Q2 2026 Cathay Financial Holdings Co Ltd Earnings Call
Speaker #1: Welcome, everyone, to Cathay Financial Holding Company's second quarter 2026 conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question-and-answer session.
Operator: Welcome everyone to Cathay Financial Holding Company Q2 2026 conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question and answer session. Please follow the instructions given at the time if you would like to ask a question. I would like to introduce Mr. C.K. Lee, the CEO of Cathay Financial Holding Company. Mr. Lee, please begin.
Operator: Welcome everyone to Cathay Financial Holding Company Q2 2026 conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question and answer session. Please follow the instructions given at the time if you would like to ask a question. I would like to introduce Mr. C.K. Lee, the CEO of Cathay Financial Holding Company. Mr. Lee, please begin.
Speaker #1: Please follow the instructions given at the time if you would like to ask a question. And now, I would like to introduce Mr. C.
Speaker #1: K. Lee, the CEO of Cathay Financial Holding Company. Mr. Lee, please begin.
C.K. Lee: Good afternoon and good morning to those joining us from Europe. Welcome to Cathay Financial Holdings 2026 Q2 analyst meeting. I am C.K. Lee, CEO of Cathay Financial Holdings, and I will host today's meeting. Thank you for joining us. Let me begin by introducing the senior management team with us today. Ms. Grace Chen, CFO of Cathay Financial Holdings, Mr. Albert Lin, President of Cathay Life, Mr. Robert Fuh, EVP of Cathay United Bank. Before we begin the presentation, let me share a few key highlights. We delivered strong earnings in H1 2026. Cathay Financial Holdings reported net income of NTD 76.5 billion. Net income plus OCI attributed also gains recognized directly in the retained earnings, reached NTD 165.9 billion, surpassing the full year level for 2025 and reaching an all-time high. Corporate momentum remains strong across the group.
C.K. Lee: Good afternoon and good morning to those joining us from Europe. Welcome to Cathay Financial Holdings 2026 Q2 analyst meeting. I am C.K. Lee, CEO of Cathay Financial Holdings, and I will host today's meeting. Thank you for joining us. Let me begin by introducing the senior management team with us today. Ms. Grace Chen, CFO of Cathay Financial Holdings, Mr. Albert Lin, President of Cathay Life, Mr. Robert Fuh, EVP of Cathay United Bank. Before we begin the presentation, let me share a few key highlights. We delivered strong earnings in H1 2026. Cathay Financial Holdings reported net income of NTD 76.5 billion. Net income plus OCI attributed also gains recognized directly in the retained earnings, reached NTD 165.9 billion, surpassing the full year level for 2025 and reaching an all-time high. Corporate momentum remains strong across the group.
Speaker #2: Good afternoon and good morning to all those joining us from Europe. Welcome to Cathay Financial Holdings' 2026 second quarter analyst meeting. I am C.
Speaker #2: K. Lee, CEO of Cathay Financial Holdings, and I will host today's meeting. Thank you for joining us. Let me begin by introducing the senior management team with us today.
Speaker #2: Ms. Grace Chen, CFO of Cathay Financial Holdings; Mr. Albert Lin, President of Cathay Life; and Mr. Robert Fu, EVP of Cathay United Bank. Before we begin the presentation, let me share a few key highlights.
Speaker #2: We delivered strong earnings in the first half of 2026. Cathay Financial Holdings reported net income of $76.5 billion. Net income plus after-tax equity over the year, including estimated total gains recognized directly in retained earnings, reached $165.9 billion.
Speaker #2: First, passing the full-year label for 2025 and reaching an all-time high. Coffee's momentum remains strong across the group. Cathay United Bank delivered record-high first-half earnings, supported by strong loan and deposit growth.
C.K. Lee: Cathay United Bank delivered record high H1 earnings, supported by strong loan and deposit growth, higher net interest income, and robust investment management fee growth. Cathay Life net income plus after-tax FVOCI equity exposure gains also reached an all-time high. New business CSM generation remain robust. The positive spread remains stable and net worth reached a record high. Cathay Century, Cathay SITE and Cathay Securities also delivered a record high H1 earnings. Cathay Century's earnings were supported by steady premium growth and well-contained loss ratios. Cathay SITE continued to expand its AUM, while Cathay Securities benefit from Taiwan equity market turnover and continued gains in mortgage market share. I will hand over the call to Claire from our team for the 2026 H1 results presentation. Claire, please.
C.K. Lee: Cathay United Bank delivered record high H1 earnings, supported by strong loan and deposit growth, higher net interest income, and robust investment management fee growth. Cathay Life net income plus after-tax FVOCI equity exposure gains also reached an all-time high. New business CSM generation remain robust. The positive spread remains stable and net worth reached a record high. Cathay Century, Cathay SITE and Cathay Securities also delivered a record high H1 earnings. Cathay Century's earnings were supported by steady premium growth and well-contained loss ratios. Cathay SITE continued to expand its AUM, while Cathay Securities benefit from Taiwan equity market turnover and continued gains in mortgage market share. I will hand over the call to Claire from our team for the 2026 H1 results presentation. Claire, please.
Speaker #2: Higher net income, higher net interest income, and robust wealth management fee growth. Cathay United's net income plus after-tax equity-over-the-year equity disposal gains also reached an all-time high.
