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Cathay Life ratings upgraded by Moody's

Cathay Life ratings upgraded by Moody's

Moody's Investors Service has upgraded its ratings for Cathay Life Insurance Co. (??), one of Taiwan's largest life insurers, on the back of the company's improving profitability, solid capitalization and strong business profile.

Moody's has upgraded its insurance financial strength rating (IFSR) for Cathay Life, the insurance flagship of Cathay Financial Holding Co., to Baa1 from Baa2, and also hiked Cathay Financial's issuer rating to Baa2 from Baa3.

The ratings agency said that the outlook of both Cathay Life and Cathay Financial is stable.

The upgrade in Cathay Financial reflected the upgrade of Cathay Life's IFSR as the life insurer is the financial holding's largest subsidiary in terms of assets, shareholder's equity and net income, Moody's said.

According to Moody's, Cathay Life's return on capital (ROC) has increased since 2013. The annualized ROC as of the third quarter of this year was more than 10 percent, higher than 8.5 percent recorded in 2014. Moody's added that Cathay Life's ROC as of September was sharply higher than the company's average ROC of 3 percent during the period of 2010-2014.

Moody's said that the improving bottom line resulted from Cathay Life's efforts in shifting its product focus from single-premium products to investment linked products, which are associated with higher profit margins. Moody's said that Cathay Life's capital adequacy, a Moody's adjusted capital to asset ratio, stood at 5.5 percent as of the end of the third quarter of this year.

The rating agency said that the life insurer's risk-based capital ratio (RBC) improved to 295 percent at the end of June 2015 from 287 percent at the end of 2014 and the RBC ratio is expected to move higher at the end of September.

The ratings agency has also affirmed Cathay United Bank Co.'s local and foreign currency long term deposit ratings at A2 and the local and foreign currency short term deposits at P1, saying that the outlook for Cathay United Bank Co., the banking arm of Cathay Financial, is stable.

Moody's said that the bank is largely funded by customer deposits and has very limited reliance on market funding. The bank is expected to maintain its strong funding and liquidity profile in 2016, the agency said. (By Tien Yu-pin and Frances Huang)

Updated : 2021-09-25 20:01 GMT+08:00