China Life Insurance Co (中國人壽) yesterday said it would reclassify its financial assets under the International Financial Reporting Standards 9 (IFRS 9) to improve its financial strength, following in the footsteps of its peers to cushion itself against rapidly rising interest rates.
The asset reclassification would boost China Life’s shareholders’ equities by about NT$30 billion (US$932 million) and raise its equity-to-asset ratio by 1.3 percentage points, parent company China Development Financial Holding Corp (中華開發金控) said in a filing with the Taiwan Stock Exchange on Thursday.
China Life’s equity-to-asset ratio, a gauge of a life insurer’s capital adequacy, stood at 4.03 percent at the end of June, higher than the Financial Supervisory Commission’s (FSC) threshold of 3 percent, company data showed.
Photo courtesy of China Life Insurance Co
China Life is the fifth local life insurer to reclassify its financial assets, after Nan Shan Life Insurance Co (南山人壽), Cathay Life Insurance Co (國泰人壽), Taiwan Life Inasurance Co (台灣人壽) and Shin Kong Life Insurance Co (新光人壽).
By reclassifying their assets, these insurers have been able to raise their shareholders’ equities by about NT$650 billion in total.
The commission on Oct. 11 said that local life insurers can use one of three accounting methods to recalculate the value of their investments: amortized cost (AC), fair value through comprehensive income (FVOCI) and fair value through profit and loss (FVTPL).
Unlike the AC method, the FVOCI and FVTPL methods reflect changes in bond prices, so life insurers the latter two methods are vulnerable to plunges in bond prices when the market rate goes up.
Reclassification allows insurers to change to amortized cost, thereby protecting their investment value from rate hikes.
However, FSC Chairman Thomas Huang (黃天牧) on Wednesday expressed disapproval over a proposal by life insurers to change the accounting method for liabilities.
“There should be a consistency in the way financial reports are made. Thus, we still have concerns about such a proposal,” Huang told a meeting in Taipei.
For example, changing the accounting method for liabilities might seem beneficial when interest rates rise, but it would not be favorable when interest rates fall, he said, adding that accounting principles should not be changed frequently.
When an apartment comes up for rent in Germany’s big cities, hundreds of prospective tenants often queue down the street to view it, but the acute shortage of affordable housing is getting scant attention ahead of today’s snap general election. “Housing is one of the main problems for people, but nobody talks about it, nobody takes it seriously,” said Andreas Ibel, president of Build Europe, an association representing housing developers. Migration and the sluggish economy top the list of voters’ concerns, but analysts say housing policy fails to break through as returns on investment take time to register, making the
‘SILVER LINING’: Although the news caused TSMC to fall on the local market, an analyst said that as tariffs are not set to go into effect until April, there is still time for negotiations US President Donald Trump on Tuesday said that he would likely impose tariffs on semiconductor, automobile and pharmaceutical imports of about 25 percent, with an announcement coming as soon as April 2 in a move that would represent a dramatic widening of the US leader’s trade war. “I probably will tell you that on April 2, but it’ll be in the neighborhood of 25 percent,” Trump told reporters at his Mar-a-Lago club when asked about his plan for auto tariffs. Asked about similar levies on pharmaceutical drugs and semiconductors, the president said that “it’ll be 25 percent and higher, and it’ll
NOT TO WORRY: Some people are concerned funds might continue moving out of the country, but the central bank said financial account outflows are not unusual in Taiwan Taiwan’s outbound investments hit a new high last year due to investments made by contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and other major manufacturers to boost global expansion, the central bank said on Thursday. The net increase in outbound investments last year reached a record US$21.05 billion, while the net increase in outbound investments by Taiwanese residents reached a record US$31.98 billion, central bank data showed. Chen Fei-wen (陳斐紋), deputy director of the central bank’s Department of Economic Research, said the increase was largely due to TSMC’s efforts to expand production in the US and Japan. Investments by Vanguard International
WARNING SHOT: The US president has threatened to impose 25 percent tariffs on all imported vehicles, and similar or higher duties on pharmaceuticals and semiconductors US President Donald Trump on Wednesday suggested that a trade deal with China was “possible” — a key target in the US leader’s tariffs policy. The US in 2020 had already agreed to “a great trade deal with China” and a new deal was “possible,” Trump said. Trump said he expected Chinese President Xi Jinping (習近平) to visit the US, without giving a timeline for his trip. Trump also said that he was talking to China about TikTok, as the US seeks to broker a sale of the popular app owned by Chinese firm ByteDance Ltd (字節跳動). Trump last week said that he had
RSS