Speaker #2: New business CSM generation remains robust. The positive spread remains stable, and net worth reached a record high. Cathay Century, Cathay SITE, and Cathay Securities also delivered record-high first-half earnings.
Speaker #2: Cathay Century’s earnings were supported by steady premium growth and well-contained loss ratios. Cathay SITE continued to expand its AUM, while Cathay Securities benefited from active Taiwan equity market turnover and continued gains in brokerage market share.
Speaker #2: Now, I will hand over the call to Claire from our IR team for our presentation on the first half of 2026. Claire, please.
Speaker #3: Thank you, C. K. Let's start with the business highlights on page 4. Cathay United Bank's net income reached a record high for the first half.
[Company Representative] (Cathay Financial Holdings): Thank you, C.K. Let's start with the business highlight on page 4. Cathay United Bank net income reached a record high for H1, up 15% year on year. Loans and deposits both posted strong growth, while net interest income and net income increased 14% and 11% year on year respectively. Cathay Life new business CSM reached NTD 53.9 billion, while the CSM balance increased 6.9% year to date with NTD 547 billion. Liability interest cost declined significantly to 2.13%. Pre-hedging recurring yield reached 3.47%, and the hedging cost remained stable, supporting a stable positive spread. Net worth reached a record high. Cathay Century, the general insurance subsidiary, recorded steady growth in retained premiums, with market share at 13.2%, ranking number 2 in the industry. Net income reached a record high for H1. Loss ratio remained well-contained, and the return combined ratio improved year on year.
[Company Representative] (Cathay Financial Holdings): Thank you, C.K. Let's start with the business highlight on page 4. Cathay United Bank net income reached a record high for H1, up 15% year on year. Loans and deposits both posted strong growth, while net interest income and net income increased 14% and 11% year on year respectively. Cathay Life new business CSM reached NTD 53.9 billion, while the CSM balance increased 6.9% year to date with NTD 547 billion. Liability interest cost declined significantly to 2.13%. Pre-hedging recurring yield reached 3.47%, and the hedging cost remained stable, supporting a stable positive spread. Net worth reached a record high. Cathay Century, the general insurance subsidiary, recorded steady growth in retained premiums, with market share at 13.2%, ranking number 2 in the industry. Net income reached a record high for H1. Loss ratio remained well-contained, and the return combined ratio improved year on year.
Speaker #3: Up 15% year-on-year. Loans and deposits both closed with strong growth, while net interest income and net fee income increased 14% and 11% year-on-year, respectively.
Speaker #3: Cathay Life's new business CSM reached $53.9 billion. The CSM balance increased 6.9% year-to-date, reaching $547 billion. Liability interest costs declined significantly to 2.13%.
Speaker #3: Pre-heading recurring yield reached 3.47%, and the hedging close remains stable, supporting a stable positive spread. Net worth reached a record high. Cathay Century, the general insurance subsidiary, recorded steady growth in written premiums.
Speaker #3: With market share at 13.2%, we ranked number two in the industry. Net income reached a record high for the first half. Loss ratio remained well-contained, and the combined ratio improved year-on-year.
[Company Representative] (Cathay Financial Holdings): Cathay Life, the asset management subsidiary, total AUM reached NTD 3.6 trillion. Discretionary mandate AUM reached NTD 1.7 trillion, maintaining the number one position in the industry. Net income also reached a record high for H1. Cathay Securities net income reached a record high for H1. The strong performance was driven by active trading in Taiwan's equity market. Domestic brokerage market share and stock brokerage trading value continued to grow. Please turn to page five for an update on our sustainable finance initiatives. In July, we hosted the Cathay Sustainable Finance and Climate Trends Summit for the 10th consecutive year. This year's event attracted more than 5,800 participants, and the participating listed companies represented over 80% of Taiwan's total market capitalization. Page six shows Cathay Financial Holdings net income and EPS. In H1, Cathay Financial Holding reported net income of NTD 76.5 billion.
[Company Representative] (Cathay Financial Holdings): Cathay Life, the asset management subsidiary, total AUM reached NTD 3.6 trillion. Discretionary mandate AUM reached NTD 1.7 trillion, maintaining the number one position in the industry. Net income also reached a record high for H1. Cathay Securities net income reached a record high for H1. The strong performance was driven by active trading in Taiwan's equity market. Domestic brokerage market share and stock brokerage trading value continued to grow. Please turn to page five for an update on our sustainable finance initiatives. In July, we hosted the Cathay Sustainable Finance and Climate Trends Summit for the 10th consecutive year. This year's event attracted more than 5,800 participants, and the participating listed companies represented over 80% of Taiwan's total market capitalization. Page six shows Cathay Financial Holdings net income and EPS. In H1, Cathay Financial Holding reported net income of NTD 76.5 billion.
Speaker #3: Cathay Site, the asset management subsidiary, had total AUM reach $3.6 trillion. Discretionary mandate AUM reached $1.7 trillion, maintaining the number one position in the industry.
Speaker #3: Net income also reached a record high for the first half. Cathay Securities' net income reached a record high for the first half. The strong performance was driven by active trading in Taiwan's equity market.
Speaker #3: Domestic brokerage market share and sub-brokerage trading value continue to grow. Please send patch 5 for an update on our self-countable finance initiatives. In July, we hosted the Cathay Sustainable Finance and Climate Trends Summit for the 10th consecutive year.
