Zurich International: A profile and review
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Introduction
Zurich International is a member of the Zurich Insurance Group, a well-known multi-line insurer that provides services to clients on both the domestic and international markets.
In more than 215 nations and territories, the company offers a wide range of insurance products and services, with a client base of over 600,000 since January 2020, including over 400,000 corporate employees through group life and disability solutions and roughly 200,000 retail consumers.
Essentially, Zurich International is a financial services firm and broker-dealer that provides investment advice and offers securities, including annuities, life insurance and mutual funds, mostly tailored for the expat market.
We’ve mentioned them before, particularly about their expat savings plan Zurich Vista. In this article, we will discuss Zurich International as a company and its products and services for you to decide if what they offer is right for you.
What is Zurich International?
Zurich International’s parent company, Zurich Insurance Group Ltd. Is the largest insurer in Switzerland. The organization ranked as the 112th-largest public corporation in the world as of 2021 on Forbes’ Global 2000s list.
The three primary business divisions of Zurich Insurance Group as a global insurer are General Insurance, Global Life, and Farmers. There are 60,000 employees and customers of the organization across 215 countries and territories. The company is a publicly traded company on the SIX Swiss Exchange.
Zurich International offers life insurance products that include annuities and customizable retirement plans to meet a variety of needs as well as other financial services such as investment advice and banking services.
In its mission statement, the company says that it aims to collaborate with its clients to create a better future.
“Our ambition is to work with our customers to build a brighter future, together. This defines who we are, who our stakeholders are, and the impact we want to have in the world,” the company states on its website.
“It’s an evolution. It builds on our group legacy and better reflects how we serve the needs of our customers, employees, partners and society. We have spent the last 150 years going above and beyond to protect the people who put their trust in us.”
Zurich International, which has branches and offers its personal savings, investment, and protection products Bahrain, Hong Kong, Qatar, and the United Arab Emirates, among other countries, was one of the first businesses to enter the market.
Zurich has full legal authorization to operate in Hong Kong, Singapore, Sweden and Switzerland; it also has licensed operations in Abu Dhabi, Bahrain, Sharjah and Dubai.
The Middle East and Far East–where the company has a sizable presence–are important parts of its business strategy.
In terms of regular premium business (business that doesn’t include annuities), Zurich International is the market leader among offshore insurers.
It advertises its Vista savings plan as a regular premium unit-linked plan that provides benefits for goals like retirement or education fees.
What products and services does Zurich International offer?
Zurich International has a wide range of funds available to its customers. Corporate and group pension options are offered in addition to the individual Vista. In the insurance sector, Zurich is a well-known global brand with a solid track record of compliance and customer service.
The investing offering from Vista includes a variety of fund categories:
- Cash and funds with cash equivalents make up the majority of low risk funds. Due to the current low interest rates, it is unlikely that the funds with a 0.75% fee would provide a sufficient return to cover their costs.
- Managed funds are those that are run by outside fund managers on behalf of Zurich International. Protective, cautious, blue-chip, performance, or adventurous are the several categories for these. 1.5% annually is their hefty management charge.
- Mirror funds are institutions set up by life insurance firms that give investors access to the unit trusts of other businesses through their life insurance contracts. Although this gives the investor a wide range of investment options, these mirror funds are frequently pricey, and fees may be obscured or complicated.
Money market funds, assured accumulation (essentially deposit administration) funds, and dynamic growth funds are some of the low risk investment options. The annual management fees for guaranteed accumulation are 0.5%, money market fees are 0.75%, and dynamic growth fees are 1.8%.
One thing to take note is that there is a significant lack of passive or low cost fund alternatives on offer.
Depending on the number of years before maturity, Zurich also offers an automatic investing strategy.
What is Zurich International’s Automatic Investing Strategy?
Depending on how long it is until your policy matures, the Automatic Investment Strategy (AIS) and the Retirement Investment Strategy (RIS) automatically transfer your policy across up to five investment portfolios, reducing risk.
Each portfolio offers a lower risk exposure than the one before it. While RIS is only available on Vista policies made prior to January 2005, AIS is available on plans produced after that date.
