It is easy to be cheated (2) - Capital Protected Products

During the past ten years, many financial institutions introduced structured products, such as the capital guaranteed or capital protected products. They are designed to attract investors who do now wish to take investment risk, and wanted a better return than paid on fixed deposits. 

These structured products are usually issued for a term of 5 years. The capital is protected or guaranteed. The investors were told that the capital is protected and they can earn a higher rate of return.  

To provide the capital protection, about 80% of the money is invested in a low risk bond to produce the capital return on the maturity date. Of the remaining 20%, about 10% is taken away as expenses, distribution cost and profit for the issuer. The remaining 10% is used to buy an option that has a small chance of earning a high return, but a larger chance of returning nothing. 

Most investors of these products got back only their capital after five years, with little or no gain. 

If the investors had bought the low risk bond, they would have received a return of 20%  for the 5 year period. The financial institutions did not want to sell the low risk bonds as they earned a small fee compared to the structured products (which paid a higher commission). 

To be fair, some distributors were not aware that the products were bad products. They were only concerned about earning the high commissions for distributing the products. They failed in their duty in giving the proper financial advise to their customers. 

During the period that these products were sold, the retail customers must have invested several billions of dollars and lost several hundred millions in the return that they would have obtained by investing in low risk bonds. Unfortunately, the financial institutions were not held accountable for selling these bad products. 

Tan Kin Lian

 

Benchmark premium rates

Some readers ask if it is possible to get $100,000 of cover in a term insurance policy and if it depends on age? 

You can refer to the benchmark rates here. Some insurance companies should be able to offer premium rates that meet these benchmark. You can call their hotline. 

Different Types of Life Insurance Policies

Dear Mr. Tan,

If you find the time, can you explain the different types of life insurance policies, such as whole life, endowment, term, ILP. I am quite confused about them.

REPLY

You can read this explanation. Please tell your friends to read it as well.

Try this test.

Preparing your case in FIDREC

Dear Mr. Tan,

I have just received a rejection letter from the bank that sold the minibond to me. I am devastated. What can I do now? Shall I go to FIDREC? What about the class action?

REPLY

Over the past five months, many investors have recieved a rejection letter or a low offer that they cannot accept.  The best course of action is through FIDREC. I have updated this guide on how to use FIDREC. I have found a lawyer who is willing to provide legal assistance to help the investor in the FIDREC process for a flat fee of $500. 

Various groups of investors have approached several lawyers to organise a class action. I understand that most of these efforts have stalled. The class actions required at least 500 participants to contribute $2,000 or more. They were not able to get an sufficient number of participants. 

Masdar - City of the Future

Watch this video.

It is easy to be cheated (1) - Introduction

I shall be writing a few articles about how easy it is for someone to be cheated in the world of investments. I shall be quoting from several recent experiences in Singapore, but I will not be mentioning specific products or organisations. You have to make a guess.

There will be lessons that can be learnt so that you are not caught in these scams. You have to worry about reputable organisations, as many of them are now engaged in these type of practices in their pursuit of profit.

It is easy for a consumer to be cheating from the following  types of products:

a) structured and banking products

b) insurance products

c) shares

d) trading in foreign currenty 

e) land banking and other non-listed products

f)  exotic products sold by private bankers

Nearly all investments are similar to gambling. The investor in speculating (i.e. gambling) on the price movement of the product. The speculator makes a profit when the price goes up and makes a loss when it goes down. The investor also has to make a choice in selecting the right product to invest it. 

It is easy for a small investor to be cheated in this environment by the other party who has better information or the ability to create the product to their advantage.

Even the cautious investor, who does not wish to take any speculative risk, can be conned into investing in products (such as the credit linked notes) that can wipe out the entire savings, without providing a commensurate rate of return. Some are offered products that have already turned bad, but are packaged in a misleading manner at an over-inflated price. They are being cheated!

Do come to my blog daily to read about these stories and take the lessons to avoid being cheated of your hard earned money.

Tan Kin Lian

AGM of NTUC Income

I attended the AGM of NTUC Income and raised several questions. I shall post the answers separately. 

I wanted to submit a nomination for the board of directors, to represent the policyholders. However, the nominee decided to withdraw at the last minute. He felt that most of the attendees were staff and agents of Income, and would have voted in favour of the CEO - who was standing for re-election. I have to respect his wishes.

There appeared to be insufficient policyholders (who were not staff or agents) at the AGM. Even if they were there, most of them preferred not to ask any question or follow up questions.

 

Logic Quiz 4-1 (Vol 4)

There are four houses with different colours in a row. Each occupant plays a different sport and drinks a different beverage.

 1. The engineer drinks whiskey.
 2. The golf player lives in the last house.
 3. The volleyball player lives in the grey house.
 4. The rugby player drinks rum.
 5. The scientist plays cricket.
 6. The green house is left of the grey house.
 7. The engineer lives in the blue house.
 8. The accountant lives left of the scientist.
 9. The salesman lives in the first house.
10. The vodka drinker lives in the purple house.

Question: Who drinks wine?

Record your time and give your answer here. You will be given the correct answer, after you submit your entry.

Benchmark
1 to 5 mins: very good
5 to 10 min: good
10 to 15 mins: fair
more than 15 mins: need more practice! 

More of the quiz
It appears every Sunday in The New Paper.
You can buy my book at these bookstores:

The spectre of death

Dr. Wong Wee Nam wrote an article about H1Ni virus in this blog. It is written clearly for the layman and explains why there is no need to have undue concern about this virus at the present time. 

Generally, Singaporeans tend to over-react to any type of perceived risk (claiming that a "black swan" event could occur). It is good to hear from the experts. In this respect, he quoted Professor Lee Wei Ling who shared the same idea.

Dr. Wong has contested in past general elections as an candidate from the alternative parties.

Automated vehicles - to arrive soon?

I have posted several interesting articles in this blog.

Uncertain distribution of bonuses

In recent months, I have received many e-mails from policyholders of various insurance companies asking about the reduction in the bonuses on their participating policies. The companies explained that the bonus cuts were necessary in the light of the financial situation and indicated that the terminal bonus will be increased to give a high payout on the policies.

However, the terminal bonuses are not guaranteed and many years later, these policyholders are told that the terminal bonuses have to be cut due to some other reasons at that time. 

The insurance company claimed that the bonus rates have been approved by the appointed actuary and fairly distributed to policyholders. What is fair is subjective and may not be fair from the prespective of the policyholders - as they have no say. 

Many policyholders have found that the bonuses have been reduced compared to what they were told at the point of sale, and that the insurance company continued to make bigger profits for shareholders and pay higher managenent expenses and commissions. They are not convinced that they have been fairly treated over the years, but they have no way to exercise their contractual or legal rights.

