Ceo Report

GREAT EASTERN ANNUAL REPORT 2005

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CEO’s Report

The different chapters of our life story…

Great Eastern continued to be the market leader in the life insurance industry in 2005 with an improved market share of 23.3% in Malaysia. The asset size of the Company grew to RM26.7 billion in 2005, an increase of 11.4% over the previous year. Investment income increased by 7% to RM1.3 billion despite the low bank interest rate regime for much of the year. The profit attributable to shareholders for the year ended 31 December 2005 is RM280.8 million. In 2004, the profit attributable to shareholders was RM328.4 million which included the one-off profit of RM35 million from the sale of OCBC Bank shares. Gross premium income increased to RM4.1 billion with robust growth in the sale of investment-linked products, which is in line with the Company's strategy to develop and increase the market share for all business segments. During the year 2005, the Company declared a One-Time Special Bonus of RM60.2 million, which was given to some of the Regular Premium Whole Life and Endowment policies bought on or before 31 December 2003. This Special Bonus was given to close to one million of our policy owners. With continuous growth in premiums and profits each year, the Company is largely on track to achieve our vision of being the choice financial service provider in the region when we celebrate our 100th Anniversary in 2008.

Customer Acquisition – Agency Management The Company continued its focused strategy to grow the investment-linked business for 2005 using our main distribution channel, i.e., the tied agency force. This resulted in another double-digit growth in new business premiums for investment-linked plans (ILP) and more than 100% growth in ILP policy owners.

New initiatives and motivating programmes were introduced in 2005 with the key objective to enhance productivity and increase sales for the 17,000 agents throughout Malaysia. Various mentoring programmes were launched to provide dedicated guidance and training for aspiring performers, e.g. the Great MDRT Achievers Programme, which is a mentoring programme for aspiring MDRT qualifiers/members and the Great ILP Mentoring Programme, for developing ILP-focused agents. While new programmes were launched, existing and on-going activities were well-received by the members of the field force; who have been recognised as the most aggressive, vibrant and professional field force in the market place. These new programmes comprised orientation programmes for agents that were promoted to a higher level, head-start and final sprint seminars, sales and leadership enhancement workshops and the Annual Supremacy Award ceremony. Agency Management continued its other key strategy of continuous learning and structured recruitment to enhance the professionalism and skills of the field force. This was

achieved via introduction of training programmes such as Peak Performance And Continuous Excellence (for developing professional agents), besides other comprehensive training programmes and communication sessions to keep them updated on recent changes in guidelines from the regulators. Recruitment of new agents is an on-going process, and the quality of the new recruits has been improving each year via the Company Organised Recruitment Programme and joint graduate recruitment drives with Agency Leaders. Regular Business Opportunity Programme (BOP) had been organised at all branches in collaboration with Agency Leaders. In addition, we have joined efforts with selected Agency Leaders to organise campus recruitment programmes targeted at recruiting final year graduates. Great Eastern and OCBC Bank have jointly initiated an Agent Referral Programme in July 2005 to engage the field force in selling Great Eastern-OCBC Bank co-brand Credit Card. To ride on the strength of our field force, OCBC Bank is embarking on a joint initiative with the Company to promote other loan-based financial products as part of its financial planning initiatives. Our pioneer effort in this may pave the way for a gradual transformation of our professional agents to full fledge financial advisors.

GREAT EASTERN ANNUAL REPORT 2005

2005 Agents' Honour Roll

Bancassurance

Top 3 Group Sales Managers with Investment-Linked Rider Toh Chun Shiong Tan Lay Seong Tan Kuen Wei

Top 3 Group Sales Managers without Investment-Linked Rider Tan Lay Seong Toh Chun Shiong Tan Soo Hin

Top 3 Unit Sales Managers with Investment-Linked Rider Chen Lai Li Cheng Wan Leng Mok Weng Onn

Top 3 Unit Sales Managers without Investment-Linked Rider Ng Heap Teik Mok Weng Onn Chuah Kang Boon

Top 3 Career Agents with Investment-Linked Rider Gui Siew Luang Heng Shoou Ju Kiu Siu Ung

Top 3 Career Agents without Investment-Linked Rider Heng Shoou Ju Nalla Thambe a/l Ramasamy Serjit Kaur

