Cathay Life Insurance Co. Ltd.

The outlook reflects the potential that a surge in global financial market volatility could negatively affect Cathay Life's capital resilience through asset depreciation and slower capital accumulation. We expect Cathay life to remain Cathay FHC group's flagship entity and we believe the insurer will dominate the group credit profile over the next few years. We also expect the group to maintain a proactive capital management policy to meet the insurer's capital needs. We could lower the ratings on Cathay Life if: The insurer's capital deficiency weakens due to: (1) unexpected financial market volatility with sizable and unrecoverable losses on the insurer's investment portfolio; (2) overly aggressive business growth, either organically or via merger and acquisitions, or (3) significantly slower growth

...We believe Cathay Life has very strong business prospects, given its ability to effectively deploy product strategies via its distribution channels. As the largest player in the domestic life insurance market, Cathay Life Insurance Co. Ltd. has the largest direct agency force and is likely to sustain its competitive advantages for the foreseeable future. The insurer's significant scale, well-established distribution force, and well-diversified customer base should help it to secure satisfactory (slightly above-average) business prospects for the next one to two years. We also believe the insurer's very strong control over its distribution channels enables it to exploit slightly above-average growth from its targeted product lines. Cathay Life's earnings level is similar to other domestic life insurers'. Structural weaknesses in Taiwan's life insurance sector constrain market conditions resulting in greater time needed to solve the legacy issue of negative spread that affects most insurers,...

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