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Taiwan Life Earnings Volatility from Interest-Sensitive Products

by Celia

Taiwan Life Insurance Co.’s financial outlook remains positive, bolstered by its emphasis on regular-premium policies, which have contributed to an improved new business margin over the past three years. However, according to Fitch Ratings, the insurer’s earnings are expected to face volatility due to its significant reliance on interest-sensitive products, which are vulnerable to market fluctuations.

In the first half of 2024, Taiwan Life reported an annualised return on equity (ROE) of 17%, a notable increase from 10% at the end of 2023, driven by favorable equity market conditions. The average ROE from 2021 to 2023 stood at 7.5%.

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The insurer’s exposure to risky assets, measured as a percentage of shareholder equity and loss-absorbing reserves, was 216% as of mid-2024, a decrease from 249% at the end of 2023.

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Capital adequacy remains solid, with the regulatory risk-based capital ratio rising to 318% in the first half of 2024, up from 305% at the end of 2023. This figure is well above the regulatory minimum of 200%, signaling strong financial stability.

As of 2023, Taiwan Life held a 6% share of premium income, making it the sixth-largest insurer in Taiwan. Additionally, the company commanded a 7% market share in first-year premiums as of the first half of 2024.

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The insurer offers a wide range of products, including risk protection, savings, healthcare, and retirement solutions. Its robust distribution network consists of 8,000 tied agents and bancassurance partnerships, including collaborations with CTBC Bank Co., Ltd.

Despite ongoing challenges tied to investment risks and earnings fluctuations, Fitch’s stable outlook for Taiwan Life reflects confidence in the company’s solid capitalization, gradual improvement in financial performance, and steady market positioning.

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