Market performance and development prospects of unit-linked insurance plans (ULIPs) in Russia

The average return rates of 5-11% were received by ULIP funds with the following performance:

· Large maximum return rates in combination with significant negative rates of return as the minimum return rates. Examples: Ingosstrakh-Life Innovative Pharmaceuticals, RGS-Life Food, both URALSIB Life funds,

· Average maximum return rates in combination with only marginal negative rates of return (1-3%) as the minimum return rates. Examples: SG Life Insurance Multifund and Portfolio of shares funds, Ingosstrakh-Life Balanced growth, AS-Life High dividends,

· Average maximum return rates in combination with positive, but relatively low rates of return as the minimum return rates. Examples: Renaissance Life Sputnik fund and Sberbank Life Global Bond Fund.

Figure 2. Maximum and minimum rates of return of Russian ULIP funds in 2009-2016.

When analyzing rates of return of funds of selected ULIPs, it was figured out that some companies had rather significant difference between return rates during observed years which shows its volatility. Further the author decided to compare standard deviations of selected ULIPs funds which serves to evaluate the amount of risk, associated with each portfolio (Table 8). The largest volatility of more than 25% is observed in RGS-Life Food fund. It can be explained by the fact that the minimum rate of return of this fund was -54% in 2009 and in the following year the maximum return rate was almost 30%. Ingosstrakh-Life Innovative Pharmaceuticals funds is also regarded as risky with a standard deviation of more than 20%. It is also connected with the rather significant difference between maximum and minimum rates of return as well as several negative returns during the observed period.

The least standard deviation of 3% is observed in Sberbank Life Global Bond Fund. This fund does not have any negative returns during the period, thus, its overall performance is rather successful with the average rate of return 8,2%. For example, SG Life Insurance Portfolio of shares fund with the standard deviation of 5,31% has only 5% average return rate. Therefore, Sberbank Life Global Bond Fund earns more income with less risk.

RGS-Life Sure choice fund with the highest average rate of return of 16,6% has almost 9% as the standard deviation. However, Sberbank Life US Equity Market and Sberbank Life New technologies funds which are also rather profitable (14,2% and 13%, respectively) have even higher standard deviations of 16,38% and 13,36%, respectively. Thus, RGS-Life Sure choice fund performs better then both Sberbank funds, as it more profitable and less risky.

As a rule, portfolios with average rates of return have average standard deviations. However, the author identified that there are some funds which receive average level returns, but very risky from the point of standard deviation. For example, URALSIB Life Medicine of the future fund with almost 18% standard deviation returns only 7,1% in average. Thus, these investments are associated with the excess risk which is not paid off.

Moreover, it was figured out that VTB Life Insurance funds which shown the poorest performance during 2009-2016 has rather high standard deviation dimensions. Thus, it can indicate poor management of the fund, as not only the significant income was not earned, but also a lot of risk was taken in vain.

Table 8. Standard Deviations of Russian ULIP funds in 2009-2016.

№	ULIP funds	Standard Deviation
1	Sberbank Life US Equity Market	16,38%
2	Sberbank Life New technologies	13,36%
3	Sberbank Life Global Bond Fund	3,04%
4	VTB Life Insurance Medicine of the future	11,00%
5	VTB Life Insurance World wealth	13,68%
6	URALSIB Life Medicine of the future	17,87%
7	URALSIB Life World brands	12,24%
8	AS-Life High dividends	6,33%
9	RGS-Life Sure choice	8,96%
10	RGS-Life Food	25,29%
11	Renaissance Life Sputnik	4,96%
12	Ingosstrakh-Life Balanced growth	8,00%
13	Ingosstrakh-Life Innovative Pharmaceuticals	20,47%
14	SG Life Insurance Portfolio of shares	5,31%
15	SG Life Insurance Multifund	5,98%

Further the author evaluates performance of selected ULIP funds in comparison to benchmarks and risk-free instruments.

Information ratios, which measure the ability of the portfolio generate excess profits relative to its benchmark, for all selected ULIPs were calculated (Figure 3, Appendix 2). The best dimension of this ratio was observed in Sberbank Life New technologies fund and was equal to 0,81. It means that this fund overperformed its benchmark which is MSCI World index and earned an excess return in comparison with the index. Moreover, with respect to retrospective data of IR, this fund had rather high IRs and only one negative dimensions of IR in 2010 during the observed period. Additionally, in 2008 the portfolio had outstanding information ratio of more than 2,5. These facts demonstrate long-term fund overperformance with regard to its benchmark.

Ingosstrakh-Life Balanced growth fund averagely performed better than its benchmark with mean Information Ratio of 0,61 which is regarded as quite good. In 2009 and 2010 this fund overperformed the benchmark rather significantly with great results of IR equaled to 2,36 and 1,81, respectively.

