Insurance arm Great Eastern makes OCBC unique among its peers, bank’s chairman says

SINGAPORE - OCBC Bank chairman Andrew Lee has defended a takeover offer for Great Eastern (GE), saying the insurer gives the bank an added advantage over its peers.

“The board has looked at all (the options) and remains convinced that our strategy on GE is the right strategy,” he said at OCBC’s 2024 annual general meeting (AGM) on April 17.

“We are not blinking.”

OCBC in May 2024 launched

a $1.4 billion bid to privatise GE

by acquiring the remaining 11.56 per cent stake it did not own at $25.60 per share.

However, the bank’s accumulated stake by the end of the offer in July 2024, at 93.7 per cent, was insufficient for it to compulsorily acquire the rest of GE’s shares, causing GE to lose its required 10 per cent minimum free float and resulting in the trading suspension of GE’s shares.

OCBC has since stated that it plans to seek GE’s delisting from the Singapore Exchange if the public float requirement is not met by May 25, the deadline given by the exchange. It also does not intend to take any action to keep GE listed if that requirement is not fulfilled.

Addressing questions from shareholders at the AGM, including why the bank is raising its stake in GE and whether it is paying the right price for the insurer, Mr Lee stressed that OCBC “is not a pure-play bank” like DBS and UOB.

He cited OCBC’s diversified business model, which includes insurance, asset and wealth management, and two banking licences – commercial banking and private banking – under one financial group.

“Today, we are an integrated financial services group consisting of OCBC, Bank of Singapore and GE. We are the biggest wealth management player in town,” he said.

That structure has enabled OCBC to amass over US$300 billion (S$394 billion) in assets under management (AUM), with GE, which is the top insurer in both Singapore and Malaysia with over 16 million customers, contributing more than US$100 billion in AUM, he noted.

Mr Lee added that GE’s earnings contribution to OCBC has also grown, rising from 9 per cent in 2023 to 12 per cent in 2024, when the insurer locked in a net profit of just under $1 billion.

With OCBC now owning 93.7 per cent of GE, the lion’s share of GE’s earnings directly benefits OCBC shareholders.

“That is no small sum,” said Mr Lee, adding that continuing to increase OCBC’s ownership in GE will enable the group to further strengthen its financial performance.

Addressing concerns about whether OCBC should focus on growing its core banking business rather than expanding into insurance, which has a different risk and regulatory profile, Mr Lee noted that globally, there are 43 financial institutions that own insurance companies.

“Leading banks own insurance companies. This is the integrated financial services model, which is the leverage we have over pure-play banking groups.”

He said that by doubling down on the strategy to directly benefit from GE, OCBC also eliminates the need for unnecessary risk management.

“We know the animal. We have been associated with them for the last three decades,” he said, referring to OCBC’s controlling stake in GE.

“Saying that OCBC does not know about the insurance business is a fallacy. We know it well.”

Mr Lee also addressed concerns surrounding OCBC’s $25.60 per share offer price for the remainder of GE’s shares, and calls from the insurer’s minority shareholders for the bank to raise its offer for the insurer, given that it is below GE’s embedded value of $36.59 as at Dec 31, 2023.

“We are not a small business where we can raise prices as we like,” he said, adding that OCBC had relied on independent financial advice from JP Morgan Securities Asia, one of the world’s top investment banks, to determine the fair price of $25.60 per share.

“We paid millions for that advice,” Mr Lee said, adding that the board has exercised its fiduciary duty in keeping strictly to the advice.

As board members of GE, both Mr Lee and OCBC chief executive Helen Wong are recused from discussions on the matter and have no influence over decisions taken by GE’s independent directors.

“We don’t know what is being discussed in GE, and we have no ability to influence how the independent directors of GE decide the future course,” Mr Lee said.

He added that GE, which remains under trading suspension, has appointed Merrill Lynch as its financial adviser to evaluate its options and next steps. “We will wait for that advice,” he said.

Whatever the outcome, “we’re doubling down on what we do best”, Mr Lee said, naming wealth management, GE’s insurance business, and regional growth in Indonesia as core priorities for growth.