Media Release | 08 Aug 2005
Great Eastern Holdings announces 2nd Quarter Financial results for 2005
Singapore, 8 August 2005: Great Eastern Holdings Limited announces Profit Attributable to Shareholders of $100.6 million for the 2nd quarter, and $190.9 million for the first half-year, ended 30
Jun 05. It was an increase of 36% and 17% respectively over the same periods last year, if last year's one-time investment gain of $71.0 million was excluded from the comparison.
The one-time gain was realised in May 2004 from the disposal of the Group's shareholdings in OCBC upon completion of the selective capital reduction exercise undertaken by OCBC. This one-time gain was reflected in three items in the 2004 profit and loss statements i) life assurance profit from the Non-Participating Fund, (ii) investment income and (iii) gain on sale of investments and changes in fair value.
Including the one-time gain, the profit for the 2nd quarter and first half of 2005 would have shown a decrease of 31% and 19% respectively against the corresponding periods in 2004.
Group gross premiums totalled $2,175 million in the first half of 2005, a drop of 11% over $2,438 million in the first half last year.
Pre-tax profit from insurance operations (both life and general) increased by 17% to $194.4 million in the first half of this year, without the one-time disposal gain in the comparison, with 54.5% coming from Singapore and 45.4% from Malaysia and 0.1% from other ASEAN countries.
For life insurance operations, pre-tax profit increased by 17% to $169.4 million, without the Disposal gain in the comparison. The main contribution was from the Non-Participating Fund where the pretax profit of $106.6 million was an increase of 35% over that in the first half last year without the onetime gain, due mainly to improved investment returns in both the equity and fixed income portfolios. Pre-tax profit from the Investment-linked Fund decreased by 27% to $16.9 million, due primarily to a one-time understatement of $7.6 million commission expenses in the Malaysian operations in 2004, which had to be recognised in this quarter.
For general insurance operations, pre-tax profit increased by 16% to $25.0 million in the first half of 2005, due to the release of the fund solvency margin of $17.6 million arising from the transfer of the general insurance business of Great Eastern Life in Singapore to its Non-Participating Fund in the 2nd quarter of 2005 and the closure of its general insurance fund.
Profit from Investments
Pre-tax profit from investments of the Shareholders' Fund for the first half of 2005 amounted to $32.5 million, a decline of 19% over the same period last year, if the disposal gain was excluded. If included, the decrease would have been 57% when compared to $74.8 million in the first half of last year.
Fees and Other Income
Fees and other income in the first half of this year increased 46% to $25.6 million. The increase was contributed by the Group's asset management and financial advisory subsidiaries - Straits Lion Asset Management Ltd, Fairfield Straits Lion Asset Management Ltd (FSL) and Alpha Financial Advisers Pte Ltd. Assets under management (including collateralised debt obligations) by Straits Lion and FSL increased by 34% from $20.5 billion as at 30 Jun 04 to $27.5 billion as at 30 Jun 05. The fee income in June 2005 included a contribution from OCBC Asset Management Ltd upon its merger with Straits Lion.
The Group's total assets as at 30 Jun 05 amounted to $37,727 million, 4% higher than the $36,257 million as at 31 Dec 04. The net asset value per share improved 7% from $4.91 to $5.27.
The Group continued to be the market leader in the life insurance business with a market share of about 22.9% in terms of weighted premium in Singapore and 19.1% (estimated) in Malaysia.
Implementation of Risk-Based Capital Framework
The new Insurance Regulations 2004 governing the risk-based capital framework for insurers in Singapore came into effect on 1 Jan 05. The Group's insurance subsidiaries in Singapore are in compliance with these regulatory provisions. Each of the insurance funds is required to maintain a minimum 100% of regulatory risk capital within the fund.
There was a one-time adjustment in the 2nd quarter due to the revision of accounting estimates and this reduced the after-tax profit by $24.7 million.
Outlook for the Year
The Group's performance is affected by the local, regional and global economic conditions and growth. Overall, the economic outlook remains positive. Earnings from the Group's insurance operations will continue to be sensitive to any substantial movements in the equity and foreign exchange markets and in interest rates. In particular, the de-pegging of the Malaysian Ringgit on 22 Jul 05 is expected to have an earnings impact although the extent is not known yet. Against a positive economic backdrop, the Group will continue to grow its insurance operations, asset management and financial advisory operations.
Director & Group CEO Tan Beng Lee said, "The Group is preparing for the establishment of a joint venture life assurance operations in Chongqing, China and will continue to incur start-up expenses. It may take a few years for the joint venture company to start contributing profits to the Group. I am pleased to announce that on 4 Aug 05 we received approval from the China Insurance Regulatory Commission to commence preparatory work to establish a joint venture life assurance company with Chongqing Land Properties Group.
"I am also very pleased to announce that we have been appointed by the CPF Board to manage its Dependants' Protection Scheme with effect from 17 Sep 05. Half of the existing 1.6 million DPS members are being randomly assigned to us. We will receive a one-time lump-sum premium of approximately $218 million and an annual premium of approximately $73 million from managing this Scheme. The one-time new business strain, post-tax, is approximately $8 million."