Bonus Fulfilment Ratios in Annuity Products: A Close Look at Historical Data

The Hong Kong Monetary Authority’s (HKMA) updated Guideline on the Sale of Long-Term Insurance Products (GL21), effective 1 January 2025, imposes a new mandatory disclosure requirement: insurers must now publish historical bonus fulfilment ratios for all participating annuity products sold in Hong Kong. This regulatory shift, following a 2023 consultation that revealed a median fulfilment ratio of 87% across 12 major insurers, directly impacts the retirement cash-flow projections of over 300,000 policyholders. For a retiree relying on a HKD 2 million annuity, a 13 percentage-point shortfall translates to approximately HKD 260,000 in missed income over a 20-year payout period. The data, now publicly accessible via the HKMA’s Integrated Disclosure Platform, allows for the first time a systematic comparison of actual payouts against the non-guaranteed bonus illustrations that drove purchasing decisions. This article analyses the 2025 published data for Hong Kong, Singapore, and Taiwan annuity products, focusing on the mechanics of bonus fulfilment, the variance between terminal and annual bonuses, and the implications for retirement planning.

The Mechanics of Bonus Fulfilment Ratios

Definition and Calculation Methodology

The bonus fulfilment ratio is the actual non-guaranteed bonus paid by an insurer divided by the bonus amount illustrated in the original policy projection at the point of sale, expressed as a percentage. For Hong Kong policies, the HKMA’s GL21 mandates that this ratio be calculated for each policy year, with a minimum of five years of historical data required for products launched before 2020. The calculation excludes guaranteed benefits and surrender values, focusing solely on the discretionary component. As of the 2025 reporting cycle, the HKMA’s Integrated Disclosure Platform lists 47 participating annuity products from 14 authorised insurers. The median fulfilment ratio for annual bonuses across all products is 84.2%, while the median for terminal bonuses is 71.6%, according to the HKMA’s 2025 Annual Report on Insurance Statistics.

Annual Bonus vs. Terminal Bonus Fulfilment

The divergence between annual and terminal bonus fulfilment is the single most significant data point for retirement planners. Annual bonuses, once credited, become part of the policy’s guaranteed cash value and cannot be clawed back. Terminal bonuses, by contrast, are paid only upon surrender or maturity and are subject to the insurer’s investment performance in the final policy years. Data from the HKMA’s 2025 disclosure shows that for the 10 largest annuity providers by premium volume, the average annual bonus fulfilment ratio is 91.3%, while the average terminal bonus fulfilment ratio is 68.7%. For example, Prudential Hong Kong’s “Prudential Lifetime Income” product reported a 96.2% annual bonus fulfilment for policies issued in 2018, but a terminal bonus fulfilment of only 54.1% for the same cohort. This 42.1 percentage-point gap underscores the risk that the largest portion of non-guaranteed income—often 60-70% of total projected benefits—is the least reliably delivered.

Regulatory Differences Across Jurisdictions

Hong Kong’s disclosure regime, while improved, remains less granular than Singapore’s. The Monetary Authority of Singapore (MAS) requires insurers to publish bonus fulfilment ratios for each policy year, broken down by bonus type, since 2019. Singapore’s 2025 data, from the MAS’s Life Insurance Statistical Information Portal, shows a median annual bonus fulfilment of 88.4% and a median terminal bonus fulfilment of 73.2% across all participating annuity products. Taiwan’s Financial Supervisory Commission (FSC) mandates a similar disclosure but only for policies issued after 2021, leaving a significant data gap for older products. For a Hong Kong retiree considering a cross-border purchase, the Singapore data offers a more reliable historical baseline, while Taiwan’s newer disclosures provide limited backward-looking analysis.

Historical Performance Across Major Providers

Hong Kong: The Top and Bottom Quintiles

An analysis of the HKMA’s 2025 disclosure data for 20 annuity products with at least seven years of history reveals a clear performance tier. The top quintile—products from AXA Hong Kong, Manulife, and HSBC Life—achieved a median annual bonus fulfilment of 97.2% and a median terminal bonus fulfilment of 82.1%. The bottom quintile, including products from two smaller insurers (names withheld per HKMA disclosure rules), posted a median annual bonus fulfilment of 68.4% and a median terminal bonus fulfilment of 44.3%. The primary driver of this divergence is asset allocation: top-quintile insurers allocate an average of 42% of the participating fund to investment-grade bonds, compared to 28% for bottom-quintile insurers, according to the HKMA’s 2025 Asset Allocation Survey for Insurance Companies. Bond-heavy portfolios provide more predictable returns, directly supporting bonus payments.

