Cathay Financial cautious on cash utilization plans

CASH PILEUP::Cathay Life Insurance’s cash position had surged to NT$210 billion due to lower payout obligations as more policies matured

By Ted Chen  /  Staff reporter

Wed, Aug 30, 2017 - Page 12

Cathay Financial Holding Co (國泰金控) yesterday gave a conservative outlook on plans to improve cash utilization at its most profitable subsidiary, Cathay Life Insurance Co (國泰人壽).

The life insurer reported that its cash and cash equivalents had surged to NT$210 billion (US$6.95 billion), representing 4 percent of total investments, compared with NT$63.1 billion and a weighting of 1.3 percent a year earlier.

Cathay Financial president Lee Chang-ken (李長庚) attributed the rapid cash pileup to lower payout obligations to life insurance customers as their policies matured.

He told an investors’ conference that Cathay Financial has also taken profit from its equity investments and that it would continue to seek viable investments in Taiwanese stocks, despite the TAIEX’s record-breaking performance this year.

While equities markets in Taiwan and abroad have posted steady growth this year, Cathay Life would remain cautious and prioritize valuation over returns, Cathay Life Insurance executive vice president Lin Chao-ting (林昭廷) said.

Cathay Financial is mulling expansion of its investments in solar power from NT$1 billion to a more meaningful scale as a way to put its cash to use, Lee said.

Backed by 20-year power purchase contracts with state-run Taiwan Power Co (台電), solar energy investments are estimated to reap an internal rate of return of 6 to 7 percent, which is quite favorable compared with other New Taiwan dollar-denominated investments.

“Depending on the government’s commitment toward phasing out nuclear energy by 2025, we could potentially expand green energy investments to as much as NT$100 billion,” Lee said.

Cathay Financial hopes to see more investment opportunities in securitized products tied to public infrastructure, Lin said.

Cathay Financial reported that first-half net profit rose 86 percent annually to NT$26.5 billion.

Cathay Life Insurance saw its earnings in the first six months reach NT$16.2 billion, up from NT$7.8 billion a year earlier on strong investment gains.

Cathay United Bank (國泰世華銀行) also saw its first-half profit jump to NT$10.7 billion from NT$9.4 billion a year earlier on the back of stable lending growth and credit card fee income.