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Find Out How Great Eastern's Sales Are Down, But Long-Term Profit Is Up In Q3FY2025 · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Welcome back to the Deep Dive. Today, we are digging into the numbers from Great
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  Eastern Holdings Limited, GEH.
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  We're looking at their performance for the first nine months of 2025, what they call 9M25.
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  And, you know, if you just glance at some of these figures, you might be left
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  scratching your head a bit.
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  So our mission today is to really unpack this, Well, financial paradox.
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  How does a major company like this report a pretty big drop in sales volume,
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  but at the same time show really significant growth in its long-term value and overall profit?
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  Right. Sounds counterintuitive, doesn't it? Selling less but making more. Exactly.
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  Is it genius or just like a reporting quirk? Well, I'd lean towards genius or
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  at least very deliberate strategy. It really reflects a crucial strategic pivot
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  they seem to be making. The numbers tell, well, quite different stories depending
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  on which metric you focus on.
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  To understand why their performance was actually quite good,
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  despite that sales drop, we need to look past the sort of traditional sales headlines.
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  We need to focus on the metrics that really matter for the long-term health
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  of an insurance business.
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  Okay, so what are those key metrics then? We'll focus on three main ones.
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  First, there's total weighted new sales, or TWNS.
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  That's basically a raw sales volume number. Got it, the volume.
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  Then, and this is critical, new business embedded value, NBEV.
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  This measures the long-term profitability that sort of locked into those new
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  sales they did make. Right. The future value.
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  Precisely. And finally, the
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  bottom line everyone watches, group profit attributable to shareholders.
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  That's the, you know, the net profit for the period. Okay. Makes sense.
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  Let's start with that first one, PW&S, the metric that, well,
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  looks pretty rough on the surface. Yeah, it does.
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  Looking at the first nine months of 2025 versus the same period in 2024.
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  TW&S dropped by 21%. That's quite a hit. It's a significant number, yeah.
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  S1,081.7 million dollars, down from S1,363.3 million dollars. Wow.
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  Okay, so for most companies, a 21% drop in volume like that would be setting
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  off alarm bells everywhere. What was the main reason they gave?
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  The immediate cost cited was lower single premium sales, primarily in Singapore.
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  So they weren't selling as many of those sort of lump sum shorter term type policies.
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  And I guess that puts pressure on the sale teams, right, when their main volume
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  number tanks like that. Oh, absolutely.
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  Huge pressure. And that's why understanding the strategy behind it is so key.
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  They seem to be deliberately choosing quality over just sheer quantity.
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  Was it just Singapore or regional too?
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  It was compounded regionally, even just looking at the third quarter,
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  that TWNS decline, which was about 5% in Q3, was also linked to a,
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  well, a challenging environment in Malaysia.
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  Demand there was apparently quite subdued. So tough market conditions generally.
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  Yes, but the company's reaction seems quite deliberate and focused on that long-term value picture.
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  Okay, so that brings us neatly to NBEV, the quality score, as you put it,
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  if TWNS is how much they sold.
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  NBEV is how much profit that new business is expected to generate over, say...
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  The next 20 or 30 years. It's a measure of future profitability.
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  And the contrast here is stark, right? Absolutely striking. Despite that 21%
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  drop in the volume metric, TWNS, the group NBEV actually grew by 16% for the
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  nine months. 16% growth in NBEV.
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  Yeah, hitting nearly half a billion dollars.
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  That's $498.7 million compared to SEC's $428.1 million the year before.
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  So selling 21% less volume, but the business they did right is 16% more valuable long-term.
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  That really underlines the strategic shift. How did they manage that?
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  What drove that improved product mix?
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  It boils down to what they stopped selling and what they focused on selling instead.
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  Those single premium products they cut back on, often quite low margin.
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  Right. Easy sale maybe, but not much profit in it long-term.
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  Exactly. They generate a quick sale, maybe a quick commission,
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  but very little sustainable value for the insurer.
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  They seem to have shifted quite aggressively away from those. Towards what then?
