Embedded value of Cathay Life up more than 19%

FRESH PERSPECTIVE::The insurer’s embedded value rose following a reappraisal of its real-estate properties, which now have a book value of NT$372.3 billion

By Amy Su  /  Staff reporter

Sat, May 04, 2013 - Page 13

Cathay Financial Holding Co (國泰金控) yesterday said that the embedded value of its life insurance arm, Cathay Life Insurance Co (國泰人壽), reached NT$106.5 per share as of the end of last year, up 19.13 percent from a year earlier, following a reappraisal of the company’s real-estate assets.

“The increase in the value of new businesses and valid contracts, as well as the increasing value of real-estate properties, helped raised the company’s embedded value,” Cathay Life executive vice president Lin Chao-ting (林昭廷) told an investors’ conference.


Following the reappraisal, the book value of the life insurer’s real-estate assets stood at NT$372.3 billion (US$12.57 billion), an increase of NT$188.8 billion from the end of 2011, Cathay Financial said in a report.

The embedded value of the financial holding company rose to NT$53 per share as of the end of last year, compared with the NT$46.1 recorded a year earlier, the report said.

Cathay Life aims to raise its profitability this year by further adjusting its product mix and reducing sales of contracts with lower profitability, Lin said.

The company’s banking arm, Cathay United Bank (國泰世華銀行), said it expects to post an above average net interest margin (NIM).

The nation’s banking sector has seen pricing pressure in NIM since the second quarter last year, following the sluggish economic sentiment.

However, Cathay United looks to slightly raise its NIMs this year from last year, with the margin in the first three months standing at 1.26 percent, compared with 1.24 percent last year.


The bank also plans to expand its business with small and medium enterprises this year, with the focus shifting from loans to deposits and cash flows.

Cathay Financial president Lee Chang-ken (李長庚) called on the government not to raise financial enterprises’ business tax, saying that doing so would seriously hurt the competitiveness of the local financial sector.

The nation’s financial sector has been facing pressure in merger and acquisition costs as a result of the development of China’s financial sector over the last few years, Lee added.

Cathay Financial posted NT$7.06 billion, or NT$0.65 per share, in net profit for the first three months, compared with net income of NT$2.43 billion, or NT$0.23 per share, recorded a year earlier, the company’s report said.


Separately, Cathay Financial said on Thursday its board had proposed distributing NT$1.4 in dividend for each outstanding share, the highest in five years. It would comprise a cash dividend of NT$0.7 and a stock dividend of NT$0.7, a company statement said.

Cathay Financial shares rose 0.37 percent to close at NT$40.55 yesterday, stock exchange data showed. The stock has climbed nearly 30 percent this year.