YF Life Insurance Faces New Business Margin Challenges
Fitch Ratings anticipates that YF Life Insurance International will continue concentrating on capital efficiency and product diversification.
According to a recent assessment by Fitch Ratings, YF Life Insurance International maintains robust capitalisation levels. The company’s Hong Kong risk-based capital ratio stood at 234% in the third quarter, substantially exceeding the regulatory minimum of 100%. Fitch anticipates that YF Life will continue to prioritize capital efficiency and product diversification, while maintaining a debt-free capital structure.
Fitch also projects stable financial performance for YF Life, with a return on equity averaging 6.4% throughout 2023 and the first half of 2024. However, the insurer is encountering difficulties in its value of new business margin, due to shifts in its product mix and increased competition.
The company is expected to further decrease the duration mismatch between assets and liabilities to mitigate exposure to interest rate volatility. Fitch noted that liability duration has been lengthening faster than asset duration under declining interest rates, leading YF Life to acquire long-term US-dollar bonds and bond-forwards to extend asset duration.
Investment risk remains low, with Fitch forecasting a continued conservative asset management approach.