RGS-Life Sure choice fund, which shown successful performance from the point of average return rate and standard deviation, has 0,60 as the mean Information ratio in the observed period of 2009-2016. Despite the fact that the portfolio shown negative dimensions of Information Ratios in 2009 and 2010, all the rest 6 years were rather successful with ratios of 0,33-1,63 , depending on the year. Thus, it demonstrates the consistency of the fund management and their rational investment decisions which results in higher profits with lower risk relatively to fund's benchmark.

Sberbank Life US Equity Market fund, Renaissance Life Sputnik fund and SG Life Insurance Multifund also shown positive average Information Ratios. In some years, rather significant values of more than 2 were identified. Therefore, long term all aforementioned funds performed quite successful and beaten the benchmarks receiving more income with less risk.

All the other ULIP funds received negative values of average Information ratios. For example, the worst performance of -0,8 was observed in VTB Life Insurance World wealth fund. It is connected to the fact that in 6 out of 8 years the fund returns were less than benchmark return rates and, respectively, the fund received negative IRs in these years. Thus, the author considered this fund as underperforming relatively to its benchmark.

There are other funds which had negative values of Information Ratios. The author explains that they had rather significant tracking errors which demonstrate quite high differences between the fund and the benchmark returns. In combination with even small underperformance of the fund relatively to the benchmark it results in negative IR values (Appendix C).

Figure 3. Information Ratios of Russian ULIP funds in 2009-2016.

In order to compare the average returns of funds with risk-free instruments performance the author calculated Sharpe ratios for selected ULIP funds (Figure 4, Appendix D). It was figured out that almost all chosen funds have positive mean values of Sharpe ratio during 2009-2016. The vast majority of them had shown the average performance in relation to risk-free instruments. However, three ULIP funds - Sberbank Life Global Bond Fund, RGS-Life Sure choice fund and Renaissance Life Sputnik fund - shown rather outstanding values of Sharpe ratio which were equal to more than 1,5. It indicates that these funds generated rather significant returns in excess of the risk-free rate per unit of its total risk. Thus, the risk which was taken by the funds is considered to be justified and well compensated by extra income.

The only one fund which received the negative Sharpe ratio was VTB Life Insurance World wealth fund. As it was said earlier, this fund had the one of the lowest return rate and the rather large value of standard deviation which indicates the high volatility of the portfolio. Thus, the negative value of Sharpe ratio proved that the fund was taking too much risk during the period and did not receive an excess income for that. Moreover, it means that a risk-free asset would perform better than this security.

Moreover, VTB Life Insurance Medicine of the future fund which also had the rather low rate of return only marginally performed better than risk-free instruments with the value of Sharpe ratio equal to 0,01. Moreover, this fund received negative values of Sharpe Ratio in four years during the observed period which tells about the fact that the excess risk, taken by the fund, was not compensated with the extra return on investments.

RGS-Life Food fund with the highest standard deviation of more than 25% had rather insignificant Sharpe ratio of 0,08. In 2009 the value was -2,31, thus, the high volatility of the portfolio was not compensated and even caused losses in comparison with risk-free securities performance. During the following years Sharpe ratio was not greater than 1 which is also not a very good indicator for the portfolio with the large standard deviation.

Figure 4. Sharpe Ratios of Russian ULIP funds in 2009-2016.

The author also employed Treynor ratio which is also utilized to measure the excess returns, generated by the portfolio per unit of its risk with respect to risk-free investments. However, when calculating Treynor ratio, instead of a standard deviation as a risk indicator a beta coefficient is used which measures a volatility of the portfolio in comparison with the market. Analyzing beta coefficients of the funds (Figure 5), the author figured out that Sberbank Life US Equity Market fund, Sberbank Life New technologies fund, VTB Life Insurance World wealth fund and Ingosstrakh-Life Innovative Pharmaceuticals fund are considered to be more volatile than the market as they have betas more than 1.

URALSIB Life World brands fund and both funds of SG Life Insurance received negative values of beta coefficient which can be interpreted as the indicator of the opposite movement of the funds in comparison with the market. However, absolute values are less than 1, thus, these portfolios are less risky than the market.

All other funds shown betas less than 1 and are theoretically considered to be less risky than the market and rather stable.

Figure 5. Beta coefficients of Russian ULIP funds in 2009-2016.

Further, using beta coefficients of analyzed ULIPs, the author calculated Treynor ratios of selected ULIP funds (Figure 6).

The best value of Treynor Ratio was identified in Renaissance Life Sputnik fund, it was averagely equal to 3,38 during the period. This ratio indicates that the fund generated outstandingly high returns on each of the market risks it has taken. AS-Life High dividends fund performed quite good as well with the mean Treynor ratio of 1,46. However, as the author said earlier, these funds had very small betas which indicated the low volatility of the portfolios relatively to the market. Hence, such a significant Treynor ratios might be received due to the overall low risk of the funds.