Speaker #3: This year's event attracted more than 50,800 participants, and the participating listed companies represented over 80% of Taiwan's total market capitalization. Patch 6 shows Cathay Financial Holdings' net income and EPS.
Speaker #3: In the first half, Cathay Financial Holdings reported net income of $76.5 billion. Net income plus $89.4 billion of after-tax FPOCI equity disposal gains, recognized directly in retained earnings, reached $165.9 billion.
[Company Representative] (Cathay Financial Holdings): Net income plus NTD 89.4 billion of after-tax FVOCI equity disposal gains recognized directly in retained earnings, reached NTD 165.9 billion, surpassing the 2025 full-year level and setting a new all-time high. EPS was 4.95, including after-tax FVOCI equity disposal gains, the per share amount was 11.04. Please turn to page seven for subsidiaries net income and ROE. Cathay United Bank, Cathay Century, Cathay Life, and Cathay Securities all delivered record high net income for H1. Cathay Life's net income plus after-tax FVOCI equity disposal gains surpassed the 2025 full-year level and reached an all-time high. Cathay Financial Holdings ROE reached 16.9%, and all major subsidiaries delivered double-digits ROEs. Page eight shows the net worth of Cathay Financial Holdings. Consolidated net worth reached NTD 1.13 trillion, supported by strong earnings and significant increases in OCI asset and liability valuations.
[Company Representative] (Cathay Financial Holdings): Net income plus NTD 89.4 billion of after-tax FVOCI equity disposal gains recognized directly in retained earnings, reached NTD 165.9 billion, surpassing the 2025 full-year level and setting a new all-time high. EPS was 4.95, including after-tax FVOCI equity disposal gains, the per share amount was 11.04. Please turn to page seven for subsidiaries net income and ROE. Cathay United Bank, Cathay Century, Cathay Life, and Cathay Securities all delivered record high net income for H1. Cathay Life's net income plus after-tax FVOCI equity disposal gains surpassed the 2025 full-year level and reached an all-time high. Cathay Financial Holdings ROE reached 16.9%, and all major subsidiaries delivered double-digits ROEs. Page eight shows the net worth of Cathay Financial Holdings. Consolidated net worth reached NTD 1.13 trillion, supported by strong earnings and significant increases in OCI asset and liability valuations.
Speaker #3: Surpassing the 2025 full-year level and setting a new all-time high. EPS was $4.95, including after-tax FPOCI equity disposal gains. The per-share amount was $11.04.
Speaker #3: Please center patch 7 for subsidiaries' net income and ROE. Cathay United Bank, Cathay Century, Cathay SITE, and Cathay Securities all delivered record high net income for the first half.
Speaker #3: Cathay Life's net income, plus after-tax FPOCI equity disposal gains, surpassed the 2025 full-year level and reached an all-time high. Cathay Financial Holdings' ROE reached 16.9%, and all major subsidiaries delivered double-digit ROEs.
Speaker #3: Patch 8 shows the net worth of Cathay Financial Holdings. Consolidated net worth reached $1.13 trillion, supported by strong earnings and significant increases in OCI assets and liability valuations.
Speaker #3: Including after-tax CSM, a drastic net worth reached 1.58 trillion Taiwan dollars. Better reflecting economic value. After deducting preferred shares, a drastic book value per share was 101.2 Taiwan dollars.
[Company Representative] (Cathay Financial Holdings): Including after-tax CSM, adjusted net worth reached NTD 1.58 trillion, better reflecting economic value. After deducting preferred shares, adjusted book value per share was NTD 101.2. Now, let's move to the performance of the major subsidiaries. Please turn to page 10 for Cathay United Bank's loan and deposit performance. Total loans reached NTD 3.1 trillion, up 14% year on year, driven by double-digit growth in corporate and consumer loans, and steady mortgage growth. Deposits grew 15% year on year to NTD 4.6 trillion, with the demand deposit ratio rising to 62.4%. Interest yield is shown on page 11. Supported by strong foreign currency loan growth and a higher demand deposit ratio, the H1 net interest margin and interest rate were 1.61% and 1.93%, up five basis points and seven basis points year on year respectively. Both Q2 metrics increased by four basis points quarter on quarter.
[Company Representative] (Cathay Financial Holdings): Including after-tax CSM, adjusted net worth reached NTD 1.58 trillion, better reflecting economic value. After deducting preferred shares, adjusted book value per share was NTD 101.2. Now, let's move to the performance of the major subsidiaries. Please turn to page 10 for Cathay United Bank's loan and deposit performance. Total loans reached NTD 3.1 trillion, up 14% year on year, driven by double-digit growth in corporate and consumer loans, and steady mortgage growth. Deposits grew 15% year on year to NTD 4.6 trillion, with the demand deposit ratio rising to 62.4%. Interest yield is shown on page 11. Supported by strong foreign currency loan growth and a higher demand deposit ratio, the H1 net interest margin and interest rate were 1.61% and 1.93%, up five basis points and seven basis points year on year respectively. Both Q2 metrics increased by four basis points quarter on quarter.
Speaker #3: Now, let's move to the performance of the major subsidiaries. Please turn to page 10 for Cathay United Bank's loan and deposit performance. Total loans reached $3.1 trillion, up 14% year-on-year.
Speaker #3: Driven by double-digit growth in corporate and consumer loans, and steady mortgage growth. Deposits grew 15% year-on-year to $4.6 trillion, with the demand deposit ratio rising to 62.4%.
