Great Eastern H2 profit falls 37% to S$281.3 million

INSURANCE provider Great Eastern ’s profit for the second half of the year ended Dec 31, 2022 declined 37 per cent to S$281.3 million, from S$443.1 million for H2 2021.

In a bourse filing on Wednesday (Feb 22), the group attributed this to the “negative impact of financial market movements” which adversely impacted the valuation of insurance contract liabilities.

The group’s earnings per share for the second half of the year stood at S$0.60, down from S$0.93 in the year-ago period.

After the announcement, shares of Great Eastern fell as much as 1.8 per cent and closed at S$18.45. Shares of OCBC – which holds an 87 per cent stake in Great Eastern – also fell as much as 1.8 per cent on Wednesday, before ending 1.1 per cent lower at S$12.90. The bank is due to report its fourth-quarter and full-year results for FY2022 on Friday.

In a results briefing on Wednesday, Great Eastern chief executive Khor Hock Seng noted that Singapore experienced an inverted yield curve towards the end of the year, resulting in the insurer’s liabilities – which are valued on a longer term – incurring higher mark-to-market losses.

This resulted in a non-operating loss of S$249.7 million in Q4, from the non-operating profit of S$46.1 million in the same period in 2021.

Rising interest rates had also hit the sales of savings products in Singapore, given that consumers could turn to other options such as fixed deposits and Singapore Treasury bills that were offering better returns with higher yields, Khor noted.

Gross premiums for H2 fell 21 per cent to S$7.7 billion from S$9.8 billion, due to lower sales in single premium products.

Meanwhile, total weighted new sales (TWNS) for the group fell 9 per cent to S$449.1 million in Q4. TWNS dropped 18 per cent in Singapore, although it rose 3 per cent in Malaysia.

Great Eastern chief financial officer Ronnie Tan noted that the insurance industry typically sells more savings products in Singapore, as compared to Malaysia with more protection products, resulting in such interest rate movements having a higher impact on operations in Singapore than in Malaysia.

For the full year, profit for the insurer was down 30 per cent to S$784.2 million, from S$1.1 billion for FY2021. Gross premiums fell just 2 per cent to S$18.6 billion, from nearly S$19 billion in FY2021.

Meanwhile, the insurer’s embedded value fell 2 per cent on year in FY2022, due to a decline in its adjusted shareholders’ fund.

Tan noted that the adjusted shareholders’ fund was dragged by investment losses recorded for both equities and fixed income products in 2022. He added, however, that this was a trend seen across the industry, and that this was mitigated by a 5.9 per cent rise in the value of Great Eastern’s in-force business over FY2021.

Looking ahead, Khor expects a growing emphasis on the protection market will likely continue to boost sales in 2023. Meanwhile, new structures in savings products should also provide some recovery, given that savings products still have a high demand among customers.

“But we may have to introduce more protection on such products, to differentiate them from other instruments that do not offer such protection,” he said. 

Khor also expects the insurer’s Indonesia business to post solid growth, while its Takaful business in Malaysia continues to be a bright spot.

Great Eastern proposed a dividend of S$0.55 per share for the second half of the year, payable on May 8 after books closure on Apr 28.