URALSIB Life World brands shown the results of -0,98. However, negative values of Treynor ratio do not always mean the failure of the fund manager to pay off the additional risk that was taken. If a negative ratio was obtained because of a negative beta, which only demonstrates the opposite movement of the fund in comparison with the benchmark, the ratios can be interpreted in absolute values. Thus, the author concluded that the risk of investments in this fund were rather good compensated.

Oppositely, VTB Life Insurance World wealth fund also had the negative value of Treynor ratio which was received since the risk-free asset return was higher than the plan's return. In that case, the negative Treynor ratio indicates that the excess risk of this fund was not paid off.

Other funds have positive dimensions of Treynor Ratio which are regarded as the proof that extra risk that was taken by these funds received compensation.

Figure 6. Treynor Ratios of Russian ULIP funds in 2009-2016.

Another measure of risk-adjusted ULIP funds' performance that was employed by the author is Jensen measurement or Jensen alfa (Figure 7). This measure evaluates portfolio performance in relation to the value of CAPM (Capital Assen Pricing Model).

Basing on the previous analyses of return rates, standard deviations, beta coefficients, Information, Sharpe and Treynor ratios, performance of both VTB Life Insurance funds, RGS-Life Food fund and Ingosstrakh-Life Innovative Pharmaceuticals fund already was regarded as ones of the worst. The calculation of Jensen measurement also confirmed these conclusions with significant negative values of Jensen alfa.

Sberbank Life US Equity Market fund also received the negative Jensen Alfa of -0,96. It was identified in earlier parts of the research that this fund had the large standard deviation (Table 8), which reported about rather significant level of risk, associated with the portfolio. Thus, the author concluded that the fund did not manage to compensate the excess risk that was taken.

All the other funds performed quite good. For example, RGS-Life Sure choice fund which had one of the best values of earlier analyzed ratios had the Jensen measurement outstanding value of more than 11% as well. It also confirmed that this fund was rather successful in earning excess returns for extra risk. Renaissance Life Sputnik fund which also had exceptionally good values of Sharpe and Treynor ratios received almost 8% as a Jensen alfa. Thus, this result of Jensen measurement confirmed that fund's returns compensated for the risk it had taken.

Figure 7. Jensen Measurements of Russian ULIP funds in 2009-2016

3. Developments Prospects

Based on the conducted research, some drawbacks of Russian ULIPs which are likely to prevent the ULIPs market progress were identified. Furthermore, the author suggested possible development activities that should be made to enable the market to grow steadily in the nearest future.

First, the possible duration of ULIPs in Russia is tightly restricted. The maximum unit-linked insurance contracts last for 10 years and are provided only by Sberbank Life. Vast majority of insurance companies, operating in the Russian market, suggest 3-5-year policies. In comparison with Indian ULIPs which allow their clients to have policies up to 75 years. Long-term contacts are more favorable for clients as they can generate more investment income (Khurana, A. & Goyal, K., 2010). Thus, this policy characteristic can be regarded as the one of possible limitations that make Russian ULIPs not as profitable and popular as they can be and, thus, slow down the development of the sphere.

Moreover, in comparison with foreign ULIPs vast majority of Russian unit-linked insurance policies are much less flexible. Generally, ULIP insurers do not provide the opportunity to their clients to make any major changes to their contracts such as an increase of an insurance sum by adding capital to the policy, a prolongation or a withdrawal of an investment income. Possible policy management options, provided by vast majority of Russian ULIP insurers, include a change of investment fund and a fixation of profitability. Some companies do not provide any options at all. Hence, this fact also can be regarded as the limiting factor which prevents the market from the growth.

Number of funds, available under Russian ULIPs are also very poor relatively to foreign insurers. For example, in India and Romania each ULIP policy has from 6 to 10 funds to allocate the money (Khurana, A. & Goyal, K., 2010, Gavriletea, M., 2009). Russian insures provide from 1 to 3 funds under ULIPs. Moreover, a foreign ULIP funds' nature is more diverse. Thus, the scarcity or even the absence of choice could also lead to low popularity and unwillingness of population to invest in unit-linked insurance products in Russia.

From the other side, taking into consideration the character and the mentality of Russian citizens, the low level of population financial literacy and overall scarcity of information about ULIPs, the author suggested that Russians are not likely to invest their capital in financial instruments with a duration of more that the couple of years. Moreover, due to that aforementioned reasons people might do not event go deeply into research about all these policy features and benefits of ULIPs. Hence, before taking steps to improve the product itself, several problems are to be solved to prepare the ground for that changes.

