Cathay benefits from falling NT$ and rising bond yields

• By Kao Shih-ching / Staff Reporter

The depreciation of the New Taiwan Dollar against the U.S. dollar and higher bond yields in the first quarter helped Cathay Life Insurance Co (國泰人壽) maintain decent investment returns, despite a correction in the global stock market, said the insurer yesterday.

The flagship arm of Cathay Financial Holding Co (國泰金控) reported a return on investment after hedging of 4.74%, down from 6.31% a year earlier, but still the second highest figure for the first quarter, the insurer said.

While last year’s record investment returns were driven by an equity boom, this year has come on the back of lower currency hedging costs, capital gains and higher foreign bond yields, said Cathay Life Executive Vice President Lin Chao-ting (林昭廷) at an investor conference. in Taipei.

The insurer reported a hedging gain of 0.43% for the first quarter as its proxy hedging strategy worked as the local currency weakened around 3% against the greenback , Lin said.

“We typically expect a 1-1.5% currency hedging cost, but it looks like the costs could be even lower this year,” Lin said.

The insurer divested some stocks for capital gains in the first quarter, reducing its investment in local equities by 6.5% from the end of last year to NT$485 billion (16. US$4 billion) and those in foreign equities by 2.3% to NT$454 billion. , company data showed.

Returns on its investments in local equities nearly halved to 10.5% from 20.9% a quarter earlier and returns on investments in foreign equities fell from 11.6% to 8.8% , according to the data.

“Stock market corrections have given us a chance to buy on dips, and we will focus on blue chip stocks and those with pink dividends,” Lin said.

Meanwhile, Cathay Financial Holding Co (國泰金控) Chairman Lee Chang-ken (李長庚) said Cathay Life Insurance and Cathay Century Insurance Co (國泰世紀產險), its insurance unit of goods, would relax their indemnity conditions for insured COVID-19 to ease the burden on hospitals.

Under the terms, insurers are not obligated to compensate policyholders with mild symptoms of COVID-19 who are not hospitalized, but insurers would compensate them if they are prescribed medication by a doctor, Lee said.

Cathay Century Insurance sold 1.3 million COVID-19 insurance policies with total premium income of NT$1.47 billion and distributed compensation of approximately NT$300 million, with average compensation s amounting to NT$20,000, he said.

It plans to compensate more policyholders this month and next month as the number of COVID-19 cases increases, it added.

The property insurer’s risk-based capital ratio stands at 284% and it has not determined whether it should apply to use a special reserve to absorb losses, he said.