TEXT-S&P summary: The Great Eastern Life Assurance Co. Ltd.

(The following statement was released by the rating agency)

Dec 06 -

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Summary analysis -- The Great Eastern Life Assurance Co. Ltd. ----- 06-Dec-2012

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CREDIT RATING: Country: Singapore

Local currency AA-/Stable/--

Primary SIC: Life insurance

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Credit Rating History:

Local currency Foreign currency

26-Dec-2010 AA-/-- --/--

19-Mar-2002 NR/-- --/--

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Rationale

The ratings on Great Eastern Life Assurance Co. Ltd. (GEL) reflect the insurer's very strong

business position in the Singapore and Malaysia life insurance markets and its robust financial

profile, with strong risk-based capitalization, strong risk controls, and a supportive risk

management framework. GEL's sensitivity to the equity market and interest rate movements

moderates the above strengths.

We view GEL as a core entity for Great Eastern Holdings Ltd. (GEH; not rated).

Oversea-Chinese Banking Corp. Ltd. (OCBC: AA-/Stable/A-1+; axAAA/axA-1+) owns 87% of

GEH. We assess the group credit profile of GEH on an insulated basis, based on our group

methodology criteria for bank groups. The insulated approach reflects GEH's separate listing

from OCBC, which gives the insurance group strong financial flexibility and operational

independence.

Factors supporting our insulated rating approach include the group's significant minority

shareholding (13% is not owned by OCBC) and board structure (seven out of the 10 board members

are independent directors). The rating approach reflects our belief that the insurance group's

financial strength will be protected in the event of financial stress at OCBC, considering that

Singapore has separate regulatory frameworks for banking and insurance.

GEL and its subsidiary, Great Eastern Life Assurance (Malaysia) Bhd. (not rated), are

dominant insurers in Singapore and Malaysia. The insurers' diversified distribution channels

include tied agency networks, a bancassurance arrangement with OCBC, and financial advisors.

GEL's tie-up with OCBC in Singapore has benefited the company's business growth. GEL's strong

agency base and robust bancassurance partnership, which are supplemented by potential strong

growth in the Takaful operations, support its competitive position in Malaysia. While GEL's

presence outside Singapore and Malaysia remains small, we expect its regional expansion strategy

to gradually contribute to its financial profile.

We consider the company's operating performance as adequate, although it has fluctuated

somewhat in recent years due to volatile investment markets and interest rates. GEL's

year-to-date performance as of Sept. 30, 2012, benefited from marked-to-market gains and capital

gains on asset sales. However, strong competition in Malaysia has caused slower business growth.

We expect the insurer to maintain its underwriting discipline and continue to use derivatives to

manage earnings volatility.

GEH has participating, nonparticipating, and investment-linked funds, together with general

insurance and a shareholder fund. We view the capital in the participating fund as ring-fenced.

In our analysis of the insurer's financial profile, we determine the potential shareholder

exposure to the participating fund at each rating level, but exclude any surplus capital in the

participating fund in our measure of available capital to meet shareholder risk charges.

GEL's capitalization is strong on a consolidated basis, according to our capital analysis.

The group's prudent reserving and pricing practices support the company's capitalization. GEH's

ratio of shareholders' fund to total assets was 7.1% in 2011 (2010: 7.6%).

GEL has exhibited some sensitivity to equity market volatility and interest rate movements.

Similar to other insurers operating in Singapore, GEL is required to hold extra regulatory

capital for asset liability mismatches. Decreases in interest rates over the past few years,

coupled with the limited availability of long-dated financial assets, have contributed to

increased capital requirements.

GEL's level of equity investments (about 27% of invested assets) is somewhat higher than

that of peers and reflects the insurance group's significant participating insurance portfolio.

We consider GEL's investment performance to be subject to some inherent market volatility.

Overall, GEL's investment quality is good, with more than 67% of its invested assets in

high-rated bonds.

Enterprise risk management

GEL's enterprise risk management (ERM) is adequate, in our view, with strong risk controls.

Given GEH's evolving but strengthening ERM framework, the insurer's operating performance has

appeared less volatile than peers' in recent years. The strong management culture, ability to

articulate its risk appetite, and strong risk analytics also provide a solid foundation to GEH's

future ERM initiatives.

The insurer's risk culture is strong, with a sound governance structure and entrenched

discipline. We consider its risk controls to manage insurance and investment risks, and ability

to observe multiple risk interactions to be adequate. We view GEH's management of its operations

through optimizing risk-adjusted returns to be still developing. We expect its evolving

strategic risk management framework to strengthen over time, focusing on capital allocation

among products and businesses.

Outlook

The stable outlook on GEL reflects our expectation that the company's financial profile will

remain strong. GEL's very strong competitive position in Singapore and Malaysia and strong risk

management control will support its financial profile.

We may lower the ratings if the insurer's capitalization is weakened to a level not

commensurate with the current rating due to volatile investment or credit markets. We may raise

the ratings if GEL's financial profile remains very strong while its operations in emerging

markets continue to grow profitably with good scale in local markets.

Related Criteria And Research

-- Group Rating Methodology and Assumptions, Nov. 9, 2011

-- Refined Methodology And Assumptions for Analyzing Insurer Capital Adequacy Using The

Risk-Based Insurance Capital Model, June 7, 2010

-- Interactive Ratings Methodology, April 22, 2009

-- Group Methodology, April 22, 2009

-- Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008

-- Summary Of Standard & Poor's Enterprise Risk Management Evaluation Process For Insurers,

Nov. 26, 2007

Source: http://news.yahoo.com/text-p-summary-great-eastern-life-assurance-co-093850914--sector.html

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