A GROUP of minority shareholders of Great Eastern Holdings : G07 0% (GEH) have proposed three resolutions to be tabled at the insurance provider&rsquo s upcoming annual general meeting (AGM), in an attempt to &ldquo protect and preserve&rdquo shareholder value.

 

The resolutions are calls to withhold directors&rsquo fees, to change the share option schemes of employees, and to appoint an independent financial advisor (IFA).

 

According to a letter seen by The Business Times on Friday (Mar 1), a group of close to 80 shareholders have raised concerns over GEH&rsquo s depressed share price and continued valuation decline over the last decade, despite its &ldquo strong financial position&rdquo .

 

The shareholders are led by independent investor Ong Chin Woo, who noted that most of the group are long-term shareholders of GEH.

 

At the market close on Friday, shares of GEH &ndash which is majority owned by OCBC : O39 +0.08%&ndash were flat at S$17.85.

 

This represents a discount of 51.2 per cent from its embedded value per share of S$36.59 for the full year ended 2023.

 

In an interview with BT, Ong said: &ldquo These are reasonable resolutions. First, I want to align everybody &ndash the board, the executives, the shareholders. With that, we can then talk about unlocking value, such that everyone will benefit.&rdquo

 

He said he has raised these investors&rsquo concerns to GEH&rsquo s board several times.

 

He first sent questions to GEH in 2020, when a physical AGM was not held due to the Covid-19 pandemic. In 2022, he represented minority shareholders and sent a letter to GEH&rsquo s board, urging it to &ldquo do a better job in pursuing tangible actions&rdquo .

 

In 2023, the group of shareholders raised similar questions at GEH&rsquo s and OCBC&rsquo s respective AGMs.

 

In the latest letter, Ong and the shareholders are hoping GEH&rsquo s board will table the three ordinary resolutions at its upcoming AGM.

 

In the first resolution, he is proposing to withhold 30 per cent of the board of directors&rsquo fees until GEH&rsquo s share price recovers to 0.8 times its embedded value.

 

Surveying the counter&rsquo s price-to-embedded-value ratio between December 2011 and December 2022, Ong noted that GEH has historically traded at around 0.8 times its embedded value.

 

The valuations, however, have slid 38.8 per cent over the period.

 

He expects that withholding part of the director fees will help the directors to &ldquo better appreciate the situation faced by GEH shareholders&rdquo .

 

In the second resolution, he is proposing to replace OCBC shares in GEH&rsquo s current executive share option schemes with GEH shares.

 

While it is not uncommon for employees in subsidiary companies to receive shares of parent companies as part of their remuneration package, Ong noted that GEH is a listed company with its own minority shareholders.

 

Replacing OCBC shares with GEH shares will likely better align GEH employees&rsquo interest with that of GEH shareholders, he said.

 

This should also provide additional assurance to GEH minority shareholders in situations where potential conflicts of interest exist between OCBC and GEH, he added.

 

In the third resolution, Ong hopes to appoint an IFA to explore options to enhance shareholders&rsquo value.

 

He noted that there are experienced IFAs that can help enhance shareholder value in a timely and orderly manner.

 

These measures include increasing normal dividend payouts, paying special dividends, or exploring listing possibilities in markets that offer higher, fairer and more reasonable valuations.

 

&ldquo I totally agree that (the management and directors) cannot be 100 per cent influencing the share price, but we all know that there are tried-and-tested methods to raise value, so get the IFAs to come in,&rdquo Ong said.

 

During a media briefing on Feb 26 for the insurer&rsquo s Q4 results, GEH group chief executive Khor Hock Seng said the management focuses on &ldquo what is important&rdquo &ndash which is to grow new business embedded value (NBEV), profit from insurance business and overall profit.

 

&ldquo For the share price and so on, we will leave it to the market,&rdquo he said, in response to questions on what the management is doing to narrow the discount between its embedded value per share and its trading price.

 

Ong said GEH&rsquo s low liquidity is a long-standing, but widely understood, issue among shareholders. But its valuations were acceptable and tracked OCBC&rsquo s ups and downs.

 

He noted that GEH&rsquo s valuations started to decline around 2017 and 2018 alongside OCBC&rsquo s, but while OCBC&rsquo s valuations eventually recovered, GEH&rsquo s continued to fall.

 

&ldquo This is ridiculous. If it was just the share price, we would not have said anything, but when the valuations also declined, I think the company can do more,&rdquo Ong said.

 

But the minority shareholders have a hurdle to face.

 

For shareholders to propose resolutions at AGMs, they have to either represent at least 5 per cent of the total voting rights, or have not less than 100 shareholders with a paid-up average sum of not less than S$500.

 

Ong said the group of around 80 shareholders likely hold less than 5 per cent of GEH shares.

 

This is in part due to OCBC&rsquo s tight hold on GEH. As at Jun 19, 2023, the lender held 88.4 per cent &ndash or 418.4 million &ndash of GEH shares.

 

While Ong does not want to speculate on GEH&rsquo s and OCBC&rsquo s response, he hopes that they will take action in the spirit of good corporate governance, given that this will be a win-win situation for all shareholders.

 

He noted that OCBC had mentioned in its 2023 AGM minutes that it was aligned with minority shareholders of GEH.

 

&ldquo I will be curious of their reasons if they don&rsquo t (support our proposal),&rdquo Ong said.

 

&ldquo It will be disappointing if they plainly exercise their legal rights, which they are totally entitled to.&rdquo

 

Responding to BT&rsquo s request for comment, a GEH spokesperson noted that there are statutory requirements that need to be met before shareholders can requisition any resolutions to be tabled at an AGM.

 

&ldquo We will look into whether the requirements have been satisfied,&rdquo the spokesperson said.

 

&ldquo Notwithstanding, we always welcome constructive suggestions from shareholders to improve group performance as well as improve market recognition of GEH&rsquo s share value. GEH&rsquo s management will consider the matters raised in the letter it received.&rdquo

 

BT has reached out to OCBC for comments.

Great Eastern Holdings, a member of the OCBC Group, has reported earnings of $774.6 million for FY2023 ended December, up 27% y-o-y.

 

This is driven by favourable investment performance in its Singapore life business and shareholders fund. The profitability of its insurance business is healthy, though dampened by higher medical claims.

 

The group&rsquo s FY2023 total weighted new sales (TWNS) for the FY2023 decreased 12% against the previous year, reflecting lower single premium sales in the Singapore market. The inverted Singapore dollar yield curve has made shorter-term interest yielding investments more appealing than single premium products to some customers.

 

The lower sales in single premium products were partially offset by growth in regular premium sales, particularly in protection and whole life plans through the group&rsquo s core distribution channels. On the back of lower sales, Great Eastern&rsquo s FY2023 new business embedded value (NBEV) fell by 11% y-o-y.

 

The board has recommended a final one-tier tax exempt dividend of 40 cents per ordinary share, payable on May 17.

 

Including the interim one-tier tax exempt dividend of 35 cents per ordinary share paid in August 2023, the total dividend for FY2023 would amount to 75 cents per ordinary share. 

 

Although the operating climate remained challenging in 2023, the group stayed focused on its core strategies of improving customer experience and developing new products to meet the evolving wealth and protection needs of our customers across the region, says group CEO Khor Hock Seng. 

 

&ldquo Moving ahead, we will continue to look at innovative ways to enhance our service level and enrich customer experience through digitalisation and analytics. We have built a strong foundation which positions us well to continue to serve our customers, and deliver profitable growth and long-term sustainable value to our shareholders,&rdquo he adds.