Great Eastern Q2 earnings down 11% at S$248.2 million; declares bonus ordinary shares

[SINGAPORE] Insurer Great Eastern (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 GEH – a subsidiary of OCBC.

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.

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 came from the Singapore business, rather than from 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.

“We do see a trend of customers changing their purchasing behaviour because of the movement in interest rates,” said Tan.

While the endowment product’s margins were critical from a business perspective, Tan said its reduced sales did not significantly affect Great Eastern’s financial performance. This was more than offset by the increase in sales of longer-term savings and investment products. 

According to him, longer-term products tend to allow for better profitability while shorter-term offerings usually result in lower margins.

He added that while health insurance typically yields lower margins, it remains essential.

“Over the past six months to one year, we do see a constant purchase of health insurance so the sales of health insurance continue to be there,” he said.

Shareholders to receive bonus ordinary shares

GEH’s board has declared an interim one-tier tax exempt dividend of S$0.25 per ordinary share or Class C non-voting share for the half year, to be paid on Sep 5.

The insurer is set to issue bonus ordinary shares and/ or Class C non-voting shares on or around Aug 19 as part of its 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.

As the bonus shares are expected to be issued before the Aug 28 interim dividend record date, ordinary and Class C non-voting shares under the issuance will be entitled to the S$0.25 interim one-tier tax exempt dividend, GEH said.

“We encourage our shareholders to do nothing so that they will receive their bonus ordinary shares, which will allow Great Eastern to resume trading,” said Tan in a media briefing.

All shareholders will receive the bonus shares unless they elect to receive the Class C non-voting shares. Class C shares were created to allow OCBC to support Great Eastern in resuming trading if the delisting resolution was not approved.

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 SGX. This means shareholders must find willing buyers privately. and conversion to ordinary shares is only possible after five years.

He further explained that shareholders will not be able to reverse their decision if they mistakenly opted 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 enough shareholders opted for the Class C non-voting shares.

When asked about the number of shareholders needed to choose ordinary shares to reach a 10 per cent free float, Tan said it’s difficult to give a precise figure as it depends on how many opt in. He estimated roughly one third and expressed optimism about achieving the target.

Tan told The Business Times that they have not received any shareholder feedback on the mechanics of the resolution and shares, adding that shareholders appeared to understand them.

GEH will send election forms to shareholders on Tuesday (July 29). 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, 5.30pm.

GEH shares, which have been suspended since Jul 15, 2024, are set to resume trading after a resolution to accept the conditional exit offer made by the insurer’s parent company OCBC fell short of the 75 per cent approval level required to be passed.

Earlier in June, OCBC had raised its offer for the 6.28 stake in GEH that it does not own to S$30.15 per share. The lender, which owns 93.72 per cent of the insurer according to its 2024 annual report, said that it does not intend to launch another offer in the foreseeable future.

Looking ahead, Greg Hingston, GEH’s group chief executive officer, said that the group 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.