Crediting Interest Rate Philosophy

Crediting Interest Rate Philosophy for Universal Life Plans

The crediting interest rates for our policies are primarily based upon the performance of the underlying investments of Transamerica Life Bermuda, after allowing for the costs incurred by, and profits attributable to, the company. Performance of the underlying investments, and therefore the crediting interest rates, may be affected by any changes in the financial markets and economic conditions which include changes in interest rates, corporate bond spreads and asset default rates.

A number of factors are considered when determining the crediting interest rates for your universal life insurance policy. These factors include, but are not limited to, future investment expectations, the cost of providing the guaranteed minimum crediting interest rate applicable to your policy, and the long-term affordability of the crediting interest rates.

Transamerica Life Bermuda recognises that market conditions can be unpredictable and investment performance can be volatile in the short term. Through our investment philosophy and approach, we aim to deliver a fair return determined from the underlying investments and ensure a stable crediting interest rate by spreading out and managing the gains and losses over a longer period of time. In addition, crediting interest rates of your policy may be affected by claims and persistency experience (including withdrawals, surrenders and policy lapses).

The crediting interest rates are also subject to the guaranteed minimum crediting interest rates and lock-in crediting interest rates as stated in your policy contract, where applicable.

We will review the crediting interest rates of our policies annually or more frequently as needed.

The crediting interest rate policy and resulting crediting interest rates are formulated by the Appointed Actuary based on actuarial principles and his/her professional judgment to balance the interests of policyholders and shareholders. The recommendations made by the Appointed Actuary on the policy and rates are reviewed by our Risk & Capital Committee which are then approved by our Board of Directors. At least one-third of our Board is composed of Independent Non-Executive Directors.

Investment Strategy

Recognising our customers' needs for sound financial security, Transamerica Life Bermuda employs effective investment strategies and a prudent risk management culture in order to meet our commitment of safeguarding our customers' wealth for their lifetime. Our investment strategy is focused on securing good investment grade fixed income assets that provide fair value in terms of risk and rewards. As of 31 December 2018, 94.8% of our bonds are investment grade bonds of which 17.2% were rated AAA. This strategy ensures that we are able to maintain stable returns for our customers over the tenure of their policy.

Bond ratings are sourced from independent credit rating organisations including Standard & Poor's, Moody's and Fitch, and factored into our in-depth internal analysis which also takes into account information from the National Association of Insurance Commissioners#. The portfolio is determined by employing risk management and valuation techniques along with investment expertise to select securities that are diversified across sectors and hence avoiding over-concentration in one issuer. Subject to Transamerica Life Bermuda's investment and risk management policies, we may hold a limited amount of below-investment grade bonds if they are deemed to offer good value to the portfolio. We may also utilise derivative instruments for the purpose of efficient portfolio management and better matching of assets and liabilities.

Assets are invested predominantly in the United States and in US dollar denominated assets to match the currency of our products. We may also hold a limited portion of bonds from emerging markets in our portfolio if we believe they can add value and enhance performance to the overall bond portfolio.

Transamerica Life Bermuda's investment strategy may be subject to change due to factors including, but not limited to, changes in or the outlook of the market and economic conditions.

Any update of the crediting interest rate philosophy and the investment strategy will be published on our website

Life insurance policies are issued by Transamerica Life Bermuda, a company incorporated in Hamilton, Bermuda.

# The National Association of Insurance Commissioners is the US standard-setting and regulatory support organisation created and governed by the chief insurance regulators in the US.