Threadneedle, which manages the funds, offers three different currencies: US dollars, British pounds, and euros.
By selecting the automated investing plan, you can automatically transition your savings as you get closer to the maturity of your insurance policy from equity-based funds to money market and bond-based funds.
This helps to safeguard any gains made in the first few years of your insurance and decreases your exposure to investment risk over time.
Depending on how long it is until the maturity date of your policy, the AIS automatically switches your policy through up to five investment portfolios, each offering a lower level of risk exposure than the one before. This lowers investment risk.
Simply put, when a plan gradually approaches maturity, the profile of managed funds gradually switches from higher risk funds to reduced risk funds.
AIS makes investments in various Zurich funds. The money market funds invest in certificates of deposit, short-term deposits, and other foreign short-term interest-earning instruments.
US dollars, sterling, and euros are all acceptable currencies for these money market funds. Their goal is to create an environment with low risk, stability, and plenty of liquidity.
The spectrum of managed funds includes funds with various risk tolerances. The funds invest mostly in bonds and stocks that are traded on international stock exchanges.
These funds’ asset allocation is controlled by Threadneedle, our fund adviser. Managed funds, which invest in a mixed portfolio of stocks, fixed-interest securities, and cash, come in five levels:
The least risky funds are the Defensive funds, which invest mostly in foreign corporate and government debt and a little amount in foreign equities.
Although the Cautious funds often hold a bigger percentage of stocks than the Defensive funds, they invest largely in fixed-interest assets.
The Blue Chip funds make investments in fixed-interest securities as well as equity.
In comparison to Blue Chip funds, the Performance funds have a lower exposure to fixed-interest assets and an even higher concentration of stocks.
Meanwhile, the exposure of the Adventurous funds to equities is typically larger than that of the other managed funds in the range, while their exposure to money market instruments is generally smaller.
Characteristics of the AIS that Zurich International highlights are:
- May be switched in and out of at any moment.
- Early-stage growth potential
- A long-term strategy that can mitigate the short-term volatility of equity investments and offer the possibility of outpacing inflation and cash returns; portfolios with decreasing equity exposure as maturity approaches, which can support policy value preservation in later years.
- Comfort with the automatic switching for the duration of the policy.
What are Guaranteed Accumulation Funds?
The Guaranteed Accumulation Funds are designed with smoothed, comparatively consistent growth and assured medium-term returns, supported by holdings of top-notch corporate and government bonds.
These funds promote capital growth through investments in the global bond market and are accessible in pounds, US dollars, and euros. By “smoothing” the payouts and providing medium-term assured returns, the funds offer loss protection.
The returns from the funds can be smoothed by Zurich International Life, ensuring that they do not fluctuate greatly from year to year regardless of how well the underlying assets perform.
It is possible that the funds won’t disperse every return in years when the assets perform well. This effectively builds a reserve that may be used to “top up” the payout of the fund during lean years.
Based on an evaluation of the anticipated returns, Zurich International will each year announce an interim dividend for each of the funds. This interim dividend is effective as of January 1 for the entire upcoming calendar year.
This interim dividend will be credited to your account on a monthly basis throughout the year. As long as the insurance is kept in force until maturity or an allowed withdrawal date, the interim dividend cannot be eliminated or reduced after it has been introduced.
An annual dividend is calculated at the end of the year after the actual returns from each of the funds have been computed.
A “bonus dividend” will be added to your account to make up the difference if the yearly dividend is more than the interim dividend that has already been credited.
The interim dividend that has already been received cannot be decreased or eliminated if the annual dividend is smaller than the interim dividend.
Zurich International Life determines the levels of dividends due on policies invested in the funds; these levels are based on the cumulative profits made by each fund over time. If profits are minimal, it is feasible that dividends in one or more years could be zero.
Keep in mind that past performance does not guarantee future results.
What determines how much I get back?
The performance of the fund’s investments has the most impact on the amount you’ll receive back. Bonuses won’t always reflect investment performance because of other considerations. These cover the impact of guarantees, costs, and our strategy for dividends and how the business manages variations in them.
Risks associated with investments include defaults on corporate fixed-interest instruments and changes in interest rates.
