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Victor Farrugia, Senior Executive Manager of Middlesea Valletta Life Assurance, here answers some questions about Middlesea Valletta Life’s latest product, to be released of 1 November
Middlesea Valletta Life (MSV) on 1 November will be launching the MSV Capital Guaranteed Bond. How would you describe the product?
The MSV Capital Guaranteed Bond is a ten-year unit-linked, single premium life insurance policy with a fixed duration that aims to provide security of capital as well as regular annual income. It also provides some life cover in the event of death. The MSV Capital Guaranteed Bond has a fixed term and matures in 2014. It guarantees investors the return of their capital, intact on maturity. The bond pays a 4.8%p.a. fixed coupon for the first four years and a variable coupon (with a maximum of 8%p.a.) for the remaining six years. This is the first unit-linked capital guaranteed insurance product to be launched in Malta by a Maltese insurance company.
What guarantees does the MSV Capital Guaranteed Bond offer?
The MSV Capital Guaranteed Bond incorporates guarantees relating to repayment of capital invested (after deduction of the policy fee) upon maturity of the policy, payment of coupons on a regular basis for the first four years and payment of Sum Insured in the event of death before maturity of the policy.
What type of investors is this product intended for?
It is aimed at cautious investors, because after ten years it guarantees the return of capital invested intact (if held to maturity). In these days of market volatility, this must be a primary attraction to such investors.
What benefits does the MSV Capital Guaranteed Bond offer?
Its offers repayment of capital. The capital invested (after deduction of the policy fee) is guaranteed to be repaid in full when the policy matures. This guarantee is given by BNP Paribas S.A. (a leading French bank). It also offers payment of coupons and payment of the Sum Insured. The latter means that in the event of death of the Life Insured under the policy, MSV guarantees to pay 101% of the value of the investment without deducting any surrender charges.
Can you explain the types of coupons paid throughout the bond’s duration?
Two types of coupons are paid annually – on the 10th December of every year from 2005 to 2014. In the first four years the coupon is guaranteed for a total of 19.2% (4.8% payable annually). In the remaining six years, the coupon is variable and is linked to the performance of a basket of 25 shares. This variable coupon will provide a 100% participation of any rise in the value of the equity basket subject to a maximum of 8%. Even if the equity basket registers a negative performance in any particular year, the capital remains protected and guaranteed.
Can anyone apply for the MSV Capital Guaranteed Bond?
Any person who is of legal age (minimum of 18 years) and subject to a maximum of 85 years of age can apply for the MSV Capital Guaranteed Bond either on a single life or joint life basis. The policy can also be taken by corporate entities, in which case one natural person would need to be specified as the Life Insured under the policy.
This new product is being launched with the collaboration of the acclaimed banking institution BNP Paribas Group. What was the reason for this partnership?
BNP Paribas Group has long been considered as one of the leading institutions in providing capital protected structured products. BNP Paribas also has an outstanding credit rating of AA by Standard & Poor’s. They were also deemed ideal partners since they are commended providers of tailor-made financial products.
The CGB is a Euro-denominated investment. What was the reason for this choice of currency?
The choice of the currency was seen as a natural choice given the fact that the Maltese Lira is currently pegged to the tune of 70% to the Euro and also the Maltese government’s declared intention to switch the domestic currency to the Euro sooner rather than later.
What does the product’s equity basket consist of?
BNP Paribas has set up – specifically for the MSV Bond - a basket of 25 stocks that includes some of the world’s most successful companies, all of them corporate organisations operating internationally. These include Nokia, Siemens, British American Tobacco, Nissan Motors, Coca Cola, Yahoo, Texas Instruments and eighteen other similarly hallowed brands.
What is the product’s investment objective?
The investment objective and policy of the MSV Capital Guaranteed Fund 2014 is to enhance the value of the assets of the fund over the long-term by participating in equity markets. It guarantees the return of the capital invested if held to maturity and also aims to provide annual distributions in the form of Annual Fixed or Variable Coupons.
During the Subscription Period the fund may invest in money market instruments so that during this period the value of the fund will progress in liaison with money markets and only after this initial period pursue the above described investment policy.
To achieve its investment objective, the fund will invest in a balanced portfolio of bonds issued by government and investment grade non-government issuers (BBB or higher by Standard & Poor’s) and build an exposure to the Equity Basket by investing in over-the-counter financial instruments and in particular by entering into swap agreements, options and futures with the aim of optimising its investment policy.
When does the offer open?
Applications open on 1 November 2004 and close on 1 December 2004 or earlier if the amount is fully subscribed. No additional investments may be made after the end of the subscription period. The minimum subscription is only Euro2,525 (equivalent to circa Lm1,100) and is therefore accessible by many small investors to whom this investment is targeted. For more information, interested investors may contact MSV head office – Christianne Debattista on 2569 4411 (or freephone 8007 2220), any branch of Bank of Valletta or any authorised intermediary.
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