Welcome everyone to Cathay Financial Holdings Company's fourth quarter 2024 conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question- an- answer session. Please follow the instructions given at the time if you would like to ask the question. Now, I would like to introduce Mr. CK Lee, CEO of Cathay Financial Holdings Company. Mr. Lee, please begin. Okay, thank you. Good afternoon and good morning to those in Europe. Welcome to Cathay Financial Holdings 2024 fourth quarter analyst meeting. I am CK Lee. Today, I will host the meeting. Thank you for joining us. In the beginning, I would like to introduce the senior managers who are with us today. We have Ms. Grace Chen, CFO of Cathay Financial Holdings; Ms. Sophia Cheng, Chief Investment Officer of Cathay Financial Holdings; Mr. Abel Lin, Managing Senior EVP of Cathay Life Mr. Kevin Hu, Senior EVP of Cathay United Bank. Before we begin the presentation, I'd like to share some key highlights. Last year, we delivered strong financial results with the growth. Net income reached TWD 111 billion, more than double the figures in 2023, marking the second highest profit in our history. This achievement was driven by robust performance across our subsidiaries, which record high earnings from the Cathay United Bank, P&C Insurance, Asset Management, and Securities, while Cathay Life posts the second highest profit on record. Cathay United Bank maintained strong business momentum, achieving double-digit loan growth and expanding net interest margin and over 30% year-on-year growth in fee income. Cathay Life continued to strengthen its fundamentals, delivering a historic high in CSM of TWD 90 billion. Investment performance was solid, and capital position remain strong. Cathay Century, our P&C subsidiary, sustained steady underwriting profitability, while Cathay SITE, our asset management subsidiary, saw AUM reaching another record high. Meanwhile, Cathay Securities continued to expand its customer base and gain market share in the domestic brokerage business. We will share more details on our performance and outlook during the call. Now, I would like to hand over the call to Charlie from our IR team for the 2024 fourth quarter results presentation. Thank you. Thank you. Let's start with the business overview on page four, which provides a quick highlight on each subsidiary. Cathay United Bank's 2024 annual earnings set a record high for the fourth consecutive year, with 32% growth year-on-year. Loan growth was robust. Asset quality remained benign. Net interest income grew 18% year-on-year. Net fee income rose 34% year-on-year, with wealth management and credit card fee rising 41% and 33% year-on-year respectively. Cathay Life continued value-driven product strategy to accumulate CSM. Annualized premiums and value of new business grew 22% and 30% year-on-year respectively. Maintained solid capital position. RBC ratio was 359%, and equity to asset ratio was around 9%. Cathay Century, the general insurance subsidiary, premium income grew 13% year-on-year, with market share of 13.6%. Asset management subsidiary, Cathay SITE, delivered record high annual earnings in 2024. AUM reached TWD 2.24 trillion. Lastly, Cathay Securities continued to gain market share in domestic brokerage business, maintained number one market share in sub-brokerage business. We would also like to share with you our achievement in sustainability on page five. Cathay has been selected in the DJSI Index for 10 consecutive years and received highest MSCI ESG AAA rating. We have attended COP for the fourth consecutive year, and once again hosted important forums in the Blue Zone at COP 29, showcasing our leadership in sustainable and climate finance. Page six shows our progress in digital development. The number of the group's digital users has grown to over 9.3 million. In AI, Cathay leads in developing GenAI architecture with diverse application and governance across the group. In cloud development, Cathay is the first financial institution in Taiwan to receive approval from FSC for data migration to the cloud. For overseas business, we continue to expand customer base and digital retail business. Next page seven, shows our outlook for 2025. Cathay United Bank will expand wealth management and credit card business by deepening relationship with high net worth clients to increase fee income, grow loans steadily while maintaining benign asset quality, enhance cross-selling for more effective capital deployment, develop cross-border business and digital retail banking business overseas. Cathay Life will continue the protection first and elderly-friendly strategy and focus on protection-type products to accumulate CSM. For investment, Cathay Life will seek opportunities for quality stocks and bonds to enhance return income, maintain dynamic hedging strategy to deliver stable hedging costs. Cathay Century will grow business emphasizing on quality and quantity, deepen digital application to enhance customer satisfaction. For overseas operation, Cathay Century will expand online business in China. In Vietnam, Cathay Century will strengthen digital infrastructure and foster cross-industry cooperation. Cathay SITE will focus on promoting retirement and inclusive financial planning products and developing innovative fintech applications. Cathay Securities will enhance data-driven capability to provide diverse and personalized services, creating strong word-of-mouth effect, replicate the success of strategies such as smart, Systematic Investment Plan and dividend reinvestment, driving new growth momentum. Please look at page eight, Cathay Financial Holdings net