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SINGAPORE: Insurance company Great Eastern, a subsidiary of OCBC Bank, has offered to buy back its GreatLink Choice products from 18,000 policyholders.
The affected policy is a series of structured products and the offer will open from Monday.
The move can potentially cost the company S$594 million.
Observers said the move by Great Eastern has injected confidence at a time where trust in financial institutions has been eroded.
Under the redemption offer, policyholders of the affected products will receive the money they have invested, minus the total annual payouts they have received so far. This means they will recover almost all their invested capital.
David Gerald, president and CEO, Securities Investors Association Singapore, said: "This has happened for the first time. Whether or not other financial institutions dealing with similar or different products, which carry similar risk, will do that is yet to be seen. We hope that this will be a lesson for other institutions, how to manage your clients, and how to help in difficult times."
Great Eastern said annual payouts have been made under the GreatLink Choice products as projected. But the market values of these products have plunged due to credit events and the global financial crisis.
Great Eastern said the impact of the offer will be reflected in the third quarter financial results and it is estimated to be around S$250 million. This is lower than the redemption value of S$594 million because the company said some policyholders may not accept the offer, especially those with policies maturing next year.
Observers said the move will be watched with interest by investors of failed structured notes. But it may not advance their case.
Gerald said: “It will excite the minds of those who have lost money in minibonds and high notes. I would say that it is very difficult for them to draw a parallel. This is a different situation, different reasons why the insurance company is doing this."
The Monetary Authority of Singapore said it welcomes efforts by financial institutions to take appropriate steps to maintain the trust and confidence of their customers based on their own commercial considerations.
- CNA/yt
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