5 May 2008
In 2004 and 2005, NTUC Income made investments in collateralized debt obligations (CDOs) as part of our strategy to diversify our investment portfolio by investing in alternative asset classes. The investments were made out of surplus assets from allocations intended for equity investment. There are no investment in CDO-related products under NTUC Income’s suite of investment-linked funds where the risks are fully borne by policyholders.
From an initial investment of US$299.9 mn, we have aggressively written off, (net of principal redemption and interest payments which amount to US$90.9 mn), US$140.3 mn in order to be on the conservative side. Our outstanding CDO positions are valued at US$68.7 mn as of March 2008. The ABS-CDOs have a diversified portfolio of underlying high grade and mezzanine ABS (asset backed securities) assets.
Our total investment returns of 10.7% in 2007 were derived after taking into account the above write-offs.
Our bonus reshape initiative is unconnected with our CDO position and is meant to ultimately benefit policyholders and the cooperative in the long term.