Cathay Financial Holding Co (國泰金控) yesterday said that the local currency’s sharp appreciation has limited impact on its life insurance arm, thanks to 20 years of experience in managing foreign exchange risk.
Cathay Life Insurance Co (國泰人壽) has stood by a dynamic and flexible hedging strategy, which maintained total foreign exchange losses — including valuation changes and hedging costs — at NT$7.3 billion (US$243.15 million), Cathay Life spokesman Lin Chao-ting (林昭廷) told an investors conference in Taipei.
Unrealized losses would ease to NT$5.4 billion after factoring in gains from other currency operations, compared with Cathay Life’s NT$5 trillion in overseas assets — primarily in US corporate bonds, Lin said.
Photo: CNA
The New Taiwan dollar rose 3.6 percent against the US currency last month and has increased another 6.1 percent this month, raising market concerns over possible erosion of capital sufficiency and profitability among local life insurers.
Fitch Ratings and Taiwan Ratings issued separate warnings about domestic life insurers’ profitability outlook, attributable to foreign exchange volatility.
Cathay Life’s foreign exchange exposure is well-controlled, as it has significantly increased its traditional hedging ratio since late 2023 by taking advantage of low-cost opportunities in the non-deliverable forward market, Lin said.
In the previous quarter, the insurer raised its traditional hedging ratio from 65 to 69 percent, while extending hedge tenors from one-to-three months to six-to–24 months, he added.
It also increased its allocation for non-greenback currencies, further enhancing its alternative hedging effectiveness, Lin said.
Only 22 percent of Cathay Life’s portfolio, or about NT$840 billion, is exposed to foreign exchange risk, he said.
With 40 percent covered by alternative hedging tools, the exposure impacting the income statement is limited to about NT$560 billion, Lin said.
For every 1 percent appreciation in the NT dollar, Cathay Life would incur a manageable NT$2 billion loss in foreign exchange, he said.
Cathay Life has also filed a request with the Financial Supervisory Commission to use a new foreign exchange reserve mechanism that would allow the insurer to fully offset foreign exchange losses for this month, even if the NT dollar continues to appreciate, Lin said.
As of March, Cathay’s foreign exchange reserve amounted to NT$30.5 billion, with an extra NT$3 billion provisioned for the January-through-April period, he said.
Even if the NT dollar gains 10 percent to reach NT$29.5, Cathay’s risk-based capital ratio would remain at a robust 329 percent, down from 359 percent in December last year, but still well above the regulatory minimum of 200 percent, Lin said.
The local currency yesterday closed up NT$0.047 at NT$30.023 in Taipei trading.
The net worth ratio would decline by 0.7 percentage points to 8.18 percent, also comfortably above the 3 percent threshold, Lin said.
Taichung reported the steepest fall in completed home prices among the six special municipalities in the first quarter of this year, data compiled by Taiwan Realty Co (台灣房屋) showed yesterday. From January through last month, the average transaction price for completed homes in Taichung fell 8 percent from a year earlier to NT$299,000 (US$9,483) per ping (3.3m²), said Taiwan Realty, which compiled the data based on the government’s price registration platform. The decline could be attributed to many home buyers choosing relatively affordable used homes to live in themselves, instead of newly built homes in the city’s prime property market, Taiwan Realty
The government yesterday approved applications by Alphabet Inc’s Google to invest NT$27.08 billion (US$859.98 million) in Taiwan, the Ministry of Economic Affairs said in a statement. The Department of Investment Review approved two investments proposed by Google, with much of the funds to be used for data processing and electronic information supply services, as well as inventory procurement businesses in the semiconductor field, the ministry said. It marks the second consecutive year that Google has applied to increase its investment in Taiwan. Google plans to infuse NT$25.34 billion into Charter Investments Ltd (特許投資顧問) through its Singapore-based subsidiary Fructan Holdings Singapore Pte Ltd, and
JET JUICE: The war on Iran’s secondary effects have seen fuel prices skyrocket, knocking flight schedules down to earth in return as airlines struggle with costs Airline passengers should brace for more irritation in the next few months as carriers worldwide cancel flights and ground planes to cope with stratospheric increases in jet-fuel prices. Dutch flag carrier KLM is the latest company to cut its schedule, saying on Thursday that it would scrap 80 return flights at Amsterdam’s Schiphol Airport in the coming month. That puts it in the same league as United Airlines Holdings Inc, Deutsche Lufthansa AG and Cathay Pacific Airways Ltd, which have all pruned itineraries to mitigate costs. Global capacity for next month has been reduced by about 3 percentage points, with all
Micron Technology Inc is a driving force pushing the US Congress to pass legislation that would put new export restrictions on equipment its Chinese competitors use to make their chips, according to people familiar with the matter. A US House of Representatives panel yesterday was to vote on the “MATCH Act,” a bill designed to close gaps in restrictions on chipmaking equipment. It would also pressure foreign companies that sell equipment to Chinese chipmaking facilities to align with export curbs on US companies like Lam Research Corp and Applied Materials Inc. The bill targets facilities operated by China’s ChangXin Memory Technologies Inc
RSS