income, EPS and ROE. Cathay Financial Holdings net income reached TWD 111 billion in 2024, the sixth highest record. EPS was TWD 7.29. Net income for subsidiaries, Cathay United Bank, Cathay Century, Cathay SITE, and Cathay Securities set all-time highs. Cathay Life net income delivered second highest record. On a consolidated basis, the holding company ROE reached 13%, with all subsidiaries achieving double-digit ROEs. Please turn to page nine for the book value of Cathay Financial Holdings. The consolidated book value of holding company reached TWD 907 billion, driven by the earnings contributions and the rebound in equity markets. Book value per share was TWD 54.3. Page 11 and 12 shows our overseas expansion. Cathay Financial Holdings continued to expand overseas business, cultivate local and cross-border corporate banking clients. Singapore branch shows strong business momentum with more than 30% of revenue generated from new business and clients. Premium income for Cathay Life Vietnam increased 7% year-on-year. As for the operation in Greater China, Cathay United Bank (China) subsidiary and Hong Kong branch continue to advance sustainable finance, earning local recognition. For Cathay Life's joint venture in China, the total premium grew 17% year-on-year. Please turn to page 14 for more detail about our banking subsidiary. Cathay United Bank delivered robust loan growth with double-digit growth in corporate mortgage and consumer loans. The total loan balance increased 17% year-on-year to TWD 2.6 trillion. Deposits grew 8% to TWD 3.8 trillion, maintained the advantage of high-demand deposit ratio of over 60%. Interest yield is shown on page 15. Net interest margin for the year increased 17 basis points year-on-year to 1.55%, driven by strong loan growth, increased position and higher yield in foreign currency financial assets, as well as well-contained funding costs. Page 16 shows the asset quality. Cathay United Bank maintained low NPL ratio at 11 basis points and coverage ratio at 1,445%. Gross provision was TWD 9.8 billion. Recovery was TWD 1.2 billion. Please turn to page 17 for SME and foreign currency loans. SME loan balance increased to TWD 335 billion, accounting for 13% of the total loan. Foreign currency loan grew 31% in 2024, reaching TWD 282 billion. Excluding foreign currency rate effect, foreign currency loan grew 23% year-on-year. Page 18 shows offshore earnings. The offshore earnings rebounded to TWD 6.3 billion, due to the recovery in deposits, loans, and investment income. Please turn to page 19 for net fee income. Net fee income reached TWD 27.8 billion, up 34% year-on-year, driven by strong sales across wealth management products and a 32% year-on-year increase in credit fees due to increased overseas spending. Page 20 shows the breakdown of wealth management fees. Wealth management fee rose 41% to TWD 16 billion. All products show strong growth. Fees for mutual funds, securities products, and bancassurance grew by 52%, 48%, and 32% year-on-year respectively. Please move to page 22 and 23 for Cathay Life's premium performance. Total premium grew 5% to TWD 488 billion. Premium for high CSM protection products and traditional savings product both rose 7% year-on-year. On page 23, first-year premium, FYP, rose 16% year-on-year to TWD 154 billion, driven by significant growth in sales for health and accident products and foreign currency denominated traditional long-term regular premium products, which also led to a 22% year-on-year growth for annual life premium, APE. Notably, FYP for high CSM health and accident products increased 31% year-on-year, driving new business CSM to an all-time high. Page 24 shows the value of new business. Value of new business reached TWD 35 billion, up 3% year-on-year. This growth was driven by the same factors as APE performance, which also contributes increase in VNB margin. Page 25 shows the cost of liability and break-even asset yield. The cost of liability remains stable quarter-on-quarter at 3.78%, while break-even asset yield continue to improve. Please look at page 26 for the investment portfolio. Cathay Life's total investment reached TWD 8 trillion. Overseas investment accounted for around 70%. Please refer to the table for the investment returns by each asset class. The investment yield for domestic and international equity were 15% and 12% respectively. Overall investment yield are shown on 27. After hedging investment yield was 3.74%, supported by capital gains from equity portfolio adjustment during the market rally. The pre-hedging recurring yield was 3.43%, down slightly by 2 basis points, reflecting lower cash dividend income from capital gain realization, partially offset by continued growth in interest income. The hedging cost was 1.56%, as major Asian currencies were weaker than Taiwan dollar against U.S. dollar in the fourth quarter, reducing the effectiveness of proxy hedging. In particular, the sharp depreciation of Korean won in last December, driven by short-term political turmoil, has a notable impact, but has largely rebounded year-to-date. If excluding this shorter impact, the hedging cost for the first 11 months was 1.45%. While proxy hedging may experience short-term volatility, it is an effective strategy that help us to achieve more stable hedging costs in the long run. Please turn to page 28 for cash dividend income and regional breakdown of overseas fixed income. Cathay recognized TWD 16.8 billion cash dividend income in 2024, down year-on-year, as Cathay dynamically adjusted its portfolio amid variable equity market. On the right-hand side, Cathay Life took the higher interest rate