Cathay remains asset-rich

Cathay Financial Holding Co (國泰金控), the nation's largest financial group by capitalization, reported a strong showing in asset value according to several measures.

Flagship unit, Cathay Life Insurance Co (國泰人壽) is estimated to have embedded value of between NT$267 billion (US$8.37 billion) and NT$298 billion, or between NT$31.6 and NT$35.2 per share of the value of parent company Cathay Financial, the company told an investor conference yesterday.

The figures are based on accumulative results for the end of last year.

The appraisal value also includes the value of new insurance policies which brings the company's assets to between NT$499 billion and NT$591 billion, or NT$58.9 and NT$69.9 per share of the value of Cathay Financial, a representative said.

Embedded value can be used to refer to the present value of insurance firms while appraisal value indicates future profits.

Cathay Financial closed down 0.42 percent at NT$71.50 on the Taiwan Stock Exchange yesterday.

Value

"The current share price reasonably reflects the company's value," SinoPac Securities Corp (建華證券) said in a report released yesterday.

Cathay Financial created NT$7.94 billion, or NT$0.93 per share in first-quarter earnings, up from NT$4.79 billion, or NT$0.57 per share, from a year earlier.

The company's profits momentum for the current period appeared positive as long as the stock and property markets continued to prosper and the nation's interest rates spread with the US can be further narrowed.

The latter would help cut its hedging costs of overseas investment, said Sherry Lin (林淑娥), an analyst who tracks Taiwan's finance sector at Credit Suisse (Hong Kong) Ltd.

Meanwhile, Cathay Financial decided to give shareholders NT$2.0 per share for dividends this year, comprising NT$1.5 in cash and NT$0.5 in stocks, the first-time a stock dividend has been issued since the financial holding firm was established in 2001.

This saves the company as much as NT$4 billion in cash, a sum which is likely to be used for future acquisitions, according to Cathay Financial.

"We want to keep some cash at hand for more flexibility," the company's spokesman Lee Chang-ken (李長庚) said, citing its takeover of smaller rival Lucky Bank (第七商銀) last year.

Cathay Financial was interested in the state-controlled First Financial Holding Co (第一金控), Chinese-language reports said earlier this week, citing Chairman Tsai Hong-tu (蔡宏圖).

Lee however remained tightlipped yesterday, saying that they may not make the move until the government's shareholding disposal policy became clearer.

Bad debts

On the issue of consumer bad debts, Cathay Financial expected its banking arm Cathay United Bank (國泰世華銀行) to continue incurring a large amount of provision expense in the current quarter, following a NT$4.7 billion expense result in the January-March financial period.

"I am not that positive as the regulator expected the bad loans to peak in July," the bank's executive president Joseph Jao (饒世湛) said, adding that he expected the peak to arrive in the third quarter.