GEH 2Q12 earnings were within expectations. Great Eastern Holdings (GEH) reported 2Q12 net profit of S$81.4m, down 31% YoY.  Earnings were dented by weaker investment performance from less favourable market conditions.  This is in line with our expectations of weaker insurance profitability, which we highlighted in our OCBC previewnote dated 16 Jul 12.  This set of results reaffirms our view that OCBC's 2Q12 net profit would be sharply softer QoQ. We maintain NEUTRAL recommendation on OCBC, with a target price of S$8.54 (from current traded S$9.55), pegged to 1.3x book ' this has factored in the gains from the recent sale of F&N and APB stakes.

Expect OCBC to record weak 2Q12 insurance income. 2Q12 insurance operations profit was S$75.9m, down 33% YoY. The weakness was largely due to the non-participating fund segment, which recorded S$1.7m profit versus 2Q11's S$46.9m. Falling interest rates,widening credit spreads and declining equity prices led to overall mark-to-market losses.  This will translate to weaker OCBC 2Q12 insurance income.


GEH has declared an interim tax exempt (one-tier) dividend of 10S'' per share.

Source: OSK