Cathay Life gets to keep crown as leading insurer in Hong Kong: Moody’s

Cathay Life is forecasted to stay profitable in the next 12-18 months.

Moody's Ratings sees Cathay Life as the largest life insurer in the domestic market, supported by a robust franchise and a strong agency force. 

The insurer is transitioning to products with higher protection elements and longer premium payment terms, which will enhance profitability and earnings quality over the next 12-18 months.

Savings-oriented traditional life products accounted for 42.3% of the first-year premium equivalent in 2023. The investment mix includes high asset risks due to significant allocations in equities and real estate.

Capitalisation remains sensitive to equity market volatility but is solid due to strong earnings and a focus on less capital-intensive products.

The insurer's large overseas investments, partly unhedged, create significant asset-liability mismatches, exposing it to foreign exchange risks.

A foreign-currency volatility reserve of approximately $640m (TW$20.7b) can mitigate up to 60% of the earnings volatility from exchange rate movements.

The stable outlook reflects expectations of solid profitability and capital position over the next 12-18 months.

Its non-life business, Cathay Century, exudes a strong brand and capitalisation, tempered by high gross catastrophe risks and tail risks in its commercial line business, Moody’s indicated.

Cathay Century is the second-largest non-life insurer in the domestic market, benefiting from affiliation with Cathay Financial and distribution support from Cathay Life's large agency force.

Strong capitalisation is maintained through capital support from Cathay Financial, with a $620m (TW$20b) injection over the past two years counteracting capital erosion from pandemic policy claims.

Profitability is expected to recover to historically strong levels over the next 12-18 months, driven by robust underwriting profitability and good investment income.

($1.00 = TW$32.38)