Top 3 Agents with Investment-Linked Rider Bo Chin Hoong Oo Huei Ying Goh Ek Sean

Top 3 Agents without Investment-Linked Rider Datin Teh Beng Swan Nagarajan a/l Ramasamy Chan Mui Lin

Top 3 Personal Producers with Investment-Linked Rider Bo Chin Hoong Tan Kuen Wei Tan Lay Seong

Top 3 Personal Producers without Investment-Linked Rider Heng Shoou Ju Nalla Thambe a/l Ramasamy Datin Teh Beng Swan

*MDRT Qualifying & Life Member Robert Cheah Booy (23 years) Teh Boon Sing (22 years) G Satheesan (21 years) Chang Chee Kiang (18 years) Mahalingam a/l Vellasamy (14 years) Gan Sing Shoo (13 years) Chua Choh Wan (12 years) Lai Kok Fung (12 years) Lau Kim Noi (11 year) Cheah Har Mooi (10 years) Subramaniam Ponnusamy (7 years)

*MDRT Court of the Table Ng Nyet Chin (qualifying & life member 10 years) Heng Shoou Ju (qualifying member 9 years) Kiu Siu Ung (qualifying member 9 years) Kuan Sousa (qualifying member 9 years) Lee Moi Chin (qualifying member 9 years) Ng Bok Her (qualifying member 9 years) Tang Nyut Kiow (qualifying member 8 years) Datin Tan Po Moi (qualifying member 7 years) Cheng Wan Leng (qualifying member 6 years) Yau Kim Choy (qualifying member 5 years) Chen Foong Ling (qualifying member 4 years) Hua Chwee Lan (qualifying member 4 years) Ravi Doraisamy (qualifying member 4 years) Leong Wai Haan (qualifying member 3 years) Pua Han Nee (qualifying member 3 years) Tan Yoke Chan (qualifying member 3 years) Chen Lai Li (qualifying member 2 years) Lee King (qualifying member 2 years) Lo Lai San (qualifying member 2 years) Ong Yeok Aye (qualifying member 2 years) Oo Huei Ying (qualifying member 2 years) Tan Wha Chong (qualifying member 2 years) Goh Ek Sean (qualifying member 1 year) Lawrence Tan Sau Poh (qualifying member 1 year)

*MDRT Life Member Michael Cheong Moon Lam (15 years) Tan Poo Hong (12 years) Honour Roll G Satheesan *MDRT Top of the Table Jackson Ting Hwong Sui (qualifying member 8 years) Tony Ng Keng Hong (qualifying member 8 years) Gui Siew Luang (qualifying member 6 years) Tan Lay Seong (qualifying member 6 years) Toh Chun Shiong (qualifying member 6 years) Wong Hang Yoke (qualifying member 5 years) Tan Kuen Wei (qualifying member 2 years) Bo Chin Hoong (qualifying member 1 year)

*Great Eastern proudly produced a total of 467 Agents in year 2005 who have met the MDRT production requirements.

Bancassurance started 2005 with the successful launch of a Guaranteed Income Plus Plan with our partner bank, Public Bank Berhad, in April 2005. Public Bank distributed a five-year single premium endowment plan via all of its branches nationwide in Malaysia. All the tranches allocated were fully taken up within a short period. Several measures were taken to further promote Mortgage Reducing Term Assurance (MRTA) as an attractive and competitive product in the market. This included the innovative packaging of riders, and in particular our Refund of Premium rider, which recorded encouraging take-up rates. Despite the competitive market and other sales campaigns introduced by competitors, the Company registered growth in MRTA sales in 2005 as compared to 2004. This was achieved through the innovation of products, which catered to the business banking segment and our continuing efforts in enhancing relationships

Group Insurance

Group Insurance had a great year, with new business growth of 30% in 2005 as compared to the previous year. In 2005, the Reward Insurance Scheme (RIS) product reached another significant milestone with enhancements in benefits. During the year, efforts have been stepped up to increase awareness of RIS via regular training and communication sessions. The teamwork and activities between members of the field force and Group Insurance team have resulted in an 82% increase in the number of customers.