Speaker #3: Interest yield is shown on page 11, supported by strong foreign currency loan growth and a higher demand deposit ratio. First half net interest margin and interest rate were 1.61% and 1.93%, respectively.
Speaker #3: Up 5 basis points and 7 basis points year-on-year, respectively, while both account quarter metrics increased by 4 basis points quarter-on-quarter. Page 12 shows the asset quality.
[Company Representative] (Cathay Financial Holdings): Page 12 shows the asset quality. Asset quality remains sound, with the NPL ratio at 14 basis points and the coverage ratio at 1,100%. Annualized credit cost was 24 basis points up year on year, mainly reflecting higher general provisions due to loan growth. Please turn to page 13 for SME and foreign currency loans. SME loans grew 7% year on year to NTD 377 billion, accounting for 12% of total loans. Foreign currency loans reached NTD 378 billion at the end of Q2, up 34% year on year or 26% excluding FX impact, supported by supply chain realignment and the corporate overseas CapEx demand. Page 14 shows offshore earnings. Offshore earnings increased 5% year on year to NTD 5.4 billion, driven by growth in loans and deposits and investment income. Please turn to page 15 for net fees.
[Company Representative] (Cathay Financial Holdings): Page 12 shows the asset quality. Asset quality remains sound, with the NPL ratio at 14 basis points and the coverage ratio at 1,100%. Annualized credit cost was 24 basis points up year on year, mainly reflecting higher general provisions due to loan growth. Please turn to page 13 for SME and foreign currency loans. SME loans grew 7% year on year to NTD 377 billion, accounting for 12% of total loans. Foreign currency loans reached NTD 378 billion at the end of Q2, up 34% year on year or 26% excluding FX impact, supported by supply chain realignment and the corporate overseas CapEx demand. Page 14 shows offshore earnings. Offshore earnings increased 5% year on year to NTD 5.4 billion, driven by growth in loans and deposits and investment income. Please turn to page 15 for net fees.
Speaker #3: Asset quality remains strong, with the MPL ratio at 14 basis points and the coverage ratio at 1,100%. Annualized credit cost was 24 basis points, up year-on-year.
Speaker #3: Many are reflecting higher general provisions due to loan growth. Please refer to slide 13 for SME and foreign currency loans. SME loans grew 7% year-on-year to $377 billion, accounting for 12% of total loans.
Speaker #3: Foreign currency loans reached $3,178 billion at the end of the second quarter, up 34% year-on-year, or over 26% excluding FX impact. Growth was supported by supply chain realignment and corporate overseas capex demand.
Speaker #3: Patch 14 shows offshore earnings. Offshore earnings increased 5% year-on-year to $5.4 billion, driven by growth in loans and deposits and investment income. Please tend to patch 15 for.
Speaker #3: Net fixed income was $19.8 billion, up 11% year-on-year, driven by strong wealth management momentum. Wealth management fees reached $13.9 billion, up 25% year-on-year.
[Company Representative] (Cathay Financial Holdings): Net fee income was NTD 19.8 billion, up 11% year-on-year, driven by strong wealth management momentum. Wealth management fees reached NTD 13.9 billion, up 25% year-on-year. Page 16 shows the breakdown of wealth management fees. Fees from mutual funds grew 16% year-on-year, while fees from securities and structured products grew 74%. Fees from insurance products also grew steadily. Please move to page 18 for Cathay Life's earnings breakdown. Insurance service result was NTD 22.2 billion, supported by stable CSM release, while financial result was NTD 38.8 billion, driven by recurring positive spread. Net income reached NTD 46.2 billion. Net income plus after-tax FVOCI equity disposal gains reached an all-time high of NTD 131.2 billion. Please move to page 19 for Cathay Life's premium performance. FYP and APE reached NTD 195.4 billion and NTD 39.3 billion, up 105% and 27% year-on-year respectively.
[Company Representative] (Cathay Financial Holdings): Net fee income was NTD 19.8 billion, up 11% year-on-year, driven by strong wealth management momentum. Wealth management fees reached NTD 13.9 billion, up 25% year-on-year. Page 16 shows the breakdown of wealth management fees. Fees from mutual funds grew 16% year-on-year, while fees from securities and structured products grew 74%. Fees from insurance products also grew steadily. Please move to page 18 for Cathay Life's earnings breakdown. Insurance service result was NTD 22.2 billion, supported by stable CSM release, while financial result was NTD 38.8 billion, driven by recurring positive spread. Net income reached NTD 46.2 billion. Net income plus after-tax FVOCI equity disposal gains reached an all-time high of NTD 131.2 billion. Please move to page 19 for Cathay Life's premium performance. FYP and APE reached NTD 195.4 billion and NTD 39.3 billion, up 105% and 27% year-on-year respectively.
Speaker #3: Patch 16 shows the breakdown of wealth management fees. Fees from mutual funds grew 60% year-on-year, while fees from securities and structured products grew 17.4%.
Speaker #3: Fees from insurance products also grew steadily. Please move to page 18 for Cathay Life's earnings breakdown. Insurance service result was $22.2 billion, supported by stable CSM release.
Speaker #3: While financial result was $38.8 billion, driven by recurring positive spread, net income reached $46.2 billion. Net income plus after-tax FPOCI equity disposal gains reached an all-time high of $131.2 billion.
