How Exposed Is Great Eastern Holding Limited To The Threat Of Autonomous Vehicles?

Credit: Sam Churchill

In a previous article of mine, I had written about how autonomous vehicles have the potential to drastically reduce the frequency of accidents.

If that comes to pass, one implication is that the premiums charged for car insurance could fall hard too. In the article, I mentioned that Great Eastern Holding Limited (SGX: G07) is one company in Singapore’s market that provides car-related insurance.

Let’s have a look into the sources of Great Eastern’s revenue and profit. In the first-half of 2016, the insurer had taken in S$4.54 billion in gross premiums. It also recorded S$205.3 million in profit from its insurance business. So the question here is: Of the S$205.3 million in profit, how much of it comes from general insurance? This is the sector that includes car insurance.

Source: Great Eastern’s earnings release

As you can see above, general insurance only accounted for S$14 million of the company’s S$205.3 million in total profit from insurance business – it’s just 6.8% of the total.

Great Eastern does not breakdown its general insurance business, so it’s likely that car insurance accounts for less than S$14 million in profit. This also means that the insurer is not exposed in a big way to autonomous vehicles.

Besides, Great Eastern probably has many years to adapt its business before autonomous vehicles become truly mainstream and potentially pressure car insurance premiums.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ong Kai Kiat doesn't own shares in any companies mentioned.