Excess cash investment option

Insuring a bright return

Manulife is an international financial services provider with its main operations in Asia, Canada and the United States, offering a suite of financial protection and wealth management products and services. Ranked among the top 200 on Forbes’ top 2,000 world’s largest public companies, Manulife has a strong global presence, with more than 20 million customers in 22 countries, and is currently expanding rapidly in Asia.

Manulife's purpose is to help their clients achieve their dreams and aspirations by adopting a customer-focused approach to providing the right financial advice and solutions.

In 2016, Manulife partnered with DBS to distribute life and health insurance products across Singapore, Hong Kong, China and Indonesia, where the bank has over six million retail, wealth and SME customers.

 

Getting the most out of excess

Manulife's Treasury team expressed an interest to structure an investment option for the company's excess cash across a number of entities where they have holdings with DBS in Singapore, Hong Kong, China and Indonesia.

Specifically, they required support in the form of enhanced investment yields for their excess cash (apart from traditional fixed deposits), which also ensured immediate access to funds for operating requirements. Furthermore, this solution should not require their local in-market finance teams to regularly request the bank for fixed deposit rates prior to providing placement instructions.

In summary, Manulife needed:

  1. To enhance investment yield for their excess cash held in a number of operating accounts over several entities in each of the four markets.
  1. To have a regional overview on the balances held across the four markets without co-mingling of funds across the various entities involved.

 

Pooling for bigger interest

In order to meet these needs, DBS proposed a Regional Interest Optimisation (RIO) management solution, whereby all excess operating account cash balances held with the bank across the four markets (in both foreign and local currencies) are combined.

The total balance is then aggregated notionally in USD and the interest is paid towards each individual account at the local level, regardless of market or currency. The total interest is calculated on a tiered basis, and as the account balances grow with DBS, higher interest rates will be applied to every account in the pool.

The key benefits of the proposed RIO solution are as follows:

  1. Local account structures remain untouched, and continue to operate as per normal;
  2. Yield is improved by remunerating interest on regional aggregated balances, as opposed to individual market or account balances;
  3. It did not require physical movement or co-mingling of funds, whether cross-border or domestic.

 

Cash management for life

Following the implementation of the RIO solution, Manulife was able to greatly improve its working capital efficiency. The solution provided them with the control, visibility and access to their balances across four markets, as well as a monthly report on the enhanced credit interest calculation.

Furthermore, with the RIO structure in place, Manulife’s local in-market finance teams were able to reduce time spent sourcing for the most preferential fixed deposit rates. A post-implementation review session identified other processes that could be further streamlined, which would lead Manulife into their next phase of Cash Management.

In summary, by fully understanding the needs of the Manulife Treasury Team, DBS was able to provide a comprehensive and customised liquidity management solution. As a result, this has enabled Manulife to maximise interest yield on its excess operating cash while minimising excessive manual processes on term deposit reinvestment and monitoring.

"The RIO allows Manulife to retain business flexibility, preserving liquidity contingency whilst enhancing yield within an easy to administer structure."

Manulife

 

Discover a spectrum of opportunities

Explore DBS Treasury Prism to discover how you can create a similar cash management solution for your business. If you'd like to read more case studies, simply click on Case Studies on the left.

 

 

The information herein is published by DBS Bank Ltd. (“DBS Bank”) and is for information only.

The information is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

All case studies provided, and figures and amounts stated, are for illustration purposes only and shall not bind DBS Group. DBS Group does not act as an adviser and assumes no fiduciary responsibility or liability for any consequences, financial or otherwise, arising from any reliance on the information contained herein. In order to build your own independent analysis of any transaction and its consequences, you should consult your own independent financial, accounting, tax, legal or other competent professional advisors as you deem appropriate to ensure that any assessment you make is suitable for you in light of your own financial, accounting, tax, and legal constraints and objectives without relying in any way on DBS Group or any position which DBS Group might have expressed herein.

DBS Bank Ltd. All rights reserved. All services are subject to applicable laws and regulations and service terms. Not all products and services are available in all geographic areas. Eligibility for particular products and services is subject to final determination by DBS Bank Ltd and/or its affiliates/subsidiaries.