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  • Nelson Huang

Accelerating Taiwan ILP Scale and Selected SITEs Rock the Market

What satisfies Taiwan investors’ appetite for Insurance Linked Policy (ILP)

To follow our research and local insight for Taiwan ILP market, we come to anthother observation of hot-selling foreign currency ILP (FC ILP) mandates. The feature of the most welcome ILPs by Taiwan clients, grant for big sales volumes, are satisfied dividend, stable returns and multi-assets. All the most popular FC ILPs keep performance by NAV per share above 10 after paying out the annual dividend in average of 5%, net of their management fee of 1.5-1.7% p.a. Upon SITEs’ descritoinary allocation across different assets, they take risk management and maximum drawdwown control as the optimal consideration, given ILP eventually as insurance prodcut. Long-term stable performance compensation is essential in line with the needs of insurance clients.


To learn how Cathay SITE works as top one ILP manager


The strength of the largest Securities Investment Trust Enterprise (SITE), Cathay SITE, in terms of FC ILP mandate management scale is its alignment of Cathay Financial Holdings. Cathay Life dominates the vast territory no matter of local or foreign currency ILPs. Coupled with its strong sales force, and tapping on Cathay United Bank’s solid platform, Cathay Life takes several seats if we look at top 10 popular FC ILPs in Taiwan. As the group member, Cathay STIE has the innate advantage to gain business from the largest ILP issuer. Therefore, in terms of ILP ecology, both Cathay Life and Cathay SITE firmly sit in the throne and lead the industry. According to the statistics of Securities and Investment Trust Association (SITCA), Cathay SITE has grown at an average YOY rate of more than 20% in the past five years, in terms of FC ILP mandates. Moreover, its’ extinguish to highlight Cathay SITE’s further success that as of June 30, 2021, Cathay SITE post a 28% YTD growth ahead, jumping its FC ILP mandate scale to USD7,875mn and confirming its leadership in the industry. Cathay Life reports the largest FC ILP mandate managed by Cathay STIE is scalable of USD3,757mn, a hardly beaten record for other relative small SITE.


Exhibit 1: Cathay SITE FC ILP Mandate Assets

Source: SITCA, NIC consolidated


Besides Cathay, we sense opportunities from selected SITEs too


In last NIC insight, we pointed it out more than 90% of the total ILP mandate assets are occupied by top 10 SITEs. We may clearly see, with the advantages of global investment professionality, it is easier for famous foreign SITEs who have global branding background (ex. Alliance Bernstein, JP Morgan, Schroders, Fidelity) to strive and achieve comparatively better performance. However, under the framework of ILP mandate allocation and preference of foreign currency funds, those SITEs often invest in their own strategies and funds for best interest.


Unlike Cathay SITE having the above-mentioned support of group resources, local SITEs or foreign SITEs incorporated with local sales team, in contrast, are willing to explore offshore asset management companies to innovate better strategy together. That is why we specially selected Allianz, FT and CTBC to introduce and try to explore opportunities.


Over the past five years, current ranking on top 6, Allianz SITE, has maintained a scale of about USD 300 million. On June 15 this year, it successfully got a new mandate from Cathay Life, using its well-known income and growth fund strategy to provide the comparatively good performance and low volatility. The scale of this single mandate has reached USD 567mn, creating a 225% increase to USD1,080mn for total mandate assets in YOY. Allianz Income and Growth is for years the most favorable offshore fund in Taiwan. An alliance of favored strategies and strong policy issuer is eventually a perfect win-win combination.


Exhibit 2: Allianz SITE FC ILP Mandate Assets

Source: SITCA, NIC consolidated


A very interesting example of observation is the current ranking on top 7 FT SITE who manages 45 mandates which is remarkable largest in numbers of peers in terms of its ability to customize mandates over the past years. However, since 2016, the scale has decreased; but still, there are mandates which get continuous sales. For example, according to our survey and industry insider, one of FT ILP mandates which was market first mover, issued in 2015, has its scale increasing year by year to USD 411mn. Furthermore, it is still approving to be on the list of the bank's annual re- launch product. FT continuously impose strategies to tie up with banking partners to retain its assets and industry position.


Another example is the current ranking on top 9 CTBC SITE, a member of CTBC financial holding. Taiwan Life is one of the insurances companies who regularly issues ILP product. However, CTBC SITE was relatively slow to participate in the business. It began to manage mandates in 2017 and has proven a level of success in the next year, reporting USD 132mn FC ILP mandates as of 2018. Over the efforts to show its capabilities, CTBC SITE increased its contracts to four, and the scale rushed to USD 761mn according to updated statistics companies with well-established sales team and closer group synergy. This is how we consider it’s worth to put effort to make attractive mandate happens.


Exhibit 3: CTBC SITE FC ILP Mandate Assets

Source: SITCA, NIC consolidated


The road ahead, the mandate industry is supersizing


At present, FC ILP is exposed to registered offshore funds and ETFs while local currency ILP is limited to onshore funds only. As for the overall ILP market, the demand form is still a trend and can be expected to continue to grow. In the future, we encourage foreign professional institutions to register funds in Taiwan, to join part of the huge business. We can cooperate to build up effective mandate solution, enabling managers to participate in this growing market. Please talk to NIC if you have any new idea.