First, the low level of population financial literacy significantly slows down the growth of ULIP market in Russia. For successful development of unit-linked insurance in Russia, citizens are supposed to understand at least the basics of different financial instruments operation, such as bank deposits and loans, stocks, securities and overall stock market functioning, insurance service operations (Logacheva, A.V., 2017). The lack of this knowledge very often leads to the clients' disappointment in ULIPs. It happens when clients, entering the ULIP, do not fully realize what amount of risk they take and, therefore, do not fully understand all possible outcomes of it. Eventually, it can result in unjustified expectations about the profitability of ULIPs as well as financial losses for customers which lead to general dissatisfaction with the product and its development slowdown. As unit-linked insurance plans are rather difficult products for the understanding, gradual financial literacy improving and general population education are necessary for future development of the field. It will not only help in understanding of the product structure by potential clients, but also allow to get rid of misunderstanding on the subject of risks and profits, associated with ULIPs. Hence, higher financial literary of clients will allow the sphere to grow significantly as well as make the quality of its services even better.

Another factor which can be regarded as the development obstacle is the scarcity of professionals who have required skills and knowledge to develop ULIPs in Russia. According to the research which was conducted by the author it was figured out that this assumption can be true, as some ULIP consultants are not fully competent to provide potential consumers with detailed information about unit-linked insurance plans and subtleties of its functioning. Thus, incompetent service providers of ULIPs together with the overall low financial literacy of population make it almost impossible for clients to understand the ULIP operation. Hence, educational lectures and seminars for employers can be extremely effective and useful. Moreover, the attraction of competent professionals to the sphere is need. It can be reached by the creation of special career programs for top universities graduates.

Furthermore, the lack of information about ULIPs and statistical retrospective data about its profitability also do not allow this market to develop properly. In comparison with abroad experience where both unit-linked insurers and government officially publish the results of performance of this market, in Russia nobody does it and there is no public information about ULIP market performance in Russia (Expert RA, 2017). Sometimes insurance companies promise some certain profitability in their promotional brochures which makes the situation even worse, as they demonstrate the best performance which is not reached every year. Thus, the profitability of Russian ULIPs is not transparent and it causes a mistrust of clients and unwillingness to invest in ULIPs which is understandable from the point of rationality. Moreover, insurance companies informed that the clients did not want to prolongate their ULIP contracts after the expiry date which can be regarded as the signal of unjustified expectations and the disappointment in the product. Thus, for future development of unit-linked insurance it is extremely important to make the statistical information about market performance of ULIPs public. Moreover, the attention from the government to this sphere and official reporting on the profitability of ULIP funds also can have positive influence on people's attitude to this product which also credit to ULIPs development.

The lack of the legal framework for this kind of services as well as not appropriate tax system do not allow the sphere to growth further.

Nowadays in Russia there are no official references to unit-linked insurance in the Russian legislation. Consequently, there are no any control and regulatory mechanisms as well as general principles of functioning of ULIPs, fixed by the law. Additionally, the author pointed out that there are some reformations in a taxation system of an income, received from unit-linked insurance products, are needed. Nowadays, a tax deduction of an insurance premium paid by the taxpayer under the unit-linked insurance contract in the amount of up to 120 000 rubles is provided, according to Tax Code of the Russian Federation, article 219, paragraph 2. However, this tax benefit is only applicable for ULIP contacts with a duration of 5 and more years. As it was said earlier, in the Russian market the vast majority of contracts are short-term and last for 3 years. Thus, it is not possible to have tax deductions under the most ULIPs in Russia. Therefore, in order to increase the attractiveness of ULIPs in Russia, the amount of a tax deduction needs to be expanded. Moreover, the period of contract under which the client can receive tax benefits should be shrank to 3 years. This reformation is rather realistic, as, for example, for users of individual investment accounts the tax deduction up to 400 000 rubles and minimum investing of 3 years are implied. Therefore, the mitigation of taxation conditions with regard to ULIPs to the level of taxation of similar products will help to increase the attractiveness of unit-linked insurance plans from the point of view of potential policyowners and may become one of the drivers of the growth in unit-linked insurance.

Based on the conducted research, the future development of unit-linked life insurance will only be possible if earlier aforementioned activities are applied. The author also suggested that the growth of this sphere can have positive effects on the economy and the society in Russia.

The unstable macro-economic situation in the county including the constant changing political situation and the high inflection as well as poor development of the Russian stock market slow down the growth of ULIPs. However, a strengthening and a further expansion of ULIPs can benefit to Russian economy. The author figured out Sberbank Life took attempts to implement investment strategies which are concentrated on investing in leading Russian companies and RTS index in order to direct the investments in Russian industry and support domestic economy. However, these strategies were not successful. This is understandable, as Sberbank is more the exception than the rule and the desire of one firm to develop the Russian stock market is not enough. More resources are needed to make the change. However, with the growth of ULIPs in Russia the idea about a support and a development of the Russian stock market and overall economy will have a chance to be fulfilled.