This practice has been prevailing in some insurance companies in past years and has now spread to many other companies. It is now becoming quite common for insurance companies to treat their policyholders in this arbitrary manner.

In some countries, the regulator has insisted on the use of asset shares to determine the bonuses to be distributed to participating policyholders. They have also placed caps on the amounts of commission and expenses that can be charged to the life insurance fund.  Malaysia has introduced these measures to a satisfactory degree.  I hope that Singapore will implement similar measures for the protection of the policyholders.

While the situation remains unclear and arbitrary, it is best for consumers to avoid putting in a lot of savings in a life insurance policy. These includes endowment, whole life, critical illness and investment linked policies sold with high commissions to the agents. You have locking the savings for a long time and is likely to get a poor return. If you terminate the plan in the earlier years, you will to suffer a large loss with have to lose more than half of your savings. 

It is all right to pay a low rate of premium for a term insurance policy, including a rider that covers critical illness. The cost should be less than $2 for every $1,000 of coverage. If you cover $100,000, the premium should be kept to $200 a year, or less.

Tan Kin Lian

Puzzle - The three coins

Joe: "I'm going to toss three coins in the air. If they all fall heads, I'll give you $2. If they all fall talls, I'll give you $2. But if they fall any other way, you have to give me $1."

Jim: "Let me think about this a minute. At least two cins will have to be alike because if two don't match, the thrid will have to match one of the other two. And if two are alike, then the thrid coin will match the other two and not match them. The chances are even that the third coin will or won't match. Therefore the chances must be even that Joe is better $2 against my $1 that they won't be alike, so the bet should be in my favor. Okay, Joe, I'll take the bet.

Was it waise for Jim to acept the bet?

Give your answer here. You can seel the solution after submitting the answer.

 

Puzzle: The Bicycles and the Fly

Two boys on bicycles, 20 miles apart, began racing direclty toward each other.The instant they started, a fly on the handle bar of one bicycle started flying straight towards the other cyclist. As soon as it reached the other handle bar it turned and started back. The fly flew back and forth in this way, from handle bar to handle bar, until the two bicycles met.

If each bicycle had a constant speed of 10 miles an hour, and the fly flew at a constant speed of 15 miles an  hour, how far did the fly fly?

Give your answer here. 

Benchmark:

Less than 2 min: excellent

2 to 5 mins: good

5 to 10 mins: fair

Above 10 mins: took so long?

Engineer Quiz

 It is said that engineers take 3 minutes to resolve this,  architects 3 hours and doctors 6 hours.

What is the 6th number?
 1, 2, 6, 42, 1806, ________?    So what is the next number???

Give your answer here.

Check the answer here.

SCMP:400 investors lose millions in echo of minibonds scandal

30 May 2009

In a disturbing echo of the Lehman minibonds scandal, the Hong Kong Monetary Authority has received more than 400 complaints from people who have lost hundreds of millions of dollars on a complex credit-linked product designed and sold by US investment bank Morgan Stanley.

The bank sold HK$2.1 billion of the products, called Octave notes, through 16 local retail banks, including ABN Amro, Bank of China (Hong Kong) and Wing Lung, between 2004 and 2007. Eighteen series of the notes were sold, of which 10 have lost more than 90 per cent of their value. Three - series 10, 11 and 12 - are worthless.

The HKMA revealed the complaints yesterday. It said the banks had sold the Octave notes to about 8,300 customers.

Lawmaker Regina Ip Lau Suk-yee called yesterday for much stronger regulation of financial products sold to retail investors.

She said she had been contacted by people who had suffered big losses on the Morgan Stanley products but had not understood their nature. "The people who have contacted me are ordinary grass-roots people. They are not wealthy," she said.

Like most minibonds, the Octave notes contain synthetic collateralised debt obligations (CDOs), which in the United States and Europe are sold only to professional investors.

"They [Octave investors] sounded very similar to the Lehman investors, who didn't know the products they bought were so risky," Mrs Ip said.

Some 48,000 Hongkongers lost most of the HK$20 billion they invested in minibonds issued or guaranteed by Lehman Brothers when the bank collapsed in September.

Synthetic CDOs are complex, conceptual products that mimic the financial health of a pool of companies. When businesses collapse, the CDOs lose value. Many of the Octave notes are virtually worthless because they were connected to the financial performance of firms that went bust.

Information that Morgan Stanley has posted on a dedicated Octave website illustrates the toxic mess.

Octave series 21, for example, is now worth 0.37 HK cents per dollar invested. It contained a CDO linked to the financial performance of some very troubled companies. These include Icelandic bank Glitnir, which collapsed in October, and US carmaker Chrysler, which entered bankruptcy protection on April 30. Notes that were priced at a fraction of their original value had a high chance of becoming worthless soon, informed sources said.

Only one Octave note is trading at anything approaching a healthy valuation. Series one, issued in 2004, is priced at 68 HK cents per dollar invested.

A spokesman for the regulator said it had taken steps to stop such a debacle recurring. "The HKMA has taken a number of steps, including the issuance of circulars and reminders, to ensure that banks implement adequate measures to manage the risks associated with retail investment products," he said.

The regulator has also asked banks to keep their relationship managers well briefed so they can handle customer inquiries.

A new era for capitalism

“Capitalism is changing in fundamental ways. For many years to come, what’s happening will affect the relationship between business and government, between taxpayers and the private sector, between employers and employees, between investors and companies. … A new capitalism is likely to emerge from the rubble.” 

- Robert Peston, business editor, BBC

EXECUTIVE SUMMARY

“Derivatives,” said Warren Buffet, a renowned US investor, “are the financial equivalent of weapons of mass destruction.” He has certainly been proved right, with failing banks around the world showing that opaque financial instruments cannot mask the effect of reckless lending. After a lull in which it seemed that the rest of the economy might just avoid the worst effects of the banking crisis that started in August 2007, consumer demand, manufacturing and trade have all fallen precipitously and the global economy is in the grip of the worst downturn since the 1930s. After close to 30 years of light-touch regulation, globalisation and free-market binges, during which some politicians claimed to have tamed the business cycle, many commentators have now suggested that capitalism itself is entering a new phase.

In this report, the Economist Intelligence Unit examines the views of the people who own and manage the world’s businesses. Has capitalism changed, and if so, what might the new landscape look like? How will organisations adjust as a result of the crisis? Do business people support the actions taken to stem the crisis and do they favour expanding the government’s remit beyond the banking sector? To answer these questions, we conducted a survey of more than 400 senior business people in companies around the world. We supplemented the findings with interviews with experts, analysts and executives, as well as analysis from our editorial team.

