Great Eastern Q2 earnings down 11% at S$248.2 million due to lower contribution from insurance business

[SINGAPORE] Insurer Great Eastern Holdings (GEH) on Monday (Jul 28) posted an 11 per cent decline in net profit to S$248.2 million for its second quarter ended Jun 30, from S$280.4 million in the previous corresponding period.

The decline was due to lower profit from the insurance business for the quarter, said the OCBC subsidiary.

For the six months ended June, net profit inched up 1 per cent to S$593.7 million from S$587.1 million in the year-ago period, on the back of investment results from shareholders’ funds and growth in GEH’s underlying insurance business.

H1 earnings per share rose to S$1.25 from S$1.24 previously.

Total weighted new sales (TWNS) for Q2 stood at S$363.5 million, down 19 per cent from S$448.3 million on the year. For the first half, sales fell 27 per cent to S$708.6 million, from S$972.5 million.

Despite the decline in sales, new business embedded value (NBEV) rose on both quarterly and half-yearly bases. Q2 NBEV increased 14 per cent to S$167.7 million, while H1 NBEV climbed 16 per cent to S$316.5 million, supported by stronger overall margins.

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Shift in product mix

Speaking to the media on Monday, Great Eastern chief financial officer Ronnie Tan said that NBEV grew possibly due to a “shift in product mix”.

He added that the overall decline in TWNS was mainly due to the Singapore business, rather than Malaysia, which still saw some growth.

The product that saw the steepest drop was Great Eastern’s two-year endowment product, a savings plan that had been very popular over the past two years. However, with short-term interest rates falling significantly in Singapore, the yield Great Eastern could offer on this product also declined considerably.

The reduced sales for the product was more than offset by the increase in sales of longer-term savings and investment products.

Looking ahead, Greg Hingston, GEH group CEO, said that the company remains committed to its long-term growth strategy.

It is investing in initiatives to strengthen its capabilities, expand market and customer reach, and enhance operational resilience, he added.

Shareholders to receive bonus ordinary shares

GEH’s board has declared a H1 interim dividend per share (DPS) of S$0.25, to be paid on Sep 5.

The dividend applies to all shares, including bonus shares set to be issued as part of GEH’s resolution to satisfy its minimum free-float requirement of 10 per cent, after a delisting resolution fell through at its Jul 8 extraordinary general meeting.

Under the issuance, shareholders will receive one bonus share for each share they hold. This translates to shareholders receiving S$0.50 for each share held before the bonus shares are issued.

All shareholders will receive bonus ordinary shares unless they elect to receive Class C non-voting shares.

GEH’s Tan said that it would not be sensible for shareholders other than OCBC to opt for Class C shares, as doing so would mean relinquishing significant rights due to several disadvantages.

He added there is no market mechanism to exit Class C shares before the five-year lockup as these shares are non-tradable and not listed on the Singapore Exchange. This means shareholders must find willing buyers privately, and conversion to ordinary shares is only possible after five years.

The CFO further explained that shareholders will not be able to reverse their decision if they mistakenly opt for Class C shares. This is why GEH is looking to ensure shareholders understand its implications and choose wisely. The recommendation is to avoid electing Class C shares, Tan added.

It was previously reported that shareholders were concerned about the possibility of GEH’s free float falling below 10 per cent if a large enough number of the minority shareholders opted for the Class C non-voting shares.

When asked, Tan estimated that if more than one-third of the shares held by minorities elect Class C shares, GEH may not be able to meet the free-float requirement.

GEH will send election forms to shareholders on Tuesday. Shareholders who wish to receive bonus ordinary shares do not need to take any action or return the form, while those opting for Class C shares must complete and submit the form by Aug 7, 5.30 pm.

An earlier delisting proposal failed to get approval. GEH shares have been suspended since Jul 15, 2024, but the aim is for it to resume trading.