Tue, May 16, 2017 - Page 12 News List

Cathay Life investment profits up by NT$3.2bn

By Ted Chen  /  Staff reporter

Cathay Life Insurance Co (國泰人壽), the main arm of Cathay Financial Holding Co (國泰金控), yesterday posted a jump in investment profits following a rally on the local bourse.

The insurer reported that unrealized gains from its sale of financial assets rose from NT$3.2 billion (US$106.1 million) at the end of last year to NT$10.3 billion at the end of last quarter, as the TAIEX rallied 8.47 percent during the same period.

Last quarter, the insurer’s investments totaled NT$5.07 trillion, of which domestic equities accounted for NT$40.2 billion, or 7.9 percent, generating 9.1 percent in returns during the period, company data showed.

However, Cathay Financial president Lee Chang-ken (李長庚) said the life insurance subsidiary is reserved about adding investments in local shares to mitigate pressures from an appreciating New Taiwan dollar.

The unit’s overall investment strategy would depend on the US Federal Reserve’s interest rate hike cycle, Lee said.

Cathay Life would continue to move its cash and cash equivalents, which totaled NT$71.7 billion at the end of the last quarter, into overseas fixed income instruments, which are anticipated to generate higher returns compared with opportunities in the domestic market, Lee said.

The insurer can add an additional 2 percent weighting to overseas investments before exceeding regulatory limits, he added.

Cathay Life said that its embedded value at the end of last year rose 16 percent annually to NT$856 billion, or NT$68.1 per share.

Embedded value represents the value of an insurance company’s future profits plus its adjusted net asset value, and in some markets dictates the share price of insurance companies.

The metric does not correlate with the local bourse, Lee said.

The insurer is expected to face diminishing foreign exchange-related pressures, as the strength of the NT dollar begins to stabilize from its volatile rise during the last quarter, Lee said.

Through the use of currency swaps and non-deliverable forwards, the insurer was able to contain hedging costs at 1.55 percent of its NT$3.12 trillion foreign asset portfolio, Lee said, adding that the insurer has set a goal to contain hedging costs between 1 percent and 1.5 percent this year.

Cathay Financial’s net income in the first four months of the year rose 50.76 percent annually to NT$14.97 billion. Earnings per share were NT$0.85.

During the period, Cathay Life Insurance saw its net income jump 123.69 percent to NT$7.27 billion.

Cathay Financial shares yesterday gained 1.32 percent to NT$49.8.

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