KGI Financial Holding Co (凱基金控) yesterday said its life insurance arm has increased hedging and adopted other moves to curb the impact of the local currency’s appreciation on its profitability.
“It is difficult to accurately depict the hedging costs, which might vary from 7 percent to 40 percent in a single day,” KGI Life Insurance Co (凱基人壽) told an investors’ conference in Taipei.
KGI Life, which underpinned 66 percent of the group’s total net income last year, has elevated hedging to 55 to 60 percent, while using a basket of currencies to manage currency volatility, the insurer said.
Photo courtesy of KGI Financial Holding Co
As different currencies demonstrate varying degrees of valuation changes, it is hard to tell the exact cost of hedging, it said.
The insurer said that based on its foreign exchange exposure, every NT$0.1 rise in the New Taiwan dollar against the US dollar would negatively impact the company by about NT$1.7 billion (US$56.79 million), without accounting for valuation gains from hedging instruments.
When gains from traditional hedging instruments and diversified currency positions are considered, the actual impact is expected to be less than NT$1.7 billion, it said, adding that non-deliverable forwards are a part of its toolkit.
As of the end of last month, KGI Life held NT$21.2 billion in foreign exchange reserves, with a break-even point on the exchange rate estimated between NT$30.7 and NT$30.8 against the US dollar, the company said.
The local currency yesterday gained NT$0.08 to close at NT$29.935 in Taipei trading, the highest in more than two years, amid concern over US and EU trade.
The continued advance in the NT dollar could spell foreign exchange losses for local life insurers given their heavy holdings of US Treasuries, corporate debts, securities and other US dollar-denominated investment instruments.
Unrealized losses on equity holdings are expected to decline as gains are realized over time, company officials said, pointing out that the company recorded a small valuation loss on real estate due to a first-quarter reappraisal.
KGI Life updated its embedded value, which stood at NT$475.9 billion late last year, rising 11.3 percent from the previous year.
Embedded value is a measure used by the industry to reflect a life insurer’s total value, including the current value of existing business and forecast profits from policies in force.
The embedded value is NT$28.4 per share, company data showed.
KGI Bank (凱基銀行), the group’s banking arm, said it is looking at loan growth of 15 percent this year, with similar contributions from mortgage and corporate lending operations.
Despite uncertainty linked to US trade policy, the bank said it is aiming for overall loan growth of at least 10 percent, with increases in loan size, interest margins and fee income.
AI BOOST: Although Taiwan’s reliance on Chinese rare earth elements is limited, it could face indirect impacts from supply issues and price volatility, an economist said DBS Bank Ltd (星展銀行) has sharply raised its forecast for Taiwan’s economic growth this year to 5.6 percent, citing stronger-than-expected exports and investment linked to artificial intelligence (AI), as it said that the current momentum could peak soon. The acceleration of the global AI race has fueled a surge in Taiwan’s AI-related capital spending and exports of information and communications technology (ICT) products, which have been key drivers of growth this year. “We have revised our GDP forecast for Taiwan upward to 5.6 percent from 4 percent, an upgrade that mainly reflects stronger-than-expected AI-related exports and investment in the third
Mercuries Life Insurance Co (三商美邦人壽) shares surged to a seven-month high this week after local media reported that E.Sun Financial Holding Co (玉山金控) had outbid CTBC Financial Holding Co (中信金控) in the financially strained insurer’s ongoing sale process. Shares of the mid-sized life insurer climbed 5.8 percent this week to NT$6.72, extending a nearly 18 percent rally over the past month, as investors bet on the likelihood of an impending takeover. The final round of bidding closed on Thursday, marking a critical step in the 32-year-old insurer’s search for a buyer after years of struggling to meet capital adequacy requirements. Local media reports
TECHNOLOGICAL RIVALRY: The artificial intelligence chip competition among multiple players would likely intensify over the next two years, a Quanta official said Quanta Computer Inc (廣達), which makes servers and laptops on a contract basis, yesterday said its shipments of artificial intelligence (AI) servers powered by Nvidia Corp’s GB300 chips have increased steadily since last month, should surpass those of the GB200 models this quarter. The production of GB300 servers has gone much more smoothly than that of the GB200, with shipments projected to increase sharply next month, Quanta executive vice president Mike Yang (楊麒令) said on the sidelines of a technology forum in Taipei. While orders for GB200 servers gradually decrease, the production transition between the two server models has been
ASE Technology Holding Co (日月光投控), the world’s largest integrated circuit (IC) packaging and testing supplier, yesterday announced a strategic collaboration with Analog Devices Inc (ADI), coupled with the signing of a binding memorandum of understanding. Under the agreement, ASE intends to purchase 100 percent shares of Analog Devices Sdn Bhd and acquire its manufacturing facility in Penang, Malaysia, a press release showed. The ADI Penang facility is located in the prime industrial hub of Bayan Lepas, with an area of over 680,000 square feet, it said. In addition, the two sides intend to enter into a long-term supply agreement for ASE to
RSS