Whether the banks refund from their profits or
from shareholders' fund, it is only right that they should
make amends for their mistaken approach in selling "toxic bonds" to
unsuspecting investors - who largely depended on their professional
advise.
It is the fiduciary responsibility of the management of the
various financial institutions to exercise due diligence in vetting
their products prior to their decision to market the same to boost
their own profit performance.
As matters stand, in a news report on 1 August 2009, GE Life had
made a voluntary refund to about 18,000 of their customers who
invested in the "toxic bonds", and in a follow-up ST news
report on 4 August 2009 - GE Life is asking their agents to make a
refund of the commission that was paid out since four years
ago.
When the total commission to be collected from the various GE
Life agents will amount to approximately $12 Million - do we need
to imagine how much more is gained by GE Life ?
While normal humans slave for a monthly fixed wage, financial
institutions make their money by "making the money work for
them".
Financial Institutions have their unique ways of making money
work that will result in profit growing in geometrical
proportions from the hoard of money that they collect through
various programs - saving accounts, fixed deposits, investment
programs, and dual-benefit or multiple benefits programs.
Cash collected do not simply sit in the vaults and earn
interests from tagging on or piggy back ride on programs offered by
other financial institutions.
Instead, the money do not even move across borders,
while electronic transactions fly across the wire as trades
are conducted electronically, and margins are earned by the minute
in a 24 Hour day through all the time zones.
The rise and fall in the fortunes of the
various financial institutions depend very much on the
rarefied atmosphere in which these Money Managers work, and in
an exclusively unique environment that is open to a very
select few around the globe.
This is evident from the sudden report that Goldman Sachs makes surprise profit of US$1.66
Billion for first three months of 2009 - when they were
reported in late 2008 to need US Government bailout.
Great Eastern Life to
Refund Greatlink Choice Investors
In a surprise move yesterday, Great Eastern Life (GE) made a
voluntarily offer to do an early redemption of their Greatlink
Choice (GLC) products from 18,000 of its investors.
The Greatlink Choice products were sold in five tranches between
2005 and 2007, collecting $594 million in premiums. It was marketed
as a safe kind of investment with an annual payout of between 3.5%
to 4.9% of the capital invested.
It is a similar class of product to the Minibond, DBS High Notes
and some of the Pinnacle notes which have been widely sold to other
investors. While none of the Greatlink Choice has defaulted yet,
their current market valuation ranged from 19% to 61% of the
original capital.
Owners of the Greatlink Choice products will now have an option
to opt for a full redemption of their Greatlink Choice investment
at their original capital less the total payouts they have received
to date. This option will be available to them from now till 28th
Aug 2009.
GLC policyholders will receive a notice from Great Eastern on
the procedure for acceptance of this offer. GLC policyholders who
have questions on the offer may also call Great Eastern’s Customer
Service Officers at 1800-248-2888 or contact their personal GE life
planners.
I applaud this move by GE as it gives investors of the Greatlink
Choice products an early exit option. I am sure many of these
investors who thought Greatlink Choice was a safe product would
have been having sleepless nights seeing the value of their
investments plummet. This is especially so for the Greatlink Choice
products which are maturing in 2012/2013 and have a higher risk of
default.
From the perspective of GE, I am sure this helps to generate
tremendous market goodwill. And while they will have to spend $250
million making this early redemption, if you think about it, this
$250 million is not exactly a loss at all.
Remember that none of the Greatlink Choice has defaulted yet and
if it stays the same way, GE would have to refund 100% of the
premiums at maturity back to investors anyway. And in giving this
early payout, they would be redeeming at less than 100% of the
capital as it is net of total payouts received.
Of course, if there is a default subsequently, then GE would
have to bear the loss themselves.
Overall, I think this move is a win-win for both GE and their
GLC customers.
I am sure investors of Prudential’s Pru
3Plus and Yield 15/20
will be casting an anxious look at Prudential and see whether they
will offer something similar.
http://www.lioninvestor.com/great-eastern-life-to-refund-greatlink-choice-investors/