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ULIP Review: MAX NEW YORK Life Flexi Fortune (MNYL)

 

 MAX NEW YORK Life Flexi Fortune (MNYL) is a type II Unit Linked Insurance Plan (Ulip) that offers nominees a sum of both death benefit and fund value in the case of an unfortunate event. The unique feature of this scheme is the automatic jump in the sum assured every year by 10%, starting from the second year till the end of the policy term to keep pace with growing inflation. The scheme offers seven funds — investment options — of which four are more than six years old. They have performed well in both bullish and bearish phases of the stock market.

COST STRUCTURE:

Flexi Fortune's cost structure is in line with most of its peers. Though the premium allocation charged by the scheme is a little high, its low policy administration charge keeps cost structure balanced. Mortality charges are very high under the plan and become more precarious for investors as sum assured increases. Mortality charges for policies with a tenure of 10 years are almost 50% higher than the usual LIC charges.

BENEFITS:

Flexi Fortune offers an exhaustive death benefit, giving investors choice to opt for a sum assured, between 10X to 30X the annualised premium. Furthermore, it automatically increases 10% on the original sum assured each year from the second year till the policy tenure. This is an in-built feature and provided at no upfront cost. However, any increase in the sum assured will lead to an increase in the mortality charge, thereby impacting the fund value. So, the cost surely exists, though in a different manner.

PERFORMANCE:

Although the scheme is only a few months old, the funds under the scheme are very much in place for long. Unlike other insurance companies which issue new funds with new schemes, MNYL has stuck to its old funds. Four of its funds — Balanced, Conservative, Growth and Secured Funds — are more than six years old. All these have exemplary track records. They have been well managed and have continuously outperformed their respective benchmarks. The Growth Super Fund, which was launched in 2007, has generated 15% returns as against 8.3% of its benchmark, the Nifty. Though the Money Market Fund and the Secure Plus Fund were rolled out two years ago, they still struggle to outperform the benchmark. There are debt-oriented funds and have very low asset under management.

PORTFOLIO:

Max New York Life has a balanced investment strategy. The equity portfolio like most insurance companies is tilted towards large caps, with just about 15-20% exposure in the mid-cap stocks. The fund manager is highly bullish on the consumption story of India, particularly the banking sector. Almost 30% of the equity portfolio is invested in banking stocks. Recently, the fund manager reduced the oil and gas exposure primarily due to the unrest at West Asian companies and the increasing crude price.


   Unlike many other insurance companies, the fund manager churns the portfolio frequently. Currently, the portfolio turnover ratio of this fund is 90%, which means, on an average, the fund holds a stock for 12 months.

DEATH/MATURITY BENEFIT:

Flexi Fortune offers the twin advantages of both sum assured and fund value on the death of the life assured. However, on maturity, the policyholder receives only the amount accumulated in the fund. For instance, if a 30-year-old healthy male invests 50,000 per annum in the Balanced Fund for 20 years, the sum assured will be 30 times the annual premium as prescribed in the plan. So, the total sum assured receivable, in the case of any eventuality, would be 15 lakh. By the end of 20 years, assuming the rate of return of 6% and 10%, the fund value shall be 10, 56,144 and 18, 46,488, respectively, receivable at maturity. However, in the case of demise of the policyholder in the 10th year, the nominee receives the sum assured of almost 27 lakh, along with the existing fund value at that time.

OUR VIEW:

Flexi Fortune, as the name suggests, is flexible enough to suit the requirements of different people and different needs. The increasing sum assured feature is unique to this plan. However, the same makes it costly and more insurance oriented rather than wealth building. The high risk return appetite investor can look at Growth and Super Growth funds, as they have generated robust returns over years now.

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