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Taiwan life insurers’ profit hit by bear markets, gain on US dollar assets

FSC
By Hui Ching-hoo   
September 29, 2022

Taiwan’s life insurers reported a profit decline of more than one-fifth last month compared with August 2021 as their income from equity investments plunged nearly 50% because of the bear run in stock markets.

The life insurance companies’ pre-tax profit in August 2022 was NT$264.3 billion (US$8.3 billion), down 21.9% from NT$338.6 billion in August 2021, according to figures released by the Financial Supervisory Commission (FSC), which publishes the numbers on an irregular basis.

Income from their equity portfolios slid 49.3% to NT$1.36 trillion from NT$2.68 trillion in August 2021, the regulator says in a statement on September 27.

Taiwan’s benchmark stock index fell more than 16% between August 2021 and August 2022, battered by a combination of US rate hikes, the war in Ukraine and Covid-19 lockdowns in China.

The FSC says life insurers “significantly” increased holdings of US dollar assets as the Taiwan dollar weakened.

Many currencies, including the Taiwan dollar, have slid to multi-year or record lows against the greenback as the Fed battles to rein in consumer prices, with five interest rate increases thus far this year. With inflation at around 40-year highs, the Fed signaled last week that it wasn’t done yet.

The Taiwan dollar was trading at around NT$31.9 to the US dollar on September 28, the weakest since 2016. The currency has lost 9.9% of its value against the greenback in the first eight months of 2022.

According to the FSC, life insurers’ foreign investments gained a net NT$815.3 billion last month just from the exchange rate differential between the US and Taiwan dollars.

“The value of [life insurers’] foreign exposure, including foreign currency-denominated insurance policies and foreign debts, hit an all-time high in August at NT$20.66 trillion, accounting for 69.1% of total investable assets,” the regulator says.

Meanwhile, non-life insurers swung to a pre-tax loss of NT$76.5 billion last month from a NT$17.5 billion gain in August 2021. The FSC did not provide any analysis of the loss.