Speaker #3: Please move to patch 19 for Cathay Life's premium performance. FYP and FPE reached $195.4 billion and $39.3 billion, up 105% and 27% year-on-year, respectively.
[Company Representative] (Cathay Financial Holdings): Growth was driven by continuing strong sales momentum in investment-linked products amidst strong equity markets, while FYP from health and accident products, key contributor to new business CSM, also increased year-on-year. Page 20 shows the distribution channels and persistency ratios. FYP was mainly generated through tied agent and Cathay United Bank, which together accounted for nearly 99%. Please turn to page 21 for new business CSM. New business CSM reached NTD 53.9 billion in H1. Health and accident products contributed nearly 60%, despite their relatively small share of FYP. Tied agent remained the primary contributor, while telemarketing accounted for only 0.2% of FYP, but contributed 4% of new business CSM. Please turn to page 22 for CSM balance movement. CSM balance reached NTD 547 billion, up 6.9% year to date, mainly driven by new business CSM. CSM release was NTD 17.4 billion, providing stable support to the insurance service result.
[Company Representative] (Cathay Financial Holdings): Growth was driven by continuing strong sales momentum in investment-linked products amidst strong equity markets, while FYP from health and accident products, key contributor to new business CSM, also increased year-on-year. Page 20 shows the distribution channels and persistency ratios. FYP was mainly generated through tied agent and Cathay United Bank, which together accounted for nearly 99%. Please turn to page 21 for new business CSM. New business CSM reached NTD 53.9 billion in H1. Health and accident products contributed nearly 60%, despite their relatively small share of FYP. Tied agent remained the primary contributor, while telemarketing accounted for only 0.2% of FYP, but contributed 4% of new business CSM. Please turn to page 22 for CSM balance movement. CSM balance reached NTD 547 billion, up 6.9% year to date, mainly driven by new business CSM. CSM release was NTD 17.4 billion, providing stable support to the insurance service result.
Speaker #3: Growth was driven by continued strong sales momentum in investment-linked products amid a strong equity market, while FYP, fund, health, and accident products were key contributors to new business CSM.
Speaker #3: Also increased year-on-year. Page 20 shows the distribution channels and persistency ratios. FYP was mainly generated through tied agents and Cathay United Bank, which together accounted for nearly 99%.
Speaker #3: Please refer to page 21 for new business CSM. New business CSM reached $53.9 billion in the first half. Health and accident products contributed nearly 60%, despite their relatively small share of FYP.
Speaker #3: Tied agent remained the primary contributor, while telemarketing accounted for only 0.2% of FYP, but contributed 4% of new business CSM. Please tend to patch 22 for CSM balance movement.
Speaker #3: CSM balance reached $547 billion, up 6.9% year-to-date, mainly driven by new business CSM. CSM release was $17.4 billion, providing stable support to the insurance service result.
[Company Representative] (Cathay Financial Holdings): Page 23 shows the liability interest cost and the breakeven asset yield. Under IFRS 17, insurance liability are major using market-based discount rates. Liability interest cost declined by 127 basis points to 2.13%, while the breakeven asset yield also declined to 2.07%. Please look at page 24 for the investment portfolio. Total investments were TWD 8 trillion at quarter end, with overseas investment accounting for nearly 70%. Please refer to the right-hand column for investment return by asset class. Please turn to page 25 for investment performance. Cathay Life realized equity capital gains amid strong equity markets, bringing the after-hedging investment yield, including FVOCI equity disposal gains, to 5.55% in H1. On a P&L basis, the after-hedging investment yield was 3.27%. Pre-hedging recurring yield was 3.47%. Please turn to page 26 for FX hedging spread trade. Annualized hedging cost was 1.21%, down year-on-year.
[Company Representative] (Cathay Financial Holdings): Page 23 shows the liability interest cost and the breakeven asset yield. Under IFRS 17, insurance liability are major using market-based discount rates. Liability interest cost declined by 127 basis points to 2.13%, while the breakeven asset yield also declined to 2.07%. Please look at page 24 for the investment portfolio. Total investments were TWD 8 trillion at quarter end, with overseas investment accounting for nearly 70%. Please refer to the right-hand column for investment return by asset class. Please turn to page 25 for investment performance. Cathay Life realized equity capital gains amid strong equity markets, bringing the after-hedging investment yield, including FVOCI equity disposal gains, to 5.55% in H1. On a P&L basis, the after-hedging investment yield was 3.27%. Pre-hedging recurring yield was 3.47%. Please turn to page 26 for FX hedging spread trade. Annualized hedging cost was 1.21%, down year-on-year.
Speaker #3: Patch 23 shows the liability interest closed and break-even asset yield. Under IFRS 17, insurance liabilities are measured using a market-based discount rate. Liability interest closed declined by 127 basis points to 2.13%.
Speaker #3: While the break-even asset yield also declined to 2.07%. Please look at page 24 for the investment portfolio. Total investments were NT$8 trillion at quarter end.
Speaker #3: Overseas investment accounted for nearly 70%. Please refer to the right-hand column for investment return by asset class. Please refer to page 25 for investment performance.
Speaker #3: Cathay Life realized equity capital gains amid a strong equity market, bringing the after-hedging investment yield, including FPOCI equity disposal gains, to 5.55% in the first half.
