Thu, May 18, 2017 - Page 12 News List

China Life Insurance says Forex losses could be easing

By Crystal Hsu  /  Staff reporter

China Life Insurance Co (中國人壽保險) yesterday said it is unlikely to have a better financial performance this year compared with last year due to foreign-exchange volatility, which seriously weakened earnings in the first quarter.

“The chance of a steep pickup in earnings is slim, if not impossible, in light of the pace of the slowdown, although the local currency has shown signs of stabilization, which might help ease hedging costs,” company chairman Alan Wang (王銘陽) told reporters on the sidelines of an investors’ conference in Taipei.

The insurer posted NT$30 million (US$995,355) in net income in the quarter ended March 31, a 98.88 percent retreat from NT$2.69 billion in the same period last year as foreign-exchange losses increased from NT$1.2 billion to NT$6.23 billion, company data showed.

‘UNPRECEDENTED’

“The strong appreciation of the New Taiwan dollar [against the US dollar] is both unexpected and unprecedented,” Wang said.

The NT dollar gained 6 percent last quarter alone, deflating the value of assets based in US currency and driving hedging costs up to 1.73 percent, from an average of 1 percent for the whole of last year, company data showed.

As a result, reserve funds dropped to NT$2.54 billion in March, from NT$6.38 billion at the end of last year.

The worst is likely over, Wang said, referring to appreciation pressure.

CHALLENGES

This year is challenging both in terms of product sales and investment trading, the main sources of income for insurers, China Life president Kuo Yu-ling (郭瑜玲) said.

The hikes in insurance policy costs makes sales more difficult, although the firm achieved a 25 percent increase in gross written premiums to NT$50 billion in the first three months from a year earlier.

First-year premiums stood at NT$21.5 billion, a 3 percent decline from a year earlier.

Wang said the value of new business growth is expected to fall between 6 and 8 percent this year, compared with 8 to 12 percent in the past.

ACTIVITY IN CHINA

China Life’s investment in China’s CCB Life Insurance Co (建信人壽保險) further diluted earnings, with losses of 57 million yuan (US$8.27 million) in the first quarter, a financial statement showed.

Kuo attributed the losses to depreciation of the yuan and a migration to sales of protection-type insurance policies as required by Chinese regulators.

China Life updated its embedded value — which aims to capture the value of an insurer’s future profitability — to NT$222.1 billion, or NT$63.94 per share, at the end of last year, a 21 percent jump from 2015.

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