The depreciation of the New Taiwan dollar against the US dollar and increases in bond yields in the first quarter helped Cathay Life Insurance Co (國泰人壽) maintain decent investment returns, despite a global stock market correction, the insurer said yesterday.
The flagship arm of Cathay Financial Holding Co (國泰金控) reported an after-hedging investment return of 4.74 percent, down from 6.31 percent a year earlier, but still the second-highest figure for the first quarter, the insurer said.
While last year’s record investment returns were driven by an equity boom, this year’s came from lower foreign-exchange hedging costs, capital gains and higher yields from overseas bonds, Cathay Life executive vice president Lin Chao-ting (林昭廷) told an investors’ conference in Taipei.
Photo courtesy of Cathay Financial Holding Co
The insurer reported a hedging gain of 0.43 percent for the first quarter, as its proxy hedging strategy worked as the local currency weakened against the greenback by about 3 percent, Lin said.
“We usually forecast a forex hedging cost of 1 to 1.5 percent, but it seems that the costs might be even lower this year,” Lin said.
The insurer disposed some stocks to realize capital gains in the first quarter, reducing its investments in local stocks by 6.5 percent from the end of last year to NT$485 billion (US$16.4 billion) and those in overseas stocks by 2.3 percent to NT$454 billion, company data showed.
Returns on its investments in local stocks nearly halved from 20.9 percent a quarter earlier to 10.5 percent and returns on foreign stock investments fell from 11.6 percent to 8.8 percent, the data showed.
“The stock market corrections have provided us with a chance to buy on dips, and we will focus on blue-chip stocks and those with rosy dividends,” Lin said.
Meanwhile, Cathay Financial Holding Co (國泰金控) president Lee Chang-ken (李長庚) said that Cathay Life Insurance and Cathay Century Insurance Co (國泰世紀產險), its property insurance unit, would relax their compensation terms for COVID-19 insurance policyholders to ease the burden on hospitals.
According to the terms, the insurers are not obliged to compensate policyholders with mild COVID-19 symptoms who are not hospitalized, but the insurers would compensate them if they are prescribed medication by a doctor, Lee said.
Cathay Century Insurance has sold 1.3 million COVID-19 insurance policies with a total premium income of NT$1.47 billion and has distributed compensation of about NT$300 million, with the average compensation amounting to NT$20,000, it said.
It expects to compensate more policyholders this month and next month as the number of COVID-19 cases rise, it added.
The property insurer’s risk-based capital ratio stands at 284 percent and it has not determined whether to apply to use a special reserve to absorb the losses, it said.
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