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with our partner banks – Public Bank and others, to promote the Bancassurance business. Throughout 2005, the Bancassurance team enhanced our partner banks’ servicing via regular participation in their sales and marketing events. This included wealth management events as well as joint marketing in property development launches. To strive for a broader reach of the market, Great Eastern has secured new tie-ups with more partner banks, and this is expected to contribute positively towards MRTA sales results in the near future. The foregoing initiatives have resulted in a 30% increase in new business premiums for 2005 over 2004 and Great Eastern is well positioned to gear for the challenges of 2006 even as market competition intensifies.

throughout the year. Promotional activities with members of the field force, together with the strategy to penetrate new market segments have sustained the growth momentum for this business segment. For the employee benefit scheme market, Great Eastern secured business by leveraging on the support of international pooling from two multi-national companies. The potential growth for this market segment continues to be optimistic as the Malaysian workforce increases each year.

The mainstay Group Multiple Benefits Scheme, with its lowcost comprehensive cover continued to attract new business

Marketing

We started 2005 database marketing working with external partners who own ‘young’ databases. During the year, Great Eastern also partnered Dumex and co-sponsored education plans worth RM380,000 for their “Building Better People” contest. The objective was to position Great Eastern as the insurer for young families with children. It created awareness of Great Eastern amongst the general public and also generated leads for our agency force. Since its inception in 2003, we have further established the Customer Relationship Management (CRM) initiative in 2005. This was achieved via insights-driven campaigns throughout

the year to encourage cross-selling or up-selling activities with sales promotions to our policy owners. It has resulted in a fourfold increase in the premium generated through insights-driven campaigns in 2005, as compared to 2003. CRM will continue its efforts as initial results have shown that these initiatives are effective in helping members of the field force. In addition, the campaigns have produced useful customer insights for effective targeting and helped increase brand affinity with the customers.

GREAT EASTERN ANNUAL REPORT 2005

Human Capital

Product Development Our Company continued its efforts to provide our customers with a good mix of traditional life insurance and investment-linked products for 2005. We introduced a buyback option to our accelerated dread disease product, Supreme Livin’Care Plus. This new product in the market allows the policy owners the option to buy back the death benefit to the maximum amount of basic sum assured in the event that he/she is diagnosed with any one of the 36 illnesses covered under the plan. In line with the changes in the guidelines from the regulators in 2005, the product development team reviewed the prices of some of the products such as the Supreme Livin’Care Plus, Great LifeCare, MultiCash Lion Endowment Series 3, GreatJunior Advantage Series 2 and Junior Advantage Rider Series 2.

Operations

The key operational departments in Great Eastern have an important role to provide continuous improvements to achieve operational excellence. Besides on-going operations and the efforts to meet the targeted customer service turnaround time, several other key initiatives were implemented. The Company launched its electronic submission (e-Submission) solution following a successful piloting phase in 2004. The e-Submission solution is an alternative option for agents to submit insurance proposals online to cater to a growing segment of customers who prefer the convenience of online transactions and services. At the Customer Service Department, several initiatives were implemented to improve operational efficiency and customer service standards, e.g. a knowledge management system for all touch-points in Customer Service. The Agent Empowerment Programme 3 was further extended at the Head Office and branches with the introduction of fast-track self-help counters and the implementation of Streamyx for faster connectivity between branches and the head office. The Great Service Culture Programme was carried out for the third year at the Head Office

Information Systems

Great Eastern continues its efforts to achieve operational efficiency and improve customer service via enhancements in information system applications and infrastructure. Despite the challenges arising from the Company’s mainframe migration project, the Information Systems team continued to implement new projects to support agents and policy owners. Some of the key initiatives and projects implemented for 2005 included the following: Enterprise Document Processing Solution – Great Eastern is the first life insurance company in Malaysia to implement an endto-end and straight-through processing solution for the production of policy documents. With this solution the policydocument-binding process becomes cost effective and efficient, and plays a big role in improving customer service. GEMobile Solution – This is a system that allows agents to use PDA (Personal Digital Assistant) devices to download customer

Following the success of the Great SeniorCare launched in 2004, Great Eastern enhanced the product and launched the new Great SeniorCare Plus, 50Care Plan and Great GoldenCare Plan – which cater to the needs of the senior citizens market segment. Products distributed via Bancassurance such as the Guaranteed Income Plus Plan, and Great Lion Prosperity Plan, which are single premium endowment products were also launched during the year.

