Re: April 2006 Q6 (ii) Theme of the question A life insurance company writes unit-linked savings products that invest in assets managed by the company's in-house fund managers. The Marketing Director has noticed the investment performance of the internally managed funds has recently been poor. She has suggested that the company allows access through its products to a range of funds that are managed by an external fund management specialist. The question asks the issues the company should take into account in considering this suggestion I dont understand the paragraph on page 14 in the Examiners Report which reads: " It would also need to think about the impact on the brand of the group if it used an external company and whether it had any detrimental impact on group profits if this lead to reduced attractiveness of the groups investment capability in the eyes of the external investor" Can someone explain the above paragraph? Many Thanks
Hi It's saying that there might be a downside in offering links to funds run by others - customers and potential customers may question the investment expertise of the company itself, which might affect new business volumes and surrender rates and so profits. External links may affect the profit per policy too, eg if expenses are different from those of in-house investment. Cheers Lynn
