TP S$12.20 — GEH posted lower 4Q earnings due to lower non-par fund profit and impairment/mark-to-market losses on investments. 4Q08 new business premiums fell 67%qoq reflecting weaker market sentiment. 2008 embedded value/share was S$12.23. GEH declared a total DPS for 2008 of S$0.26. The result suggests a possible 40%qoq fall in profit contribution for OCBC's 4Q earnings, as well as likely weaker wealth mgmt fees. GEH remains at just 0.66x price-to-embedded value. We introduce FY2011 estimates.

4Q net profit 76.5m, (3Q: 135.2m, 2Q: S$15.7m) — Premiums fell 39%qoq to S$1,326m. Life profits S$115m (3Q: S$145m), comprising par fund profit S$27m, non-par profit S$67m (see below), ILP profit S$21m. Other operating income was a loss of S$18m as fees were offset by mark-to-market losses and impairment charges on investments. Expenses S$57m more than doubled qoq.

4Q non-par profit S$67m (3Q: S$103m) — due to [a] lower interest rates for unrealized MTM gains on debt, [b] MTM losses and impairment provisions on equities and other assets, [c] increase in long term contract liabilities due to an increase in applicable discount rates. GEH reported a final 2008 embedded value per share of S$12.23, with a new business embedded value of S$0.56.

Challenging business climate — The global downturn is likely to affect new business premiums as seen in 4Q08, while volatile equity and debt markets and interest rates may cause volatility in insurance earnings, particularly in the non-par fund. However GEH retains a solid, well capitalized balance sheet and continues to maintain market share leadership in Singapore and Malaysia.