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Great Eastern's Strong 1H-25 Financial Results · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  If you ever looked at a company's financial report, all those numbers,
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  and just wish someone could, you know, cut through the noise and tell you what's
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  really going on, well, that's exactly what we're aiming for today.
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  We're doing a deep dive into Great Eastern Holdings, GEH, and their latest financials
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  for the first half of 2025.
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  Our plan, simple, sift through the numbers, pull out the key insights,
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  figure out the why behind their performance, and maybe get a sense of what's coming next.
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  We've gone through their financial summary, the media release,
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  their SGX announcement, all of it.
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  The goal is to give you a concise, useful overview. Ready to jump in.
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  Okay, so looking at GEH for the first half of 2025, a few big numbers kind of
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  jump out right away and they, well, they paint a pretty interesting picture.
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  First up, their profit attributable to shareholders, it nudged up just 1%,
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  hitting almost $594 million.
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  That's compared to $587.1 million last year.
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  So pretty modest growth there. But then, interestingly, their total comprehensive
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  income, or TCI, showed a stronger growth, up 6%, reaching $761 million.
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  Now, on the new business side, things look good, too. A solid 16% growth in
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  new business embedded value, NBEV, which climbed to $316.5 million. Yeah.
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  And what's really fascinating there, maybe even a bit confusing at first,
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  is how that NBEV figure sits next to another key number, total weighted new
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  sales or TWNS, because that number, which is basically a measure of sales volume,
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  dropped and not just a little bit down a significant 27 percent to 708.6 million dollars.
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  Just to clarify for everyone, TWS is calculated as 10% of single premium sales
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  plus new regular premium sales. It's about the amount of sales.
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  Whereas NBV, which you just mentioned, grew strongly.
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  That measures the long-term profitability expected from those new sales.
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  So you've got this situation.
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  Strong growth in expected profit from new business, but a big drop in the actual
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  volume of new business written.
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  It raises a really key question for this deep dive, doesn't it?
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  How can profitability shoot up 16% when sales volume tanks by 27%?
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  This isn't just some accounting detail. It points to something strategic happening.
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  We really need to unpack that.
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  That's a great point. It definitely suggests there's more to the story than
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  just, oh, sales are down.
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  So what is the key to understanding that apparent contradiction?
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  Exactly. And these sources are quite clear on this. That drop in TWNS,
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  it was mainly because of lower single premium sales, particularly here in Singapore.
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  But, and this is crucial, it seems it wasn't just market forces pushing sales down.
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  The reports talk about a deliberate shift in product mix. The deliberate shift. Yeah.
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  GEH seems to be actively adjusting what they're selling to better match what
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  customers are looking for now, which seems to be more focused on longer term financial planning.
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  So think of it as consciously moving away from those potentially high volume
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  but often lower margin single premium products. Towards what then?
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  Towards offerings that are maybe more complex, longer term, but ultimately more
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  profitable. and that's what directly pumped up the NBEV margin.
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  It's really a strategy focused on the quality and the long-term value of the
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  business they're writing rather than just chasing sales volume.
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  And honestly, this isn't unique to GEH. You see this trend across the industry,
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  especially in mature markets like Singapore.
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  Insurers are trying to build more sustainable, value-driven relationships.
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  It might mean slower top-line sales growth sometimes, but potentially a healthier business long-term.
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  Okay, that makes sense. A strategic trade-off then, quality over quantity. essentially.
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  Interesting. So let's circle back to
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  that overall profit attributable to shareholders, that modest 1% growth.
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  You mentioned dual engines driving it. What were they? Yes, exactly.
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  Two main things propped up that profit figure. First, they had a really strong
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  performance from their own investments, their shareholders fund.
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  Profit from that fund jumped 32%, hitting S178.5 million dollars.
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  And the reason given was stronger investment performance amid broadly favorable
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  market conditions. So good market timing or strategy there.
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  Okay. So their investments did well. What was the second engine?
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  The second was growth in their underlying insurance business. Now.
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  This part needs a little unpacking because it's slightly complicated.
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  If you just look at the reported number, profit from insurance business,
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  it was actually down 8% to S415.2 million dollars. Down? Okay, why was that?
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  Well, the reports mention specific factors like losses arising from asset liability
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  mismatch and also write-downs from the revaluation of private equity holdings.
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  Asset liability mismatch. Yeah. That sounds quite technical.
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  Can you break that down simply? What does that actually mean for them? Sure.
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  Essentially, it means the value or timing of their assets, like bonds or equities
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  they hold, didn't perfectly match up with the timing or value of the liabilities
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  they have the money they owe to policyholders in the future.
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  It's a common headache for insurers, especially when interest rates are moving
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  around or markets are volatile.
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  You know, the value of your investments might zig when your payout obligations zag.
