OVERSEA-CHINESE BANKING CORPORATION LIMITED
(Incorporated in Singapore)
(Company Reg. No: 193200032W)
ONE-TIME REDEMPTION OFFER TO GREATLINK CHOICE POLICYHOLDERS
BY GREAT EASTERN
Oversea-Chinese Banking Corporation Limited (“OCBC Bank”) refers to the attached
announcements today by its insurance subsidiary Great Eastern:
(1) Great Eastern Announces One-time Redemption Offer to GreatLink Choice
Policyholders
(2) Great Eastern Announces Net Profit of $97.7 million in Q2-09
Following the redemption offer, Great Eastern will take delivery of the underlying CDO
instruments and will account for the fair value of these instruments at the close of the offer
period. The financial impact of the offer will be reflected in Great Eastern’s third quarter 2009
financial results and is conservatively estimated to be in the region of S$250 million. Based on
this estimate, the negative impact on OCBC Group’s third quarter 2009 financial results is
expected to be around S$218 million. OCBC Group does not expect this charge to affect its
continuing profitability, business fundamentals or capital position.
OCBC Bank will be releasing its Second Quarter 2009 financial results on Monday 3 August
2009, at between 12.30 pm and 1.00 pm.
Peter Yeoh
Secretary
Singapore
31 July 2009
MEDIA RELEASE
For Immediate Release
Great Eastern Announces One-time Redemption Offer
to GreatLink Choice Policyholders
Singapore, 31 July 2009: Great Eastern today announced that it is making a one-time
redemption offer to its GreatLink Choice (GLC) policyholders. The offer will be open for
acceptance from 3 August to 28 August 2009. During the offer period, GLC policyholders can,
if they so choose, have their GLC units cancelled under this redemption offer and receive a
sum equal to the original purchase price of $1.00 per unit, less the total annual payouts
received to-date.
GLC is a series of investment-linked insurance products with the underlying investments in
CDO (collateralised debt obligations) instruments. GLC aims to provide investors with
enhanced fixed annual returns and a return of the principal amount on maturity. Insurance
coverage is provided over the duration of the investment. Both the annual payouts and
principal repayment on maturity are not guaranteed. At inception, the GLC products were rated
AA/AA- by Standard & Poor’s, based on the terms of the instruments and other key features:
1) Each fund has a built-in loss protection level allowing for as many as approximately 16 to 23
credit events (the exact figure varies by fund) before the annual payouts and maturity
benefits would be affected;
2) Each fund is made up of reference entities diversified across various industries and
geographical regions; and
3) No single reference entity in any GLC fund accounts for greater than 1.5% of the fund’s
overall exposure.
Since inception to-date, annual payouts have been made under the GLC products as projected.
However, because of the global financial crisis, the market values of these products are at
steep discounts to par due to several credit events effectively eroding the loss protection
cushion. Great Eastern understands that these steep discounts have given rise to concerns
among GLC policyholders.
Group CEO of Great Eastern, Mr Ng Keng Hooi said: “We are comfortable with these products
as they were designed with built-in loss protection levels and diversification amongst at least
115 reference entities, spread across various industries and geographical regions. However,
the global financial crisis has created much uncertainty for many investors all over the world.
Market sentiments have been severely impacted and many financial instruments have been
badly affected by the crisis.
“To address GLC policyholders’ concerns in these extraordinary times, we have taken a
decision to make this one-time offer, as a gesture of goodwill, to redeem these products. Our
offer is voluntary, and is made without any admission of liability. Further, this offer applies to
GLC products only. It will not apply to any other Great Eastern policies. Other than GLC
products, Great Eastern did not sell any other similar structured products to its policyholders.”
GLC policyholders will in due course receive a notice from Great Eastern on the procedure for
acceptance of this offer. Great Eastern’s life planners will also contact their clients to give them
a product update and to take them through the specifics of the offer. GLC policyholders who
have questions on the offer may also call Great Eastern’s Customer Service Officers at 1800248-2888 or email the Company at wecare@lifeisgreat.com.sg
GLC policyholders who choose to take up the offer will receive a refund of their original
investment amounts, less total payouts received to-date, and the insurance coverage will
cease.
The financial impact of the offer on Great Eastern’s financial results is explained in the media
release for Great Eastern’s second quarter 2009 financial results.
- End About GLC
GreatLink Choice (GLC) is an investment-linked product which seeks to provide policyholders with fixed
annual payouts and return of the principal amount on maturity. It is stated in the policy documents that
both the annual payouts (coupons) and maturity benefit are not guaranteed. The risks of the Fund are
set out in the Product Summary (Specific Risk). As a life insurance policy, GLC provides insurance
coverage against death of between 101% and 110% of the single premium invested. Five GLC tranches
were issued. Details of the policies and the latest prices are given in the Appendix.
