It notes that low liquidity makes GEH share purchases &lsquo difficult to execute&rsquo with the cost of purchase &lsquo less certain&rsquo and &lsquo liquidity would be further affected&rsquo

 

INSURER Great Eastern Holdings (GEH) : G07 0%&rsquo s group chief executive officer (CEO) and other senior executives have long been rewarded with shares of holding company OCBC Bank : O39 0% because this &ldquo helps to foster a One OCBC Group spirit&rdquo .

 

The counter&rsquo s low liquidity made GEH share purchases &ldquo difficult to execute&rdquo with the cost of purchase &ldquo less certain&rdquo and &ldquo liquidity would be further affected&rdquo , said GEH in written responses on Saturday (Apr 20) to shareholders&rsquo questions before its annual general meeting on Apr 25.

 

The company&rsquo s free float was about 11.6 per cent as at Mar 5, said GEH.

 

The CEO and those who directly report to him, key personnel at business units and senior control staff &ndash deemed to have a major influence on the long-term performance of the insurer &ndash are subject to a deferral of 40 per cent of their annual bonuses if their bonuses exceed S$100,000. 

 

The CEO had S$1.4 million or nearly 30 per cent worth of his S$4.7 million pay package rewarded in OCBC shares in 2023.

 

&ldquo As the amount of performance bonus is determined solely based on GEH&rsquo s performance and not OCBC&rsquo s performance, there is no reason for any employee not to want to see good performance in GEH. Therefore, we do not see any potential conflict in using OCBC shares for the deferred portion of the bonus,&rdquo GEH responded.

&ldquo The 40 per cent deferred portions in OCBC shares provide further incentives for the employees to continue improving GEH performance so as to contribute to OCBC share value.&rdquo

 

Rewarding GEH&rsquo s senior executives with holding company OCBC shares and not shares of the insurer has been in focus lately, after a group of minority shareholders asked to table three resolutions at GEH&rsquo s upcoming AGM.

 

On GEH&rsquo s 21 per cent decline in the New Business Embedded Value for the Singapore market in 2023, the insurer attributed the dip mainly to the lower single premium sales as the inverted Singapore dollar yield curve has made shorter-term interest yielding investments more appealing than the insurer&rsquo s typical single premium products.

 

It, however, declined to comment on the performance of AIA, when shareholders compared its performance against the competitor&rsquo s 10 per cent increase in value of new business for the Singapore market over 2023.

 

The cash and cash equivalents GEH had and the &ldquo substantially lower&rdquo interest of 0.7 per cent it earned prompted a query about the need to hold more than S$700 million of &ldquo idle cash&rdquo and whether the funds could get higher yield.

 

GEH had S$6.3 billion in cash as at end-2023, $786.4 million of which were with OCBC Bank group.

 

&ldquo The cash and cash equivalents held with the holding company are cash balances maintained mainly for operational purposes, supporting daily operations such as insurance claims and benefits settlements, expense payments and other operational costs,&rdquo said GEH.

 

As GEH needs to fulfil obligations promptly and the monthly outflow for these operational purposes averages around S$1 billion, ample liquidity is thus necessary.

 

The cash thus is primarily held in bank current accounts or shorter-term deposits where interest rates are lower.