In our previous insight “Accelerating Taiwan ILP Scale and Selected SITEs Rock the Market” in August 2021, we provided an overview of booming phenomenon of Investment Linked Policies (ILP) in Taiwan. As one of the most efficient investment solutions that provides both stability and profitability, ILP continue to grow up on a steady pace.
Exhibit 1 : Overview of Onshore Mandate market and Breakdown of SITE Mandate types
Source: SITCA, 2022/8, NAVIGATE consolidated
Echo to our previous article, ILP Mandate has been an important portion of SITE managers’ discretionary investment business. In 2022, the size of ILP mandate (including Foreign and local currency) has first time overtaken TW equity mandate and account for over 50% of overall discretionary assets. We expect the accelerating trend will move forward as 1) ILP’s featured to offer conservative policyholders, who have relatively scare investment resources, the fit opportunities to enjoy gain and profit in financial market, and 2) Asset managers also favor ILP mandates on the ground that ILP’s structure secures investors’ asset with longer duration, opposite to volatile capital movement of mutual funds.
Exhibit 2: Foreign Currency ILP mandate assets
Source: SITCA, 2022/8, NAVIGATE consolidated
Although regulation on ILP mandate has been rigorous than ever, it could not stop capital flying into the ILP mandates. That was seen even more obviously in foreign currency ILP (FC ILP) mandates. As of August 2022, total FC ILP mandate asset has increased 20% YTD and reached $US 36,239 million; total number of FC ILP accounts has surpassed 250. With the turbulence of the financial market, it makes sense that investors would like to preserve their assets in policies, while simultaneously handover the capital to professional asset managers for better asset allocation.
Exhibit 3: Top 10 Foreign Currency ILP Mandate managers
Source: SITCA, 2022/8, NAVIGATE consolidated
ILP mandate market continues to grow, however, the market is majorly dominated by few top asset managers. Cathay SITE, Alliance Bernstein SITE and J.P Morgan SITE for years remain top 3 players in ILP mandate market. Cathay SITE surpassed Alliance Bernstein's long time leading place in 2020, and far ahead hold a safe lead with its steady growth on new contracts and capital inflow from new investors (policyholder) to existing ILP account. It’s highly possible Cathay SITE will be the first manager stepping its ILP assets into $US 10 billion scale in the very near future.
BlackRock SITE and CTBC SITE are among the best performers in growth of ILP assets. Ignoring the change of USD/TWD, ILP assets of BlackRock and CTBC increased 201% and 161% respectively since June 2021.
The reason BlackRock has tremendous growth in ILP asset in 2022 is it got nominated by three of the top lifers, Taiwan Life and Fubon Life and Cardif Life, with total assets $US 145 million, $US 553 million and $US 79 million respectively, the success could be attributed to the effort of its brand-new channel sales team.
On the contrary, CTBC grow its ILP asset mostly from its existing accounts. CTBC also launched three new accounts since June 2021, but grand total of the new account size is only $US 254 million, which means more than US$ 900 million asset is from policyholders of existing ILP accounts. This achievement is due to the synergy of other affiliates of CTBC group, including Taiwan life insurance. Collaboration and trust between ILP manager and insurance company will be essential for such intrinsic growth.
With everlasting interest in foreign currency ILP Mandate products, the market will no doubt be a battle ground for foreign asset manager who would like to expand its footprint in Taiwan. Please reach out to Navigate if you believe your products could lure investors eyes!