TP S$12.20 — Excluding one-time gains, GEH made an estimated 1Q09 net profit of S$42m* (4Q08: S$77m), vs. our full year 2009 forecast of S$330m. As expected, new business premiums continued to be weak as in 4Q08, impacting core insurance profit, and resulting in a lower new business embedded value. The result will nominally boost the non-interest income line and reported net profit for OCBC's 1Q09 result (reporting 6 May), but the weak new business premiums suggest a poor outcome for wealth mgmt and bancassurance fees.

1Q09 profit S$237m, (4Q08: S$77m, 3Q08: S$135m) — Premiums fell 11% qoq to S$1,176m. Life profits were S$266m (4Q08: S$115m), comprising par fund profit S$29m, non-par profit S$195m, ILP profit S$42m. General insurance profit was S$12m in 1Q09. Results boosted by one-time profits of S$213m, meaning recurring insurance profits were S$64.5m.

S$213m non-recurring gains — Adopting risk-based capital in Malaysia gave a S$180m gain on revaluing assets and liabilities from a cost to a market basis. In Singapore an exercise to reduce duration mismatch on longer dated portfolio assets/liabilities in the non-par fund also generated non-recurring gains.

Outlook — The April recovery of equity markets should help lift performance for the rest of 2009, but we suspect lower new business premiums (especially on single premiums) could remain the trend for some time given the events of 4Q08. Mgmt previously indicated that there would be greater reliance on higher margin but lower volume regular premium sales in the near-term.