10.30.2001
Dismal profits so far this year

• Company reported accumulated pretax profits to Sept. of NT$856m, much lower than last year's NT$12bn. Low profits are mainly due to higher provisions for investment losses, which reached NT$8.3bn. As provisions are not tax deductible, the firm suffered after-tax loss of over NT$2bn. After Cathay adjusted its policy prices upward in 1H01, first year premium (FYP) growth has slowed, dropping more than 50% YoY in Sept. Cathay is slated to form a financial holding company by year's end. We remain concerned over the profitability of the company under a low interest rate environment, thus we are downgrading our rating on the shares.