Low Interest Rates Dent Thai Life Firms' Investment Returns.

Dec. 2--Life insurance companies, led by market leader American International Assurance Co (AIA), have moved to raise premiums on certain insurance policies in order to cover higher operating costs and declining investment returns.

Industry sources said AIA this month began raising premiums by 13-15 percent on its 20-year triple endowment policy, a popular long-term savings product. AIA was also reducing guaranteed interest returns to policy holders to 4 percent from 6 percent.

Some products under the endowment plan would also be eliminated, including the 16-year and 20-year savings plans offering special bonuses every two years.

The new rate will not be applied retroactively to outstanding policies, but will be applied to new ones only.

Other leading insurers, including Thai Life Insurance Co, Ayudhya Allianz CP Life Plc (AACP), and Muang Thai Life Assurance are expected to follow suit to cope with the cut in returns to policyholders.

Sutti Rajitransarn, president of the Thai Life Assurance Association and an AIA senior vice-president, said that with the downward trend in interest rates, many life insurance companies had to cut the returns to 4 percent to compensate for declining investment returns.

Interest on bank deposits, a major component of insurers' asset portfolios, have reached their lowest point in decades at just 1.75 percent to 2 percent for fixed accounts.