Moreover, the development of ULIPs could result in the overall rise of education as well as consciousness of population. This progress also can be extremely important for the county and its economy. It could result in the boost in other spheres of life where financial education of population is essential.

4. Results and Discussion

The author analyzed the Russian ULIP market from qualitative and quantitative characteristics. Hence, the following results were received on the subject of qualitative characteristic (Table 9).

Table 9. Major characteristics of Russian ULIPs.

Entry age	Duration	Minimum entry sum	Insurance payment of an insurance premium, increased by an investment income.	Policy management	Funds
Minimal	Maximal	Minimal	Maximal
18	83	3	10	30 000 RUB	100% -300%	5 options	3

In India the minimum entry age is 10 years old and the maximum is 85 (Khurana, A. & Goyal, K., 2010). The upper boarder is rather close to Russians ULIPs; however, the minimum age is significantly different.

The duration of a policy under Russian ULIP is 10 years, when European and Indian ULIPs provide up to 75 years policies. Therefore, foreign ULIPs can be more profitable than Russian, as they are long-term.

However, Russian ULIPs provide their clients with the rather good insurance coverage in comparison with Indian ULIPs. In Russian the policyholder can receive from 100% to 300% of an insurance premium, when in India policyowners can have only 125% of single premium (Valluvan, S., Sivasakthi, G. & Ida, D., 2015). The author suggested that this fact might testifies that Russian ULIPs are more insurance rather than investment instrument, when abroad ULIPs are real hybrids of insurance and investments. It shows how the product is modified to fit in the particular country.

Taking about Policy management options of Russian ULIP, there are 5 of them:

· change of the fund;

· fixation of profitability;

· additional sum;

· withdrawal of an income;

· prolongation.

However, not all insurance companies in Russia provide their clients with the opportunity to manage their policies. Some insurers allow only couple of options from the whole list, some companies do not provide policy management at all. In comparison with foreign ULIPs, where policy management is available under every ULIP, this factor is also can be regarded as the limitation and the weak point of Russian plans.

Talking about investment strategies and funds, available under Russian ULIPs, there are four main directions of ULIP investment strategies:

· the most profitable companies from all over the world;

· Innovative medicine corporations;

· corporate and governmental bonds.

The author investigated that the investment strategies of unit-linked insurance plans in Russia have a lot in common with foreign ULIPs. According to Gavriletea,M.(2009) and Valluvan, S., Sivasakthi, G. & Ida, D. (2015), in Romania and India there are also funds, oriented on investing in strong international corporations. Moreover, different kinds of bonds are also used as the focus of investments.

However, the foreign funds are more diverse. For example, the nature of some ULIP funds can consist of 100% of deposits of high solvency banks. Moreover, there are no pure Russian bond ULIP funds, as bonds are always mixed with stocks of leading corporations. Abroad ULIP funds have various funds, concentrated only on different kind of bonds. This diversity can be connected to the fact that foreign ULIPs have more funds under each policy. Thus, in comparison with Indian and Romanian ULIPs, which normally have from 8 to 10 funds available for investing, Russian plans have only from 1 to 3 funds. The author suggested that the lack of choice also can act as the fact which slow down the Russian ULIP market and its development.

Moreover, more developed stock market and bank system, vast experience in this sphere and competent professionals contribute to advance and variety of ULIP funds abroad and explain the difference between foreign and Russian ULIPs. Thus, this fact also emphasizes the necessity of Russian ULIPs development.

Based on the conducted study, SmartPolice from Sberbank Life was considered as the most preferable from the point of view of major policy characteristics. Rather wide entry age frames from 18 to 80 years, the highest possible 10-years duration of the policy, the opportunity to issue a policy both in rubles and dollars, the widest policy management with all 5 possible options and the variety of funds for investments credit to the attractiveness of this ULIP for private investors.

The least favorable policy was considered to be Maximum by VTB Life Insurance. It has the rather limited entry age and lasts only for 3 years. Moreover, the policy requires the significant entry sum of 350 000 RUB which is regarded as the highest among other studied ULIPs and make it difficult for potential clients to enter the policy. The highest insurance payments from 100% to 300% of an insurance premium, increased by an income from investments, are provided by VTB Life Insurance under ULIP named Maximum. However, as it was said earlier all the other characteristics of the contract are rather inconvenient for consumers. The author suggested that the insurer uses the significant insurance coverage as its advantage and due to this fact imposes rather strict limitations on other policy characteristics.

Redemption sums vary from 64% to 94% of an insurance premium, depending on a duration of ULIP, the number of years before the date of policy expiry as well as an insurance company who provides ULIP. It was suggested that the difference in redemption sums of ULIPs can be explained as the following:

· the number of years before the expire date of the policy;

· difference in insurance service charges and fees of insurance companies;

· difference in expected profitability of ULIP guaranteed funds;

· overall performance of the stock market;

· insurance companies with relatively small market shares provide more favorable cancelation condition for customers.