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  Towards higher margin products, things that align with what they see as emerging
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  customer needs, you know, longer term financial planning, protection policies,
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  retirement planning, maybe more complex critical illness cover.
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  Stuff that builds a relationship and a longer revenue stream. Precisely.
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  These policies tend to guarantee a more predictable, high-margin income stream over decades.
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  So yeah, they sold fewer easy policies, but focused on selling more valuable ones.
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  Even in Malaysia, despite the tough market, they apparently held profitability
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  firm by being disciplined on pricing and focusing on quality.
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  Okay, that really clarifies the paradox for you, the listener.
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  They consciously sacrificed that top-line sales number, KWNS,
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  by moving away from low-margin stuff, but boosted the future health metric, NBE,
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  significantly, a real focus on sustainable growth. That seems to be the story, yes.
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  Let's move on then to the overall bottom line. Group profit attributable to shareholders.
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  This is the actual profit they booked. How did that look? That was also up.
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  An increase by a pretty healthy 12% for the nine months.
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  12%. So Saks for $965.7 million versus $860.5 million previously,
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  and the third quarter was even stronger.
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  Yeah. 3Q on its own showed 36% growth compared to the same quarter last year.
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  So definite momentum there in the recent period.
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  Okay. A 12% rise overall. But where did that profit boost actually come from?
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  Was it purely from selling those better margin products?
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  Ah, well, that's where it gets interesting. When you break down that profit
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  figure, there are two main components.
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  And the story here is that the market environment played a huge role this period.
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  How so? The main engine driving that 12% growth was actually the profit from the shareholders fund.
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  That part soared by a massive 45%.
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  Yes. Up to $321.7 million.
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  And the reason given. Favorable market conditions and effective portfolio management.
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  Basically, their investment team had a really, really good run.
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  Wow. Okay. So a huge chunk of the profit increase came from investments doing well.
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  What about the other piece, the profit from the actual day-to-day insurance business?
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  That provided, well, much more modest support.
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  Profit from the insurance business grew by only 1%, just 1%.
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  Only 1%. So it's converted $644 million versus about $638 million.
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  That's stable, I guess, but not exactly shooting the lights out.
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  No, it's quite muted growth on the core operational side.
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  But wait, if NBEV, the future profitability of new sales, was up 16%.
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  Why was the current profit from the insurance operation so flat?
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  Was something holding it back? Exactly.
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  There were some headwinds. On the plus side, they saw steady underlying business
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  growth and, interestingly, improved claims variance from their individual life business.
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  So fewer unexpected claims there than perhaps planned for. That's good news.
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  It is. But that positive was largely offset by a significant drag elsewhere.
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  There was an increase in what they called the loss component.
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  And this was related to updated expectations around, and this is the phrase
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  they use, evolving experience from their medical businesses,
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  both individual and group medical in Singapore and Malaysia.
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  Evolving experience. That sounds like classic corporate speak.
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  What does it actually mean in plain English? It often is, isn't it?
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  Basically, it suggests that things like how often people claimed on their medical
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  insurance, the complexity of those claims, or maybe the actual cost of health
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  care services, went up more than they'd initially anticipated.
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  Oh, okay. So higher than expected medical costs or claims frequency.
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  That's likely it. It forced them to recognize a higher potential loss or cost
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  associated with that part of the business, dragging down the overall insurance
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  profit for the current period.
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  Right. So even while the strategic shift to higher margin life products is boosting
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  future value and the EV, the current reality of running the medical insurance
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  side hit the current profit line. That seems to be the dynamic.
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  A strategic win on one side, but an operational headwind on the other,
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  balanced out by a huge win from the investment portfolio.
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  Okay, that paints a much clearer picture.
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  Now, let's quickly touch on another set of numbers that might seem confusingly
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  negative at first glance. Yeah. The comprehensive income figures. Yes, good point.
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  While that main profit number was up 12%, Total Comprehensive Income,
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  or TCI, which includes other, sometimes more volatile gains and losses,
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  actually went down by 8%.
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  That's 8%. And other Comprehensive Income, OCI, which is a component of TCI,
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  saw a really sharp drop, down 47%. Okay, hold on.
