Great Eastern Q1 profit tumbles 90% on non-operating losses

GREAT Eastern Holdings on Wednesday posted a 90 per cent drop in net profit to S$33.9 million for the first quarter ended March 31, 2020 from S$342.7 million a year ago.

The insurance arm of OCBC Bank was weighed down by non-operating losses of S$222.8 million, compared to a non-operating profit of S$75.9 million a year earlier. Great Eastern said this was due to lower valuation of investments, arising from unfavourable financial market conditions in the first quarter.

Meanwhile, operating profit doubled to S$298.6 million from S$148.7 million in the same quarter last year. This was driven by increased contribution from its core markets and a reduction in insurance contract liabilities in both Singapore and Malaysia.

Total weighted new sales for the quarter grew 21 per cent to S$298.8 million, from S$247.4 million a year ago.

According to Great Eastern, the group's operations in Singapore and Malaysia continued its growth momentum, driven by agency channels in both countries and the bancassurance channel in Singapore.

Correspondingly, new business embedded value increased by 15 per cent for the quarter to S$126.1 million, from S$109.8 million for the corresponding period last year.

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Group chief executive officer Khor Hock Seng noted that the group delivered "strong operating results" for the first quarter, but added that the onset of the Covid-19 outbreak has delivered many challenges globally which will continue for a period of time.

"While the group's profit was impacted by the volatility in the global financial markets during the quarter, our investment portfolio remains sound and our capital position also remains strong," Mr Khor said.

Great Eastern expects its new business activity to be dampened as a result of weakened demand and restricted face-to-face interactions. Nonetheless, the digital and technology infrastructure initiatives it embarked on in the past two years have helped to cushion the impact of the Covid-19 situation, the company said.

In the near term, sales from the bancassurance channel may see a more significant impact as sales activity is largely at bank branches, while new business volume may decline further if the economic slowdown and "circuit breaker" persist, Great Eastern noted.

That said, it pointed out that the Covid-19 mortality rate is relatively low based on current statistics and that the group does not expect any material impact on its operating profit arising from a significant worsening of mortality risks.

As at 9.57am on Wednesday, shares in Great Eastern were trading at S$18.90, up S$0.17 or 0.9 per cent.