opportunity to increase the holding of U.S. funds, raising the proportion of fixed income investment in North America to 2%. Page 29 shows the book value and unrealized gains of financial assets both increased year-on-year. The book value rose to TWD 718 billion, supported by earnings contribution and an increase in unrealized gains and losses of financial assets. The equity-to-asset ratio was around 9%. Next, please turn to page 33 and 34 for the performance of Cathay Century. Cathay Century's premium income grew 13% year-on-year to TWD 27.8 billion. Market share was 13.6%. Page 34, the gross combined ratio and retained combined ratio both improved due to higher premium income in 2024. This is the end of the presentation. Okay, thank you. Good afternoon, this is Grace Chen. During today's earlier Chinese session, the audience had many questions regarding our outlook guidance on key drivers and dividend policy. For the bank, we expect high single- digit growth in loans driven by all segments, including corporate, mortgage, and consumer loans. Asset quality remain benign, with the credit cost expected to be around 30 basis points. Our full year NIM is expected to remain around last year's level, that is 1.55%. Assuming the Taiwan Central Bank keeps rates flat and the Fed cuts the rate by 50 basis points. For fees, we anticipate at least a high single- digit growth in credit card and wealth management fees. Wealth management fees have potential for double- digit growth, particularly if capital markets perform well. On the life insurance side, continuing to build the CSM remains our top priority. We expect the FYP growth in traditional products, including high-yield CSM contribution product, health and accident product, as well as the U.S. dollar-denominated interest sensitive life policies. So far, the sales momentum for investment-linked policies have been strong, though it remains sensitive to movements in the capital markets. In terms of investment, we will continue to enhance our recurring income, targeting at 3.45%-3.5% level for the full year. Regarding next year's IFRS 17 and ICS adoption, we are well prepared and have a positive outlook on the post-adoption impact. The economic value will still be the same, but it provides us with an opportunity to reset the high guarantee cost of liability from the legacy book, as the liabilities will be measured at mark-to-market rates. We have been accumulating quite a sizable CSM since 2012 by transferring to value-driven product strategy. While there will be a one-off manageable impact on the book value, the book value combined with the after-tax CSM will be much higher than the current book value. The liability cost will significantly decline. This will allow us to enjoy a possible spread on recurring basis. With our strong CSM generation capability, annual CSM release to the net income is expected to grow 10%-15% over the next five years post-adoption. The earnings are likely to be more predictable. We have also built a strong capital buffer with current ICS ratio stands around 190%, far above the industry requirement of 100%. As for our dividend policy, we will reflect our strong earnings from last year, the second highest, while also consider peers dividend payouts as well as our financial and capital positions. Our goal is to provide a competitive dividend yield and provide a proposal to the board for their decision and approval. These are the key highlights. Okay, thank you. Any question? Yes. Ladies and gentlemen, we will now begin our question- and- answer session. If you wish to ask the question, please press star key and number one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. Should you wish to cancel your question, you may press star key number two. Thank you. Now, please press star one on your keypad if you would like to ask the question. Thank you. If you would like to ask the question, please press star key and number one on your keypad. Thank you. Now it sounds like everything's clear. Ladies and gentlemen, we are now in question- and- answer session. Please press star one on your keypad if you would like to ask the question. Thank you. Our first question will be coming from Jaime Huang of JPMorgan. Go ahead, please. Oh, yeah. Thanks for the presentation. I have just two questions from me. First one is if you look at your credit costs last year, TWD 5 billion is for general provisions. We still have another like TWD 4 billion- TWD 5 billion, that's for specific provisions. Could you provide a little bit more color in terms of what these specific provisions set aside? Is that for the consumer banking or the corporate banking? If corporate banking, is that in Taiwan or the offshore loan portfolio? I think the second question I want to figure out more is, I think you do mention under IFRS 17, maybe the insurance earnings will be less volatile and therefore better visibility for dividend policy. Just trying to understand because even either under IFRS 17 or under the current accounting, the dividend distributions only to take into account OCI, the other comprehensive income. Even though the reported profits will be less volatile under IFRS 17, the OCI will remain volatile. Just trying to figure out, like under that kind of situation, how could you make the dividend policy more visible or more sustainable? Thanks. Let me answer the question about the credit losses. I think majority of the losses coming from those corporate. Even though we do have witnessed some losses from the personal loan side, but majority of the losses is actually coming from the corporate side and across all markets, including Taiwan