Taiwanese insurance giant Cathay Life Insurance (Cathay Life) is looking to increase its overseas portfolio by up to NT$150 billion (US$4.72 billion) in a bid to seek better investment returns.
Speaking at a Cathay Financial Holding (Cathay Financial) investors’ conference on November 15, Lee Chang-ken, the company’s president, told local media that the insurer had trimmed its onshore real-estate investments to 9.7% from around 10% of its portfolio as the company shifts more money towards overseas investments. Cathay Financial is the holding group of Cathay Life.
According to the Taipei Times, Cathay Life is looking to raise its overseas investments to 3% from 1% at the moment. This translates to investments of around NT$100-$150 billion.
In March this year, the island-state’s Financial Supervisory Commission (FSC) released new rules to cap local insurers’ asset allocations in offshore real estate investments to 10% of their owner’s equity.
Cathay Life has become increasingly active in direct property investments overseas in view of the current low-rate environment. For example, it purchased the Walbrook Building from UK property firm Minerva Ltd for US$914 million in May 2015.
Mr. Lee stated that the company is taking a neutral view on potential interest rate hikes by the US Fed next month, although higher interest rates would bode well for life insurance companies.
“An isolated rate hike would have very limited effect on Cathay Financial. What really matters is whether the increase ushers in a tightening monetary cycle whereupon we have to adjust our portfolio,” he remarked.
Mr. Lee added that Cathay Life had cut back its weighting to property loans by NT$80 billion this year due to their low-return yields. The annualised returns from its overseas bond investments amounted to 5.9% for the first three quarters of 2016, compared to 1.9% from its returns on its property loans.
According to Cathay Financial’s latest financial report, the company’s allocation to overseas equities dropped marginally to 6.1% or NT$298.4 billion as of September 30, from 6.2% in the corresponding period a year earlier. Meanwhile, its investment in overseas debt was up from 50.6% to 52.5%, or NT$2.56 trillion, and its real estate investments decreased from 10.5% to 9.7%, or NT$489.1 billion.