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  How can the main profit be up, but this broader comprehensive income be downspin?
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  That seems contradictory.
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  It does, but it's about what these different measures capture.
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  Think of profit attributable to shareholders as like the realized income for
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  the period money that actually came in from operations and successful investment sales.
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  Right. The cash, more or less. Kind of.
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  Whereas OCI includes unrealized gains and losses.
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  It's more like the value of assets you hold, say, stocks or property going up
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  or down on paper during the period, even if you haven't sold them.
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  It reflects market value fluctuation.
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  Ah, OK. So profit is like your salary hitting the bank, but OCI is like the
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  paper value of your house changing month to month. That's a pretty good analogy. Yeah.
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  And the reason OCI dropped so much was mainly due to things like reduced foreign
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  exchange translation gains.
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  Maybe the Singapore dollar strengthened against other currencies where they
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  hold assets and lower fair value gains on their equity investments.
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  So the market got choppy and the paper value of some assets went down,
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  even though the core profit engine, especially investments they did realize
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  gains on, was strong. Exactly.
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  The OCI decline reflects that broader market volatility and maybe currency movements
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  during those nine months.
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  Doesn't necessarily mean the underlying business health deteriorated in the same way.
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  Got it. That context is crucial. So looking ahead, what's the company saying?
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  The CEO, Mr. Greg Hingston, acknowledged the challenging environment,
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  right? Market volatility, shifting interest rates.
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  Yes, the commentary was quite cautious. They expect continued,
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  quote, elevated volatility and uncertainty, largely due to the global geopolitical situation.
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  No big surprises there, really. But they feel financially stable enough to weather it. Definitely.
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  They made a point of highlighting that their capital adequacy ratios,
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  basically, their financial buffer remains strong and well above the minimum
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  levels regulators require. That financial strength is key.
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  And does that stability allow them to stick to the strategy we talked about
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  focusing on NBEV over TWNS?
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  Absolutely. That's the plan. The group's CEO reiterated their long-term growth
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  strategy, which focuses on three main priorities for customers.
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  Helping them live well, plan with confidence, and retire better.
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  Pretty standard insurance goals, but the focus is on how. Which involves?
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  Delivering those tailored, profitable products we discussed, the ones driving NBEV.
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  Providing really good advice and service both through human advisors and increasingly
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  digital tools, and internally fostering a culture that can adapt quickly agility and innovation.
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  So stay the course on the high-value strategy despite the bumpy market. That's the message.
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  They remain, quote, steadfast in executing the growth strategy to conclude the year on a solid footing.
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  Okay, well, this deep dive has certainly cracked that initial paradox.
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  The 9M25 results really seem to show a strategy in action, prioritizing that
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  long-term margin, the NBEV, over just chasing sales volume, TW&S.
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  That made the underlying business healthier.
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  Yeah, and while the core insurance operations faced some headwinds from medical
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  claims costs, the overall net profit got a very strong boost from,
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  well, stellar performance in their investment portfolio within the shareholders fund.
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  It really highlights the different levers an insurance company can pull. It does.
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  And that NBEV metric really is the one to watch for the underlying health,
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  confirming that pivot towards sustainable value creation seems to be working,
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  strategically at least.
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  So a final thought then. We've seen GEH trade volume for profitability.
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  What could that imply more broadly? Well, it makes you think,
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  doesn't it? This trade-off isn't unique to insurance. You see it elsewhere.
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  What does the success of this kind of high-margin, perhaps lower-volume strategy
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  mean for other industries?
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  Think about, say, tech companies or maybe even manufacturers facing their own
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  shifting consumer demands. Do they keep chasing market share at all costs?
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  Or do they pivot, like GEH seems to be doing, towards finding and serving customers
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  who offer more sustainable long-term value?
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  It's a fundamental strategic question. A really interesting point to consider.
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  Which path creates more resilient businesses in the long run?
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  Definitely something for you, our listeners, to chew on.
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  Thank you for joining us for this deep dive into Great Eastern Holdings' recent
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  financials. We'll catch you on the next one.