Great Eastern Q2 profit up 251% to $193.2 million after change in accounting standards

SINGAPORE - Great Eastern on Thursday posted a 251 per cent rise in net profit for the second quarter ended June, to $193.2 million from $55 million in the same period the year before.

The jump in profit came after the group adopted a change in accounting standards on Jan 1, which led to the comparative numbers for financial year 2022 being restated, said the insurance arm of OCBC on Thursday.

Before the numbers were restated, net profit for the second quarter of 2022 was $282.9 million. The replacement of Singapore Financial Reporting Standard (SFRS) 4 Insurance Contracts into SFRS 17 impacted the timing of profit recognition and initial shareholders’ equity.

It will not significantly affect the group’s business operations, earning prospects and ability to pay dividends, said Great Eastern.

It will pay an interim dividend of 35 cents per share on Aug 31, up from an interim 10 cents for the previous financial year.

Before restatement due to the change in accounting standards, net profit for the first half of 2022 stood at $502.9 million. The restated amount for that period is $224.1 million. For the first half of this financial year, net profit stood at $437.2 million.

The group also attributed the rise in first-half net profit to favourable investment performance for its Singapore Life business and shareholders’ fund. It noted that its underlying insurance business “remained healthy”, despite higher-than-expected claims in Singapore and Malaysia.

Group chief executive Khor Hock Seng said: “Our general insurance business experienced good growth from our retail business, supported by our well-received product proposition.”

For the second quarter ended June, total weighted new sales (TWNS) fell 39 per cent to $335 million, from $548.2 million in the same period a year earlier, reflecting lower single-premium sales in the Singapore market. Similarly, new business embedded value (NBEV), a measure of the long-term profitability of new sales, registered a 9 per cent decline to $181.5 million, from $200.1 million.

However, a more favourable product mix towards protection plans in Singapore and Malaysia allowed NBEV margins to improve, Great Eastern said.

Its new customer base grew by more than 150,000 in the first half of 2023 across the group, it added.

For the six months ended June 30, TWNS was $725.9 million, 31 per cent down from $1,051.8 million. NBEV stood at $351.2 million, 10 per cent down from $390.6 million in the same period a year ago.

Insurance service results in the half-year period dropped 41 per cent to $371.2 million, led by higher insurance service expenses and net expenses from reinsurance contracts held.

This was mainly due to worsening claims experience, said the group.

Great Eastern’s share price closed at $18.83 on Thursday.

THE BUSINESS TIMES