Great Eastern

Great Eastern: 3Q11 results.
Net income at $40.4m, -76% yoy, -66% qoq, largely due to sharp drop in life assurance profit from non-participating fund, and losses on sale of invmts and changes in fair value (vs gains yoy and qoq).
Co noted that 3Q10 was an exceptional quarter of high earnings as a results of good invmt performance amidst favorable mkt conditions, while 3Q11 was affected by poorer invmt performance, unrealised mark-to-market losses, and an overall decline in insurance profit due to adverse mkt conditions and net impact of falling interest rates on liability valuations.
Nevertheless there were no significant impairment charges.

Underlying drivers remains positive.
Total weighted new sales increased 8% yoy and qoq to $204.6m.
New business embedded value (NBEV) increased 13% yoy and 3% qoq to $86.7m.
Gross premiums increased 3% yoy and 7% qoq to $1.7b.

On outlook, mgt notes the Group’s performance may be affected by interest rate and credit spread movements and volatility in the equity markets resulting from the ongoing global economic uncertainties.

Deutsche notes that Great Eastern’s lower net profit effectively delivered a $67m sequential earnings headwind to OCBC, and implies potential for near term share price weakness for the bank. But notes, given the key driver was recent financial mkt volatility, the house views any weakness as a buying opportunity. Keeps Buy on OCBC with TP $9.70.