Great Eastern H2 profit falls 13% to S$337.4 million

INSURANCE provider Great Eastern posted a net profit of S$337.4 million for the second half of the year ended Dec 31, 2023, down 13 per cent from S$385.9 million a year earlier.

Earnings per share for H2 2023 slipped 13 per cent to S$0.71.

The whole of 2023 had been “quite challenging” as the inverted yield curve impacted new sales, said Ronnie Tan, group chief financial officer at Great Eastern, at a media briefing on Monday (Feb 26).

This was especially so in Singapore, which experienced a more pronounced inversion, he said.

The inverted Singapore-dollar yield curve made shorter-term interest-yielding investments more appealing than single premium products, which are typically longer term.

For the full year of 2023, total weighted new sales fell 12 per cent on year to S$1.7 billion, reflecting lower single premium sales in the Singapore market, partially offset by growth in regular premium sales, particularly in protection and whole life plans.

Great Eastern group chief executive Khor Hock Seng said it was mainly the insurer’s longer-term single premium portfolio that took a hit in 2023.

“We are one of the few market leaders in this particular segment, so I think we were impacted a bit more than the others,” Khor said.

But he added that sales have already picked up in Q4, and hopes this trend will continue in 2024.

In Q4, total weighted new sales were up 18 per cent on year to S$514.1 million, amid higher sales across all markets.

The pick-up in sales also boosted Q4’s new business embedded value by 4 per cent on year to S$227.2 million.

But for the full year, lower sales overall resulted in the group’s new business embedded value falling 11 per cent to S$762.1 million in FY2023.

FY2023’s profit from the insurance business fell 4 per cent on year to S$649.6 million, due to higher claims in Singapore and Malaysia.

Tan noted that claims have increased since the fourth quarter of 2022, as patients return to hospitals for treatment post-Covid, and medical travel regained popularity amid pent-up demand.

Meanwhile, inflation and strong demand may have also driven up prices for certain procedures, resulting in 2023’s claims surpassing pre-Covid levels in 2019, Tan said.

Nevertheless, he noted that claims levels have stabilised in Singapore since Q4 2023, and he expects Malaysia will follow suit in a few more quarters.

Profit from shareholders’ fund stood at S$139.6 million for FY2023, reversing from a loss of S$60.8 million in FY2022. This was due to mark-to-market gains in equities, bonds and collective investment schemes, compared to losses in the previous year.

Overall, Great Eastern’s net profit increased 27 per cent to S$774.6 million for FY2023.

The insurer said its core business lines remain resilient and strong. It noted a steady growth in new customer count, with the total new customer base growing by over 400,000 in the whole year.

For FY2023, the group’s embedded value stood at S$17.3 billion and its embedded value per share stood at S$36.59, which is down 3.2 per cent from FY2022.

The board proposed a final dividend of S$0.40 per share, which will be payable on May 17, upon shareholders’ approval at the annual general meeting on Apr 25.

The transfer books and the register of members of Great Eastern will be closed from 5 pm on May 2 till May 3 to determine the dividend entitlements.

Including the interim dividend of S$0.35 per share paid in August 2023, the total dividend for FY2023 would amount to S$0.75 per share, higher than S$0.65 per share in FY2022.

This represents a payout ratio of around 46 per cent on its 2023 net profit attributable to shareholders.

Khor also highlighted the insurer’s proposed acquisition of AmMetLife Insurance and AmMetLife Takaful in Malaysia, together with the entering of a 20-year exclusive bancassurance and bancatakaful agreement for the distribution of life insurance and family takaful products through the distribution network of AmBank and AmBank Islamic.

He expects the acquisition and partnership to expand the insurer’s reach to a larger customer base and strengthen its distribution in Malaysia.

Khor expects Singapore sales will perform better in 2024. Given that the US Federal Reserve is expected to cut rates this year, the inversion on the yield curve will likely be less drastic, which should boost demand for longer-term products.

“When people come to terms that interest rates may be slowing or coming down, they may be more keen to lock in on a longer-term basis. On that aspect, things should move in the right direction for us as we are very strong in the savings market,” he said.

Shares of Great Eastern closed at S$17.93 on Monday, down 1.7 per cent or S$0.31. .