and overseas. Yes, Jaime. Current rules for the distributable earning. You need to consider the OCI change. Right now, because OCI only consider for the asset side, there is no hedging to consider the liability side. After that, because you need to consider the asset and liability. As I mentioned, right now we manage our ALM quite well. We are thinking about even though the interest rate volatile, we are thinking about the asset and liability that can match, especially in US dollar portfolio. Of course, on the Taiwan dollar portfolio still have some volatile. This is because the currency mismatch, like the Taiwan dollar interest curves and the U.S. dollar interest curve. Because we also will classify some portion of the U.S. fixed income to amortized cost. We're thinking about it also can be manageable. Right now it's still positive. Of course, all the rules need to be determined by the FSC, still can have some changes on the calculation of the distributable earnings. Till now we're thinking about it more manageable comparison right now. Thanks, Abel. Another volatility will come from equity investment, right? Because that part will also be the volatility on OCI. Yes. Is there any mechanism to manage down that volatility as well? Or, will you increase the dividend, the investment proportion into the dividend stock as the way to lower the volatility? I think this is Taiwan's unique situation to consider this kind of volatility, so maybe another way is that we need to lobby this kind of, should it be considered in the distributable earnings calculation? Because this already remains in current situation, because when we adopt IFRS 17, maybe it's a time that we can discuss with the FSC to see if there is some possibility that can change the calculation. Not even to consider the volatility of the equity in OCI. I see. Thank you. Thank you. If you would like to ask the question, please press star key number one on your keypad. Thank you. Next one, Alex Ye, UBS. Go ahead, please. Hi. Thanks for taking my question. My first question is, you know, about your earlier comments that, post IFRS 17 adoption, you are going to expect a positive spread, meaning that your post-hedge recurring yield is going to be higher than your cost of liability. Just want to confirm that, you know, what's the underlying assumption regarding the recurring hedging cost part because obviously that is quite volatile in recent two years because you don't disclose that in your presentation. If we refer to the level of your pre-hedge full-year balance that they're running at around 2.4% level of post-hedge recurring yield. Should we consider that as sort of the right level to expect going forward? Does that, you know, mean your cost of liability is going to be, you know, lower than that level after that? Yeah. I think our assumption in hedging cost is still our guidance is 1%-1.5%. So if you calculate our return here is around 3.45%-3.5%, then after deduct by the hedging cost, I think it's around, after hedging, our recurring year is well around 2.7% something. But because this 2.7% something per, I think will be higher at this moment, which is higher than our cost of liability in net income. Just to add some point to that. When we apply IFRS 17, we will settle down the old legacy books, the mark-to-market basically. The whole industry will be applying redefined yield curve. Based on that, if you hedge for now the old legacy book problem, that means we no longer need to take current profit to compensate for the old problem, then yes, you can reflect your earnings. Thank you. Yeah. Thanks. Second question is regarding your treatment on your equity position post-adoption. You know, if you classify them as the FVTPL then their volatility will go through P&L. But if under the OCI, you know, they won't. Just want to confirm what's the strategy going forward? Are you going to place both of them into OCI so that you minimize the volatility, but you know, the capital gain will not go through P&L? We will classify our equity almost in FVOCI. Even though we don't have that kind of capital gain in income statement, because we have positive spread and also we have very strong insurance result, mainly come from the CSM release. Actually our net income will be very strong even though we didn't consider the capital gains on the equity. We want to minimize the volatility of our net income to be more predictable on our net income. We still will maintain equity position. Actually, I think it's still like the same. Right now we have the 10%-15% of all the equity position. We didn't want to change this policy. But- All the equity well classified to FVOCI. The capital gain will come through the shareholder equity in our distributable earnings. We have been actually doing this for a couple of years by identifying the good timing for companies who offer a good dividend yield. Dividend yield play will be one of the main focus in our equity portfolio. Understood. Thank you. Thank you. We are now in question and answer session. If you would like to ask the question, please press star key and number one on your keypad. Thank you. Okay. Any other question? Okay, Mr. Lee, there appears to be no further questions at the point. Can we close the conference call now? Okay. Thank you. Well, thank you for your participation in Cathay Financial Holdings conference call. If you have any further questions, please feel free to contact our IR team. Thank you so much. Thank you, Mr. Lee. Ladies and gentlemen, we thank you for your participation in Cathay Financial Holdings Company's conference call. You may now disconnect. Thank you and goodbye.