In a pioneering move, UK insurer Aviva has launched the first single premium non-participating endowment plan denominated in Chinese renminbi in Singapore. The new product has been branded the Dragon Renminbi Plan (DRP) and offers an annual yield of 2.85%. The minimum single premium is CNY250,000 ($39,500).
“We felt that the time was right for us to offer a renminbi product to our customers, backed by a rewarding yield,” said Simon Newman, CEO, Aviva Singapore. “The Dragon Renminbi Plan is the first product of its kind and unlike anything seen in this market before.”
DRP is to be distributed exclusively by Singapore bank DBS Bank which has about 100 branches across the island state.
The major attraction of the DRP is being pitched as the exposure it provides to what is generally perceived as an undervalued Chinese currency.
Alluding to this, Newman says: “As the only renminbi endowment product in the market right now, the plan provides investors with a mid-term financial planning solution into a currency that is expected to gradually appreciate in the next five years.
“Moreover, with the fixed return of 2.85%, it allows investors to gain access to China without taking on excessive market risk.”
Adding additional emphasis to DRP’s currency appeal, Jeremy Soo, MD and head of consumer banking for DBS Bank in Singapore, said: “The launch of the Dragon Renminbi Plan provides our customers with another product that leverages on the rise of Asia and China’s growth, allowing them to enjoy potential currency gains.”
He added that since, DBS Bank has seen strong demand for the first renminbi-denominated products it launched in February 2011.
These comprise current and fixed-deposit accounts, currency-linked investments, renminbi-denominated bonds, unit trusts and structured notes.
“We’re confident the demand for renminbi-denominated products will continue as investors seek to diversify their portfolio and capitalise on the relative strength of the Asian economy,” Soo said.
Whether betting on a significant revaluation of the Chinese will prove worthwhile remains to be seen. With the exception of small upward adjustments, China has steadfastly refused to bow to foreign pressure and revalue its currency significantly. The renminbi has revalued from about CNY7.30 to the US dollar in early-2008 to about CNY6.40 to the US dollar.
Estimates of how much the renminbi is undervalued are many and varied. A study by the US Congressional Research Service, published at the end of 2010, noted that China’s currency is undervalued by at least 40% against the dollar and by 25% on a trade-weighted basis.
Aviva and DBS have been in a bancassurance partnership since 2001, which the UK insurer emphasises has been a significant contributor to Aviva’s strong growth in Singapore.
The insurer reports that in the third quarter of 2011, its life insurance sales increased by 65% compared to the same period in 2010. The biggest driver of growth in 2011, noted Aviva, has been bancassurance sales which in the nine months in 2011 were three-times higher than in the same period in 2010.