Media Release | 05 Aug 2008
Great Eastern's Net Profit in H1 drops to $60.7 millionVolatility in debt and equity markets experienced in Q1 continued into Q2
Singapore, 5 August 2008: Great Eastern Holdings Limited announces Profit Attributable to Shareholders of $60.7 million for the first half of 2008, a decrease of 78% over the $277.9 million for first half of 2007. For the 2nd quarter of 2008, the Profit totalled $15.7 million, a drop of 89% year-on-year.
The underlying insurance business remains healthy. Gross premium income increased 30% to $3,586 million in H1-08, with new business premium from life assurance operations increasing 60% to $2,009 million. The growth is seen particularly in the single premium sector in Singapore. New business embedded value increased 16% to $136.1 million.
Profit from insurance operations (both life and general) totalled $48.3 million for H1-08, a decrease of 80% year-on-year. Profit from all insurance funds in Singapore and from the general insurance fund in Malaysia is reported net of tax in the Group profit and loss statement.
Profit from Participating Fund in H1-08 was 7% higher at $49.4 million. Non-participating Fund registered a loss of $40.7 million in H1-08 compared with a profit of $143.1 million in H1-07, due primarily to mark-to-market losses in equity and debt investments in the Singapore portfolio. The Malaysian segment reported a lower post-tax profit of $37.5 million (H1-07: $54 million), due to lower investment profits.
General insurance operations showed a profit of $8.2 million, a drop of 54% year-on-year. In Q2-08, profit dropped 90% to $0.7 million from $6.9 million in Q2-07, due to higher motor and accident claims in Singapore.
Profit from Investments
Profit from investments in the Shareholders' Fund totalled $63.8 million, a decrease of 13% over H1-07's $73.2 million, mainly due to mark-to-market losses from foreign currency denominated investments.
Fees and Other Income
Fees and other income declined 28% in H1-08 to $42.7 million, due mainly to lower fund management fees, compared to $59.0 million in H1-07.
The Group's total assets as at 30 Jun 2008 amounted to $45.1 billion, a 3% decrease over the $46.5 billion as at 31 Dec 2007. The net asset value per share was $6.30, about 9% lower than $6.94 as at 31 Dec 2007.
In Singapore, the Group has retained its Number One position in the life insurance business, including DPS and ElderShield. It has a market share of 28.7% in terms of weighted premiums of new business in H1-08.
Its market share in the bancassurance sector in Singapore is 47% for H1-08. This lion share is made possible as a result of the exclusive bancassurance arrangement with its parent company, OCBC Bank. Great Eastern was the first insurer to establish a bancassurance network in Singapore, in 1992.
Although the latest Malaysian industry figures are not yet available, we are also expected to retain our leadership position in Malaysia.
An interim tax exempt (one-tier) dividend of 10 cents per ordinary share for the financial year 2008 will be paid on 4 September 2008. For 2007, the interim dividend was 0.655 cents less 18% Singapore income tax and 21.345 cents less 27% Malaysia income tax.
Comments from Director & Group CEO
Mr Tan Beng Lee, Director & Group CEO said, "Our underlying insurance business remains very strong, as shown in the year-on-year increases of 30%, 60% and 16% reported for gross premiums, new business premiums and new business embedded value in H1-08 respectively.
"The volatility in the debt and equity markets experienced in the 1st quarter this year continued into the second quarter. Higher long-term interest rates reflecting increasing inflationary concerns and negative sentiments in the equity markets resulted in mark-to-market losses in our equity and debt investments."
Outlook for the Year
The Group's overall performance will continue to be affected by local, regional and global economic conditions and growth. New business premiums and embedded value are expected to grow at a healthy pace. However, the continued stress caused by volatile interest rates/credit spreads and equity markets is expected to impact earnings of the non-participating funds in Singapore.
Capital adequacy for all insurance funds remains strong. The stress tests have demonstrated the Group's ability to withstand further deterioration in the financial markets in the near and medium term. The Group will closely monitor the risks within its portfolios and implement risk mitigation measures, including those in Malaysia where Bank Negara Malaysia is expected to implement the Risk Based Capital framework for insurers in January 2009.