Great Eastern Holdings said its third-quarter net profit fell 72% to S$102.9 million, down from S$372 million a year earlier, as weaker investment valuations and a one-off loss on the partial sale of its Indonesian life insurer cut into earnings.

The result matters beyond the insurer. Great Eastern is a subsidiary of Oversea-Chinese Banking Corp., and its numbers landed on the first trading day of a week in which all three Singapore banks report. OCBC shares were down 3.7% at S$28.22 as of 11:43 a.m. Singapore time on Monday, the steepest drop among the three lenders, according to The Business Times.

Where Great Eastern's profit went

The core insurance business held up. Core insurance profit rose 6% in the quarter to S$179.3 million, according to the company's results table. The damage came from investments. The insurance fund booked a S$30.8 million investment loss, against a S$59.6 million profit a year earlier, and the shareholders' fund swung to a S$45.6 million loss from a S$143.2 million profit.

Great Eastern blamed financial market movements for the hit to its investment valuations. Its nine-month financial summary said other comprehensive income also showed a loss, mainly from mark-to-market losses on fixed income holdings as interest rates rose. Higher yields have been visible in Singapore's own government paper too, where savings bond and Treasury bill yields have climbed in recent weeks.

The second drag was a one-off. On Sept. 1, Great Eastern completed a partial sale of PT Great Eastern Life Indonesia to OCBC Indonesia, a deal it said was needed to comply with local regulatory requirements. It no longer controls the Indonesian unit. The sale produced a S$57.1 million loss on disposal in the income statement, which the company said was largely offset by a S$52.6 million reclassification gain recorded in other comprehensive income. The net effect on total comprehensive income was "broadly neutral," the insurer said, adding that the accounting remains subject to the year-end audit.

Group Chief Executive Greg Hingston said in the release that market swings had affected reported profit but did not change the strength of the underlying business.

Sales slow, but margins on new business improve

New business embedded value, the industry's gauge of the profit expected from policies sold in a period, rose 14% in the quarter to S$208.2 million. Over nine months it was up 23% at S$613.5 million. Great Eastern credited a more favorable and diversified product mix.

Sales volume was softer. Total weighted new sales fell 3% in the third quarter to S$362.4 million from S$373.1 million. In Singapore, the largest market, quarterly sales slipped to S$238.1 million from S$251.9 million, according to The Business Times. Malaysia edged up to S$117 million from S$113.3 million.

The nine-month picture is stronger. Weighted new sales rose 9% to S$1.18 billion, with Singapore up 11% and Malaysia up 4%, the financial summary showed. Nine-month net profit was down 1% at S$952.4 million, as a 22% rise in core insurance profit to S$742.7 million offset most of the investment weakness.

The company said the capital adequacy ratios of its insurance subsidiaries remain above regulatory minimums. It gave no figures in the release.

Read-through for OCBC and the banks

Great Eastern feeds directly into OCBC's earnings, so a weak quarter at the insurer tends to show up in the bank's non-interest income. The Business Times reported that OCBC's sharper share-price drop on Monday followed the Great Eastern release. At the same time, DBS Group was down 2.5% at S$71.31 and United Overseas Bank was down 2.2% at S$40.48. By noon the three had pared some losses, with OCBC at S$28.26, DBS at S$71.41 and UOB at S$40.53.

The bank selling pulled the Straits Times Index down 1.4%, or 72.9 points, to 5,303.84 at noon, according to the newspaper.

Analysts quoted by The Business Times expect wealth management fees at the banks to ease in the third quarter after a strong second quarter, with net interest margins still under pressure. They also expect investors to ask about lending tied to artificial intelligence and about how rising bond yields affect the banks' investment portfolios and capital. The same analysts expect asset quality and capital positions to remain sound.

Great Eastern warned that the investment outlook is likely to stay difficult in the near to medium term because of geopolitical uncertainty and inflation pressure. Its shares closed at S$19.11 on Friday, down 1.2%.

UOB reports third-quarter results on Wednesday, Nov. 4, followed by DBS on Thursday and OCBC on Friday, Nov. 6, when the bank's insurance line will show how much of Great Eastern's quarter carried through.