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ULIP Review: Met Smart One

 

Apart from being inefficient for insurance purpose, Met Smart One's returns are also lower than that generated by tax-saving MFs

 


   LAUNCHED in September 2010, Met Smart One is a single-premium unit-linked insurance plan offered by MetLife. The insurance scheme offers two investment strategies, auto rebalancing option and self-managed option. It gives a choice of seven investment options (funds) including an NAV guarantee fund. However, the product is more of an investment product than an insurance cover and compared to other tax-saving investment instruments, it has low footing.

COST STRUCTURE:

Although the cost structure looks quite reasonable, the gross structure becomes high in the short term due to high policy administration charges. However, the loyalty addition that the scheme offers from the sixth year to the 10th year makes the net charges low in the long run.

BENEFITS:

Met Smart One is one of the few products that offers loan to the policyholder. The interest rate for the loan is determined by the company. MetLife also offers loyalty additions to the policyholder from the fifth to the 10th year. Another salient feature of the product is the facility of stop loss that it provides under auto rebalancing option. This stop loss facility reduces the downside risk of the policyholder by shifting the fund to a protected debt-oriented fund during period of falling equity markets.

PERFORMANCE:

Ulips are popularly known as investment-cum-insurance product. Since, the scheme is primarily an investment scheme, it is important for investors to choose products as per their risk appetite and keep a track of the performance of their investments.


   Met Smart One has seven investment options giving investor a choice of all equity, debt and combination of both. Flexicap, virtue and multiplier are equity funds while preserver and protector are debt oriented. Those looking for a balanced fund may consider the balancer as an option.


   This scheme also has guaranteed NAV fund that provides fund value at the highest NAV. However, one has to stay invested for five years.


   All the above mentioned funds have been running for over one year. During the period, most of the funds failed to outperform the major market indices and their benchmarks. Preserver and flexicap were the only two funds that marginally outperformed the benchmarks. Overall, the performance of the funds has been quite disappointing.

PORTFOLIO:

MetLife has the highest exposure in the financial services and oil and gas sectors, making it a high beta fund. Beta measures the sensitivity of a portfolio or a stock to market movement. It has low exposure in the healthcare and FMCG, which are relatively low beta sectors. The portfolio is more concentrated to large-cap stock holdings that are a part of the Nifty. Cash holding seems to be nominal fraction of the portfolio.

DEATH/MATURTY BENEFIT:

Unlike most of the other single-premium unitlinked products, Met Smart One compulsorily reduces the sum assured from five times of the annual premium to just about 1.25 times from the second year onwards. Thus, the insurance component becomes very low in the product leaving it to be mainly an investment product. Upon maturity, the policyholder receives the amount accumulated in the fund, whereas in case of death, higher of the fund value or sum assured is paid

OUR VIEW:

Met Smart One is designed for investment and tax-saving than insurance as the sum assured multiple is quite low. The five times sum assured in the first year allows investors to get tax benefit under section 80C. No tax benefit will be available from the second year onwards. However, if we compare Met Smart One with the taxsaving mutual funds (ELSS), Met Smart is cost-effective but the returns generated from its funds are far lower than that generated by mutual funds.

 

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