Great Eastern profits up 90% on investment returns

Great Eastern Holdings Limited reported Wednesday a full-year 2009 net profit of $516.7 million.

This translates to a year-on-year increase of 90 percent compared to $272.4 million in 2008.

The strong performance followed a significantly improved showing by the group in the last two quarters in 2009, owing mainly to the increase in investment returns on the Non Participating Fund in line with the improving market conditions.

The company also reported two non-recurring items – first is a profit of $210.4 million arising from the move to the new risk-based regulatory capital framework in Malaysia as well as from the portfolio matching exercise in Singapore in the first quarter of the year.

Another is a non-recurring loss of $213.3 million due to the one-off redemption offer made to GreatLink Choice policyholders in third quarter of the year.

These items offset each other and thus have minimal financial impact to the firm's profit.

Full-year profit from insurance operations before Shareholders’ tax likewise registered a sharp increase of $434.9 million to $751.9 million (2008: $317.0 million).

Excluding the non-recurring profit contributions, profit from insurance operations increased 71 percent to $541.5 million.

The significant increase in profit was from the Non Participating Fund which was driven by a strong recovery in investment markets impacting equities and corporate bonds assets in both Singapore and Malaysia.

In addition, the exercise to achieve portfolio matching of assets and liabilities in Singapore also helped to cushion the impact of rising interest rates.

The group said it will closely monitor interest rates to identify opportunities for greater portfolio matching to minimise volatility in earnings in future years.

Weighted new insurance sales for the Group in the fourth quarter likewise rose 10 percent to $188.9 million compared to the third quarter.

In Singapore, the strong sales momentum continued into the fourth quarter particularly in annual premium products.

Total weighted new sales in the second half of 2009 thus doubled from the first half to $222.1 million from $107.9 million.

In Malaysia, weighted new sales increased by 71 percent in fourth quarter to $82.8 million compared to the third quarter, driven by strong growth in both investment-linked and traditional life business.

Because of these strong performances, total weighted new sales for the Great Eastern rose by 50 percent in the second half to $360.8 million from $240.5 million in the first half.

The strong showing in the second half however was insufficient to offset the weak sales in the first half, resulting in the company ending the year with a decline of 20 percent in total weighted new sales to $601.3 million.

Profit from investments in the Shareholders’ Fund in the last quarter similarly rose to $18.2 million from a loss of $28.5 million in last quarter of 2008.

For full-year 2009, however, there was a loss of $127.2 million (2008: profit of $40.9 million) attributed mainly to a non-recurring loss of $213.3 million arising from the one-time redemption offer made to GreatLink Choice policyholders.

Fees and other income increased marginally in the last quarter. For full-year 2009, this was 20 percent lower at $63.7 million largely due to lower assets being managed by Lion Global Investors Limited.

The Group’s total assets increased by 10 percent as at 31 December 2009 to $48.5 billion. An interim tax-exempt (one-tier) dividend of 5 cents per ordinary share for the financial year 2009 was paid on 2 September 2009.

The Directors recommended, for Shareholders’ approval, at their AGM, the payment of a final tax exempt (one-tier) dividend of 27 cents per ordinary share and a special final tax exempt (one-tier) dividend of 8 cents per ordinary share.

Upon approval, this dividend will be paid on 7 May 2010. This brings the total dividend payment for the financial year 2009 to 40 cents per ordinary share.

Great Eastern remains strongly capitalised, well above the minimum regulatory ratios of 120 percent and 130 percent in Singapore and Malaysia respectively.

Group CEO Mr Ng Keng Hooi said, "We maintained our market leadership position and we are particularly pleased with our performance in Singapore where sales in the second half of the year improved to double that of the first half. Our agency force maintained its ranking as one of the most productive in Singapore."

He added that in Malaysia, the company achieved a positive growth of 4 percent in total weighted new sales, retaining its pole position in the life insurance industry. With the successful launch of its bancassurance partnership with OCBC Bank, the group's bancassurance distribution channel is strengthened considerably.

"With improving economic conditions in the markets in which we operate, we are seeing renewed customer confidence and this augurs well for the future. The Group will remain focused on its long-term growth plans and maintain a robust balance sheet and healthy capital position. We will continue to grow our profitable annual premium business and actively identify new distribution channels as part of our business strategy to tap new customer segments," Mr Ng concluded.