Speaker #3: On a P&L basis, the after-hedging investment yield was 3.27%. The pre-hedging recurring yield was 3.47%. Please refer to page 26 for the FX hedging strategy. The annualized hedging cost was 1.21%, down year-on-year.
[Company Representative] (Cathay Financial Holdings): Following the adoption of the new FX volatility reserve mechanism and FX amortization for bonds classified as amortized cost, volatility in FX gains and losses declined significantly and hedging costs stabilized. The FX volatility reserve balance increased to NTD 130.9 billion. Please turn to page 27 for cash dividend income. Cathay Life adjusted its equity position and realized capital gains amid strong equity markets. Cash dividend income totaled NTD 12.7 billion as of the end of July. Page 28 shows the net worth and OCI valuation changes. Net worth reached a record high of NTD 958.7 billion, up NTD 454.2 billion in H1, supported by earnings, equity disposal gains, and OCI valuation gains. The OCI valuation gains reflected higher asset valuation amid strong equity markets and a liability valuation gain due to higher Taiwan interest rate. The equity to asset ratio and adjusted equity to asset ratio reached 11.5% and 17.1% respectively.
[Company Representative] (Cathay Financial Holdings): Following the adoption of the new FX volatility reserve mechanism and FX amortization for bonds classified as amortized cost, volatility in FX gains and losses declined significantly and hedging costs stabilized. The FX volatility reserve balance increased to NTD 130.9 billion. Please turn to page 27 for cash dividend income. Cathay Life adjusted its equity position and realized capital gains amid strong equity markets. Cash dividend income totaled NTD 12.7 billion as of the end of July. Page 28 shows the net worth and OCI valuation changes. Net worth reached a record high of NTD 958.7 billion, up NTD 454.2 billion in H1, supported by earnings, equity disposal gains, and OCI valuation gains. The OCI valuation gains reflected higher asset valuation amid strong equity markets and a liability valuation gain due to higher Taiwan interest rate. The equity to asset ratio and adjusted equity to asset ratio reached 11.5% and 17.1% respectively.
Speaker #3: Following the adoption of the new FX volatility reserve mechanism and FX amortization for bonds, classified as amortized closed, volatility in FX gains and losses declined significantly.
Speaker #3: And hedging closed stabilized. The FX volatility reserve balance increased to $130.9 billion. Please refer to page 27 for cash display income. Cathay Life adjusted its equity position and realized capital gains amid a strong equity market.
Speaker #3: Cash dividend income totaled $12.7 billion as of the end of July. Patch 28 shows the net worth and OCI valuation changes. Net worth reached a record high of $958.7 billion.
Speaker #3: Up $454.2 billion in the first half, supported by earnings, equity disposal gains, and OCI valuation gains. The OCI valuation gains reflected higher asset valuations amid a strong equity market.
Speaker #3: And the liability valuation gains due to higher Taiwan interest rates. The equity-to-asset ratio and adjusted equity-to-asset ratio reached 11.8% and 17.1%, respectively. Patch 29 summarized Cathay Life's key operating and financial metrics under IFRS 17 for reference.
[Company Representative] (Cathay Financial Holdings): Page 29 summarizes Cathay Life's key operating and financial metrics under IFRS 17 for reference. Now let's move to Cathay Century, Cathay Life, and Cathay Securities. Page 31, Cathay Century's return premium continued to grow, reaching NTD 21.3 billion in the H1. Market share was 13.2%, ranking number 2 in the industry. On page 32, the return combined ratio improved by 2.4 percentage points year on year as extended underwriting capacity drove higher insurance revenue, while loss ratios remained stable. Moving to Cathay Life on page 33. Cathay Life net income reached a record high for the H1, up 27% year on year, with ROE at 66.4%. Supported by solid AUM growth, bond AUM and the number of beneficiaries also continued to grow. Moving to Cathay Securities on page 34.
[Company Representative] (Cathay Financial Holdings): Page 29 summarizes Cathay Life's key operating and financial metrics under IFRS 17 for reference. Now let's move to Cathay Century, Cathay Life, and Cathay Securities. Page 31, Cathay Century's return premium continued to grow, reaching NTD 21.3 billion in the H1. Market share was 13.2%, ranking number 2 in the industry. On page 32, the return combined ratio improved by 2.4 percentage points year on year as extended underwriting capacity drove higher insurance revenue, while loss ratios remained stable. Moving to Cathay Life on page 33. Cathay Life net income reached a record high for the H1, up 27% year on year, with ROE at 66.4%. Supported by solid AUM growth, bond AUM and the number of beneficiaries also continued to grow. Moving to Cathay Securities on page 34.
Speaker #3: Now, let's move to Cathay-centric Cathay site and the Cathay security. Patch 31. Cathay-centric return premium continued to grow, reaching $21.3 billion in the first half.
Speaker #3: Market share was 13.2%, ranking number two in the industry. On Patch 32, the return combined ratio improved by 2.4 percentage points year-on-year, as expanded underwriting capacity drove higher insurance revenue.
Speaker #3: While both ratios remain stable. Moving to Cathay site on page 33. Cathay site net income reached a record high for the first half, up 27% year-on-year.
Speaker #3: With all E at 66.4%, supported by solid annual growth. Fund AUM and the number of beneficiaries also continued to grow. Moving to Cathay Securities on page 34.
