The recent plunge in local life insurers’ net worth does not suggest a downturn in their credit quality, but it highlights the sector’s sensitivity to market volatility and difficulties in capital management, Taiwan Ratings Corp (中華信評) said yesterday.
Life insurers’ net worth — or shareholders’ equity — tumbled to NT$1.26 trillion (US$42 billion) at the end of June, from NT$2.72 trillion six months earlier, data from the Financial Supervisory Commission last week showed.
“We do not believe the reduction in shareholder equity alone indicates credit deterioration,” Taiwan Ratings said, blaming the value erosion on falling bond prices amid interest rate hikes.
Photo: Clare Cheng, Taipei Times
Local life insurers have a high exposure to US dollar-denominated fixed-income markets, Taiwan Ratings said, adding that it believed bond prices would not pick up anytime soon as US interest rates remain on an upward trajectory.
Since the bond investments are held to match long-term liabilities, they cannot be disposed of as freely as investments intended to be traded, the ratings agency said.
“If insurers suffer heavy unrecoverable investment losses amid persistent capital erosion, we would deem that as a credit-negative development,” it said, citing the writing-off of fixed-income securities with weak asset quality as an example.
Still, local life insurers display a chronic asset-liability mismatch, namely its high investment portfolio exposure to US dollar-based assets is not matched by US dollar-denominated insurance liabilities, Taiwan Ratings said, calling the mismatch a major credit weakness for the sector.
Most local insurers’ policy liabilities remain Taiwan-based.
Recent market volatility demands an effective management mechanism, which would allow life insurers to monitor the interest-rate sensitivity of their investment profile and the matching needs of their insurance liabilities, the ratings agency said.
Such a mechanism would serve as a critical foundation for the insurers to reap the benefits of interest rate hikes and be better prepared for upcoming changes in the capital supervisory regime, it added.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s biggest contract chipmaker, has decided to slow down its 3-nanometer chip production as Intel Corp, one of its major customers, plans to push back the launch of its new Meteor Lake tGPU chipsets to the end of next year, market researcher TrendForce Corp (集邦科技) said yesterday. That means Intel has canceled almost all of the 3-nanometer capacity booked for next year, with only a small amount of wafer input remaining for engineering verification, the Taipei-based researcher said in a report. Based on Intel’s original schedule, TSMC was to start producing the new chipsets in
DATA SHOW DOWNTURN: Manufacturing in Taiwan contracted as production and demand slumped, while growth in chip exports last month eased in South Korea World chip sales growth has decelerated for six straight months in another sign that the global economy is straining under the weight of rising interest rates and mounting geopolitical risks. Semiconductor sales rose 13.3 percent in June from a year earlier, down from 18 percent in May, data from the global peak industry body showed. The slowdown is the longest since the US-China trade dispute in 2018. The three-month moving average in chip sales has correlated with the global economy’s performance in the past few decades. The latest weakness comes as concern about a worldwide recession has prompted chipmakers such as Samsung
Italy is close to clinching a deal initially worth US$5 billion with Intel Corp to build an advanced semiconductor packaging and assembly plant in the country, two sources briefed on discussions said yesterday. Intel’s investment in Italy is part of a wider plan announced by the US chipmaker earlier this year to invest US$88 billion in building capacity across Europe, which is striving to cut its reliance on Asian chip imports and ease a supply crunch that has curbed output in the region’s strategic auto sector. Asking not to be named due to the sensitivity of the matter, the sources said the
Malaysia is scrambling to protect its assets as the descendants of the last sultan of the remote Philippine region of Sulu look to enforce a US$15 billion arbitration award in a dispute over a colonial-era land deal. In 1878, two European colonists signed a deal with the sultan for the use of his territory in present-day Malaysia — an agreement that independent Malaysia honored until 2013, paying the monarch’s descendants about US$1,000 per year. Now, 144 years later after the original deal, Malaysia is on the hook for the second-largest arbitration award on record for stopping the payments after a bloody incursion
RSS