Great Eastern's Q4 net profit falls 26%

Great Eastern, whose fourth-quarter operating profit from its insurance business fell
20 per cent to $135.3million, said this was hurt by two one-off items.
Great Eastern, whose fourth-quarter operating profit from its insurance business fell 20 per cent to $135.3million, said this was hurt by two one-off items.BT FILE PHOTO

UPHEAVAL in global financial markets and one-off items put a dent in insurer Great Eastern's earnings last year.

It reported a 26 per cent drop in its fourth-quarter net profit to $165.9 million, as operating profit from its insurance business fell 20 per cent to $135.3million.

Great Eastern said at a briefing yesterday that operating profit for the three months ended Dec 31 was hurt by two one-off items.

One was the change in the timing of its terminal bonus recognition for its Malaysian business during the period, which put a drag on earnings.

Another was the gains from tax provisions for its Singapore unit in the fourth quarter of 2012, which made for a higher base of comparison.

If the one-off items were excluded, the insurer said it would have registered healthy year-on-year growth, though it did not specify numbers.

Its non-operating profit from the insurance business also took a knock from the unravelling of interest rates due to the United States Federal Reserve's tapering of its massive bond-buying programme.

Unrealised mark-to-market gains of $15.3 million made in the fourth quarter were 60 per cent lower than the same period a year ago.

Paper losses of $10.9 million in the valuation of its assets and liabilities were recorded for the whole of last year, a reversal from the $161.1 million gain in the previous year.

Financial markets went askew last May when then Fed chief Ben Bernanke first spoke of a possible pullback in its monetary stimulus, and in December, when he announced a US$10 billion (S$12.7 billion) cut in bond purchases.

That led to an inversion of interest rates - where short- to medium-term rates rose above long-term ones - affecting the valuation of Great Eastern's assets.

The firm's chief executive, Mr Chris Wei, said: "We buy most of our assets to hold over the long term. We want the quality assets that deliver the coupons and the yields that we have estimated. The one thing that I think we expect going forward is continued volatility. I think there are so many different dynamics that are going on with the global macroeconomic situation."

Profit for the full year was 43 per cent lower at $674.8 million, owing to the one-off disposal gains from the sale of its stake in Asia Pacific Breweries and Fraser & Neave in 2012.

Great Eastern said its operating profit from its insurance business rose 12 per cent for the full year to $559.6million, on the back of better performance across all its life assurance funds. That helped total weighted new sales to go up 27 per cent to $1.04 billion.

Asked about the recent ruling that insurers which make gains from shares bought for the long term using their investment funds may be exempt from income taxes if those are treated as capital gains, Mr Wei welcomed the decision.

"We feel the ruling does help clarify for the insurance industry how certain gains are treated, which is good."

Earnings per share was 35 cents for the quarter, down from 47 cents a year ago, while net asset value per share was $10.73 as at Dec 31, up from $10.13 a year earlier.

The insurer has declared a final dividend of 40 cents per share, plus a special dividend of five cents a share. Shares of Great Eastern rose seven cents yesterday to $17.67. It reported its earnings before markets opened.