1 / 7

Life insurers in Taiwan are faced with a challenging operating environment

Extremely low interest rate environment Limited opportunities to invest in long-term assets Small, illiquid domestic bond market Overseas investment restrictions of 20%. Low investment yields on asset portfolios Mismatch between asset and liability duration Higher earnings volatility

yoko
Download Presentation

Life insurers in Taiwan are faced with a challenging operating environment

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Extremely low interest rate environment Limited opportunities to invest in long-term assets Small, illiquid domestic bond market Overseas investment restrictions of 20% Low investment yields on asset portfolios Mismatch between asset and liability duration Higher earnings volatility Reduced interest gains Life insurers in Taiwan are faced with a challenging operating environment Cause Result

  2. We are pro-actively confronting these issues Strategies and approaches 1. Enhance investment yield 2. Increase asset duration 3. Lower guaranteed rate 4. Adjust product portfolio The interest spread can be further improved with appropriate asset-liability management

  3. The decision to invest in Chunghwa Telecom is completely consistent with this vision Rationale for investment High, sustainable dividend yield Long-dated asset class Stable and defensive characteristics reducing earnings volatility Unique combination of investment size and attractive valuation Highly accretive to earnings

  4. Overview of investment

  5. This investment is part of a continuing effort to reduce excess cash and optimize portfolio performance Pro forma asset allocation Pro forma asset allocation as of 3Q’02 Asset allocation as of 3Q’02 % of total assets % of total assets NT$1.24 trillion NT$1.24 trillion

  6. Cathay has existing equivalent cash balance of NT$136 bn as of Sep-02 We expect Chunghwa’s dividend yield to be quite stable over the foreseeable future As reported in the news, CHT has indicated its desire to pursue a debt-financed share buy-back program Share buyback would further increase dividend yield Future dividend yield could exceed 10% Comparative investment yields Comparison 1 Based on NT$4.50 per share cash dividend payment and NT$50.2 acquisition price 2 Assumes 1.50% after-tax yield (pre-tax rate of 2% less 25% tax)

  7. The investment will be accretive to Cathay Financial Holding earnings Potential earnings impact on Cathay Financial Holding 1 Based on NT$4.50 per share cash dividend payment 2 Assumes 1.50% after-tax cash yield (pre-tax rate of 2% less 25% tax)

More Related