Losses at Taiwan’s biggest insurers almost doubled last month from a month earlier as historic gains in the New Taiwan dollar dented the value of their foreign investments.
Losses for four of the largest reached a combined NT$35.35 billion (US$1.2 billion), company statements released yesterday showed. Among them, Shin Kong Life Insurance Co (新光人壽) posted the largest loss at NT$15.38 billion.
Fubon Life Insurance Co’s (富邦人壽) losses almost quadrupled from a month earlier to NT$9.14 billion, while losses at Taiwan Life Insurance Co (台灣人壽) doubled to NT$2.83 billion, and KGI Life Insurance Co’s (凱基人壽) losses swelled to NT$7.997 billion.
Photo: CNA
Bucking the trend, Cathay Life Insurance Co (國泰人壽) posted a small profit of NT$440 million, saved by its hedging operations, as did Nan Shan Life Insurance Co (南山人壽) with a profit of NT$13 million.
The NT dollar spiked 6.98 percent against the US dollar last month — mostly over two days at the start of the month — showing the largest monthly increase since April 1989. That heaped pressure on the life insurance industry, which already had about US$4 billion of foreign exchange losses in the first four months of this year.
“The detrimental impact on Taiwanese insurers’ earnings, book value, capital positions and this year’s dividend policies is unlikely to be fully mitigated and not fully reflected by current valuations,” said a note by JPMorgan Chase & Co analysts, including Jemmy Huang (黃聖翔), who has revised down earnings forecasts and price targets for the sector.
Cathay Life and Fubon Life have said they would increase currency hedging and take advantage of a recently introduced rule giving them more flexibility in setting aside reserves. The Financial Supervisory Commission is also considering allowing insurers to use a rolling average for exchange-rate levels when reporting results, reducing the impact of sudden swings.
“The [New] Taiwan dollar remains strong, so it might be early to turn too bullish on insurers’ earnings in the near term,” Bloomberg Intelligence analyst Steven Lam said.
Still, local stocks have performed well, which could support insurers as well, he said.
According to a Fitch Ratings report on May 23, about 70 percent of the invested assets were in foreign currency, predominantly US dollar-denominated bonds.
Still, losses were relatively muted compared with November 2022, when the life insurance industry on the whole posted a NT$75.3 billion loss. During that month, the NT dollar appreciated by more than 4 percent against the greenback.
In the first five months of the year, Cathay Life posted a net profit of NT$16.11 billion, Fubon Life reported a net profit of NT$15.81 billion, Nan Shan Life earned NT$3.12 billion and Taiwan Life booked NT$1.45 billion in profit.
Meanwhile, KGI Life reported cumulative losses of NT$1.39 billion, and Shin Kong Life’s losses totaled NT$30.25 billion in the first five months, company data showed.
Additional reporting by staff
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