Mon, Nov 26, 2018 - Page 16 News List

Hedging losses weigh heavily on life insurers: FSC

By Kao Shih-ching  /  Staff reporter

Net foreign-exchange losses for local life insurance companies totaled NT$178.2 billion (US$5.77 billion) in the first 10 months of the year, up 21.6 percent from the same period last year, due to an increase in hedging losses, the Financial Supervisory Commission (FSC) said on Thursday last week.

Local life insurers booked foreign-exchange gains of NT$354.3 billion as of the end of last month, as the New Taiwan dollar depreciated by 3.75 percent against the US dollar in the first 10 months.

However, those gains were offset by heavy hedging losses of NT$507.5 billion as of Oct. 31, the Insurance Bureau said at a news conference in New Taipei City.

The higher costs came as many local insurers had to hedge for their US dollar-denominated assets after the greenback’s strength began building in April, a commission official said.

RECORD LOSS LOOMS

Net forex losses in the first 10 months have surpassed losses of NT$176.1 billion in the whole of last year, and the number this year could exceed NT$200 billion and reach a record, the commission said.

That could affect insurers’ profitability, it said.

From January to last month, insurance companies reported combined pre-tax profit of NT$131.4 billion, up 4.8 percent from the same period last year, with profit among life insurers increasing 4.7 percent to NT$117.4 billion and rising 5.3 percent to NT$14 billion among property insurers, commission statistics showed.

Meanwhile, life insurers saw their combined net value decline 17.8 percent to NT$1.12 trillion from a year earlier, the lowest in 22 months, the commission said.

The more than 10 percent drop in several equity markets worldwide last month reduced the value of insurers’ foreign-equity holdings and affected their net worth, Insurance Bureau Deputy Director-General Wang Li-hui (王麗惠) said.

In January, all insurance companies saw their combined net value reach NT$1.51 trillion — an all-time high.

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