[Company Representative] (Cathay Financial Holdings): Cathay Securities net income reached a record high for the H1, up 148% year on year, with ROE at 44.7%, supported by active trading in Taiwan's equity market. Domestic brokerage market share reached a new high, while sub-brokerage trading value continued to grow. By the end of July, cumulative net income had already surpassed the 2025 full year level, setting a new all-time high. This concludes the presentation. I will now hand it back to C.K. for the Q&A section. Thank you.
[Company Representative] (Cathay Financial Holdings): Cathay Securities net income reached a record high for the H1, up 148% year on year, with ROE at 44.7%, supported by active trading in Taiwan's equity market. Domestic brokerage market share reached a new high, while sub-brokerage trading value continued to grow. By the end of July, cumulative net income had already surpassed the 2025 full year level, setting a new all-time high. This concludes the presentation. I will now hand it back to C.K. for the Q&A section. Thank you.
Speaker #3: Cathay Securities’ net income reached a record high for the first half, up 148% year-on-year, with ROE at 44.7%. This was supported by active trading in Taiwan’s equity market.
Speaker #3: Domestic brokerage market share reached a new high, while sub-brokerage trading value continued to grow. By the end of July, cumulative net income had already surpassed the 2025 full-year level, setting a new all-time high.
Speaker #3: This concludes the presentation. I will now hand it back to CK for the Q&A section. Thank you.
Speaker #1: Okay. Thank you, Pim.
C.K. Lee: Okay. Thank you, Pam.
C.K. Lee: Okay. Thank you, Pam.
Grace Chen: Good afternoon. This is Grace Chen. Before we move into the Q&A, let me briefly recap some of the key topics discussed during our Chinese session, which may also be of interest to international investors. Given our strong H1 results, participants were particularly interested in recent operating trends, the outlook for key earnings drivers, and dividend policy. For banking business, operating momentum remained resilient. Corporate and foreign currency loans showed strong momentum, which should continue in the H2. We maintain our full-year target of double-digit loan growth. H1 net interest margin expanded by 6 basis points, better than expected. Given strong foreign currency loan momentum, effective funding cost management, and greater visibility into the interest rate environment, we now expect full-year NIM to be around 1.63% to 1.65% level.
Grace Chen: Good afternoon. This is Grace Chen. Before we move into the Q&A, let me briefly recap some of the key topics discussed during our Chinese session, which may also be of interest to international investors. Given our strong H1 results, participants were particularly interested in recent operating trends, the outlook for key earnings drivers, and dividend policy. For banking business, operating momentum remained resilient. Corporate and foreign currency loans showed strong momentum, which should continue in the H2. We maintain our full-year target of double-digit loan growth. H1 net interest margin expanded by 6 basis points, better than expected. Given strong foreign currency loan momentum, effective funding cost management, and greater visibility into the interest rate environment, we now expect full-year NIM to be around 1.63% to 1.65% level.
Speaker #2: Good afternoon. This is Grace Chen. Before we move into the Q&A, let me briefly recap some of the key topics discussed during our Chinese session.
Speaker #2: Which may also be of interest to international investors. Given our strong first-half results, participants were particularly interested in recent operating trends, the outlook for key earnings drivers, and dividend policy. For the banking business, operating momentum remained resilient; corporate and foreign currency loans showed strong momentum.
Speaker #2: This should continue in the second half. We maintain our full-year target of double-digit loan growth. First half net interest margin expanded by 6 basis points.
Speaker #2: Better than expected. Given strong foreign currency loan momentum, effective funding cost management, and greater visibility into the interest rate environment, we now expect full-year NIM to be around 1.63% to 1.65%.
Grace Chen: Asset quality remained stable in the H1, with annualized credit cost at 24 basis points, and should remain stable in the H2. Strong wealth management momentum should support double-digit growth in net fee income. For Cathay Life, performance remained strong across both the insurance and investment sides. New business CSM reached NTD 53.9 billion in the H1, representing 72% of the full-year targets of NTD 75 billion. Given the strong momentum, new business CSM should exceed the full-year target. On the investment side, the new AC FX accounting treatment has significantly reduced volatility in FX gains and losses, and the hedging costs have stabilized. Full-year hedging costs should be around 1.2%. Interest rates have remained elevated year to date, which has been beneficial to recurring income. The full-year pre-hedging recurring year could exceed 3.5%, supporting a stable positive spread.
Grace Chen: Asset quality remained stable in the H1, with annualized credit cost at 24 basis points, and should remain stable in the H2. Strong wealth management momentum should support double-digit growth in net fee income. For Cathay Life, performance remained strong across both the insurance and investment sides. New business CSM reached NTD 53.9 billion in the H1, representing 72% of the full-year targets of NTD 75 billion. Given the strong momentum, new business CSM should exceed the full-year target. On the investment side, the new AC FX accounting treatment has significantly reduced volatility in FX gains and losses, and the hedging costs have stabilized. Full-year hedging costs should be around 1.2%. Interest rates have remained elevated year to date, which has been beneficial to recurring income. The full-year pre-hedging recurring year could exceed 3.5%, supporting a stable positive spread.
Speaker #2: Asset quality remained stable in the first half, with annualized credit cost at 24 basis points, and should remain stable in the second half. Strong wealth management momentum should support double-digit growth in net fee income.
Speaker #2: For Cathay Life, performance remained strong across both the insurance and investment sides. New business CSM reached NT$53.9 billion in the first half.