They are managed by Zurich International through its investing approach, which tries to ensure that the funds have adequate assets to pay for the guarantees issued, including any dividends that have already been paid to you.
Zurich International supports the funds through a variety of investments. The funds’ primary investments are fixed interest assets rather than equity-type assets (such as UK and international shares or real estate) (such as government bonds and high quality corporate bonds).
Your return will depend on how much you invest plus dividends. The surplus in each of the funds is used by the policy provider to pay dividends. This is the discrepancy between the fund’s total assets and what is required to cover its existing and projected liabilities.
Using the dividend mechanism, Zurich International Life hopes to disperse at least 90% of the surplus during the GAF’s remaining life.
The supplier takes future potential changes in investment returns and other factors into account when determining the payouts.
For the course of the remaining useful lives of the active policies, the goal is to achieve at least the medium-term promised investment returns. The company provides techniques to evaluate and manage these risks because unanticipated changes could have an impact on the money you receive.
The dividends will be modified gradually over time, according to Zurich International. So, while determining how much is paid out each year, the medium-term perspective is crucial.
For instance, even if recent returns have been better, the corporation will cut the regular bonus in line with expectations if it anticipates a decline in investment returns.
Depending on the product’s policy, different specific policy fees apply. The benefits that are promised by your policy will be lessened by these fees. The annual management fee for the GAFs is 0.50%. Each and every figure in this paper is presented gross of this fee.
If you hold onto your investment until a designated withdrawal date, the funds give a guaranteed investment return. This signifies that the average yearly growth rate will be at least equal to a stated rate at a specific time in the future (varying per product).
The investment will be “topped up” if the average yearly growth rate is less than the predetermined amount. If you withdraw from or surrender the fund before the permitted withdrawal date, the guaranteed return might not be applicable.
The guaranteed investment returns for the GBP, USD, and EUR funds stay at 0% (net of the annual management fee of 0.5%).
What if I want to move out of a fund?
You have the option to swap out of GAF and into another fund, or to fully or partially cash in your policy before its expiration date. Unless you are moving out of the fund on an allowed withdrawal date, Zurich International may deduct from the value of your policy when you leave the fund. Zurich International will account for the dividends already distributed to your account when determining the value of your policy.
The company would typically take into account making a Market Level Adjustment (MLA) when the market value of the assets supporting the funds is lower than the nominal unit value, and in particular if there are a significant number of policy surrenders associated to the funds.
According to Zurich International, it does this to treat consumers who continue to participate in the fund equitably. If your insurance expires due to death, the firm promises never to make an MLA.
A MLA may not be made according on your policy on the permissible withdrawal dates, but it may be made if you withdraw on any other day. This means that value can vary significantly from day to day and that you could not earn back the full amount you put.
What is the Zurich International Vista?
Zurich International’s worldwide unit-linked life insurance policy is called Vista. The insurance is subject to minimum premium levels and is intended to be held for a medium- to long-term period. New investors in the UAE can no longer access the vista.
There are over 170 funds available from the largest brands in international investment management. But, the majority are Managed funds, which incur extra costs.
Moreover, managed funds are offered in the following three currencies: US Dollar, Euro, and Pound. Each fund has a unique mix of stocks and bonds, which results in a range of risk and return.
You can choose a combination of managed funds that you feel comfortable investing in based on your risk tolerance and investment horizon.
The USD, GBP, EUR, and AED are all valid currencies for the Zurich Vista Plan. Depending on the contribution amount chosen, the duration can range from 5 years to a maximum of 25 years: £200 monthly, £600 quarterly, £1,200 half-yearly, and £2,400 annually (or currency equivalent).
The Vista savings plan includes an initial unit billing structure, similar to many offshore savings plans offered to expats. This indicates that the premiums you pay are allocated to so-called beginning units, which come with an outrageous 4% pa yearly surcharge.
Allocation is the portion of your premium that is set aside for the purchase of units; it is frequently more than the actual premium amount. With Gold, Silver, and Bronze bonuses, the Zurich Vista plans’ premium allocation to units increases as premium size does.
The monthly premiums are subject to these bonuses. Using a 15-year plan as an example, the allocation increases from the default 100% to 107.5%, 122.5%, and 137.5% of your premium for Bronze, Silver, and Gold, respectively. There is no bid/offer spread for any units, including the initial units.
