Published February 18, 2009

Great Eastern Q4 net profit slumps 47% to $76.5m

Its investments were hit by market turmoil while insurance gains fell

By LYNETTE KHOO

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GREAT Eastern Holdings saw a 47 per cent slump in its net profit for the fourth quarter ended Dec 31, 2008 to $76.5 million from a year ago, as its investments were dealt a blow from the market turmoil and profits from insurance operations fell.

Its profit from insurance operations was $123.8 million in that quarter, 33 per cent lower than a year ago. The group also incurred a $28.5 million loss from investments, compared to gains of $11.9 million in the fourth quarter of 2007.

But management expenses during the quarter more than doubled from $25.1 million a year ago to $56.2 million.

The group said that continued volatility in the equity and debt markets will impact the earnings of its insurance businesses.

'However, the capital and solvency positions of the group remain strong,' it added.

It maintained a capital adequacy ratio of 227 per cent in Singapore insurance subsidiaries, well above the regulatory requirement of 120 per cent.

Its available capital here is $6 billion, down from $7.4 billion at end-2007 and risk capital requirement at $2.6 billion, down from $2.9 billion on mark-to-market changes.

For the full year, Great Eastern's net profit fell 50 per cent to $272.4 million, down from a record high of $546.9 million achieved in 2007, due to mark-to-market losses on investments.

Profit from insurance operations totalled $317 million for 2008, a 41 per cent slump over 2007. With the exception of investment-linked fund, which registered a 7 per cent growth in profits, profits from other insurance funds fell.

The pretax profit from investments in the Shareholders' Fund dropped 63 per cent to $40.9 million, due mainly to a provision for the impairment of assets, a mark-to-market loss on foreign exchange, and lower mark-to-market gain.

'The challenging times are expected to continue into 2009,' said group CEO Ng Keng Hooi.

On a positive note, Great Eastern's underlying insurance business of the group remained strong, with gross premiums posting a 17 per cent growth to $7.03 billion last year. New business premiums sales for life assurance last year rose 32 per cent to $3.67 billion. This will contribute to future profits, the group said.

Another piece of good news was the group's growing market share.

In Singapore, Great Eastern maintained its lead in the weighted premium market, with a market share of 29 per cent in 2008, up from 22.5 per cent in 2007. Its bancassurance business in Singapore also retained a leading 46 per cent market share.

In Malaysia, Great Eastern enjoyed a 22 per cent market share in the weighted premium business last year.

The group said that profit from its Malaysian operations is expected to fluctuate subject to mark-to-market rules under the new risk-based capital framework. But it added that the group's capital is more than enough to support its insurance operations in Malaysia.

As at end-2008, Great Eastern's total assets totalled $44 billion, which was a 5 per cent dip from $46.5 billion at end-2007.

It proposed a final dividend of 16 cents per share, which would bring the total dividend payment for fiscal 2008 to 26 cents per share.

Great Eastern ended trading yesterday at $8.09, up three cents.