Post on 12-Jan-2016
Cathay Financial Holdings
April 25th, 2003
Management Presentation 2003 1Q
2
Agenda
2003 1Q Operational Results of Cathay FHC
2003 1Q Operational Results of Each Subsidiaries – Cathay Life– Cathay Century– UWCCB– CUB
Banks Integration – UWCCB & CUB
3
Cathay FHC - Strong Financial Performance
Income & EPS
10.6013.09
21.02
7.25
1.81
2.83
2.23
0
5
10
15
20
25
2001 2002 2003E 2003 1Q
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Net income EPS
NT$bn
Total Shareholders’ Equity & ROAE
Total Assets & ROAA
144
75 136151
21.1%14.7%12.4%
0
50
100
150
200
2001 2002 2003E 2003 1Q
0%
5%
10%
15%
20%
25%Total assets ROAA
118.6124.5110.974.8
25.3%17.9%14.1%
0
50
100
150
2001 2002 2003E 2003 1Q
0%5%10%15%20%25%30%
Book value ROE
Note: Non-consolidated basis
Source: Company reports
NT$bn
NT$bn
4
Cathay FHC – Operational Results
Financial Figures ($NT bn) 2002 FY 2002 1Q 2003 1Q
Insurance Premiums $ 286.7 $ 50.3 $ 57.0
Investment Income $ 11.0 $ 2.5 $ 3.8
Net Policy Reserve $ 161.9 $ 24.2 $ 26.6
Commission & Fee Income $ 3.7 $ 0.7 $ 1.0
Interest Income $ 82.3 $ 20.7 $ 20.1
Interest Expense $ 15.1 $ 4.6 $ 2.5
Benefits & Claims $ 125.9 $ 26.8 $ 29.2
Net Income (after tax) $ 13.1 $ 4.9 $ 7.3
EPS $ 2.23 $ 0.85 $ 0.97
5
2003 1Q - Performance Achievement
0.3
1.33
6.5
13.1
21.0
0.14 (45.5%)
0.4 (29.4%)
1.87 (28.8%)
5 (38%)
7.25 (34.5%)
Cathay Century
CUB
UWCCB
Cathay Life
CFH
2003 1Q (Achievement Ratio)
2003 Proforma Figure
NT$Bn
6
Subsidiary Contribution Analysis – 2003 1Q
Sales Contribution 2003 1Q Asset Allocation 2003 1Q
Total Sales: NT$7.25Bn Total Revenue: NT $113.7Bn Total Asset: NT$2128.1Bn
Revenue Contribution 2003 1Q
CUB6.2%
UWCCB25%
Cathay Century
1.7%Cathay
Life67.1%
CUB2.5%
UWCCB6.3%
Cathay Century
5.1%
CathayLife
86.1%
CUB8.3%
UWCCB30.5%
CathayCentury
0.5%
CathayLife
60.7%
7
21.14%
1.53%
5.64%
1.96%2.17%
CFH CathayLife
CathayCentury
CUB UWCCB
Profit Analysis – 2003 1Q
ROE Analysis
ROA Analysis
25.26%27.74%
19.67%
13.61%11.84%
CFH CathayLife
CathayCentury
CUB UWCCB
Note: ROA, ROE have been annualized.
8
76.193.6
70.395.0
62.7 61.3
1998 1999 2000 2001 2002 20031Q
46.3 42.3 37.7 36.8 34.2 35.8
1998 1999 2000 2001 2002 20031Q
21.3 18.6 17.6 16.6 14.6 13.8
1998 1999 2000 2001 2002 20031Q
Cathay FHC has been focusing on improving operation efficiency
% Expense ratio of Cathay Life
% Efficiency ratio of UWCCB
Operation efficiency improvement
Integrate IT and data warehousing systems and centralize CRM development to share customer base
Integrate back-end platforms and operation to reduce administration costs
Source: Company reports
% Combined ratio of Cathay Century Ins.
9
Agenda
2003 1Q Operational Results of Cathay FHC
2003 1Q Operational Results of Each Subsidiaries – Cathay Life– Cathay Century– UWCCB– CUB
Banks Integration – UWCCB & CUB
10
Cathay Life – Operational Results
Financial Figures ($NT Bn) 2002 FY 2002 1Q 2003 1QTotal Premium Income $ 280.6 $ 48.8 55.3$ FYP $ 84.5 $ 7.4 10.5$
Claim & Benefit Expense $ 122.9 $ 26.2 28.3$
Net Commission Expense $ 21.5 $ 4.7 4.4$
Net Provision in Policy Reserve -$ 156.8 -$ 24.6 27.0-$
General & Admin Expense $ 14.2 $ 3.8 3.7$
Net Income (after tax) $ 12.8 $ 5.1 5.0$
EPS($) $ 2.4 $ 0.9 1.0$
Financial Ratio 2002 FY 2002 1Q 2003 1Q13 mo. Persistency Ratio 90.1% 90.3% 90.2%25 mo. Persistency Ratio 84.1% 83.2% 84.6%Expense Ratio 14.6% 16.3% 13.8%ROAE 17.9% 28.1% 27.7%ROAA 1.1% 1.8% 1.5%NPL ratio 1.9% 2.7% 1.7%
Note: ROA, ROE have been annualized.