Speaker #2: Representing 72% of the full-year target of $75 billion. Given the strong momentum, new business CSM should exceed the full-year target. On the investment side, the new ACFX accounting treatment has significantly reduced volatility in FX gains and losses.
Speaker #2: And hedging costs have stabilized. Full-year hedging cost should be around 1.2%. Interest rates have remained elevated year-to-date, which has been beneficial to recurring income.
Speaker #2: The full-year pre-hedging recurring yield could exceed 3.5%, supporting a stable, positive spread. The significant increase in OCI valuation drove a strong rebound in Cathay Life's net worth and further strengthened its capital position.
Grace Chen: The significant increase in OCI valuation drove a strong rebound in Cathay Life's net worth and further strengthened its capital position. On dividend policy, net income plus after-tax FVOCI equity disposal gains reached an all-time high. In addition, Cathay Life's strengthened capital position supports a positive outlook for future dividend upstreaming to the holding company. These developments provide a solid foundation for our dividend distributions. In determining future dividends, we will continue to consider overall earnings performance, business development needs, shareholders' expectations, and the peer's dividend yields while maintaining healthy financial and capital ratios. As we have consistently communicated, our objective is to appropriately reflect our strong earnings performance and provide a competitive dividend yield. These are the key highlights.
Grace Chen: The significant increase in OCI valuation drove a strong rebound in Cathay Life's net worth and further strengthened its capital position. On dividend policy, net income plus after-tax FVOCI equity disposal gains reached an all-time high. In addition, Cathay Life's strengthened capital position supports a positive outlook for future dividend upstreaming to the holding company. These developments provide a solid foundation for our dividend distributions. In determining future dividends, we will continue to consider overall earnings performance, business development needs, shareholders' expectations, and the peer's dividend yields while maintaining healthy financial and capital ratios. As we have consistently communicated, our objective is to appropriately reflect our strong earnings performance and provide a competitive dividend yield. These are the key highlights.
Speaker #2: On dividend policy, net income plus after-tax FVOCI equity disposal gains reached an all-time high. In addition, Cathay Life's strengthened capital position supports a positive outlook for future dividend upstreaming to the holding company.
Speaker #2: This development provides a solid foundation for our dividend distributions. In determining future dividends, we will continue to consider overall earnings performance, business development needs, shareholders' expectations, and peers' dividend yields.
Speaker #2: While maintaining healthy financial and capital ratios. As we have consistently communicated, our objective is to appropriately reflect our strong earnings performance and provide a competitive dividend yield.
Speaker #2: These are the key highlights.
Speaker #1: Thank you. Any question?
C.K. Lee: Thank you. Any question?
C.K. Lee: Thank you. Any question?
Operator: Yes. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star key and number 1 on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. Should you wish to cancel your question, you may press star key and number 2. Thank you. Now please press star 1 on your keypad if you would like to ask the question. Thank you. Okay, there appears to be no questions at the moment.
Operator: Yes. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star key and number 1 on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. Should you wish to cancel your question, you may press star key and number 2. Thank you. Now please press star 1 on your keypad if you would like to ask the question. Thank you. Okay, there appears to be no questions at the moment.
Speaker #3: Yes. And, ladies and gentlemen, we will now begin the question-and-answer session. If you wish to ask a question, please press the star key and the number one on your telephone keypad.
Speaker #3: And you will enter the queue. After you are announced, please ask your question. Should you wish to cancel your question, you may press the star key and number two.
Speaker #3: Thank you. Now, please press star one on your keypad if you would like to ask a question. Thank you. Okay, there appear to be no questions at the moment.
C.K. Lee: Okay, thank you.
C.K. Lee: Okay, thank you.
Speaker #3: Then I will hand it over to Mr. Lee. Thank you.
Operator: I will hand over to Mr. C.K. Lee. Thank you.
Operator: I will hand over to Mr. C.K. Lee. Thank you.
C.K. Lee: It sounds we have answered all the questions from the Chinese version. Okay, thank you so much for your participation. Should you have any question, please feel free to contact our IR team. Thank you.
C.K. Lee: It sounds we have answered all the questions from the Chinese version. Okay, thank you so much for your participation. Should you have any question, please feel free to contact our IR team. Thank you.
Speaker #1: This time, we have answered all the questions from the Chinese version. Okay, thank you so much for your presentation and your participation. Should you have any questions, please feel free to contact our team.
Speaker #1: Thank you.
Speaker #2: Thank you.
[Company Representative] (Cathay Financial Holdings): Thank you.
[Company Representative] (Cathay Financial Holdings): Thank you.
Speaker #1: Thank you.
C.K. Lee: Thank you.
C.K. Lee: Thank you.
Speaker #3: Thank you, Mr. Lee. And ladies and gentlemen, we thank you for your participation in Cathay Financial Holding Company's conference call. You may now disconnect.
Operator: Thank you, Mr. Lee. Ladies and gentlemen, we thank you for your participation in Cathay Financial Holding Company's conference call. You may now disconnect. Thank you again. Goodbye.
Operator: Thank you, Mr. Lee. Ladies and gentlemen, we thank you for your participation in Cathay Financial Holding Company's conference call. You may now disconnect. Thank you again. Goodbye.
Speaker #3: Thank you again. Goodbye.
C.K. Lee: Thank you.
C.K. Lee: Thank you.