In the event of a full early encashment, penalties in the form of term-related surrender costs are incurred.
For a policy term of five to fourteen years, the maturity incentive will be a reimbursement of 10% of the total yearly management charges paid during the insurance period, less any loyalty bonuses received.
There will be a return of 20% of the annual management charge paid during the policy term for policies with terms of 15 years or more (less any loyalty bonuses paid).
The payment of all anticipated regular premiums is a requirement for both the loyalty incentive and the maturity bonus.
On policies having an original duration of more than 15 years, this effectively means that the majority of the first 18 months’ payments will be forfeited upon surrender.
Regular withdrawals and partial surrenders, however, may be paid out after the primary initial term has ended and provided there are sufficient accumulation units in the policy to surrender. These partial surrenders do not come with any fees.
Zurich Vista offers you bonus incentives as you save more and pay your premiums. Also, you can receive a loyalty incentive every five years to assist enhance your savings, and a maturity bonus is given when your policy expires.
For the first 12 months of your insurance, Zurich Vista will apply a welcome bonus to your coverage (or the first 12 months of any increase). Your monthly savings rate and the length of your contract will determine how much incentive you receive. Every five years, they will also give you a loyalty incentive.
The loyalty bonus at year five will be a reimbursement of 10% of the total annual management fee deducted during the preceding five years.
On your tenth year, the loyalty award will be a 10% repayment of the total annual management charge deducted during the previous ten (less any loyalty bonus paid in year five).
The loyalty bonus, meanwhile, is a refund of 20% of the entire annual management fee, which is withheld starting in year 15 and repeated every five years after that (less any previous loyalty bonuses paid).
You will also get a maturity bonus when the Zurich Vista policy matures on the designated date.
What should I consider before investing with Zurich International?
Offshore savings, pension plans, or expat savings plans, like the Zurich Vista, can cost up to 9% annually for the first 18 months before falling to about 4% annually after that.
This is largely due to the fact that the salesperson who persuaded you to start the plan receives commission on a significant portion of the money you agree to save.
The market average for this type of plan is often close to 4.5% of the total amount you committed to save over the course of the entire plan (whether you save it or not).
Due to the arrangement, if you cease contributing to the plan, the charge structure will continue to increase gradually based on the initially agreed-upon monthly premiums.
This effectively means that the fees are assessed on every premium, regardless of whether you pay that premium.
This is because the original premium served as the basis for the billing structure. For instance, the percentage-based payment system will continue to be based on the $2,000 premium even if you reduce your monthly premium from $2,000 to $300.
Any profits and savings could be completely lost if you have to take a break or cut your premiums.
These plans frequently also feature an 18-month “indemnity period.” That indicates that if you stop making contributions before the first 18 months, you will lose all you have invested.
If you surrender your insurance early, you can get back much less than you initially invested, and you won’t get anything back for the first 18 months.
Because Zurich Vista is a unit-linked regular savings plan, it is vulnerable to market risks. However, with careful management of the investment strategy and professional advice from an investment adviser, the plan’s fund values may grow significantly over time.
The growth in fund values of the plan may benefit significantly from efficient administration of the investment strategy and knowledgeable advice from an investment adviser.
These plans are intended to be a long-term strategy. You should not invest in a Vista plan if you anticipate needing the cash for urgent expenses.
The first agreed-upon premium will be used to determine fees, so you should also not commit to a high monthly premium if you are not confident you can keep it up for the duration of the plan.
Finally, you should not pledge to save for a period of time longer than you can reasonably anticipate to be able to do so.
Bottom Line
Zurich International is one of the largest and most reputable providers in the industry, offering access to over a hundred different funds across multiple asset classes and strategies.
If you have a high net worth, are comfortable with high fees, have a lot of money invested in annuities or mutual funds, and are comfortable committing to long-term savings plans, then it’s worth considering the products the company has to offer.
However, if you’re just looking for simple savings accounts, or more flexible investments that have better yields, there are better options available elsewhere.
Learn more about Zurich International through the Vista Savings Plan.
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