Great Eastern Holding

[weijian]

Thanks Big Toe and ghchua for the quick response. You have given me much food for further thought.

I have to clarify the "simple" in my earlier statement "Would GE be a simple low risk "value" bet for rising interest rates" - It is obviously not simple. It may be an easy bet but it is not simple.

Insurance firms are anything but simple to analyze. Most of its (actuarial) decisions are not obvious to the average joe and has a long tail. But on the other hand, if things are obvious, then the Market is much more efficient...

[weijian]

Great Eastern has a roughly 60-40% portfolio (60% - fixed income/debt, 40% - equities/funds/REITs), if we were to exclude the ~2% investment properties portfolio for a moment.

My personal policies have had the assumed returns and bonus yields consistently reduced in the low interest rate environment for the last decade. With interesting rates rising, my agent has suggested that there will be better yields coming!

Would that be actually a tail wind for GE and its business (better yields --> more attractive returns for customers --> more sticky policies written). Would GE be a simple low risk "value" bet for rising interest rates?

To date, Great Eastern seems to be a net loser (just like many others who are borrowing short term and lending it long for the spread) due to the rapid rise in interest rates.

There has been a big write-down in FY22 to reflect that and Mr Market seems to be very pessimistic about its prospects. Most of the losses are unrealized mark to market losses. Unlike banks who have short term liabilities and long term assets, an insurer like GE has long term assets and long term liabilities. But in the short term, it has to suffer from an accounting perspective, before the tailwind of higher rates actually improves its financial performance.

In summary, does a rise in interest rates bring short term pain but long term gain for a life insurer? But of course, unless we have a good idea on the books (which the OPMI doesn't have), no one really knows how to define the short term and long term here.

[weijian]

item12 is a Q&A on OCBC and GEH. Interesting that the parent is alluding to an future increase in dividend payout ratio?

MoM of OCBC AGM 2022

https://links.sgx.com/FileOpen/OCBC-Minu...eID=759938

[weijian]

A 39mil married deal (avg 16.99sgd per share) raising parent OCBC's rate from 87.908% to 88.404%. Depressed OPMIs slowly giving up?

https://links.sgx.com/FileOpen/_GEH_FORM...eID=762864

[weijian]

I don't really agree with Ben Paul's assertion that GE has great potential because parent OCBC has alluded that GE may be increasing its dividend payout ratio. But I believe GE has potential for when the inverted yield curve finally un-inverts.

The odds are really low that OCBC will privatize GE as it doesn't need to. No outsider will bid for GE. Even if OCBC is flush with cash, they may prefer to expand their existing franchises in other SEA countries. But you never know as the BOD at OCBC has a new chairman and the CEO has just been appointed to the BOD!

BT Mark to Market: Great Eastern’s great potential (Ep 33)

OCBC’s recent purchase of more Great Eastern shares has further narrowed the insurer’s public spread and increased the risk of it eventually being suspended from trading. But Great Eastern undervalued shares still hold great potential. Senior correspondent Ben Paul explains.

https://www.businesstimes.com.sg/podcast...tial-ep-33