The most striking finding is that almost 60% of respondents agree that the current crisis has “fundamentally changed” capitalism. According to one respondent, “Much as the Great Depression did in the 1930s, this crisis will permanently change the way governments and businesses view the world.” In summary, the survey respondents believe that there will be more government oversight, more economic nationalism, less risk-taking and slower growth. Decision-making within businesses will reflect a new reality, as frugal customers and state regulators hold sway. The respondents support emergency intervention in the banking sector, but their opinions are more conservative when it comes to further reform, such as outright nationalisation of other key industries, creating so-called bad banks that buy and ring-fence toxic debts, or limits on executive pay and bonuses. 

Rights issues - risk to small shareholders

During the recent credit crisis, many listed companies are have rights issue to raise additional capital. The new shares are issued at a lower price than the existing shares. This will cause the existing shares to be diluted and the price to fall.

Here is an example. If the share price is $4, and new shares are being issued at $2 (on the basis of 1 new share for 1 old share), the share price is expected to drop to $3 after the new shares are issued. This is caused by "diluation".

The practice of rights issue has the following risk to small policyholders:

a) Difficulty in finding the additional money to take up the new shares. If you are offered to 10,000 new shares at $2, you have to find $20,000 to take up these shares. If you are not able to find this spare cash, you can sell the rights during a certain period.  In theory, the rights should be worth the expected drop in the price of the old shares.

b) Oversight. You may not be aware of the rights issue and you forget to take it up or to sell the rights. This will cause your investments to drop in value, as the avlue of the old shares would have dropped due to dilution. This oversight is easy to happen, as you may be busy with work or overseas, when the rights issue are announced.

At each rights issue, there will be a certain proportion of shareholders who fail to take up or selll the rights due to oversight. These investors lose out and the benefit is given to other shareholders who take up the new shares at the lower price. (In some companies, the directors take up these excess shares).

To avoid this risk, it is better for small investors to invest in a professionally managed fund, such as a ETF (exchange traded fund).  The professional managers will take care of the work of monitoring the investments, including collecting the dividends, subscribing to rights issues and other matters.

 

Political changes in Singapore

What are your views about the proposed political changes announced by Prime Minister Lee? Give your views here.

Here are the survey results (48 replies).

Zurich Vista Plan

A few policyholders have invested in the Zurich Vista plan. They are now unhappy that they have not been informed about the high surrender charges and other features of the plan. They wish to consider appropriate action.  If you wish to join them, give your particulars here.

Flying over the glaciers in Juneau, Alaska

Getting into the seaplane.

View of glacier from the plane

Another view of the glacier

Tax incentive and commission

In some countries, there is tax incentive for saving in an insurance policy or to create an educational fund for a child. People are not aware about this incentive. The adviser helps them to gain access to the incentive through a suitable plan. The commission earned by the adviser is more than covered by the tax incentive. The customer gains from the plan, after paying the commission. All parties benefit.

In  Singapore, where there is no tax incentive, the commission paid to the adviser is a burden to the consumer. It reduces the net return to the consumer. Some insurance companies do not care about the consumer and are willing to sell "poor value" products to them. They train their agents to "convince" the customer to buy these products. It is enethical to take advantage of the igonorance of the consumer.

All financial products with high upfront fees give poor value to the consumer. They include  investment linked products, structured products,  endowment and whole life policies.

Without any tax incentive, there is no justification for high commissions to be paid to financial advisers who sell the financial products. There is a pressing need for the regulator to set limits to the commissions that can be paid, so that the consumer's are given a fair deal.

Tan Kin Lian

Online Sudoku

Try this website for Sudoku games at 4 different levels and choice of symbols. Try solving with flowers. 

BOC HK's mini-bond holders demand settlement ASAP

May. 25, 2009 (China Knowledge) - Bank of China (Hong Kong) Ltd, the largest distributor of Lehman Brothers-linked products in Hong Kong, has been asked by hundreds of Lehman mini-bond holders to settle their cases faster, the Standard reported.

On Thursday the mini-bond holders gathered outside the Hong Kong Convention and Exhibition Centre, Wan Chai, during the annual meeting at the company's headquarters there, asking the bank to resolve the issue with the mini-bonds as soon as possible.

The bank has already deployed resources to deal with the matter, said President He Guangbei, adding that the bank is handling the issue actively and seriously and expects to wrap up the cases soon. The bank has set up an internal audit committee and continues to discuss the matter with regulators. 

However, he provided no timetable. 
http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=23848

Brain Workout in The New Paper

A few readers have asked me where they can buy the TKL Intelligence Quiz book. The bookstores are listed in this website. Several have asked when the next volume will be available. They can also try the online version of the quiz here.

Lesson in leadership from the world of football

What makes Alex Ferguson great? Read this article.

Terminating an existing life policy

Dear Mr. Tan,

I have bought a vivolife policy 2 yrs ago. Recently, I am thinking of increasing my coverage as I am planning to start a family soon.

After reading your blog, I am thinking of the following: switch to term plan and invest my savings on equity personally. Do you think it's advisable?

REPLY
Please read this FAQ before you take your decision to terminate the Vivolife policy.

If you terminate the policy now, you will lose a large part of what you have paid during the past two years. If you look at the cost for the next five or ten years, you can get a better idea about the advantages of making a switch.

You should also find out the cost of the term insurance policy and critical illness coverage.

It is advisable to take up a term insurance policy, rather than a whole life policy, but a decision to terminate an existing whole life policy has to be considered separately on its merits.

BBC: Expense row minister steps down

Read this.

Salary and perks of MPs in Europe

Read this.

What to do about your endowment policy

This article is written in the context of the situation in the UK. Many of the points are valid when applied to Singapore.

http://news.bbc.co.uk/2/hi/business/8056993.stm

Lehman Role Probed in Selling Securities

onlineWSJ, 21 May

http://online.wsj.com/article/SB124286228762941197.html#mod=rss_whats_news_us

The Justice Department has questioned several former executives at Lehman Brothers Holdings Inc. as part of its criminal investigation into whether they sold supposedly safe, liquid securities to clients while knowing that the market for the securities was drying up.

Prosecutors from the U.S. attorney's office in Brooklyn and lawyers from the Securities and Exchange Commission in recent weeks interviewed several former executives who ran Lehman's auction-rate-securities business, these people said. Auction-rate securities are short-term debt instruments in which the interest rates reset at periodic auctions.

The Standard: Minibond fury hits BOCHK

22 May 2009

 

Hundreds of Lehman minibond holders vented their anger at Bank of China (Hong Kong) (2388) and demanded a faster settlement although the lender said more than 2,000 cases have been resolved. BOCHK was the largest distributor of the Lehman Brothers-linked products in the territory.

