03.20.2001
Cathay Life pays lowest dividend for 18 years

• Cathay Life Insurance Co. (2805 'Guo Shou') has declared a NT$2 dividend, NT$1 in cash and NT$1 in stock. The dividend is the lowest the company has offered for 18 years.

• Cathay Life's dividend payouts usually range between NT$2.7 and NT$6. Last year, it booked more than NT$22b in provisions for investment losses (unrealized), leading to a large drop in net earnings.

• We expect Cathay can write back more than NT$10b from 1Q01. Moreover, it can hedge its stock portfolio through futures trading from 2Q01, smoothing out the volatility in its share holdings. Effective hedging will also allow for greater flexibility and efficiency in asset management.

• Due to a lower degree of volatility in the stock market as compared to 3Q00 and 4Q00, we foresee a high probability that Cathay Life will post much improved earnings in 2001, and retain our ACCUMULATE recommendation.

WilliamFong@Primasia.com +886-[0]2-2547-8864