Taiwan’s largest insurers suffered substantial losses in May, with four major companies reporting combined losses of NT$35.35 billion (US$1.2 billion). The appreciation of the New Taiwan dollar against the US dollar was the primary cause of these losses, particularly affecting their foreign investments.
Shin Kong Life Insurance Co posted the largest loss at NT$15.38 billion, while Fubon Life Insurance Co’s losses nearly quadrupled to NT$9.14 billion compared to the previous month. Taiwan Life Insurance Co’s losses doubled to NT$2.83 billion, and KGI Life Insurance Co reported losses of NT$7.997 billion.
Two insurers managed to buck this trend: Cathay Life Insurance Co reported a small profit of NT$440 million, thanks to its hedging operations, and Nan Shan Life Insurance Co recorded a profit of NT$13 million. The New Taiwan dollar surged 6.98 percent against the US dollar in May, marking its largest monthly gain since April 1989. This significant appreciation put pressure on the life insurance industry, which had already incurred about US$4 billion in foreign exchange losses during the first four months of the year.
According to JPMorgan Chase & Co analysts, the negative impact on Taiwanese insurers’ earnings, book value, capital positions, and dividend policies is likely to persist. In response, Cathay Life and Fubon Life have announced plans to increase their currency hedging and take advantage of new regulations allowing more flexibility in setting aside reserves. The Financial Supervisory Commission is also considering permitting insurers to use a rolling average for exchange-rate levels when reporting results to mitigate the effects of sudden currency fluctuations.
Despite the challenges, some analysts remain cautiously optimistic. Bloomberg Intelligence analyst Steven Lam noted that while the strong NT dollar may continue to affect insurers’ earnings in the near term, the positive performance of local stocks could provide some support.
A Fitch Ratings report revealed that approximately 70 percent of the invested assets were in foreign currency, primarily US dollar-denominated bonds. While the recent losses were significant, they were relatively less severe compared to November 2022, when the life insurance industry as a whole reported a NT$75.3 billion loss following a more than 4 percent appreciation of the NT dollar against the US dollar.
In the first five months of the year, some insurers reported net profits: Cathay Life (NT$16.11 billion), Fubon Life (NT$15.81 billion), Nan Shan Life (NT$3.12 billion), and Taiwan Life (NT$1.45 billion). However, KGI Life reported cumulative losses of NT$1.39 billion, and Shin Kong Life’s losses totaled NT$30.25 billion during the same period.