The minibond holders yesterday gathered outside the Hong Kong Convention and Exhibition Centre, Wan Chai, where the bank was holding its annual shareholders' meeting, as well as at its headquarters, demanding that cases be wrapped up soon.

Bank management came under fire at the meeting with half the questions related to the minibonds controversy.

``You said you are concerned about the issue, but you are just paying lip service,'' one shareholder said.

President He Guangbei replied that the bank has already deployed resources to deal with the matter.

``We are handling the issue actively and seriously and hope to settle the cases as soon as possible,'' He said.

An internal audit committee has been set up, and discussions with regulators are continuing.

But He could not give a settlement timetable.

The bank denied speeding up settlements and raising the starting point for resolving the issue because of political pressure _ a claim made by Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims.

``We are handling each case individually as each has a different claims level,'' He said.

Chan claimed that since April 1 the bank has sped up the process and raised the starting level of claims from 10-20 percent to 50 percent to avoid protests on the anniversary of the handover.

The BOCHK chief declined to say whether it will have to fork out more on Lehman-related issues in 2009, after last year's HK$700 million.

``The expenses last year covered costs that might also be incurred this year,'' He said.

Separately, the bank said it has no plans as yet to issue yuan bonds locally and its parent, Bank of China (3988), has no plans to privatize BOCHK.

Reuters.com - Singapore's Temasek defends costly Bank of America exit

By Kevin Lim and Saeed Azhar

SINGAPORE (Reuters) - Singapore's Temasek defended its money-losing exit from Bank of America , saying the U.S.-centric bank did not fit its investment criteria and the risk was perceived to be greater than the expected return.

The explanation, a rarity for the state investor, came in a letter to major Singapore newspapers after the loss on BofA attracted fierce criticism from the usually muted pro-government local media, investors and independent blogs, which noted BofA shares have rallied more than 70 percent after Temasek's exit.

The losses are also expected to be discussed when Singapore's Parliament convenes next week.

Temasek, which is headed by Ho Ching, the wife of Singapore's prime minister, sold its 3 percent stake in BofA in the first quarter after converting its Merrill shares into BofA in January. Temasek has not said how much it lost in the process, but Reuters estimated the loss was more than $3 billion.

Temasek announced in February that Ho will step down and be replaced by Chip Goodyear, the former CEO of BHP Billiton , on October 1.

"Our investment thesis had changed from Merrill's specific businesses to the more diversified BoA linkage to the broader U.S. economy. The risk-return environment had also changed substantially," Myrna Thomas, managing director for corporate affairs, said in the letter.

Temasek's aim is to ensure that its portfolio delivers returns that are higher than the cost of capital employed on a risk-adjusted basis, Thomas said.

"We may choose to divest an investment, even at a loss, to optimize our risk or portfolio exposure, or if there are better opportunities elsewhere or later," she added.

Temasek, which like other sovereign wealth funds, plowed billions into Merrill Lynch in the early phase of the credit crisis, saw the value of its portfolio plunge 31 percent to S$127 billion between March 31 and Nov 30 last year during the severe market turmoil.

KEY QUESTION UNANSWERED

Financial investments accounted for 40 percent of its portfolio.

"The letter doesn't give the answer that everybody is asking. How much did they lose?," Leong Sze Hian, president of the Society of Financial Services Professionals, told Reuters.

The exact losses are difficult to quantify because Temasek had also offloaded about 30 million Merrill shares last year in smaller lots, reducing its exposure to the investment bank by the time BofA took over Merrill.

Conraj Raj, editor-at-large at the Today newspaper in Singapore, threw the spotlight on the sovereign wealth fund's stated strategy of taking a long-term view of its investments.

"After all, it has been drummed into us ad nauseam that both Temasek and its cousin, the Government of Singapore Investment Corporation, invest for the long term with a time horizon that could stretch for as long as 50 years," he wrote on May 18.

"Whatever happened to the sovereign wealth fund's (SWF) strategy of taking a long-term view of its investments?"

Singapore's bigger sovereign wealth fund, GIC, on the other hand said it was a long-term investor in Citigroup and UBS .

"It is difficult to understand why a long-term investor like Temasek was willing to stick with a dud like Australia's ABC Learning centers to the end, but did not try to exercise a little bit more patience with a U.S. government-backed entity like BofA," Png Eng Huat wrote in a letter to Straits Times forum.

"The U.S. government has stated clearly that it will not nationalize BofA even though it is technically the largest shareholder of the bank."

(Editing by Muralikumar Anantharaman)

China Daily:Settlements complicate Lehman inquiry

HONG KONG: Investigations of financial institutions that sold Lehman Brothers minibonds became more difficult after some complainants in the case reached separate settlements, Hong Kong Monetary Authority chief executive Joseph Yam said yesterday.

Yam made the revelation Friday as he was grilled by legislators in the Legislative Council subcommittee hearing on the Lehman Brothers products disaster.

"We can still get the information we need from banks," he said. "However, we cannot make verification with the investors (under terms of settlement agreements, investors are prohibited from disclosing information about their individual cases). That makes our investigation difficult."

Yam's revelation immediately drew criticism from subcommittee members. James To accused the authority of protecting the banks.

"How can you let this happen to hinder your investigation?" he demanded.

Yam defended the authority, countering that it could not stop investors from settling their complaints with the banks that sold the instruments.

"If we imposed restrictions on banks because of the difficulty involved in the investigations, the investors may not be able to reach settlements and get back their money. That is not fair to them," he said.

Yam, who will retire in October, has been grilled by the subcommittee on six occasions. Friday's hearing saw repetition of earlier incidents, with Yam's testimony interrupted by shouts from angry investors in the public gallery. Subcommittee chairman Raymond Ho Chung-tai was forced to call five-minute adjournments on two occasions so that the furor from the gallery could be quieted.

Financial services sector legislator Chim Pui-chung and Hong Kong Island constituency legislator Regina Ip said the authority failed to prevent banks from employing hard-sell tactics to persuade investors to buy Lehman Brothers financial products.

"One of the investors purchased the product through her daughter working in the banks. The daughter has not gone through any training. The bank hires her, and she is just trying hard to sell the products to her relatives as well. It is a problem for banks to set a selling quota for the staff to achieve," she said.

Yam reiterated that the authority does not tolerate irregular sales practices and will deal with the matter seriously.

"If the investors, under the cold call practice, are not interested in the product, and the investors purchased the products simply because the banks or agents called them saying they have money in their accounts, this will not be tolerated," he said.

He said the authority asked about 50 banks to conduct self-assessments in 2008.

He added that the authority would be more thorough when assessing banks in the future.