with emphasis on inter-departmental cooperation and agency relationship in delivering service excellence. In a division where there is constant interaction with customers, both front and back end, there is a need to ensure that the staff are competent and knowledgable in all aspects of their job scope. The Underwriting Support Department helps in this area with structured training for new solutions such as the e-Submission and “Train-the-trainer” programmes. The Field Underwriting Manual, launched in 2005, is a simple underwriting reference guide to help the agents understand standard underwriting requirements, relevant ratings for hazardous occupation, avocation and the probable action needed under different environments for completion of a new business proposal. Similarly, the Customer Service and Claims Department organised training and communication sessions at branches to ensure that development of skills is also carried out at service centres throughout Malaysia. All these efforts were made to ensure that excellent customer service will be provided at all times to our customers and policy owners.

information, carry out financial planning and conduct online inquiries via the mobile network. i-SmartSell Website via e-Partner – This allows agents to participate in the Company’s CRM programme in a convenient and effective manner. e-Statement – Provides summary and detailed commission statements via e-Partner. Apart from new systems, Great Eastern invested in infrastructure enhancements to ensure improvements in application development, security of systems and database. The Capability Maturity Model Integration and IT Infrastructure Library were started in 2005 to allow the development and technical services team to apply the best practices for application development. At the same time, the Enterprise Security Management System was implemented to provide the team with the capability to have a single view of various security exposure and indicators.

Besides being a key employer in the Malaysian insurance industry, Great Eastern has also been a pioneer in the education and development of the insurance industry professionals. With the onset of globalisation, there is increased pressure on the industry to employ technically skilled workers. The elite Management Trainees Programme provides the talent pool of future leaders for our Company. By working closely with local and international universities, colleges and educational institutes, Great Eastern is able to draw its talents with backgrounds in quantitative studies, actuarial sciences and technical disciplines. With such backgrounds, Management Trainees will be able to appreciate more fully the business risks and be a better fit for the Company’s line of work. Apart from attracting potential talents, existing talents in the Company are given an education impetus through the Company’s Education Assistance Scheme which supports staff in their Actuarial, Malaysian Insurance Institute, Accountancy and other professional related courses through the reimbursement of examination fees and books. Complementing this scheme is the Company’s drive in motivating its staff to take up the Life Office Management Association (LOMA) examinations. Reimbursement of examination fees and books and an attractive award scheme awaits staff who pass these examinations. As a good corporate citizen, Great Eastern is committed to developing staff with the right technical skills, who can play the role of a coach/mentor and develop leaders for the financial services industry. The Company has also in place a structured Practical Training attachment programme, which allows undergraduates from universities to undergo practical training with the Company. This win-win approach helps us to identify potential talents for recruitment.

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Great Eastern also offers scholarships to outstanding students gaining entry into local and overseas universities. To support the Company’s expansion in the region, and also to gain better insights into doing business in China, we now offer regional scholarships to students gaining entry into selected top universities in China. The Company’s scholarship initiative has assisted 45 students with an investment of RM1.52 million since it started in 1998. A structured Performance Management System assists employees with their performance planning, development planning and appraisal needs, ensuring a comprehensive and fair system for employees to achieve their goals and targets. This in turn provides clear direction on how rewards get delivered within the Company. Another initiative is the Job Rotation programme, which helps the Company build a multi-tasking workforce that is flexible, adaptable and easily deployable. This talent development programme prepares the Company for future challenges through on-the-job learning attachments. As great efforts are spent in recruiting and developing talent, Great Eastern also reinforces the need to recognise outstanding talents through the Chairman’s Award. This annual award recognises outstanding achievements across the board, culminating in a special award presentation during the Company’s Annual Dinner & Dance. A GREAT learning and development culture exists in Great Eastern that supports and spurs outstanding talents to greater achievements.

GREAT EASTERN ANNUAL REPORT 2005

Corporate Communications & Branding

Risk Management

In the Corporate Communications area, the Company kickstarted the year with the Great Eastern “Life is great!” National Dance Competition – a modern dance competition open to all secondary school students in Malaysia. Organised by Nanyang Siang Pau, Great Eastern was the main sponsor for the event and the objective was to promote arts and culture among the younger generation. This was one of the activities carried out throughout the year to promote Great Eastern and the “Life is great!” philosophy in Malaysia.

To further enhance brand awareness, outdoor advertising continued with unipole advertising at strategic locations in Penang and Johor Bahru, and a creative advertising panel in Jalan Damansara – which continues to be the ‘talk-of-the-town’ in the Klang Valley area. New outdoor advertising activities were implemented in Kuala Lumpur International Airport departure level and advertising panels were placed at the Kuala Lumpur Monorail station, which is now called the “Great Eastern Station”.