Net policy reserve = policy reserve – policy reserve writeback
11
• Improve sales performance Reward summit
• Reinforce organizational capacityPremium sales performance calculation
• Strengthen sales forceCombination of the sale of cross-selling products and insurance sales quota
• Constitute professional and efficient marketing teamUS recruiting programTransformation of sales manager
Cathay Life – Operating Activities
12
Cathay Life – Operating Indicators
Expense ratio
Persistency ratio
32.3%27.8%
25.8%24.1%
13.80%
21.3%18.6%
17.6% 16.6% 14.6%
0%
5%
10%
15%
20%
25%
30%
35%
1998 1999 2000 2001 2002 2003Q1
Industry(Cathay excluded)
Cathay Life
90.2%89.8% 90.1% 90.1%87.4%
80.7%84.6%84.1%83.2%
79.8%
61.6%
70.9%
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
1998 1999 2000 2001 2002 2003Q1
13 mo.
25 mo.
13
NT$ bn
Cathay Life – Investment PerformanceITEM 2002 2003 1Q
Short-term Investments
Listed Stocks 37.5 42.1
Corporate Bonds 12.9 10.8
Govt. bond & Fin. Debenture 30.9 29.2
Appoint purpose trust fund 42.5 49.6
Overseas Investments 77.4 89.7
Beneficiary certificate 61.2 63.7
Short-term notes 24.7 24.5
Allowance for valuation loss -5.1 -5.1
Total 282.0 304.5
Long-term Investments
Stocks 57 58.4
Allowance for valuation loss -1 0
Bonds 157 141
Real Estate 94 94
Total 307.9 293.7
14
Cathay Life – NPL ratios
1.50%1.68% 1.63%
2.49%
1.87%1.73%
2.03%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1997 1998 1999 2000 2001 2002 Mar-03
Percentage
15
Cathay Century – Operational Results
Note: ROA, ROE have been annualized. Other operating cost include General & admin expense.
Financial Figure (NT$ mm) 2002 FY 2002 1Q 2003 1Q
Premium income $ 6,184 $ 1,582 $ 1,829
Recovered reserve $ 3,337 $ 813 $ 3,532
Other operating revenues $ 1,403 $ 206 $ 356
Insurance claims payment -$ 3,056 -$ 601 -$ 853
Provision for reserve -$ 3,728 -$ 1,006 -$ 3,611
Other operating costs -$ 3,917 -$ 915 -$ 1,137
Net Income (after tax) $ 235 $ 101 $ 136
Financial Ratio 2002 FY 2002 1Q 2003 1Q
Net Expense Ratio 25.0% 24.4% 24.7%
Net Combined Ratio 62.7% 58.1% 61.3%
Solvency Margin 125.9% 116.5% 107.4%
Retention Ratio 60.9% 65.4% 60.9%
ROAA (after tax) 2.6% 4.4% 5.6%
ROAE (after tax) 8.6% 14.2% 19.7%
16
•Meet customers’ demands for one-stop shopping and cross-selling through distribution channels of each subsidiary
•Achieve cost savings by sharing group’s resources to enhance profits
•Integrate information platforms and CRMs of subsidiaries to better
serve customers
•Refine performance evaluation system of capital and gain access to
emerging investment opportunities aligned with international practice
•Pursue scale of economics and leverage advantages of each subsidiary
under the holding company structure
Cathay Century – Operating Activities
17
UWCCB – Operational ResultsFinancial Figure (NT$ mm) 2002 FY 2002 1Q 2003 1Q
Interest Income $ 29,256 7,818$ $ 6,079
Interest Expense 11,124$ 3,575$ $ 1,789
Net Interest Income 18,132$ 4,243$ 4,290$
Provision for loan losses 24,736$ 1,475$ $ 786
Non Interest Income 3,591$ 1,117$ 1,127$
Non Interest Expense 7,756$ 2,084$ $ 2,211
Net Income (after tax) -$ 8,807 1,525$ $ 1,870
Financial Ratio 2002 FY 2002 1Q 2003 1QNet Interest Margin 3.9% 3.9% 3.6%
Gross Loan* / Deposit Ratio 76.3% 70.7% 74.4%
Fee Income to Revenue Ratio 5.9% 4.5% 7.8%
Efficiency Ratio (Cost / Income) 34.2% 37.0% 35.8%
ROAA (after tax) -1.3% 0.9% 1.1%
ROAE (after tax) -14.8% 9.3% 13.6%
NPL Ratio (6mo.) 3.0% 6.9% 2.8%
NPL Ratio (3mo.) 5.0% 9.4% 4.3%
Coverage Ratio 52.2% 13.5% 52.1%
BIS Ratio 11.4% - -
Note: ROA, ROE have been annualized.
