Media Release | 24 Feb 2006
$373 Million Profit for Full Year 2005: an increase of 13%, excluding 2004's one-off gain
Singapore, 24 February 2006: Great Eastern Holdings Limited announces Profit Attributable to Shareholders of $372.9 million for the year 2005, a drop of 7% over the $402 million for the year 2004. If the one-off profit of $71 million realised in May 2004 upon completion of the disposal of the Group's shareholdings in OCBC Bank pursuant to OCBC's Selective Capital Reduction exercise were to be excluded, Profit Attributable to Shareholders in 2005 would have shown an increase of 13% over 2004.
The Company is also pleased to announce an Embedded Value per share of $10.598 for 2005, a growth of 7.7% over $9.84 for 2004.
Group gross premiums totalled $5,030 million in 2005, a drop of 6% over $5,375 million in 2004.
With effect from 2005, profits from all insurance funds in Singapore and general insurance fund in Malaysia are reported net of tax in the profit and loss statement. The comparative figures for 2004 have therefore been re-stated.
For life insurance operations, profit contributed by the Participating, Non-Participating and Investment-Linked Funds dropped by 19% from $346.8 million to $280.5 million. If the one-off gain from the disposal of the shareholdings in OCBC were to be excluded, profit from life insurance operations for 2005 would have been 4% lower than 2004, due mainly to the declaration of the special one-off policy bonus in 2004, the additional tax liability of $35.7 million in 2005 on the reserves released from the non-participating fund following the implementation of the Risk Based Capital framework, and the weaker insurance and investment performance from the Malaysian segment. Profit from the investment-linked fund improved 10% to S$50.4 million.
For general insurance operations, profit increased by 39% to $35.9 million in 2005, from $25.9 million in 2004. The increase was mainly due to the release of $17.6 million following the closure of the general insurance fund in Great Eastern Life Assurance in Singapore and the transfer of the accident and health business to its non-participating fund in the second quarter of 2005.
Overall, profit from insurance operations (life and general) dropped by 15% to $316.4 million, with $139.8 million coming from Singapore and $178.2 million from Malaysia, and the "other ASEAN sector" registering a loss of $1.6 million.
Profit from Investments
Pre-tax profit from investments of the Shareholders' Fund totalled $104.2 million, an increase of 11% from the $93.8 million in 2004. If the one-off gain from the disposal of the shareholdings in OCBC were excluded, the profit from investments would have been 77% higher than 2004. The increase was due to (a) the receipt of a one-off tax exempt dividend of $24 million from one of its investments; and (b) the realised gains of $27 million from the sale of some investments following a restructuring of the investment portfolios.
In Singapore, the Group continued to be the market leader in the life insurance business with a market share of 26.8% in terms of weighted premium, due to its strong brand, effective tied agency and bancassurance distribution channels and quality customer service. In Malaysia, Great Eastern also maintained its No.1 position with an improved market share of 23.3%.
Fees and Other Income
Fees and other income for 2005 increased 46% to $57.7 million. The increase was contributed by the Group's asset management and financial advisory subsidiaries - Lion Capital Management Ltd, Lion Fairfield Asset Management Ltd (previously known as Fairfield Straits Lion Asset Management Ltd) and Alpha Financial Advisers Pte Ltd. Assets under management by Lion Capital amounted to $32 billion as at 31 Dec 05.
The Group's total assets as at 31 Dec 05 amounted to $39.2 billion, 8% higher than $36.3 billion a year earlier. The net asset value per share improved 13% from $4.91 as at 31 Dec 04 to $5.56 as at 31 Dec 05.
On 7 Sep 05, the Company paid an interim dividend of 12 cents per ordinary share, less 20% Singapore income tax. On 24 Feb 06, the Directors recommended, for shareholders' approval, the payment of a final dividend of 20 cents and a special final dividend of 18 cents per ordinary share, less 20% Singapore income tax, as the Company intends to efficiently utilise its available balance under section 44 of the Income Tax Act. This brings the total dividend payment to 50 cents per ordinary share for 2005.
Outlook for the Next Twelve Months
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 Singapore, the recent Government announcement regarding changes to the CPF Investment Scheme has no impact on Great Eastern's existing products. However, the keen competition in Singapore for savings-oriented insurance products is likely to intensify in the near term with the continued increase in short-term interest rates and the flattening of the yield curve.
Director and Group CEO Mr Tan Beng Lee said, "We are happy with the financial performance in 2005. If we exclude the one-off profit of $71 million realised in May 2004, Profit Attributable to Shareholders would have shown a healthy increase of 13% over 2004. This is a good performance in the light of the intense competition in the markets in which we operate.
Our strategy to grow the investment-linked business has continued to produce strong results. Premium income and assets under management for linked products grew by 30% and 23% respectively in 2005 over the previous year. We will continue to focus on growing this segment.
We are also pleased with the progress of our regionalisation efforts. Our business strategies are on track to meet the Group's 2008 business goals of growing our assets to $50 billion and our PAT to $500 million."