About Great Eastern
Founded on 26 Aug 1908, Great Eastern Life Assurance Co Ltd is the oldest and most established life
insurance company in Singapore and Malaysia. In Nov 1999, Great Eastern Holdings Ltd was
incorporated and became the holding company of Great Eastern Life. Overseas Assurance Corporation
Ltd, incorporated in 1920 as the first composite insurer in Singapore, merged with Great Eastern
Holdings in Dec 2000. Today, Great Eastern is the largest insurance group and the market leader in
Singapore and Malaysia, with $45 billion in assets and 3.8 million policyholders, and with two successful
distribution channels - the tied agency force and bancassurance. The Company also operates in China,
Indonesia, Vietnam and Brunei.
Great Eastern is a subsidiary of OCBC Bank, Singapore’s longest established local bank with assets of
$181 billion and a network of more than 480 branches and representative offices in 15 countries and
territories. Great Eastern’s subsidiary, Lion Global Investors, is one of the largest asset management
companies in Southeast Asia.
For more information, please contact:
Boon-Gek Mudeliar, Head (Corporate Communications), Great Eastern
Tel: 6248 2215 or email: Boon-GekMudeliar@lifeisgreat.com.sg
or
Terence Foo, Managing Partner, Kreab Gavin Anderson
Tel: 6339 9110 or email: tfoo@kreabgavinanderson.com
Appendix
GreatLink Choice (GLC) Overview and Update
Tranche
Plan Name
GLC1
GLC2
GLC3
GLC4
GLC5
GLC (Sep 2010)
GLC (Oct 2010)
GLC (Aug 2013)
GLC (Dec 2013)
GLC (Oct 2012)
Underlying Investment
CDO
CDO
CDO
CDO
CDO
S&P Rating of CDO (at inception)
AA-
AA-
AA
AA
AA
Policy Term (years)
Policy Commencement Date
5
30-Sep-05
5
31-Oct-05
7
31-Aug-06
7
31-Dec-06
5
31-Oct-07
Maturity Date
30-Sep-10
31-Oct-10
31-Aug-13
31-Dec-13
31-Oct-12
Annual Payout
Maturity Benefit
Sum Assured
3.50%
3.50%
4.90%
4.60%
100% of Initial Unit Price of $1.00 per unit held on maturity
Up to 110% of SP
Fund Manager
Swap Counterparty
Loss Protection Level (at inception)
4.00%
Lion Global Investors Ltd
Deutsche Bank
13.50%
Deutsche Bank
13.50%
Goldman Sachs
11.00%
Goldman Sachs
11.00%
Goldman Sachs
9.60%
S$111 m
S$98 m
S$123 m
S$76 m
S$186 m
NAV (30 June 09)
S$68 m
S$61 m
S$37 m
S$15 m
S$36 m
Unit Price (30 June 09)
$0.611
$0.609
$0.298
$0.192
$0.192
BBB-
BBB-
CCC-
CCC-
CCC-
3
3
2
2
1
10.5%
10.5%
9.8%
9.2%
4.0%
6
6
9
11
9
Estimated number of additional credit events
before capital is first affected*
11
11
Thereafter, estimated number of additional
credit events for Total Capital Loss*
3
3
15
15
Inforce Single Premium Invested
LATEST UPDATE (as of 30 June 2009)
Current Standard & Poor's rating
Total Number of Annual Payouts to-date
Total Annual Payouts to-date
Number of credit events that have occurred
Assuming Recovery rates for future Credit Events = 0%
3
n/a: Recovery rate is pre-fixed at 30%
4
AssumingRecovery rates for future Credit Events = 30%
Estimated number of additional credit events
before capital is first affected*
10
7
5
Thereafter, estimated number of additional
5
5
5
4
5
credit events for Total Capital Loss*
* The computation assumes an exposure of 0.83% for each reference entity. It is also based on assumed recovery rates for credit events that are still pending
settlement.
MEDIA RELEASE
For Immediate Release
Great Eastern Announces Net Profit of $97.7 Million in Q2-09
Singapore, 31 July 2009: Great Eastern Holdings Limited announces Profit Attributable to
Shareholders of $97.7 million for the second quarter of 2009, compared to $15.7 million in the
corresponding quarter in 2008. For the first half of 2009, the Group registered a profit of $334.7
million, against $60.7 million for H1-08.
Insurance Operations
Gross premium income in Q2-09 fell 37% year-on-year to $1,249 million, due to the sharp drop
in single premiums. In H1-09, the drop was 32% year-on-year to $2,425 million.
For life assurance operations, new sales measured on a weighted basis fell 30% from $201.4
million to $140.3 million in Q2-09.
The decline was mainly due to a 61% drop in the Singapore weighted new sales, a result that
was in line with market trends. Sales of single premium investment products registered a sharp
fall of 75%, reflecting the less-than-buoyant Singapore market environment for such products in
2009. Moreover, Q2-08 had benefited from a special limited offer of a single premium product.
Annual premium sales dropped 29% to $32.4 million. In view of present difficult environment,
the strategy is to focus on developing and promoting protection and long-term savings
products.
Malaysia has a lower proportion of single premium sales and therefore was less affected by the
difficult investment market conditions. It enjoyed strong growth of 53% in Q2-09, with brisk
sales of a new annual premium product.
In China, the business operations continued with strong growth in Q2-09, with new business
weighted premium sales increasing almost four-fold year-on-year, albeit from a small base. The
growth was driven largely by a significant increase in the number of agents from under 500 a
year ago to 2,100 as at end June 2009.
