Cathay Life demonstrated robust risk-based capitalisation with a solid ratio of 323% as of the close of 2023, surpassing regulatory requirements, according to Fitch Ratings.
In preparation for the Taiwan Insurance Capital Standard set for 2026, the insurer issued subordinated debt to strengthen its capital buffer. However, its financial leverage ratio rose to 14% by the end of the first quarter of 2024.
The company’s profitability is underpinned by a strategic emphasis on long-term regular-premium and protection-type products, achieving a notable new business margin of 21% on first-year premiums in 2023. Yet, its profitability remains sensitive to spread gains, particularly from traditional savings products.
Despite maintaining a ‘most favourable’ business profile in Taiwan’s life insurance sector, capturing a substantial 21.3% share of premiums in 2023, Cathay Life faces challenges from its substantial exposure to risky assets, predominantly stocks and equity-type investments, which accounted for 166% of equity and loss-absorbing reserves at the close of 2023. This exposes the company’s earnings and capital to volatility in equity markets and foreign-exchange risks, given that 67% of its assets are denominated in foreign currencies.
Looking forward, Fitch Ratings noted optimism regarding Cathay Life’s market leadership, citing strong brand recognition, competitive advantages, a diverse business portfolio, and extensive distribution channels, including the sector’s largest agency sales force.
In conclusion, while Cathay Life navigates significant market risks, its proactive capital management strategies and strategic market position are expected to sustain its leadership in Taiwan’s life insurance industry.
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