The authority deputy chief executive Choi Yiu-kwan will give evidence at a hearing of the subcommittee in June. But chairman Ho said legislators intend to recall Yam to give further evidence after Choi's testimony.

SCMP:Yam denies shielding banks from scrutiny

The Monetary Authority cannot stop banks that settle with minibond investors inserting clauses requiring that they drop their complaints and cease disclosing information about their case, its chief executive told lawmakers yesterday.

Joseph Yam Chi-kwong denied he was shielding banks from scrutiny.

He was testifying for the sixth time to the Legislative Council panel inquiring into the alleged mis-selling by banks of credit-linked derivatives, including minibonds, issued or guaranteed by Lehman Brothers. At the end of last year, three months after the American bank filed for bankruptcy - causing 48,000 Hong Kong investors to lose much or all of the HK$20 billion they put into such products - 17 banks paid HK$257 million to settle 616 investors' claims.

"My view is that the HKMA doesn't have any power to interfere with the relationship between the banks and their clients, even if an investor has promised the bank to withdraw their complaint or to not make available further information," Mr Yam told the subcommittee.

"We can still get hold of the information we require from the banks. Of course, if we cannot get information from the investors to corroborate, then it would be more difficult to proceed with the investigation."

He said he would seek legal advice as to whether the inclusion of such conditions in settlements with investors was against the public interest.

A spokesman for the authority said the outcome of such settlements would not affect its investigations.

The authority has received nearly 21,000 complaints about banks' sale of minibonds. Despite their name, minibonds are complex products that derive part of their value from underlying credit instruments.

An authority circular issued in March said banks should not include in settlement agreements clauses that stopped investors disclosing relevant information to regulators.

Democratic Party lawmaker James To Kun-sun called on Mr Yam to reconsider allowing banks to impose such conditions, since they might interfere with the authority's statutory duty to regulate banks. Mr Yam said he would reconsider, but insisted that restricting banks would be unfair if it affected minibond investors' ability to reach a settlement.

Questioned by lawmakers yesterday, Mr Yam sought to show that the authority was on top of the situation. Inspections of bank activities continued between 2003 and 2007 even though there were not many cases of suspected mis-selling of such derivatives, he said. Around the middle of last year, the authority identified more cases of suspected mis-selling. In February last year, the authority set out to investigate 11 banks selling high-risk derivatives, but launched investigations into only four.

Yesterday's Legco session was interrupted three times by rowdy spectators in the public gallery calling for Mr Yam to step down. He will retire on October 1 after 16 years in the job.

Pledge by public servants

I visited the Parliament building of the provincial government of British Columbia. There was a display showing the pledge taken by the public servants. Some key elements of the pledge are:

1. To serve the people of British Columbia

2. To loyally obey the Government who are the elected representatives of the people

3. To serve the public interest over personal interest and avoid conflict of interest

4. To uphold confidentiality

This pledge recognises that it is the people who are supreme, and that the current Government is there only as the elected representatives of the people, and that the Government can be changed, if the people so desires.

It is quite refreshing to know that this is what democracy and legitimacy of Government really is.

Survey - social benefits and taxation

Do you prefer the state (i.e. Government) to provide less social benefits and reduce taxes, or to provide more social benefits (to be funded by higher taxes). Give your views in this survey.

Here are the survey results.

Running a business on sound principles

Lessons to be learned about operating a business on sound principles. Read this article.

SCMP:Authority suspected banks of mis-selling

The Monetary Authority suspected three banks of mis-selling credit-linked products before Lehman Brothers collapsed but did not check more banks or alert the public to its findings, its chief executive, Joseph Yam Chi-kwong, told a legislative inquiry yesterday.

There was "not sufficient information to show it was an industry-wide problem", he said.

Credit-linked derivatives, most of them minibonds issued or guaranteed by Lehman, lost much or all of their value after it collapsed last year amid the global financial crisis. Some 48,000 Hongkongers had invested HK$20 billion in such products.

Mr Yam said the authority set out to investigate 11 banks selling such products - including Lehman-linked ones - in February last year because of their high risks. But only four banks were investigated and that process was disrupted when Lehman Brothers collapsed.

Of the four, three were suspected of mis-selling, Mr Yam said. One has since been found guilty of misconduct in connection with the sale of credit-linked products; the other two are still under investigation.

Mr Yam said the inquiry last year identified problems with the way these banks' frontline staff explained to clients the nature of the products and their main risks, staff understanding of the products and staff management systems; and found sales documents were faulty and did not give detailed risk assessments for the products.

Lawmakers criticised the authority for not widening the investigation or alerting the public in time.

"There were about 20 banks selling Lehman products. Why did you not investigate all other banks immediately when you found three out of four problematic?" Ronny Tong Ka-wah of the Civic Party asked.

Independent Regina Ip Lau Suk-yee said: "What you identified in the probe were critical problems. If you had called a halt to such malpractice across the industry in time, and informed the public about that, you'd have saved many people."

Mr Yam said the authority did not have enough information at the time to show there was industry-wide malpractice. He also said the authority was investigating four complaints from bank staff about "oppressive" managements who based incentives solely on sales volume, regardless of any malpractice.

The authority considered having investigators pose as customers to check banks' sales practices, but did not do so since the Securities and Futures Commission did not use the practice and "we have to conform with their standards", Mr Yam said.

Second Lehman-backed catastrophe bond defaults

LONDON (Reuters) - A second Lehman Brothers-backed catastrophe bond is in default after issuer Ajax Re Ltd failed to repay principal in full at maturity, according to credit rating agencies.

The $100 million bond, issued in April 2007 to give Bermuda-based Aspen Insurance Holdings Ltd cover against losses from earthquakes in California, had been expected to default following the collapse of Lehman, its effective guarantor.

Credit rating agency Standard & Poor's said in a May 11 statement that it had lowered its rating on the bond to D, signifying default, and withdrawn the rating.

It said Ajax Re had paid all the interest due on the bond, "but the ultimate payment of principal was not made in full on May 8, 2008 due to a shortfall in the realizable value of the collateral assets under the TRS (total return swap)."

S&P had said a default was likely despite a timely payment of interest on March 16.

The deal is among four catastrophe bonds that used a unit of Lehman Brothers as TRS counterparty, contracted to ensure the collateral backing the bonds was sufficient to meet interest and principal repayments, and to make up any shortfall.

When the U.S. investment bank filed for bankruptcy on September 15, investors were left with direct exposure to market losses on the collateral assets, and the bonds were downgraded.

Another of the bonds, issued by Willow Re with Allstate Corp as ceding insurer, was already in default after Willow failed to make in full a February 2 interest payment.

