Cathay Life - Bank Mayapada Updates

Cathay Life Insurance Co said it would recognize an investment loss of NT$8.8 billion (US$298.1 million) in Indonesia’s Bank Mayapada Internasional Tbk PT due to concerns about the lender’s operations amid a corporate scandal.

The company said it would revise its earnings result for June, from a net profit of NT$6.52 billion to a net loss of NT$520 million, its first monthly loss over the past 17 months. After booking an investment loss of NT$5.2 billion in Bank Mayapada earlier this year, Cathay Life has so far recognized total investment losses of NT$14 billion in the lender.

Cathy Life has invested NT$13.3 billion in Bank Mayapada since 2015 and recognized a net profit of NT$700 million over the past five years. However, the recognized investment loss of NT$8.8 billion has completely written off its investment in the Indonesian lender.

The company conducted due diligence of Bank Mayapada at the end of last month, discovering that the lender’s non-performing loan ratio stood at 6.94 percent, higher than the industry average of below 3 percent, although it still made a profit of 143.6 billion rupiah (US$9.73 million) for the first half of this year.

Benny Tjokrosaputro, one of the lender’s debtors, was in January named a suspect in a bribery case involving PT Asuransi Jiwasraya, which had also triggered a run on the bank, he said.

Despite its losses of NT$14 billion in the lender, Cathay Life is still considering whether to raise its stake in the lender from 37.33 percent to 51 percent. Cathay Life is still talking with the Indonesian government and the bank’s controlling shareholder Tahir family about many issues, including how to handle the loans offered to Benny Tjokrosaputro.

Based on Cathay's investment in Vietnam and Cambodia, it believe that if it have controlling power over the investment entity, the returns would be solid. So it is still evaluating if it should be a controlling shareholder in Bank Mayapada. The insurer might reach a conclusion in three months.

Cathay Life yesterday reported net profit of NT$12.2 billion for last month, the highest for a single month, due to advancing payment of cash dividends, while its cumulative profit for the first seven months rose 29 percent year-on-year to NT$31.5 billion.