Taiwanese life insurers wanting to improve their capital structure face strong headwinds this year, given prolonged low interest rates and economic impacts derived from trade protectionism and the COVID-19 pandemic, Taiwan Ratings Corp (中華信評) said on Friday.
The local life insurance sector also still has high asset risks and such risks are susceptible to market volatility, the local arm of Standard & Poor’s Global Ratings said.
Since last year, major financial holding companies — including CTBC Financial Holding Co (中信金控), Cathay Financial Holding Co (國泰金控) and Shin Kong Financial Holding Co (新光金控) — have announced plans to raise fresh capital to bolster the financial strength of their banking and insurance subsidiaries.
This came as financial holdings were faced with increased market volatility due to the US-China trade dispute and implementation of new International Financial Reporting Standards.
Cathay Life Insurance Co (國泰人壽), for instance, reported that its capital position was solid, with a risk-based capital ratio of 346 percent as of Dec. 31 last year, up from 292 percent at the end of 2018, and that its risk-bearing ability improved with the net worth-to-assets ratio rising to 9.2 percent last year from 2.6 percent a year earlier.
While stronger economic activity and greater stability in capital markets had helped life insurers shore up their capital buffers last year, the sector’s average capitalization remains slightly weaker than in 2017, Taiwan Ratings said, adding that there are more challenges this year for insurers given increased credit risk due to COVID-19.
“We expect increased downside risk for Taiwan life insurers, given the likelihood of greater capital market volatility over the coming few months,” Taiwan Ratings credit analyst Patty Wang (王珮齡) said in a news release. “Tough operating conditions, weak investment returns and continued high asset risk pose significant headwinds for insurers to sustain the improvement in capital and earnings made in 2019.”
The ratings agency said that capitalization has long been a key rating weakness for the life insurance sector, whereas insurers still carry significant asset risks.
Meanwhile, the long-term mismatch between insurers’ assets and liabilities is a legacy issue, which could lead to higher losses if market prices experience larger fluctuations, hindering their efforts to restore capital levels, it said.
“Despite legacy issues affecting the sector’s capitalization, we believe insurers’ efforts to slow business growth and employ more rigid capital rules could somewhat offset these downside risks,” Wang said. “Nonetheless, the very low likelihood of improving investment returns over the coming two years poses a significant challenge for insurers to improve their capitalization.”
Taiwan Ratings said that its assessment of the life insurance sector’s capitalization and earnings ranges from fair to satisfactory for this year and next year.
However, this means that businesses in the sector are lagging behind most of their Asia-Pacific peers, it said.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day