Death and Total & Permanent Disabilityclaims paid45Surrenders 124Cash Bonuses 133Annuities 2Total amount of benefits paid in 2010 1,022Bonuses and dividendsThe total value of Par Fund bonuses and dividends declaredas at 31 December 2010 was S$398 million. The annualbonus and dividend rates for participating policies will bemaintained this year.More information on the bonus or dividend rates for theprevious three years will be included in your anniversarystatement.Bonuses or dividends allocated to your policy for theaccounting period ending 31 December 2010 wererecommended, in writing, by the Appointed Actuary andapproved by AIA’s Board of Directors. Once declared, annualbonuses or dividends will be credited to your plan at thepolicy anniversary.Future OutlookEconomyThe global recovery story is expected to be maintained in 2011,moderating from the previous year. The International MonetaryFund (IMF) expects world GDP growth of 4.5% in 2011 and2012. However, global economic recovery will be uneven. Weakeconomic fundamentals in the US and Europe will result in slowgrowth. The labour and housing markets in the US remainweak despite improvement in other parts of the economy. TheEuropean sovereign debt crisis is likely to hamper growth whileJapan struggles to recover from its recent disasters. In contrast,Asia’s economic fundamentals remain strong. The excessliquidity resulting from loose monetary policy in the US andEurope poses an additional challenge for policy makers andfinancial markets in Asia, which is facing inflationary pressures.So, it is likely that we will see some volatility in the year ahead.With the strong liquidity in the SGD market and with the FederalReserve likely to keep the Fed funds rate low for the rest ofthe year, short term rates are expected to remain low. Creditspreads of corporate bonds, especially SGD-denominatedcorporate bonds and USD-denominated Asian corporates,are expected to tighten against strong fundamentals andtechnicals. This should be supportive of corporate bond prices.Sustained economic growth and inexpensive valuations willprovide support for equity prices.Stability for our PolicyholdersBonus and dividend declarations in the future depend largelyon the investment returns we will achieve in the future. Futureinvestment returns cannot be guaranteed and for that reason,neither can future bonuses and dividends.AIA tries to provide stable returns over the life of yourparticipating policy, and so we adopt a concept known as‘smoothing’. Simply put, we try to spread profits and losses overthe life of your plan. For example, if the Par Fund performanceis particularly good in one year, we may hold back a portionof the earnings so that we can pay higher bonuses in yearswhen the Par Fund does not perform so well. Our aim is forthe long-term cost of smoothing to be broadly neutral acrossgenerations of policyholders.Note: The above commentary is intended for your general information only anddoes not have regard to your specific investment objectives, financial situationand particular needs of any persons. Any opinions, predictions, forecasts or forward-lookingstatements made are not necessarily indicative of future or likelyperformance. All figures quoted are rounded off to the nearest million. The aboveinformation is accurate as at 31 December 2010.1 Robinson Road, AIA Tower, Singapore 048542Monday - Friday: 8.45am - 5.30pm AIA Customer Care Hotline:1800 248 8000AIA.COM.SGYour ParticipatingFund Update for2010AIA.COM.SG

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