With participating insurance, a portion of the life insurance risk is shared between the policyholders and the company. In return for sharing this risk, policyholders may receive policyholder dividends. These dividends are not guaranteed and can vary from year to year.
Your policy falls under one of two areas, depending in general on the following criteria.
1) Dividends on Individual Participating Policies issued by Sun Life Assurance Company of Canada before demutualization.
2) Dividends on Individual Participating Policies issued by Sun Life of Canada (Philippines), Inc. after demutualization.
Life insurance involves the transfer of risk from an individual to a life insurer, and the pooling of risk over large groups of policies. Life insurance policies that are participating policies also involve sharing these risks between the policyholders and the insurer. As part of this risk-sharing relationship, participating policyholders share through policyholder dividends declared on their policies, in the experience underlying the participating policies of the life insurer. These dividends are not guaranteed; they can vary from year to year.
Generally speaking, dividends on these policies reflect the experience, over time, of the class to which they belong, as adjusted to maintain consistency in distribution from one period to another. Dividends will typically vary based on the performance of a number of experience factors, with the investment return, including the impact of asset defaults and investment expenses, normally being the main determinant of dividend performance. Other factors include, but are not limited to, mortality experience, taxes, and policyholder cancellations. Operating expenses (other than investment expenses) are not included.
The dividend allocation process seeks to achieve equity among classes of policies and among generations of policies, although there are practical limits that apply to the allocation in some circumstances.
Annually, the directors of Sun Life of Canada (Philippines) Inc. determine the amount of earnings available for distribution to participating policyholders and shareholders. This determination is based on the advice of the Company's Chief actuary, who applies accepted actuarial principles and practices.