SINGAPORE - Insurer Great Eastern Holdings (GEH)’s group chief executive officer (CEO) and other senior executives have long been rewarded with shares of holding company OCBC Bank because this “helps to foster a One OCBC Group spirit”.
The counter’s low liquidity made GEH share purchases “difficult to execute” with the cost of purchase “less certain” and “liquidity would be further affected,” said GEH in written responses on April 20 to shareholders’ questions before its annual general meeting on April 25.
The company’s free float was about 11.6 per cent as at March 5, said GEH.
The CEO and those who directly report to him, key personnel at business units and senior control staff – deemed to have a major influence on the long-term performance of the insurer – are subject to a deferral of 40 per cent of their annual bonuses if their bonuses exceed $100,000.
The CEO had $1.4 million or nearly 30 per cent worth of his $4.7 million pay package rewarded in OCBC shares in 2023.
“As the amount of performance bonus is determined solely based on GEH’s performance and not OCBC’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,” GEH responded.
“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.”
Rewarding GEH’s senior executives with holding company OCBC shares and not shares of the insurer has been in focus lately.
On GEH’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’s typical single premium products.
It, however, declined to comment on the performance of AIA, when shareholders compared its performance against the competitor’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 “substantially lower” interest of 0.7 per cent it earned prompted a query about the need to hold more than $700 million of “idle cash” and whether the funds could get higher yield.
GEH had $6.3 billion in cash as at end-2023, $786.4 million of which were with OCBC Bank group.
“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,” said GEH.
As GEH needs to fulfil obligations promptly and the monthly outflow for these operational purposes averages around $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.
The counter was 0.2 per cent down at $18.24 on April 19 when the market closed. THE BUSINESS TIMES