Based on data received from quantitative analysis, the author stated funds which shown the best and the worst performance for 2009-2016 years.

First, the rates of return of selected funds were examined (Table 10). RGS-Life Sure choice and Sberbank Life funds received the highest return rates in the observed period while VTB Life Insurance funds shown the poorest returns.

Table 10. The best and the worst Russian ULIP funds in 2009-2016 from the point of return rates.

Rate of return
The best	Value	The worst	Value
RGS-Life Sure choice	16,6%	SG Life Insurance Portfolio of shares	5,0%
Sberbank Life New technologies	13,0%	VTB Life Insurance World wealth	2,9%
Sberbank Life US Equity Market	14,2%	VTB Life Insurance Medicine of the future	2,8%

Further, the author evaluated the risk of selected funds (Table 11). For this purpose, two measurements were employed. First, a standard deviation which shows the volatility of the observed security, and, second, a beta or systematic risk which evaluates the amount of risk, associated with the portfolio, in comparison with the market. Based on the conducted research, Ingosstrakh-Life Innovative Pharmaceuticals fund and Sberbank Life US Equity Market fund were considered to be the riskiest portfolios, as they have both high values of standard deviation and beta. SG Life Insurance Portfolio of shares fund and AS-Life High dividends fund are admitted as low volatile portfolios both from the point of view of systematic risk and its own volatility.

Table 11. The most and the least volatile Russian ULIP funds in 2009-2016.

Standard Deviation
the most volatile	Value	the least volatile	Value
Ingosstrakh-Life Innovative Pharmaceuticals	25,29%	Sberbank Life Global Bond Fund	3,04%
RGS-Life Food	20,47%	SG Life Insurance Portfolio of shares	5,31%
URALSIB Life Medicine of the future	17,87%	SG Life Insurance Multifund	5,98%
Sberbank Life US Equity Market	16,38%	AS-Life High dividends	6,33%
Beta coefficient
the most volatile	Value	the least volatile	Value
Sberbank Life US Equity Market	1,66	Renaissance Life Sputnik	0,02
VTB Life Insurance World wealth	1,23	AS-Life High dividends	0,04
Sberbank Life New technologies	1,12	URALSIB Life World brands	-0,07
Ingosstrakh-Life Innovative Pharmaceuticals	1,10	SG Life Insurance Portfolio of shares	-0,23

Further, the author employed risk-adjusted measurements to evaluate ULIP funds' performance relatively to its benchmark (Table 12). Sberbank Life New technologies fund and RGS-Life Sure choice fund again were among leaders on ULIP market who generated the largest returns with the lowest risk in comparison to their benchmarks. Both funds of VTB Life Insurance as well as RGS-Life Food fund shown the worst values of Information Ratio.

Table 12. The best and the worst Russian ULIP funds in 2009-2016, based on results of Information Ratio.

Information Ratio
The best	Value	The worst	Value
Sberbank Life New technologies	0,82	VTB Life Insurance World wealth	-0,80
Ingosstrakh-Life Balanced growth	0,61	VTB Life Insurance Medicine of the future	-0,63
RGS-Life Sure choice	0,60	RGS-Life Food	-0,33

The evaluation of funds' performance, based on results of Sharpe Ratio, Treynor Ratio and Jensen Measurement, defined that RGS-Life Sure choice fund, Renaissance Life Sputnik fund and URALSIB Life World brands generated the biggest returns per unit of its total risk (Table 13). Oppositely, VTB Life Insurance World wealth fund, VTB Life Insurance Medicine of the future fund and RGS-Life Food fund shown the worst performance during the observed period. Hence, the risk they took was either not compensated by excess returns or only marginally paid off.

The author also emphasized that URALSIB Life World brands received the negative Theynor Ratio. However, negative values of Treynor ratio does not always mean the failure of the fund manager to pay off the additional risk that was taken. If negative ratio was obtained because of negative beta, the value can be interpreted in absolute value. Thus, the author concluded that the risk of investments in this fund were rather good compensated. Oppositely, VTB Life Insurance World wealth fund also had the negative value of Treynor ratio which was received since risk-free asset return was higher than the plan's return. In that case, negative Treynor ratio indicates that excess risk of these funds was not paid off.

Table 13. The best and the worst Russian ULIP funds in 2009-2016, based on results of Sharpe Ratio, Treynor Ratio and Jensen Measurement.

