KGI Life reduces risky asset exposure in 2024

Value of new business (VNB) margin expanded to 43.5% in the first half of last year.

Taiwan-headquartered KGI Life Insurance's earnings volatility remains a risk due to potential changes in investment performance, Fitch Ratings said.

Although its financial performance remains strong, with return on equity at 12.0% for the first nine months of 2024, compared with a three-year average of 10.7%. 

The insurer continues to focus on traditional life policies, which accounted for 72% of premiums in the first half of the year. 

Value of new business (VNB) margin expanded to 43.5% in the first half, up from 34.3% a year earlier, driven by a shift toward regular-premium policies with sustainable profit margins.

The insurer’s regulatory risk-based capital (RBC) ratio rose to 363% by the end of the third quarter, up from 340% at the end of 2023, following a TW$10bsubordinated securities issuance. Despite the debt issuance, its financial leverage ratio remained low at 11%.

Exposure to risky assets, including equities and below-investment-grade bonds, declined to 102% of shareholder equity and loss-absorbing reserves in the first half, down from 107% in 2023, supported by a larger capital base. 

Fitch does not expect major shifts in the investment mix in the near term.