Singapore: Consistency and Cross-Border Considerations

Singapore’s MAS data for 2025 shows a narrower dispersion than Hong Kong’s. The top-quintile Singaporean annuity products, from AIA Singapore and Great Eastern Life, posted a median annual bonus fulfilment of 95.1% and a median terminal bonus fulfilment of 79.8%. The bottom quintile, from a single insurer, achieved 81.2% and 62.3% respectively. For a Hong Kong resident considering a Singapore-issued annuity, the key structural difference is the absence of a central bank guarantee equivalent to the HKMA’s Exchange Fund. However, Singapore’s Insurance (Valuation and Capital) Regulations impose a higher solvency margin requirement (150% of the Hong Kong equivalent), which provides a capital buffer that partially offsets this risk. The MAS data is published in Singapore dollars; a Hong Kong buyer must account for currency conversion costs of approximately 0.8-1.2% per transaction, per HSBC’s 2025 Foreign Exchange Cost Index.

Taiwan: A Cautionary Tale of Volatility

Taiwan’s FSC 2025 data, while limited to policies issued after 2021, reveals a median annual bonus fulfilment of 79.3% and a median terminal bonus fulfilment of 61.1%. This lower performance is attributable to the Taiwan insurance industry’s heavy allocation to local real estate (average 35% of participating fund assets), which has underperformed due to a 12% decline in the Taiwan commercial property index between 2022 and 2024, per the FSC’s 2025 Real Estate Exposure Report. For a Hong Kong retiree, Taiwan’s annuity products offer no currency hedge advantage (the New Taiwan dollar has weakened 8.4% against the Hong Kong dollar since 2020, per Bloomberg data) and carry higher volatility in bonus payouts. The FSC’s disclosure requirement, while welcome, does not yet provide the multi-year trend data necessary for reliable retirement planning.

Strategic Implications for Retirement Cash-Flow Planning

The Impact of Bonus Shortfall on Income Sustainability

A 13 percentage-point shortfall in terminal bonus fulfilment—the median gap observed in Hong Kong—translates into a material reduction in retirement income. For a HKD 2 million annuity with a 20-year payout period, assuming an illustrated terminal bonus of 40% of total benefits, the shortfall reduces the total payout by HKD 104,000 (2,000,000 × 0.40 × 0.13). This is equivalent to a 5.2% reduction in the total projected income. For a retiree with a HKD 50,000 monthly budget, this shortfall represents a HKD 4,333 monthly gap for 24 months. The cumulative effect over a 30-year retirement is more severe: a 5.2% shortfall applied to a HKD 4 million annuity portfolio reduces lifetime income by HKD 208,000, per the HKMA’s 2025 Retirement Planning Calculator assumptions.

Diversification Across Insurers and Jurisdictions

The 2025 data supports a diversification strategy across multiple insurers and jurisdictions. A portfolio split equally among three Hong Kong top-quintile insurers, one Singapore top-quintile insurer, and one Taiwan insurer (for yield enhancement) would have achieved a blended terminal bonus fulfilment of 78.4% over the 2018-2024 period, compared to 71.6% for a single Hong Kong product. The currency risk from the Singapore and Taiwan allocations is partially hedged by the Hong Kong dollar’s peg to the US dollar, which provides a stable anchor. However, the transaction costs and regulatory complexity of holding policies in three jurisdictions must be weighed against the diversification benefit. The SFC’s 2025 Code of Conduct for Insurance Intermediaries requires that cross-border recommendations be justified by a suitability assessment, which must include a comparison of bonus fulfilment data.

The Role of Guaranteed vs. Non-Guaranteed Components

The 2025 disclosure data reinforces the importance of maximising the guaranteed portion of an annuity. Products with a guaranteed payout ratio of at least 60% of total projected benefits—such as HSBC Life’s “Guaranteed Income” series—had a median terminal bonus fulfilment of 83.1%, compared to 63.4% for products with a guaranteed ratio below 40%. This is because insurers with higher guaranteed commitments maintain more conservative investment strategies, reducing the volatility of the non-guaranteed component. For a retiree prioritising income stability, a product with a guaranteed payout ratio above 50% is the recommended threshold, even if the illustrated total benefits are lower. The HKMA’s GL21 now requires insurers to disclose the guaranteed/non-guaranteed split in a single table, making this comparison straightforward.

Actionable Takeaways

1. Prioritise annuity products with a published annual bonus fulfilment ratio above 90% and a terminal bonus fulfilment ratio above 75% over the most recent five-year period, using the HKMA’s Integrated Disclosure Platform as the primary data source.
2. Allocate no more than 60% of your annuity portfolio to a single insurer, and consider a 20% allocation to a Singapore-issued product to benefit from the MAS’s stricter solvency requirements and more consistent bonus fulfilment data.
3. Select products where the guaranteed payout ratio is at least 50% of total projected benefits, as these have demonstrated a 19.7 percentage-point higher median terminal bonus fulfilment in the 2025 HKMA data.
4. Review the asset allocation of the participating fund, favouring insurers with at least 40% of fund assets in investment-grade bonds, as this correlates with higher and more stable bonus fulfilment ratios.
5. Incorporate a 5-10% buffer in your retirement cash-flow projections to account for the historical median shortfall in terminal bonus payouts, and adjust your withdrawal rate accordingly.