Local life insurance companies’ cumulative hedging expenses and foreign-exchange losses rose 60 percent from March to NT$97.8 billion (US$3.52 billion) as of the end of last month amid rapid appreciation of the New Taiwan dollar against the US dollar, Financial Supervisory Commission data showed.
The NT dollar gained 2 percent from a month earlier to close at NT$27.95 against the US dollar at the end of last month, following depreciation of 0.8 percent in March from a month prior, central bank data showed.
With the NT dollar’s fast appreciation reducing the monetary valuation of life insurers’ US dollar-denominated assets, they reported combined foreign-
exchange losses of NT$221 billion for last month, a 51-month high, the commission’s data showed.
A strong NT dollar is increasing the risk of foreign-exchanges losses for life insurers, as 64.5 percent of their combined investment portfolio, worth NT$18.64 trillion, is allocated overseas or denominated in US dollars, the commission’s data showed.
However, the losses were partially offset by a gain of NT$176.9 billion from hedging tools, which were mostly denominated in the local currency. Their valuation rose with the NT dollar, the data showed.
The life insurers last month spent NT$10.3 billion buying hedging tools, such as currency swaps or non-deliverable forwards, while they spent NT$17.9 billion of their foreign-exchange volatility reserves to absorb last month’s losses, the commission’s data showed.
Overall, local life insurers’ cumulative forex losses and hedging expenses totaled NT$97.8 billion, down NT$100 million from a year earlier, the data showed.
Despite heavy foreign-exchange losses and hedging expenses, life insurers’ combined pretax profit advanced 193.1 percent year-on-year to NT$205.2 billion for the first four months, attributed to returns in booming financial markets, the data showed.
Their combined book value expanded 41.2 percent annually to NT$2.51 trillion, the data showed.
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