Profit from Insurance Operations
The H1-09 profit of $408.9 million (H1-08: $48.3 million) included $213.1 million non-recurring
profit contribution that was reported earlier in Q1-09 and a small loss of $2.7 million in Q2-09.
Both these non-recurring contributions reflected the move to the new risk based regulatory
capital framework in Malaysia and the exercise to achieve portfolio matching of assets and
liabilities in Singapore.
Page 1 of 3
Excluding the non-recurring profit from the quarterly results, life and general insurance
operations performed strongly with profit of $134.0 million in Q2-09 (compared with $33.9
million in Q2-08).
The strong performance in Q2-09 can be mainly attributed to the Non Participating Fund. In
Singapore, the Non Participating Fund benefited from a rebound of major stock market indices
and the tightening of credit spreads for its fixed income portfolio. These gains more than offset
marked to market losses from rising interest rates on Singapore government securities and
swaps. In Malaysia, assets were also affected by rising interest rates but there was a
compensating decrease in actuarial reserves. Overall, the Non Participating Fund achieved a
profit of $76.9 million in Q2-09.
Profit from Investments
Q2-09 profit from investments in the Shareholders’ Fund rose to $43.7 million (Q2-08: $2.0
million) as a result of realised profits from the sale of equities and also marked to market gains
on investments resulting from improving market conditions. H1-09 profit of $49.9 million was
lower than last year as H1-08 had included a one-off gain of $42.2 million from the sale of
shares in The Straits Trading Company Ltd.
Fees and Other Income
Fees and other income declined 27% year-on-year to $14.9 million in Q2-09 as a result of a
decrease in assets under management ($25.9 billion on 30 June 2009 compared to $32.8
billion on 30 June 2008). In H1-09, fees and other income was 31% lower at $29.5 million
compared to H1-08.
Management and Other Expenses
Management and other expenses increased in Q2-09 to $39.9 million (Q2-08: $23.6 million)
reflecting ongoing expenditure to develop insurance operations in the new markets. For H1-09,
expenses rose 18% to $57.2 million (H1-08: $48.3 million).
Total Assets
The Group’s total assets as at 30 Jun 2009 amounted to $45.3 billion, a 3% increase over
$44.2 billion as at 31 Dec 2008. Net asset value per share was $7.06, about 11% higher than
31 Dec 2008’s value of $6.36.
Key Development
Great Eastern has announced today that it is making a one-time redemption offer to its
GreatLink Choice policyholders.
GreatLink Choice (“GLC”) is a series of investment-linked products with underlying investments
in CDO (collateralised debt obligations) instruments. The products were designed with built-in
loss protection levels and wide diversification across various industries and geographical
regions. However, the global financial crisis has badly affected many financial instruments. The
Page 2 of 3
market values of the GLC products are at steep discounts to par due to several credit events
that have effectively eroded the loss protection cushion.
Under the offer, Great Eastern will redeem 594 million GLC units at $1.00 each, less the total
annual payouts received to-date. The offer will be open for acceptance from 3 August to 28
August 2009. Great Eastern will take delivery of the underlying CDO instruments and will
account for the fair value of these instruments at the close of the offer period. The financial
impact of the offer will be reflected in the Q3-09 financial results and is conservatively estimated
to be in the region of $250 million.
Mr Ng Keng Hooi, Group CEO said: “We are comfortable with these products as they were
designed with built-in loss protection levels and diversification amongst at least 115 reference
entities, spread across various industries and geographical regions. However, the global
financial crisis has created much uncertainty for many investors all over the world. Market
sentiments have been severely impacted and many financial instruments have been badly
affected by the crisis.
“To address GLC policyholders’ concerns in these extraordinary times, we have taken a
decision to make this one-time offer, as a gesture of goodwill, to redeem these products. Our
offer is voluntary, and is made without any admission of liability. Further, this offer applies to
GLC products only. It will not apply to any other Great Eastern products. Other than GLC
products, Great Eastern did not sell any other similar structured products to its policyholders.”
Outlook for the Year
Although credit and equity markets have strengthened in Q2-09, economic recovery is
expected to be slow. Investment risks may continue to affect the Group’s future earnings.
-----About Great Eastern
Great Eastern is the most established and largest life insurance group in Singapore and Malaysia. With
$45 billion in assets and 3.8 million policyholders, it has two successful distribution channels - the tied
agency force and bancassurance. The Company also operates in China, Indonesia, Vietnam and Brunei.
Great Eastern is a subsidiary of OCBC Bank, Singapore’s longest established local bank with assets of
$181 billion and a network of more than 480 branches and representative offices in 15 countries and
territories. Great Eastern’s subsidiary, Lion Global Investors, is one of the largest asset management
companies in Southeast Asia.
For more information, please contact
Tony Cheong, Group Chief Financial Officer
Tel: 6248 2317 or email: TonyCheongJK@lifeisgreat.com.sg
or
Boon-Gek Mudeliar, Head (Corporate Communications)
Tel: 6248 2215 or email: Boon-GekMudeliar@lifeisgreat.com.sg
Page 3 of 3