Other branding activities of the same nature included The Sun Motor Hunt, The Torch Run Procession in conjunction with the 22nd Malaysian Chinese Cultural Festival and the sponsorship of the Operafest Children’s Choir for the “Life is great!” Across Borders Charity Concert.

Great Eastern received the Reader’s Digest SuperBrands Gold Award (Insurance Category) for Malaysia for the second year running. This status was awarded to Great Eastern for receiving the highest ratings from consumers; voted quantitatively and qualitatively on five key attributes, i.e., quality, value, trustworthiness, strong image and understanding of customer needs.

Following the success of the photo contest two years ago, Great Eastern organised the “Life is great!” Photo Contest in the second quarter of 2005. It received overwhelming response from the public and winners were presented with their cash prizes in August during the prize presentation ceremony and exhibition of winning photos. The Company organised a ground breaking ceremony to mark the beginning of the construction of Great Eastern’s new Penang branch office building in a heritage conservation site in Penang. Targeted to be completed in 2007, Wisma Great Eastern Penang will be a 5-storey office structure boasting a nett lettable space of 82,000 sq ft.

The Company’s long-term charity project, ChildrenCare, had a fresh new look when we organised a ChildrenCare relaunch at the start of the year. With the support of agents and staff, fund raising promotions continued to be held throughout the year to create awareness for the Company’s charity project and to raise funds for ChildrenCare. Other activities were held as part of ChildrenCare’s contribution to needy children, e.g. Staff/Agents’ Visit to Miracle Home and the ChildrenCare Outing to Aquaria KLCC where children from five homes were treated to a trip to learn about marine life.

Property Our Branch Offices The Company has continued its efforts to enhance its branch premises in terms of consistent branding and corporate image, and to acquire suitable properties to house our branch offices.

Investment Properties Great Eastern Mall, having established itself as the favourite neighbourhood mall in its vicinity, has continued to attract discerning patrons into its outlets. As at 31 December 2005, the occupancy of the shopping centre stood at 89%.

The Kuantan, Kluang and Tawau branch offices moved into their new premises during the year. We have taken possession of the new Kuching property and renovation works are expected to start by the first quarter of 2006. We are expecting to take possession of the Bintulu property in early 2006.

Menara Great Eastern has reached an occupancy rate of 96%, with the balance vacant space reserved for the Company’s future expansion. Since the Company took over Menara Weld on 1 June 2004, the office tower has enjoyed a healthy occupancy of 88% as at 31 December 2005. The re-positioning works to the retail podium are nearing completion, with several tenants having started doing business in the centre. It is expected to be fully opened to the public by early 2006.

Construction work on the Penang building has been in progress since March 2005 and is expected to be completed by the first half of 2007. The proposed re-development to the Batu Pahat property is also expected to commence in the early part of 2006. As at 31 December 2005, ten of the 24 branches are located in company-owned premises throughout Malaysia.

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Construction of the 113 units of low-density luxurious apartments behind the existing Menara Great Eastern/Great Eastern Mall complex has been progressing since July 2005. With its expected completion in 2007, the Company’s aspirations of owning a distinguished piece of real estate comprising an integrated mix of up-market commercial retail, commercial office and residential properties will become a reality.

The management of risk is an integral part of the Company's management practice. The Company has an established risk management framework, which largely comprises a risk governance structure and a risk management process. The year 2005 saw the risk management framework undergo an extensive review to determine the alignment of its various components to the established structures and roles, procedures, policies and regulatory requirements. Under the risk management project “RK20.12”, this framework now includes the setting of specific risk categories to facilitate more focused and effective risk management and to provide a more systematic approach to the risk management process. A methodology for the aggregation of operational risks based on the specific risk categories was also developed to determine the operational risk exposure at various levels.

Alex Foong Soo Hah

Director & Chief Executive Officer 28 April 2006

As part of the risk management process, the Management continues to be vigilant of the risk landscape with regular review and monitoring of key risks. Several risk awareness training programmes were also conducted for members of staff to reinforce the importance of good and effective risk management. With all of our strategies and improvement programmes in place, and barring any unforeseen circumstances, we are confident of achieving our centennial goals of growing our assets to RM40 billion and a profit-after-tax of RM400 million in the year 2008. Thus, we are in line with our vision to be the leading financial service provider in this region, recognised for our excellence.