Another rating agency, insurance specialist A.M. Best, also said it had downgraded the Ajax Re notes to "d" following the failure to fully repay the principal at redemption.

Insurers have used catastrophe bonds since the 1990s to manage their exposure to natural disasters such as hurricanes and earthquakes by transferring potential losses to investment funds. Investors receive a high rate of interest but risk losing part or all of their principal if a catastrophe occurs.

(Reporting by Catherine Evans; Editing by Simon Jessop)

British Columbia, Canada

In the province of British Columbia, Canada, there is a Vancouver City, Vancouver Island, Victoria City and Victoria Island. Here are some interesting facts:

> Vancouver City is not on Vancouver Island

> Victoria City is not on Victoria Island.

Victoria City (capital of British Columbia province) is on Vancouver Island and Vancouver City is on the mainland Canada. Victoria Island is not in British Columbia but is near the North Pole (quite far away).

Victoria Island is the largest island in North America and is bigger than Taiwan.

Photos from the Canadian Rockies

At a high point in Banff, overlooking the mountains of the Canadian Rockies.

You need a vehicle like this to travel in the glacier. The tourists uses a Snowmobile (like a bus with big wheels).

It is cold and windy at a glacier. 

Questions for the AGM of NTUC Income, 29 May 2009

I have submitted the following questions for the annual general meeting of NTUC Income on 29 May 2009. They summarised the questions sent to me from policyholders during the past year.

If you are a policyholder and wish to attend the annual general meeting, you can send your request to the cooperative secretary at this address (lakshmi.b@income.com.sg). You can also send in your own questions.

Questions for the Annual General Meeting of NTUC Income, 29 May 2009
I wish to ask a few questions on behalf of many policyholders who bought life insurance from NTUC Income on the understanding that it is a cooperative working in the interest of its policyholders.

NTUC Income reduced its bonus rates for several series of policies last year, in spite of excellent investment results. At the annual general meeting, the chairman gave the following assurances to the policyholders:

a) While special bonuses are not guaranteed, they are designed to ensure that the reduction in annual bonus is compensated. As I have indicated earlier, the new bonus structure is aimed at improving, the total payout to policyholders.

b) Should the special bonus in future reduce due to adverse financial conditions, we are committed to restoring it when conditions improve.

c) I have stated that this Board will look after the policyholders’ interests. Towards this end, the Board will ensure that the bonus allocated to policyholders result in payouts is fair and consistent with the experience of the Life Fund. 

There is an announcement that the bonus cut will be extended to all other series of policies this year.

My questions are:

1. What is the total amount of bonus that were reduced in 2007 and 2008 compared to the bonuses that would have been declared if the bonuses had been maintained at the same rates declared in 2006. Please provide the actuarial value of the bonuses that have been reduced, in millions of dollars, for the policies that were affected.

2. What is the amount of management and selling expenses incurred for the life insurance business for 2006, 2007 and 2008. Are steps being taken to reduce these expenses in line with the reduction in bonuses suffered by the policyholders?

3. Please explain how the reduction in bonus can achieve a better payout to policyholders? With the reduction in the bonus last year, was the cooperative able to invest the undistributed surplus to earn a higher return for policyholders?

4. Will the cooperative be able to maintain the special bonus payable on maturity and surrender, which was adjusted to compensate for the reduction in the annual bonuses? Is there any likelihood that the special bonus will have to be reduced, due to the global financial crisis?

5. For policies which have matured since the last AGM, was the cooperative able to meet the promise that the payout will be fair and based on the actual experience of the fund? Where the actual payouts were short of what is due to them, does the cooperative intend to make the appropriate adjustment for these policyholders?

6. Based on renewals made in recent months, what is the average rate of increase in motor insurance premium paid by policyholders who did not make any claim during the past year? Does the cooperative intend to control its expenses and claims to allow it to reduce the premium rates for its policyholders? What steps are being taken to achieve this goal?

Tan Kin Lian

Differential pricing for petrol

My friend pointed out to me the price of 1 litre of petrol, as displayed in a prominent sign at the petrol stations. The price was around CAD 1.05 in the morning and reduces in stages to CAD 0.95 at around midnight. The next morning, the price went back to CAD 1.05.

The petrol station used differential pricing to encourage some drivers to fill up the tank during the night hours. This helps to reduce the crowd at the petrol station during the working hours.  It is an interesting way to spread out the queue.  

Perhaps petrol stations in Singapore can consider a similar strategy? It seems to work quite well in Canada.

Wearing masks

I took a flight from Singapore to Vancouver. The only people in the plane wearing masks are  the flight crew and a few Singaporeans. The other passengers did not consider it necessary to wear masks. Were they irresponsible or unaware of the risk? 

I do not think so. I think that they know the risk and have decided that it is the risk is too small to take these precautions. Singaporeans tend to over-react.

Promises made at the NTUC Income AGM in 2008

Extract from speech by chairman of NTUC Income at the AGM

1. Some policyholders have raised specific concerns on the special bonus in blogs.  Allow me to address them.
   
   
   • While special bonuses are not guaranteed, they are designed to ensure that the reduction in annual bonus is compensated.  As I have indicated earlier, the new bonus structure is aimed at improving, the total payout to policyholders.
     
     
   • Should the special bonus in future reduce due to adverse financial conditions, we are committed to restoring it when conditions improve.
     
     
   • I have stated that this Board will look after the policyholders’ interests. Towards this end, the Board will ensure that the bonus allocated to policyholders result in payouts is fair and consistent with the experience of the Life Fund. 

NTUC Income's Bonus Cut

Dear Mr. Tan,

At last year's general meeting, the chairman of Income made certain promises to policyholders concerning the bonus cut. He said that bonuses will be declared based on the actual experience of the fund. Do you intend to ask the chairman about the steps that have been taken to declare fair rates of bonuses? It seems that Income knows how to cut bonuses and to spend money to give more incentives to insurance agents? What about giving a fair return to policyholders?

REPLY

I am in Canada now on a 3 week vacation. I will return to Singapore just before the annual general meeting. I have asked to attend the meeting which will be held on Friday 29 May.

I like to ask policyholders who are unhappy with the bonus cut to attend the annual general meeting and post the questions to the board. I have labelled my blog postings on the bonus cut separately. Click on the label "NTUC Income Bonus Cut".

The statement by the chairman at last year's AGM can be found here. NTUC Income's FAQ on bonus cut is found here.

Can policyholders help to identify the questions to ask the chairman at the AGM to be held on 29 May?

 

Scenes from Vancouver, Canada

Chinatown in Vancouver - second largest Chinatown in North America (after San Francisco).

Tulips in bloom in Vancouver. 

Skyline of downtown in Vancouver.

