KGI Life Reduces Risky Asset Exposure
KGI Life Insurance, headquartered in Taiwan, is taking steps to reduce its exposure to risky assets, according to a recent report from Fitch Ratings. Despite concerns about earnings volatility, primarily due to potential fluctuations in investment performance, the insurance company’s financial health remains strong.
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For the first nine months of 2024, KGI Life reported a return on equity of 12.0%, surpassing the three-year average of 10.7%. A significant portion of the company’s focus continues to be on traditional life policies, which accounted for 72% of premiums during the first half of the year. This strategy has contributed to an expansion in the value of new business (VNB) margin, which reached 43.5% in the first half of the year, a considerable increase from 34.3% a year earlier. This growth was largely driven by a shift towards regular-premium policies, which provide more sustainable profit margins.
KGI Life’s regulatory risk-based capital (RBC) ratio also improved, climbing to 363% by the end of the third quarter, up from 340% at the close of 2023. This increase followed the issuance of TW$10 billion in subordinated securities. Even with this debt issuance, the financial leverage ratio remained low at 11%.
In a move to mitigate risk, KGI Life reduced its exposure to assets considered risky, including equities and below-investment-grade bonds. This exposure declined to 102% of shareholder equity and loss-absorbing reserves in the first half of the year, down from 107% in 2023. This reduction was supported by a larger capital base. Fitch Ratings does not anticipate any substantial changes in the company’s investment mix in the immediate future.
