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(Singapore)
GREAT Eastern Holdings' net profit rose to $97.7 million
in the second quarter from $15.7 million a year earlier, as a rebound in equity
and fixed-income markets boosted its insurance fund profits.
But the life insurer warned that it expects the economic recovery to be slow and that investment risks could continue to affect its future earnings.
It also said it expects its third-quarter results to take a hit, 'conservatively estimated to be in the region of $250 million', from its offer to buy back at full value $594 million worth of structured investment products that it sold to policyholders.
Great Eastern said it will take delivery of the collateralised debt obligation or CDO instruments underlying the GreatLink Choice series of investment products and will account for their fair value when its buyback offer ends on Aug 28, to assess the financial impact to the firm.
For the first six months of the year, net profit jumped to $334.7 million, from $60.7 million for the same period last year.
Its earnings per share for the half-year was 71 cents, up from 13 cents a year earlier.
The firm declared an interim dividend of five cents a share, to be paid on Sept 2.
Profit from insurance operations rose to $131.3 million in the second quarter, from $33.9 million a year earlier, as its non-participating fund benefited from a rebound of major stockmarket indices and the tightening of credit spreads for its fixed-income portfolio, Great Eastern said. It made $74.2 million in profit on its non-participating fund for the three months to end-June, compared to a loss of $11 million a year earlier.
Over the same period, profit from its participating fund rose 14 per cent to $27.2 million, while profit from its investment-linked fund grew 15 per cent to $23.3 million.
Profit from investments in the shareholders' fund rose to $43.7 million from $2 million a year earlier, from equity sales and marked-to-market gains on investments resulting from improving market conditions, Great Eastern said.
But total gross written premium sales fell 37 per cent to $1.25 billion in the second quarter compared with $1.98 billion a year earlier, due to a sharp drop in sales of single-premium products, which plunged 73 per cent.
For life assurance operations, new sales measured on a weighted basis fell 30 per cent to $140.3 million, mainly due to a 61 per cent drop in Singapore weighted new sales.
Sales of single-premium investment products in Singapore for the quarter slumped 75 per cent to $250.5 million from a year earlier. New annual-premium sales also dropped, by 29 per cent, to $32.4 million.
'In view of the present difficult environment, the strategy is to focus on developing and promoting protection and long-term savings products,' Great Eastern said.
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