SCMP:Sanctions loom in Lehman investigation

The Monetary Authority is one step closer to sanctioning those guilty of misconduct in 48 cases that involved the sale of Lehman Brothers-linked investment products.

It had concluded its investigation into the 48 complaints and was considering disciplinary action, the authority said yesterday.

But it would decide on what action to take only after it had heard from those against whom the complaints were lodged.

"A number of cases are at a very advanced stage of the enforcement process. Before making a final determination in these cases, we have to go through due process to ensure fairness, including giving the subjects of investigation an opportunity to be heard," it said.

If found guilty, an executive officer of a financial institution could be withdrawn or suspended from office, and a financial practitioner's registration could be removed or suspended under the Banking Ordinance, an authority spokesman said.

An institution could have its registration revoked or suspended by the Securities and Futures Commission, be subject to a reprimand, a fine or a prohibition order. Employees of the firm who were involved could also be similarly sanctioned.

Some 48,000 Hongkongers lost most of the HK$20 billion they invested in credit-linked derivatives, such as minibonds, issued or guaranteed by Lehman Brothers when the US investment bank collapsed in September. Many of them have accused financial institutions that sold them the products of misconduct. By Thursday, the authority had received a total of 20,913 such complaints.

Hours before the announcement the authority's chief executive, Joseph Yam Chi-kwong, told a Legislative Council hearing that mis-selling was inevitable because of the variable quality of bank employees.

Responding to criticism by financial services legislator Chim Pui-chung that the authority had not fulfilled its regulatory duties, Mr Yam said: "It is like crime ... always exists in the society. Are law enforcement departments responsible for that?"

The authority recently hired 40 more employees to handle complaints of mis-selling, he said, and would continue its recruitment to raise the current number of 243 officers to 300.

Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims in Hong Kong, welcomed the possible sanctions in the 48 cases.

Mr Chan also said the alliance was arranging a meeting with the Bank of China (Hong Kong) to discuss compensation.

In yet another protest, dozens of investors stormed the Citibank headquarters in Central in the afternoon. They were removed by police in the evening.

Perils of global banking

Dear Mr. Tan,

This article shows how global banks have packaged toxic products to be sold to investors. Please highlight this in your blog.

Electric powered vehicle

Singapore is spending $20 million to test the use of electically powered vehicles. I have a suggestion to expand the scope of this project and develop a better system, based on the concept of "personal automated transport". Read here.

Pleasant weather in Vancouver, Canada

The weather in Vancouver, Canada, is pleasant, around 5 to 10 degrees Centigrade. It is cold, but not harsh. 

A Singaporean that migrated to Canada 15 years ago told me that he enjoys the weather in Canada. When he returns to Singapore occasionally to see his mother, he finds Singapore's weather to be too hot and humid. 

He said that many Singaporeans who have lived in temperate climates for 10 years or longer share the same opinion.

Low Job Satisfaction

Read my articles and the comments in The Online Citizen.

Lower alert level for Influenza A (H1N1)

I appreciate the decision taken by the Minister for Health in reducing the alert level for Influenza A. It is a bold decision to recognise that the threat is not serious, at least based on the information that is available now.

There is still a small risk that things can turn worse. When that happens, it will be appropriate to raise the alert level. I hope that this will come to pass, similar to other health concerns that have surfaced in recent years. 

We do have many big challenges to worry about,  such as restoring the health of the global economy.  We should not divert our attention to other matters that are not serious at this time.

Someone mentioned that Influenza A could be a black swan event. Really? There are other black swan events that could occur, such as an earthquake, terrorist attack or nuclear explosion.

Tan Kin Lian

Strong recovery in Singapore stockmarket

The Singapore stockmarket recovered by 50% from 1400 to 2100 (on the ST Index) over the past two months.

I did not buy any shares during this period, so I missed the rally. But I did not sell any shares either, during the decline from 2400 to 1400. So, they cancelled out.

This illustrates the importance of staying invested, for a long term investor. If one gets out of the market, when conditions are gloomy, one is likely to miss the rally. It is difficult to time the market. It is better to invest for the long term, and take a long term view.

Even the experts like Warren Buffet adviced investors to take a long term view and invest over a time frame of 10 years or longer.

Alaska

I will be in Alaska for the next three weeks. I may not be able to access my emails or the internet during part of this period.

Survey: Competition and Fair Trading

When we buy a car, we have a competitive market giving a large choice of car models. After buying the car, we have to approach the manufacturer for certain special parts, e.g. a replacement electronic key. The manufacturer does not allow other people to provide the key.

What is a fair price to pay for the car? Is it $30, $300 or $3,000? A non-electronic key can be made at a cost of $10. An electronic key is more expensive, but is $300 or $3,000 fair? If some manufacturer can make an electronic key for $150, should another menufacturer charge $300 or $1,000? 

Is there any party responsible to address complaints of consumers? 

Give your views in this survey.

Here are the survey results.

Are bonuses declared fairly?

Dear Mr Tan,
I have come to realise my folly in buying substantial insurance for myself and family ranging from endowments, whole life, etc. All along, I am told buying insurance is also saving for the future - how wrong I have been. Now I am aware that term life is still the best in terms of value. Now I have to consider how to handle the current policies that I have, especially those where I have to pay for "life".

Last month, I received a Bonus Notice that informed me of the reversionary bonus for 2008 (Endowment policy). I was told that "Due to current market conditions, your Projected Matuity Value at this point in time is revised to $71,491 from $87,786. This revision is done to reflect the reduction in value of the fund's assets."

I bought this policy in 1997. The yearly premium of $1,400 is deducted from my CPF OA account. At that time, the projected return is much more than if I leave the money in CPF. In Feb 2008 that I was told the projected maturity value is $87,786, with a yield to maturity of 4.41%.

In one year, I am now informed of this drastic reduction in just 2 sentences. What I cannot comprehend is the way life insurance company is able to decide unilaterally whatever value they want to reduce even when it affects the insurance buyers so much. In that case, the insurance buyers always lose, insurers always win.

In good times, the insurers make money, then in bad times, the insurance company still make money by just reducing bonuses on the insurance policies. There is no equity. Will you help me to understand why this is so?

REPLY 
The question that you asked has troubled me a lot in the past two years.

When I was in charge of NTUC Income, I made sure that the policyholders are given a fair deal. In bad years, the bonus are reduced, but in good years, the bonus are increased.

I now get the impression that many insurance companies are not practicing a fair approach in treating their policyholders.

I suggest that you should raise your question with MAS or with the Consumer Association of Singapore (CASE) and see if they are willing to take up this point as a matter of public interest or consumer protection.

