Cathay Financial to boost capital

UNCERTAINTY::The conglomerate’s president said that potentially greater volatility awaits this year and next with Taiwanese elections and US-China tensions

By Kao Shih-ching  /  Staff reporter

Tue, May 21, 2019 - Page 12

Cathay Financial Holding Co (國泰金控) plans to increase capital amid rising uncertainty due to the US-China trade dispute and implementation of new International Financial Reporting Standards (IFRS), company president Lee Chang-ken (李長庚) told an investors’ conference in Taipei yesterday.

Lee did not reveal how much money Cathay Financial Holding proposed to raise, but it would be its second cash injection since 2013, when it raised NT$12.7 billion (US$404.7 million).

The proposal needs to be approved by the board of directors, he said.

Cathay Life Insurance Co (國泰人壽), the conglomerate’s main subsidiary, reported a risk-based capital ratio of 292 percent at the end of last year, higher than its local peers, but Lee said the insurance unit was seeking more capital to optimize its risk profile.

“We need to prepare ourselves in view of market volatility and IFRS 17, which Cathay Life is to adopt by 2025,” Lee said.

Cathay Life Insurance booked unrealized losses of about NT$70 billion last year as global equities and bonds markets plunged, but booked unrealized gains of NT$30 billion last quarter as financial markets recovered, he said.

“The markets were so volatile last year. We do not know if we will see greater volatility this year and next year with the trade tensions and Taiwan’s elections, so we need to prepare for the uncertainty,” Lee said.

Financial Supervisory Commission Chairman Wellington Koo (顧立雄) has encouraged local life insurance firms to increase capital to bolster their financial strength and prepare for the worst, Lee said.

Cathay Financial Holding, the nation’s largest financial services provider by assets, reported NT$13.6 billion in net profit for the first quarter, down 42 percent from a year earlier, while net profits plunged 61.16 percent to NT$6.4 billion.

Foreign bonds accounted for 59.1 percent of its total investments of NT$5.98 trillion, generating a 4.9 percent return, while domestic and foreign shares made up 7.3 percent and 6.4 percent respectively, generating 3.5 percent and 9.2 percent in returns, company data showed.

Cathay Life Insurance would boost investment strategy adjustments and would avoid investing in firms blacklisted by the US amid the US-China trade dispute, Lee said.