Sharpe Ratio
The best	Value	The worst	Value
Sberbank Life Global Bond Fund	1,65	VTB Life Insurance World wealth	-0,02
Renaissance Life Sputnik	1,58	VTB Life Insurance Medicine of the future	0,01
RGS-Life Sure choice	1,50	RGS-Life Food	0,08
Treynor Ratio
The best	Value	The worst	Value
Renaissance Life Sputnik	3,38	Ingosstrakh-Life Innovative Pharmaceuticals	0,07
AS-Life High dividends	1,46	RGS-Life Food	0,04
URALSIB Life World brands	-0,93	VTB Life Insurance World wealth	-0,0024
RGS-Life Sure choice	0,43	VTB Life Insurance Medicine of the future	0,0014
Jensen Measurement
The best	Value	The worst	Value
RGS-Life Sure choice	11,16%	VTB Life Insurance World wealth	-6,19%
Renaissance Life Sputnik	7,64%	VTB Life Insurance Medicine of the future	-4,23%
URALSIB Life World brands	6,80%	RGS-Life Food	-3,16%

Based on conducted research, RGS-Life Sure choice fund was regarded as the best one from the point of overall performance. Turning to the conducted research of qualitative characteristics of the plans, this ULIP is provided on rather average, but still acceptable conditions: a relatively long-term policy, the opportunity to invest both in rubles and US dollars, the average entry sum and a sufficient insurance coverage. Moreover, performance of RGS-Life Sure choice fund was considered as the most successful on the market.

The SmartPolice of Sberbank Life was also considered to be one of the most successful ULIP. It was regarded as the most favorable from the point of major features. Moreover, funds of Sberbank Life received one of the highest average returns in 2009-2016 and had one of the best values of Information Ratio and Sharpe Ratio. Thus, despite the fact that they were regarded as the most volatile ones, this ULIP funds shown rather successful performance, hence, the ULIP was regarded as one of the most favorable for potential policyholders.

Thus, RGS-Life Sure choice fund and The SmartPolice ULIP of Sberbank Life are considered as the most preferable for private investors.

VTB Life Insurance World wealth fund and VTB Life Insurance Medicine of the future fund were considered to show the worst performance. Taking into consideration the analysis of major terms of ULIPs, the author admitted VTB Life Insurance Maximum policy as less preferable for clients due to the weakest performance of its both funds and inconvenient policy features.

To sum up, the author suggested possible activities which can be useful for the future market growth and development:

· to improve policy characteristics such as to extend the duration of policies, to widen policy management options and to increase the number of ULIP funds and to diversify investment strategies;

· to increase the level of financial literacy of population;

· to attract professionals to the sphere;

· to provide transparency of the field by making the information about the profitability of ULIPs public;

· to establish legal framework for this kind of services;

· to mitigate tax regulation of ULIPs and to make it more favorable for clients.

Thus, it can be seen from the research this market and its products require dramatic changes that should be done as soon as possible. The future development is only possible if the government, insurance companies as well as population take the relevant steps to it. In case the activities, proposed by the author, are applied, the subsequent growth of ULIPs can have extremely positive impact on Russian society and economy and facilitates the development of other spheres.



Conclusions and implications

The findings of the research are expected to be useful for a scientific world. Since there are no studies which explored in details unit-linked insurance products in Russia, this research fills this gap in worldwide knowledge and provides the broad analysis of Russian ULIPs. Moreover, the study outcomes can be used in future domestic and foreign studies in this field.

The research can attract an attention of the government and the society to unit-linked life insurance which also can have a positive influence on the development of the market. In addition, suggestions about existing problems in the field that slow down the growth of the ULIPs can be used by both life insurance companies and public authorities on their way toward developing unit-linked life insurance in Russia. Furthermore, the work can facilitate the growth of awareness of unit-linked life insurance among population and make the ULIP products more transparent and understandable for Russian citizens.

Private investors who are interested in ULIPs or need a help in making decision about investing in ULIPs also can find useful information in the research. Since the study provides a detailed overview of features of the most popular Russian ULIPs as well as ULIP funds' performance, potential policyholders obtain the opportunity to explore the supply and make the right choice when choosing ULIP. Moreover, the research can be useful for education of the population about financial instruments and contribute to the rise of the level of financial literacy and overall education of Russian citizens.



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Appendices

Appendix A

Annual return rates of Russian ULIP funds in 2009-2016.

