Media Release |07 Nov 2005
$90.0 Million Profit in 3rd Quarter: an increase of 40% over last year
Singapore, 7 November 2005 : Great Eastern Holdings Limited announces Profit Attributable to Shareholders of $90.0 million for the 3rd quarter, an increase of 40% over the corresponding period last year.
The Profit for the first 9 months ended 30 September 2005 was $280.9 million, an increase of 23% over the corresponding period last year, if the one-time investment gain of $71.0 million realised in May 2004 from the disposal of the Group's shareholdings in OCBC was excluded from the comparison. Including the one-time gain, the profit for the first 9 months of 2005 would have shown a small decrease of 6%.
Group gross premiums totalled $1,376 million in the 3rd quarter of 2005, a drop of 8% over $1,500 million in the third quarter last year.
Pre-tax profit from insurance operations (life and general) increased by 43% to $102.4 million in the third quarter of this year.
For life insurance operations, pre-tax profit increased by 36% to $91.3 million, with increases in all three Funds. Profit from Participating Fund increased 9% to $24.1 million, in line with expectations. Non-Participating Fund profit increased 37% to $47.7 million, as a result of a more diversified portfolio of products. With the continued focus on the Investment-linked Fund, pre-tax profit increased by 88% to $19.5 million.
As reported in the last quarter, Great Eastern Life has been appointed by the CPF Board as one of the two insurers to manage its Dependants' Protection Scheme. The CPF Board transferred approximately half of the business to Great Eastern Life in September 2005. The initial estimate of a one-time new business strain of about $8 million post-tax, mentioned in the 2nd quarter results announcement, did not materialise.
For general insurance operations, pre-tax profit increased by 164% to $11.1 million, due to the strong investment performance in the Malaysian segment.
Our Group continued to be the market leader in Singapore with an estimated market share of about 26% in terms of weighted premium (excluding the Dependants' Protection Scheme) for the 3rd quarter and 24% for the first 9 months of the year. In Malaysia, the Group maintained its leadership position with 22.1% market share in the 3rd quarter (an improvement over the previous quarter's share of 20.5%) and 20.1% for the first 9 months of the year.
Profit from Investments
Pre-tax profit from investments of the Shareholders' Fund in the 3rd quarter of 2005 amounted to $14.8 million, an increase of 64% over the 3rd quarter last year, due to higher dividend income from investments and foreign exchange gains.
Fees and Other Income
Fees and other income in the 3rd quarter increased 73% to $15.9 million. The increase was contributed by the Group's asset management and financial advisory subsidiaries - Straits Lion Asset Management Ltd (SLAM), Fairfield Straits Lion Asset Management Ltd and Alpha Financial Advisers Pte Ltd, and a full quarter's contribution from OCBC Asset Management Ltd (OAM), following the completion of its merger with SLAM in June 2005. The integration between OAM and SLAM, including the transfer of business from SLAM to OAM, was completed on 26 September 2005. With effect from that date, OAM's name was changed to Lion Capital Management Ltd. Assets under management by Lion Capital totalled $31.6 billion as at 30 September 2005.
The Group's total assets as at 30 September 2005 amounted to $39,046 million, 8% higher than the $36,257 million as at 31 December 2004. The net asset value per share improved 11% from $4.91 to $5.45.
Outlook for the Year
The Group's performance is affected by local, regional and global economic conditions and growth. Overall, the general view is that 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.
Mr Tan Beng Lee said, "We are very pleased with the solid performance in the 3rd quarter of 2005, despite the increasingly competitive environment in both Singapore and Malaysia. However, the Government's recent announcements about changes to the CPF Investment Scheme, in particular the tightening of charges for insurance and investment products using CPF funds, could have an impact on the sale of single-premium insurance products in Singapore in the year ahead.
"The increase in short-term interest rates and the flattening of the yield curve are expected to continue to put downward pressure on savings-oriented insurance products."
On 4 August 2005, the Group received approval from the China Insurance Regulatory Commission to commence preparatory work for a life insurance operating licence in China. A 50/50 joint venture life assurance company was formed on 18 August 2005 with Chongqing Land Properties Group in China. While preparing for life assurance operations in China, the Group will continue to incur start-up expenses, as the joint venture company is likely to take a few years before it starts contributing to the Group's profits.