SCMP: Minibond meetings

Minibonds meeting. About 50 investors who suffered losses after buying Lehman Brothers' minibonds protest at the Hong Kong Association of Banks in Central yesterday. They asked to meet association chairman Peter Wong Tung-shun, and their five-hour protest ended after the association agreed to arrange a meeting between the two sides on Thursday.

China Daily: are leaders retired?

"Public interest would not be adequately served by making known the names of the redundant leaders. It is more important to publicize where the dismissed leaders are placed.

 

Otherwise, there is every risk of the ejected excess being placed in positions elsewhere. The process calls for the utmost transparency.

 

Once a leader, always a leader until retirement, seems to have become a tacitly prevalent rule. As a result, quite a number of people do their best to get promoted not for doing a better job but for the benefits of the position.

 

Leadership entails not only benefits but also accountability. Unless the principle of acountability is enforced, just trimming the flab will neither raise efficiency nor make leaders discharge their duties in a responsible manner."

May the rulers be righteous

Dear Mr. Tan Kim Lian, 

While I am inspired by your selfless effort to embark on the mission of educating Singaporeans on issues relating to insurance, financial investment and current affair, I think it is a matter of dire urgency to educate Singaporeans on the importance of political awareness. This will decide if Singapore as a society has a bright future. 

For too long, the ruling elites have successfully succumbed the population into political apathy through undemocratic oppression, threats of litigation and many other shrewd social engineering strategies. At the same time, the past few decades have seen economic prosperity largely because of the world economy and the hardworking culture of the local population who just wanted to earn a decent living. This complacency with a good life of the population has encouraged the ruling elites to justify their one-party rule by advancing the fallicious argument that the "too-good" life Singaporeans are enjoying cannot afford a two-party system and instilling the fear of not having the right talents to run the country, except those handpicked by the founding father. 

This politcal apathy is a "killer" for the well being of Singapore. Foremost is to educate Singaporeans that a policy decided and implemented by the ruling elite, without thorough debate, discussion and scrutiny by the citizens, could end up having a disastrous impact on the future generations. This is not always felt immediate or the near term but until many years later. Some good examples are the elitist "graduate mother scheme", "the stop at two scheme", "Speak Mandarin scheme suppressing the proliferation of dialects", the victimisation of "Nanyang University" for political motive, and even the use of CPF for investment and housing has now become a constant concern for retirement. 

Therefore, I urge you to focus your effort on educating Singaporens to speak up politically. Do not be complacent with the "good" life we have had, we must continue to play our part as responsible citizens and in all fairness to our children, our children;s children, to monitor, scrutinise and question polices mandated by the ruling elites. Singaporeans have to become aware that the ruling elites are not messiahs, saviours, gods, otherwise we would not have the current financial crisis we are going throught right now with the huge GIC and Temasek looses of monety belonging to Singaporeans. 

Available for rental: Thomson View #17-xx

This 2 bedroom apartment (1,300 sf) is available for rental in May 2009. Monthly rental $2,100. View details. Interested? send email to kinlian@gmail.com

Insurance company disallow revival of policy

A friend approached me for help. He took a policy more than 10 years ago. Recently, he overlooked to pay his premium and his policy "lapsed". He wanted to revive the policy after one year, but was told that this is not allowed.

I asked him to get the reply in writing. From my understanding, a policy should be allowed to be revived within a few years, as long as the policyholder is able to provide evidence of good health. In this case, the lapsation was due to an oversight, due to poor service by the agent and the office in not reminding the policyholder.

In the policy condition, there is a provision for an automatic premium loan or for a paid up policy. These options should be explained to the policyholder. It was not done, as my friend was not told about them.

Sometimes, the agent wanted to get the policyholder to take up a new policy to replace the old policy. This could be a reason why they said that the policy cannot be revived.

In my friend's case, he called the office. I wonder if the customer service office is also adopting the same approch, to get the policyholder to take up a new policy? If this is the case, it will be unethical and against the interest of the policyholder.

This could be another example of taking the policyholder "for a ride". By getting the reply in writing, it will be possible for the policyholder to lodge a complaint with FIDREC or with MAS. 

Tan Kin Lian

Advice from three religion on how to handle debt

Read this.

Terminating existing policies

Dear Mr. Tan,

I read in your blog that you have cancelled a few NTUC policies recently. Can you explain your reasons?

REPLY

I have stopped full time work and my children are grown up. I do not need the coverage under the life insurance policies now.

I could keep the policies as an investment, but I found the return to be quite low. In recent years, the investment yield has been rather low and the expenses incurred by the NTUC Income  have increased significantly. This has resulted in a severe cut in the bonus rates payable on the policies.

Even in a good year (e.g. 2007), the bonus distributed has not been commensurate with the good results. I have lost confidence in getting a fair return and have decided to terminate most of my policies.  I can get a better return by investing on my own or in a low cost unit trust.

Contractor Particulars

I need your help to provide particulars of contractors (e.g. plumber, electrician, air con, refigerator, repairman, etc) that you use regularly or who have dropped flyers into your letter box. I wish to invite them to join a Contractors Portal. Please enter the details here.

Are we over-reacing to Influence A (H1N1)?

The World Health Organisation has raised the alert level for Influenza A (previously called swine flu) to 5. When it moves up to level 6, it is a full blown pandemic.

A pandemnic meams that the infection has spread to all the continents. But the fatality rate of the infection is still quite low at this time. Not many people die from Influenza A. More people died from ordinary flu than from Influenza A.

Two doctors told me that the measures being taken, such as wearing masks, are not necessary at this stage. It is more important to wash the hands to remove the virus.

A few friends have cancelled their overseas holidays, losing the money that they paid for the tours. It is rather wasteful and the risk is quite low. Perhaps, they are alarmed by the coverage in our newspapers and the advisory given by our Government.

President Barack Obama said that "We should be concerned, but not alarmed". By all means, take some precautions, but do not over-react in implementing the harsh measures - unless things get much worse than now.

Tan Kin Lian

 

Additional points: 

The fatality level of Influenza A is 3%, compared to 65% for avian flu. More details here.

Latest update: 4 May 

Report from Mexico said that there were only 19 confirmed deaths from Influenza A, instead of nearly 200 deaths reported earlier (which was over-stated). Less people are now infected.  

Is Singapore over-populated with foreigners?

E-mail sent to me

There is no denying that every 1st world country needs foreigners to supplement its citizens to help drive its economy. BUT, is Singapore over-doing it?

	Population	Citizen	Non-citizen
Norway (2008)	4,799,300	93.7%	6.3%
Finland (2008)	5,326,314	97.3%	2.7%
Singapore (2006)	4,017,733	74.0%	26.0%
Singapore (2008)	4,839,400	65.4%	34.6%