GE to return $250mI applaud Great Eastern Life for taking this unprecedented move in contrast with other financial institutions. Bear in mind though that the GreatLink Choice has not defaulted yet as mentioned by Lioninvestor so GE would still have to refund the premiums at the end of maturity if it does not run into default down the road. Overall, it is a win-win situation since the investors can get back their funds while the reputation of GE has been enhanced tremendously by this move that they have taken. You can check out the official media press release by GE at here.
Surprise move related to investment-linked products sold to 18,000
By Lorna Tan, Senior Correspondent(Taken from the Straits Times on 1st August 2009)IN A stunning development, about 18,000 Great Eastern Life customers who bought investment products similar to the ill-fated Lehman Minibonds will get all of their money back. And they did not have to ask for it. The move by GE Life, which will cost the insurer a whopping $250 million, is purely voluntary.
The products in question are called GreatLink Choice (GLC) - a series of single-premium investment-linked insurance products sold in five tranches between 2005 and 2007, netting $594 million in investments.
Like Lehman Minibonds, GLC was linked to a class of complex financial instruments whose value has been badly hit by diving financial markets. So despite diversifying the risk and building in various loss-protection features, the values of the GLC plans have plummeted between 40 and 80 per cent.
'Great Eastern understands that these steep discounts have given rise to concerns among GLC policyholders,' group chief executive Ng Keng Hooi said in a statement on Friday.
'To address GLC policyholders' concerns in these extraordinary times, we have taken a decision to make this one-time offer, as a gesture of goodwill, to redeem these products. Our offer is voluntary, and is made without any admission of liability.'
The GLC plans, available for a minimum investment of $5,000, had aimed to provide investors with fixed annual payouts ranging from 3.5 to 4.9 per cent. They also aimed to return to investors their principal on maturity, though both the annual payouts and principal repayment on maturity were not guaranteed.
The plans came with a five- or seven-year maturity period and the first tranche would have matured in September next year. But policyholders can now opt, anytime from Monday to Aug 28, to redeem their investments and receive a sum equal to their original investment, less total payouts received to date.
The unprecedented move comes three weeks after a lengthy investigation by the Monetary Authority of Singapore (MAS) into the selling of similar structured products in the banking and securities sectors.
About 9,900 people lost most or all of their investments totalling about $520 million in structured products such as Lehman Minibonds and DBS Hi Notes 5. Ten financial institutions were penalised, and 3,900 investors received a total of $107 million as compensation.
GE's surprise offer on Friday to redeem up to $250 million is more than twice that amount, and that immediately drew high praise from consumer advocates such as the Securities Investors Association of Singapore (Sias).
Sunday, August 2
GE to return $250m
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Sunday, August 02, 2009
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GE with OCBC has done a great job and truly lived up to her slogan "life is great". She has shown many other giant financial instituitions (including the people's bank) about customer care over protection of own self interest by hiding behind some finely printed contract clauses.
ReplyDeleteShame on the banks who chose to "conveniently" forget that many of their customers will lose their life savings and never make it back.The banks know they will have future opportunities to make back the losses but what about the common folks. In the first place, banks shouldn't sell such risky products.
Hi,
ReplyDeleteI agree with you. To add on, GE is an insurance company which make profits for its shareholders. Unlike banks, people tend to stick to one insurance company. By offering to refund the premiums, GE has gained a tremendous amount of goodwill that can result in an greater loyalty among its current policyholders and attract more new clients.
Banks are not our friends. They are for profits similarly. Either the products offered by banks need to be regulated or the public will need to be educated in taking a cautious approach towards such products.
Kay