18
• Accelerate pace of banks integration
• Establish co-franchises with Cathay Life, provide easy access to ATM policy loans,
and get written consents from customers for cross-selling purposes
• Focus intensively on mortgage loans with a net increase of NT$3.95 billion
• Launch cash cards, platinum credit cards and small-sized consumer credit loans
• Train 30 dedicated financial advisors, and have proprietary “Information system for
FAs” in place
• Establish centralized loan management department for credit and debt quality control
• Set up Mainland China development team and visit Taiwanese businessmen in
Mainland in preparation for coming operations of Shanghai branch
• Provide direct financing, guarantee, and A/R factoring services to Taiwanese
companies in Mainland China.
UWCCB – Operating Activities
19
Cathay United Bank – Operational Results
Financial Figure (NT$ mm) 2002 FY 2002 1Q 2003 1Q
Interest Income 8,839 2,164 2,270
Interest Expense 3,877 1,102 781
Net Interest Income 4,961 1,062 1,488
Provision for loan losses 2,041 368 783
Non Interest Income 1,697 332 626
Non Interest Expense 3,257 659 876
Net Income (after tax) 1,118 244 390
Financial Ratio 2002 FY 2002 1Q 2003 1Q
Net Interest Margin 3.4% 2.9% 3.7%
Gross Loan / Deposit Ratio 78.5% 86.0% 80.6%
Fee Income to Revenue Ratio 12.5% 9.7% 14.2%
Efficiency Ratio (Cost / Income) 44% 44% 37%
ROAA (after tax) 0.7% 0.6% 0.9%
ROAE (after tax) 9.0% 8.2% 11.8%
NPL Ratio (6mo.) 4.4% 4.1% 4.2%
NPL Ratio (3mo.) 10.2% 16.2% 9.4%
Coverage Ratio 40.5% 50.0% 43.2%
BIS Ratio 8.3% - -
Note: ROA, ROE have been annualized.
20
CUB – Operating Activities
•Roll out U-LIFE cash cards, mortgage and auto loans to increase weighting
of consumer banking
•Initiate to launch Master World cards in anticipation of fee income surge
•Set up wealth management system, intensify trainings for FAs, leverage
group resources for revenue synergies
• Establish VIP center, first rated safes to cater to demands of high net worth
clients
•Innovate financial products, and seek strategic alliance with foreign partners
to enrich product offerings
•Have 2nd generation credit card system and tele-marketing on track
•Establish multi-distribution channels
21
2003 1Q Operational Results of Cathay FHC
2003 1Q Operational Results of Each Subsidiaries – Cathay Life– Cathay Century– UWCCB– CUB
Banks Integration – UWCCB & CUB
Agenda
22
Banks integration – Accelerating operating capacities
TimetableScheduled to complete integration in 6 months
Organizational structure for integrationSteering committee on top and followed by 7 execution teams, including
Administration & Personnel, IT, Corporate Banking, Consumer Banking, Credit Card, Wealth Management, Finance & Risk Management as well
Key themes for integration…….– Bank integration– Assurbanc– Bancassurance
Cathay United Bank, post integration, is ranked #3 private banks in Taiwan with 112 franchises and total assets of more than NT$840 bn
23
Comparison of CUB and UWCCB
Note: The consolidated capital is NT$43.18 bn. The above figures are based on proforma basis. Market shares are calculated based on total assets at the end of 2002.
2003 1Q (NT$ bn) CUB UWCCB Combined
Total Asset 180.50$ 660.00$ 840.50$
Shareholder Equity 13.36$ 55.90$ 69.26$
Deposit 161.00$ 540.40$ 701.40$
Loan 135.80$ 402.00$ 537.80$
Market Share 0.80% 2.90% 3.7%
Corporate : Consumer 38:62 58:42 53:47
Fee Income Ratio 14.19% 7.84% 10.0%
No. of Branches 28 84 112
No. of ATM 102 706 808
No. of Employee 1,519 2,520 4,039
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Cathay has developed a comprehensive blueprint for its banking platform integration…
IT structureIT structure
Centralize IT systems for UWCCB’s and Cathay United’s credit card business
EIP (Enterprise Info Protocol) and EAI (Enterprise Application Integration) in process
Obtain written consents to share customer information among subsidiaries
Form Product and Marketing Committee to determine cross-selling strategy
Leverage CRM system to segment consumer banking customer base
Credit risk control
Credit risk control
Centralize credit policy and monitoring for major exposure Data sharing for real estate appraisal system
Cleaner asset portfolio is the consistent policy
Corporate banking
Corporate banking
Treasury function integration Centralize marketing strategy for corporate clients One trading team
Consumer banking
Consumer banking