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  I see. So it's more about market movements affecting balance sheet values than
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  their day-to-day insurance operations. Precisely. And that's the key distinction.
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  Because, as I was saying, their underlying insurance operations did show growth.
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  This came from what they call disciplined and forced management,
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  basically, managing their existing policies well.
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  This led to improved claims experience, fewer big payouts, perhaps,
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  and a lower loss component.
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  So, fundamentally, the core business of managing insurance risks seems to be
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  performing better, even if some accounting or market factors drag down the reported
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  number, it shows operational health.
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  That's a really important difference to understand separating those market fluctuations
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  from the core operational strain.
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  Now, we also saw that other comprehensive income, OCI, had a significant increase.
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  Up 29 percent. What was driving that? Right, that OCI jump. It was mainly driven
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  by mark-to-market gains on bonds.
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  This happened because there was a downward shift in interest rates.
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  Basically, when interest rates fall, the older bonds GEH holds,
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  which pay a higher fixed interest rate, suddenly look more attractive compared
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  to new bonds. So their market value goes up.
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  Ah, okay. Like having a sought-after antique when only mediocre reproductions are available.
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  Exactly. It creates these paper gains, these mark-to-market gains, which boost the OCI.
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  It's worth noting, though, that the reports also mention these bond gains were
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  partly offset by lower gains from their equity holdings compared to the previous
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  year. So not all smooth sailing in the markets.
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  No, definitely not. It just highlights how dynamic things are.
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  Bond values up, equity gains down compared to last year.
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  It affects the overall picture. OK. And if we dig just a little deeper into
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  the financial statements, were there any other sort of fine print details that
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  add color to this? Yeah, a couple of other points stood out.
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  Their insurance service result, which is a key measure under the newer accounting
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  standards, that actually increased significantly, up by almost 50 percent,
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  49 percent to be precise, hitting S-614 million dollars.
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  And the reason given, largely due to improved insurance revenue.
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  So that reinforces the point about the underlying strength of the core insurance
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  operations we just talked about. OK, that's positive.
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  Anything else? Well, on the other side, other investment revenue was down 27%.
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  The main culprit here was a loss on exchange differences as a result of depreciation in USD.
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  Ah, currency effects. Always a factor for international companies. Indeed.
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  It shows how fluctuations in the U.S. dollar can directly impact their investment
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  returns reported in Singapore dollars.
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  And one last detail, the net insurance financial result.
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  It was still a loss, but it was a much smaller loss than the previous year,
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  a significant improvement.
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  This was mainly due to changes in fair value of underlying items for contracts
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  with direct participation features, again, reflecting how market changes flow
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  through their specific types of contracts.
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  So yeah, lots of moving parts, operational improvements, market gains in some
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  areas, market headwinds or currency impacts, and others.
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  A complex picture. It certainly sounds complex. So putting all these numbers
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  and reasons together, what does it tell us about GEH's strategy moving forward?
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  How are they translating this performance into action and shareholder value?
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  Well, their strategy seems pretty clear from their recent actions,
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  especially around product innovation and how they're engaging with customers.
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  In Singapore, for instance, they've launched a couple of really interesting new products recently.
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  There's one called Great Life Multiplier. It's described as a multi-generational
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  whole life plan, and they're specifically targeting the sandwich generation.
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  Oh, people looking after both
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  kids and parents. Yeah. That's a huge demographic with specific needs.
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  Exactly. It shows they're really thinking about specific life situations.
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  Then there's another one, great index income. This one's a single premium endowment plan.
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  It's capital guaranteed aimed at the mass affluent, and it offers yearly payouts
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  linked to an index. trying to capture that demand for safer,
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  income-generating investments, perhaps.
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  And it's not just product launches in Singapore, is it? I saw they're active
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  in Malaysia, too. That's right.
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  In Malaysia, they introduced a third medical rider earlier this year,
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  and they're also building partnerships with clinics and hospitals.
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  The goal seems to be enhancing health protection, but also making the actual
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  experience of getting treatment smoother for customers.
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  It sounds like they're trying to be more than just an insurer,
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  moving towards being a partner in financial and health wellness.
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  I think that's exactly it.
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  And you see it in their broader customer engagement programs, too.
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  Things like the Great Explorer program, which offers family bonding activities,
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  or the Great Finchamp, which is
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  an online game teaching financial literacy basics to primary school kids.
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  Financial literacy for kids. That's quite forward thinking.
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  It is. And all these things, the targeted products, the health partnerships,
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  the engagement programs, they all tie back to this commitment GEH has stated.
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  Meeting evolving customer needs and building those crucial long-term relationships.
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  It's about embedding themselves more deeply, becoming more relevant across different
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  life stages, not just at the point of sale.
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  It feels like a smart long-term play. Absolutely.
