Callable notes to enhance Great Eastern Life’s financial resilience

S&P Global sees the proposed notes as having intermediate equity content.

Great Eastern Life’s (GEL) proposed issue of the Singapore dollar-denominated callable subordinated notes is seen to have the ability to absorb losses or conserve cash through optional deferral without causing an event of default, S&P Global Ratings said.

The issue is part of the group’s recently launched Singapore dollar (S$) 2 billion euro medium-term note (EMTN) programme, which will be funding general corporate purposes, working capital, and future growth plans. 

S&P Global sees the proposed notes as having intermediate equity content and incorporates them as part of Great Eastern group's capital base. 

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As such, the notes should support S&P Global’s assessment of the insurer's very strong capital and earnings position.

With a legal maturity of April 2039 and an issuer option to redeem from April 2034, they will be treated as intermediate equity content for the first five years until April 2029 under S&P's insurance hybrid criteria.

Despite potential market volatility, S&P expects GEL to maintain resilience in its operating performance, supported by higher bond yields, thus sustaining a healthy capital buffer. 

The issuance's impact on financial leverage and fixed-charge cover is deemed modest and does not undermine GEL's sound funding structure.