The combined net worth of local life insurance companies as of the end of June fell to NT$1.26 trillion (US$42.1 billion), down 53.88 percent from NT$2.72 trillion at the end of last year, the largest decline for the first six months of a year on record, the Financial Supervisory Commission (FSC) said on Tuesday.
The drop in net worth came as life insurers’ stock and bond holdings plummeted amid market routs, as volatility continued to affect global financial markets following a series of rate hikes by central banks, the commission said.
Local life insurers’ average equity-to-asset ratio, a key solvency measure, declined to 3.8 percent as of June 30, the lowest in a decade and slightly above the regulatory minimum of 3 percent, it said.
Taipei Times file photo
The commission said it is not concerned about the decrease in life insurers’ net worth and believes the firms face limited liquidity risks, as they on June 30 still had NT$373.2 billion in cash and cash equivalents.
Local life insurers also face limited credit risks, as 97.77 percent of the bonds they hold are “investment-grade,” it said.
The commission said that bonds with ratings of “BBB-” or better by Standard & Poor’s and Fitch, or “Baa3” or better by Moody’s are considered investment-grade.
In addition, life insurers’ investment in China only accounted for 0.77 percent of their combined working capital in the first six months, with no risk exposures to troubled developers China Evergrande Group (恆大集團), Fantasia Holdings Group (花樣年控股集團) and Sunac China Holdings Ltd (融創中國), the commission said.
Life insurers’ combined pretax profits fell 17 percent year-on-year to NT$213.8 billion in the first six months, commission data showed.
However, non-life insurers posted combined losses of NT$46.9 billion in the six-month period, compared with pretax profits of NT$12.2 billion a year earlier, the data showed.
Losses from compensation for policyholders of COVID-19 insurances contributed to the losses at non-life insurers, the commission said, adding that insurers had as of Monday last week paid NT$32 billion to policyholders, 7.5 times the premiums of NT$4.2 billion gained from sales of the products.
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