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  And what about the shareholders directly? Beyond the strategy,
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  how's the financial health looking from their perspective? Capital strength?
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  Dividends? Yeah, good question. On the capital front, the message is reassuring.
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  The capital adequacy ratios for their insurance subsidiaries are reported as
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  strong and, importantly, well above the minimum regulatory levels.
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  That's always good to hear, especially with market volatility. Definitely.
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  And then there's the dividend. They declared an interim dividend of $0.25 per share.
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  Now, this is after a bonus issue, so for a fair comparison.
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  That's equivalent to $0.50 per share before the bonus issue.
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  And that represents an 11% increase compared to the interim dividend from the
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  previous year on that pre-bonus basis.
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  An 11% increase. Which is pretty decent.
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  It reflects this progressive dividend payment method they adopted back in August 2023.
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  The idea is to have sustainable dividend growth that aligns with their profit trends.
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  And they've been delivering on that. You mentioned the 11% increase now.
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  While the last two financial years saw increases of 15% and 20% respectively.
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  Wow, that's a strong track record recently. It is. And increasing dividends
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  consistently like this, even while navigating market ups and downs and shifting product strategy,
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  it signals real management confidence in their underlying cash generation and
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  their commitment to returning value to shareholders.
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  That's often attractive to investors looking for income.
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  And you mentioned the bonus issue. Maybe just quickly touch on that.
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  It sounds like a corporate finance detail, but worth clarifying. Sure.
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  It's basically a corporate action where they're issuing new shares to existing shareholders for free.
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  In this case, up to about 473 million new shares expected around August 19th, 2025.
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  This came out of an EGM, an extraordinary general meeting held on July 8th.
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  The main technical reason seems to be facilitating the resumption of trading
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  on the SGX stock exchange after a suspension.
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  But the key takeaway for anyone looking at the core business is what GEH themselves emphasized.
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  These corporate developments have no impact on the group's insurance business and operations.
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  Okay, so it's more of a structural adjustment than something affecting their
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  day-to-day insurance activities. Good to know.
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  Looking ahead now, after this strategically, well, nuanced first half,
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  what's the outlook for Great Eastern?
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  It feels like they're walking a bit of a tightrope, balancing these market pressures
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  with that long-term vision.
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  I think tightrope walk is a good way to describe it, and management seems quite realistic about it.
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  Their official outlook mentions expecting continued volatility in the financial markets.
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  No rose-tinted glasses there. Right. They explicitly state this volatility will
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  likely cause fluctuations in the mark-to-market valuation of our assets and liabilities.
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  And that, in turn, will directly impact both their reported profitability and
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  that total comprehensive income figure we discussed.
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  But they're bracing for more ups and downs tied to the markets.
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  Seems so. And they point to specific things they'll be watching very closely.
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  The direction of interest rates, credit spreads, and equity prices.
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  Standard market indicators. But also, crucially, their internal claims experience.
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  That remains a key operational lever for them. Yeah, makes sense.
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  And despite acknowledging these headwinds, it sounds like they're still pushing
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  forward with their strategy.
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  I saw the group CEO talking about accelerating growth.
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  Absolutely. They're not just bracing for impact. They're actively working on
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  their long-term growth strategy through what they call future-focused initiatives.
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  What kind of initiatives are we talking about? It sounds quite broad, but strategic.
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  Things like strengthening capabilities could be tech, could be people,
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  expanding their reach, both in terms of markets and customer segments,
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  and boosting operational resilience, making sure the foundations are solid.
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  All of this, according to the CDO's message, is aimed at unlocking new growth
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  opportunities, supporting innovation and building a solid foundation for sustained
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  value creation in the years to come.
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  So it's a clear message. Yes, the short term might be choppy due to markets,
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  but we have a long term plan and we're investing to execute it.
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  It shows a management team trying to look beyond the immediate noise.
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  Okay, so let's try and wrap this up.
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  To recap our deep dive today, it seems Great Eastern Holdings had a really complex first half in 2025.
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  They showed, I think, real strategic thinking, focusing on profitable growth,
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  on long-term value, even if it meant seeing sales volumes dip in some areas
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  due to that deliberate product mix shift.
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  Definitely. Strong underlying business performance masked by some market volatility
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  and accounting effects.
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  But the core seems healthy. Yeah, and a clear, forward-looking strategy,
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  trying to balance those short-term market realities with their long-term goals
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  around customer needs and shareholder returns.
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  So maybe a final thought for you listening. As you reflect on Great Eastern's
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  approach here, what does discipline management really look like when markets
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  are as volatile as they are now?
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  And perhaps, how could you apply some of these principles, balancing those immediate
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  numbers with longer-term strategic value in your own work, your own investments,
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  or even just how you approach planning?
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  Something to think about. Thanks so much for joining us on the Deep Dive today.