Great Eastern

Great Eastern: 4Q13 net profit dropped 26% y/y, dragged by mark-to-market losses from its financial assets portfolio, and one-off accounting items. Otherwise, the core insurance business continued to register y/y improvement. Operating profit from insurance business fell 20% y/y to $135m, affected by the combined effect of two one-off items, a release of tax provision in 4Q12 which benefitted the Singapore Non-participating Fund, and a negative impact in 4Q13 from a change in the timing of terminal bonus recognition for the Malaysia Participating Fund. Otherwise y/y growth would have been positive. For the quarter, total weighted new sales rose 19% y/y to $306m, with growth across all channels in S’pore, a pick up in sales of savings and retirement products in Malaysia, as well as continuing growth in takaful sales. New business embedded value (NBEV), a measure of long term economic profitability rose by 41% y/y to $146m for the quarter, thanks to a shift in distribution channel and product mix towards higher margin sales, as well as a change in risk-adjusted discount rates to better reflect market conditions. However, non-operating profit fell 60% y/y to $15m, due to lower mark-to-market valuation of its financial assets portfolio, as news of the US Taper resulted in an adverse impact on the financial markets. The group declared final dividend of $0.40 (FY12: $0.27) and special dividend of $0.05 (FY12: $0.27). Including the interim dividend, total dividends for FY13 would be $0.55 (FY12: $0.64), which implies 3.1% yield. At $17.60, the stock trades at 12.3x P/E, and 1.6x P/B on 13.7% ROE.