№	ULIP Fund	2009	2010	2011	2012	2013	2014	2015	2016
1	Sberbank Life US Equity Market	22,7%	19,4%	-5,3%	20,0%	31,2%	33,6%	-8,7%	0,9%
2	Sberbank Life New technologies	39,8%	17,9%	-4,0%	18,2%	13,0%	11,2%	0,4%	7,5%
3	Sberbank Life Global Bond Fund	11,1%	8,0%	5,0%	13,0%	8,5%	9,0%	7,2%	3,6%
4	VTB Life Insurance Medicine of the future	12,7%	-10,9%	10,1%	9,7%	18,4%	-1,5%	-1,9%	-14,1%
5	VTB Life Insurance World wealth	24,7%	2,2%	-24,0%	7,8%	8,6%	4,4%	-4,5%	3,7%
6	URALSIB Life Medicine of the future	-16,6%	23,3%	-1,8%	14,0%	20,8%	11,2%	25,8%	-19,9%
7	URALSIB Life World brands	-19,8%	18,0%	11,7%	12,4%	15,7%	11,8%	17,3%	7,8%
8	AS-Life High dividends	12,8%	12,7%	2,8%	14,8%	12,9%	4,5%	9,2%	-3,2%
9	RGS-Life Sure choice	8,3%	4,3%	15,5%	15,2%	33,8%	23,1%	16,0%	16,4%
10	RGS-Life Food	-54,2%	29,6%	16,2%	12,2%	16,4%	12,7%	4,4%	3,4%
11	Renaissance Life Sputnik	15,0%	16,0%	4,0%	11,0%	9,0%	6,0%	18,0%	9,0%
12	Ingosstrakh-Life Balanced growth	22,9%	8,8%	0,0%	13,4%	8,9%	6,6%	-2,5%	13,2%
13	Ingosstrakh-Life Innovative Pharmaceuticals	-6,7%	-5,0%	11,2%	29,3%	42,6%	25,2%	3,8%	-17,0%
14	SG Life Insurance Portfolio of shares	1,7%	12,1%	8,8%	-1,4%	5,3%	3,5%	11,3%	-1,0%
15	SG Life Insurance Multifund	15,8%	10,6%	11,9%	-1,5%	14,3%	9,9%	10,2%	1,8%



Appendix B

Annual values of Information Ratios of Russian ULIP funds in 2009-2016.

№	ULIP Fund	2009	2010	2011	2012	2013	2014	2015	2016
1	Sberbank Life US Equity Market	0,34	0,75	-0,49	0,77	0,78	2,19	-0,75	-0,73
2	Sberbank Life New technologies	2,63	1,30	0,60	0,93	-0,90	1,19	0,45	0,35
3	Sberbank Life Global Bond Fund	-2,12	-0,37	0,36	-0,05	-0,07	0,64	1,14	-0,86
4	VTB Life Insurance Medicine of the future	0,11	-1,95	0,26	-0,47	0,40	-1,94	-1,45	0,02
5	VTB Life Insurance World wealth	0,06	-1,16	-2,88	-0,68	-1,28	0,25	-0,21	-0,51
6	URALSIB Life Medicine of the future	-1,92	1,13	-0,59	-0,28	-0,52	0,32	1,12	-0,39
7	URALSIB Life World brands	-2,49	0,38	-0,04	0,22	-0,50	-0,18	0,80	0,14
8	AS-Life High dividends	-1,00	-0,08	0,19	0,73	0,50	-1,63	0,48	-1,77
9	RGS-Life Sure choice	-1,04	-0,69	1,51	0,33	1,07	1,25	1,63	0,75
10	RGS-Life Food	-2,69	0,44	0,22	0,18	-0,46	-0,20	0,18	-0,29
11	Renaissance Life Sputnik	-0,43	0,50	0,43	-0,09	-1,48	-0,45	2,00	0,03
12	Ingosstrakh-Life Balanced growth	2,36	1,81	-0,18	0,84	0,06	0,20	0,28	-0,50
13	Ingosstrakh-Life Innovative Pharmaceuticals	-0,98	-1,28	0,03	1,19	0,80	0,40	0,22	-1,52
14	SG Life Insurance Portfolio of shares	-1,60	0,13	1,32	-0,95	-0,72	-0,02	1,10	-0,51
15	SG Life Insurance Multifund	-0,59	0,24	2,21	-1,26	-0,05	0,51	0,34	0,27



Appendix C

Tracking Errors of Russian ULIP funds in 2009-2016.

№	ULIP Fund	Tracking Error
1	Sberbank Life US Equity Market	10,66
2	Sberbank Life New technologies	7,07
3	Sberbank Life Global Bond Fund	10,13
4	VTB Life Insurance Medicine of the future	9,28
5	VTB Life Insurance World wealth	6,34
6	URALSIB Life Medicine of the future	20,08
7	URALSIB Life World brands	13,44
8	AS-Life High dividends	9,48
9	RGS-Life Sure choice	10,25
10	RGS-Life Food	25,30
11	Renaissance Life Sputnik	9,35
12	Ingosstrakh-Life Balanced growth	5,99
13	Ingosstrakh-Life Innovative Pharmaceuticals	18,28
14	SG Life Insurance Portfolio of shares	14,42
15	SG Life Insurance Multifund	11,16



Appendix D

Annual values of Sharpe Ratios of Russian ULIP funds in 2009-2016.

№	ULIP Fund

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