GREAT Eastern on Tuesday (Feb 25) pointed to provisions made for its medical insurance business as the primary reason its net profit fell 14 per cent to S$134.8 million for the fourth quarter ended Dec 31, from S$157.2 million in the previous corresponding period.
“In terms of profitability, it was only (our) medical (insurance business) where we had to make provisions. Generally, the rest of the business performed very well,” Greg Hingston, the insurer’s new group CEO, said at a results briefing on Tuesday.
The provisions were linked to changes in Singapore’s mandatory MediShield Life scheme, which will see premiums rise by up to 35 per cent from April 2025, along with higher claim limits and expanded coverage. The changes were first announced last October.
Great Eastern also noted that Q4 “saw several developments in the medical insurance business from both Singapore and Malaysia”. These developments were taken into consideration, resulting in a lower profit recorded for the period.
Regarding the Malaysia business, Hingston explained that rules introduced by the country’s central bank impacted the insurer’s Q4 profit and prompted an adjustment to its contractual service margin (CSM), which reflects the expected unearned profit over the life of an insurance contract.
The new rules from Bank Negara cap premium increases at 20 per cent annually, with a 10 per cent cap for 80 per cent of policyholders. Meanwhile, premiums for those aged over 60 with basic plans will default to the lowest level.
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Hingston also noted that market sentiment in Malaysia dampened during the quarter. “We did see business soften to some degree, particularly in December,” he said.
Nevertheless, he noted that Great Eastern outperformed in the country – it grew its market share and had strong productivity in its agency business.
Impacted profitability
However, the insurer did not fare as well in the area of new business embedded value (NBEV) as in the previous year, said group chief financial officer Ronnie Tan at the briefing.
NBEV fell 53 per cent to S$105.7 million from S$225.9 million in Q4, while it decreased 9 per cent in FY2024. Tan attributed the decline mainly to the group’s Singapore business, as its Malaysia segment had an increase.
The group wrote down its NBEV by S$91.7 million in Q4 to reflect revised actuarial assumptions following its annual year-end review exercise.
Tan explained that typically, at the end of the year, an actuarial review is conducted to assess assumptions, with adjustments made accordingly.
The significant adjustments last year were driven by changes in insurance experience, expense as well as mortality and morbidity assumptions, and the risk discount rate. Most of the reductions were attributed to Singapore.
Excluding this impact, NBEV in Q4 would have been S$197.4 million, down 13 per cent year on year. This was due mainly to the decline in total weighted new sales (TWNS).
TWNS in Q4 fell 16 per cent to S$432.7 million from S$514.1 million, amid lower single premium sales in the Singapore market.
For the full year, TWNS rose 8 per cent to S$1.8 billion, from S$1.7 billion, as the group’s operations in Singapore and Malaysia continued their growth momentum, driven by agency channels.
Excluding the impact of the revised actuarial assumptions, the group’s NBEV for the full year stood at S$713.2 million, a 4 per cent year-on-year increase on the back of higher TWNS.
Investment outperformance
For the full year, net profit rose 28 per cent to S$995.3 million from S$774.6 million. This was attributed to improvements in the insurance business and also significant investment outperformance for the year.
Tan noted that FY2024 was a “relatively good year from an investment perspective”, with investment markets being “relatively favourable” as the insurer saw significantly higher investment income and investment-related gains.
Great Eastern benefited from cost management initiatives, improved claims experience in the individual life business, and favourable investment performance from its shareholders’ fund.
Profit from the shareholders’ fund surged 112 per cent on the year to S$264.6 million from S$125 million. This was attributed to strong investment performance and mark-to-market gains amid positive investment market conditions.
Meanwhile, profit from the group’s insurance business rose 12 per cent year on year. Tan said the increase was due largely to the risk adjustment, which accounts for reserves set aside for claims and their variance, and the CSM.
The group’s embedded value also saw a 4.1 per cent increase, marking a positive turnaround after two years of decline. Tan explained that the rise was driven by both an increase in the value of imports and an improvement in the adjusted net worth.
Great Eastern’s board has proposed a final dividend of S$0.45 per share, which will be payable on May 6, following the record date of Apr 21.
Including the interim dividend of S$0.45 per share paid in August 2024, the total dividend for FY2024 will amount to S$0.90 per share, an increase of 20 per cent from S$0.75 per share in FY2023.
Barring unforeseen circumstances, Great Eastern said it “aims to maintain each dividend amount to be no lower than the preceding one”.
OCBC’s takeover bid
Last May, OCBC made a S$1.4 billion bid for the remaining 11.56 per cent stake in Great Eastern that it did not already own, with the aim to delist the insurer.
The bank held nearly 94 per cent of the insurer when the takeover offer closed in July, but this was not enough for Great Eastern to delist, or for OCBC to compulsorily acquire the rest of its shares.
However, it did result in Great Eastern breaching the minimum free float requirement, and its shares were suspended from trading.
In January 2025, the insurer made an application to the Singapore Exchange (SGX) for a further extension of time to examine its options for complying with the free float requirements under the SGX’s listing rules.
SGX had no objection to granting the extension and Great Eastern has until May 25 to explore options.
During the Q4 results briefing, Hingston noted that the board was “considering the options” and looking to appoint a financial adviser who will help assess these different courses of action.
“Once they determine which option or options make sense, shareholders will be updated in due course,” he said, adding that he could not comment further at this time.
Shares of Great Eastern have been suspended from trading since July.
