Cathay Financial Holding Co (國泰金控) on Thursday said it would issue 1.5 billion common shares to raise new capital, with an aim to boost the financial strength of its life and property insurance subsidiaries, which were struck by key interest rate hikes and a huge number of COVID-19 compensation claims.
Cathay Financial is to receive proceeds of NT$39 billion to NT$60 billion (US$1.2 billion to US$1.9 billion), as the new shares were priced at NT$26 to NT$40 each, corporate data showed.
That would be the largest capital financing project ever launched by the company. Cathay Financial raised NT$42 billion by issuing 700 million preferred shares at NT$60 each in June 2018, corporate data showed.
Photo: Cathay Financial Holding Co
Cathay Financial’s equity-to-asset ratio dipped to 2.63 percent at the end of last month, as hiked interest rate hikes at central banks worldwide led to price declines of foreign bonds, which cut the valuation of the life insurer’s fixed-income investment, the data showed.
Equity-to-asset ratio is a solvency measure, and all life insurers are required by the Financial Supervisory Commission (FSC) to maintain an equity-to-asset ratio higher than 3 percent.
Cathay Financial would use the proceeds to inject NT$35 billion into Cathay Life Insurance (國泰人壽) and NT$10 billion into Cathay Century Insurance Co (國泰世紀產險), by subscribing all their new shares, the company said in a filing to the Taiwan Stock Exchange (TWSE).
Cathay Life planned to offer 500 million new shares at NT$70 each, to supplement its capital and boost its equity-to-asset ratio, it said in another statement to the TWSE.
Cathay Life’s board members on Thursday approved the proposal to reclassify its financial assets, a change that would boost its equity-to-asset ratio to 5.78 percent, with the reclassification dating back to Oct. 1, the statement said, adding that shareholders’ equity would increase by NT$242.6 billion the end of last month.
Cathay Life is the second local life insurer seeking to free itself from deteriorating financial reports by reclassifying assets, following the steps of Nan Shan Life Insurance Co (南山人壽) last week.
Cathay Financial’s share price retreated 3.43 percent to NT$36.55 in Taipei trading yesterday, with investors concerned that the capital injection could signal a dilution in profit, TWSE data showed.
The injection is expected to strengthen the capital adequacy of its insurance units and help protect against volatility in the financial markets, Moody’s Investors Service analyst Kelvin Kwok (郭嘉銘) said in a note yesterday.
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