Moody's revised the outlook on Taiwan-based Cathay Financial Holding Co. Ltd. and unit Cathay Life Insurance Co. Ltd. to positive from stable.
At the same time, the rating agency affirmed the Baa2 issuer rating of Cathay Financial and the Baa1 insurance financial strength rating of Cathay Life.
Moody's said the positive outlook on Cathay Life reflects its expectation that the insurer's profitability will improve on the back of its increasing focus on nonspread-dependent products, a declining average cost of liabilities and a lower expense ratio.
The affirmation of the insurer's ratings reflect the structural improvement in profitability, its solid capital position and its strong and stable business profile. The strengths are offset by the insurer's elevated high-risk asset leverage compared with global peers.
Meanwhile, the positive outlook on Cathay Financial reflects the outlook on Cathay Life. The company's ratings reflect the consideration that the credit profiles of its major subsidiaries remain solid and the units have a very strong franchise in the domestic market. An upgrade in the parent's key operating subsidiaries, mainly Cathay Life and Cathay United Bank Co. Ltd., could lead to a positive rating action on the parent, Moody's noted.