Thank you. Good afternoon and good morning to those in Europe.

Welcome to Cathay Financial Holding 2025 Third Quarter Analyst Meeting. I am C.K.

Lee, CEO of Cathay Financial Holdings. 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 Grace Chen, CFO of Cathay Financial Holdings; Herbert Lin, Managing Senior EVP of Cathay Life; Jack Chen, Executive VP of Cathay United Bank. Before we begin our presentation, I'd like to share I would like to share to share some highlights.

Cathay Financial Holdings delivered strong performance in the first nine months, achieving our third highest result on record with net income of $75 billion and ROE of 11%. Our core businesses remain resilient: Cathay United Bank, Cathay Century Insurance, and Cathay SITE all reached record highs, while Cathay Securities delivered its second best nine-month result.

Cathay United Bank reported 11% year-on-year earnings growth, supported by double-digit growth in net in net interest income and a 25% increase in fee income. At Cathay Life, earnings did decline year-on-year, reflecting more volatile financial market in the second quarter and a higher base of capital gains last year.

That said, business fundamental remains solid: annualized premium, value of new business, and recurring income all posted healthy growth. Cathay Century continued to deliver strong underwriting profit with net income already surpassing last year's full-year level, up 28% year-on-year.

Cathay SITE also achieved 15% earnings growth. Cathay Securities continued to strengthen its position in the domestic brokerage market and maintained its number one ranking in sub-brokerage.

Now, I will hand over the call to Claire from IR team for the 2025 third quarter results presentation. Claire, please.

Thank you. Let's start with the business overview on page 4, which provides a quick highlight on each subsidiary.

Cathay United Bank delivered record-high earnings for the first nine months, 11% year-on-year growth. Loan and deposit growth remained solid, and asset quality stays strong.

Net interest income increased by 12% year-on-year; net fee income rose 25% year-on-year. Wealth management and credit card fees grew 31% and 14% respectively.

Cathay Life first year premium, annualized premium, and the value of new business all achieved double-digit year-on-year growth. Recurring yield continued to improve, supported by higher dividend and interest income.

Capital position remained robust, with an equity-to-asset ratio of 9.3%. Cathay Century, the general insurance subsidiary, net income for the first nine months exceeded last year's full-year result, reaching an all-time high.

Premium income grew 9% year-on-year, and market share reached 13.8%. Asset management subsidiary, Cathay SITE, also delivered record-high earnings.

Asset under management reached NT$2.3 trillion. Cathay Securities continued to gain market share in the domestic brokerage business, and remained number one in sub-brokerage market share.

Cathay Financial Holdings continued to strengthen its asset management business as the group's third profit engine. Please turn to page 5.

The group has integrated the investment research capabilities of the life insurance business, the distribution strength of banking business, and the product development expertise of the asset management arm to expand asset management capabilities and service scope. Today, the group's total assets under management have exceeded NT$10 trillion.

To further strengthen global connectivity and investment insight, we hosted the second Cathay Asset Management Summit in October. Global investment experts and Cathay team explored macro trends, investment strategies, and industry development.

Please look at page 6, Cathay Financial Holdings net income and EPS. Cathay Financial Holdings net income reached NT$75 billion, down year-on-year.

This was mainly due to the sharp appreciation of the Taiwan dollar in the second quarter, and a high base of investment gains from last year's strong financial market performance. However, the core business momentum across subsidiaries remained solid.

Earnings per share was $4.84. Page 7 shows the subsidiaries net income and ROE.

Cathay United Bank, Cathay Century, and Cathay SITE each delivered record-high earnings for the first nine months, while Cathay Securities achieved its second highest performance for the same period. The bank reported NT$35 billion in net income, up 11% year-on-year.

P&C insurance grew 28%, and asset management increased 15%. Cathay Life posted $35 billion in net income, down year-on-year due to the high investment gains base and the sharp appreciation of the Taiwan dollar in the second quarter.

Nevertheless, recurring income continued to rise, and underwriting operations remained steady. On a consolidated basis, Cathay Financial Holdings recorded ROE of 11%, with the bank, P&C insurance, asset management, and security all delivering superior ROE performance.

Please turn to page 8 to see the book value of Cathay Financial Holdings. The consolidated book value of holding company was NT$908 billion, up from the end of last year, supported by profit contribution and partially offset by mark-to-market losses on financial assets amid the sharp appreciation of the Taiwan dollar.

Book value per share was $54.5. Page 9 shows our overseas expansion.

For the banking business, Cathay United Bank Singapore branch launched corporate bond services, the first among Taiwan-based banking, to address the growing demand for corporate cash management and help clients manage cash flow and liquidity more effectively. For the insurance business, Cathay Life's joint venture in China achieved 60% year-on-year growth in total premium, driven by the stop-selling effect ahead of the reduction in guaranteed rates.

Please turn to page 11 for more details about the banking subsidiary. Cathay United Bank's total loan balance rose 8% year-on-year to NT$2.76 trillion, with growth across all sectors.

Personal loans grew 14%, and mortgage loan increased 8%. Deposits rose 21% year-on-year to 4 trillion, maintaining the advantage of a high demand deposit ratio of about 60%.

Interest yield is shown on page 12. Interest spread for the first nine months increased to 1.87%, up 5 basis points year-on-year, supported by lower funding costs from US rate cuts and optimized deposit mix.

Net interest margin for the first nine months remained flat year-on-year at 1.55%, as adjustment in higher-yield FX financial assets reduced asset yield. Page 13 shows the asset quality.

Cathay United Bank maintained low NPL ratio at 14 basis points, and coverage ratio at 1,140%. Gross provision was 5.2 billion, and recovery was 1.3 billion.

Please turn to page 14 for SME and foreign currency loans. SME loan balance grew 7% year-on-year to NT$361 billion.

Foreign currency loans also expanded, reaching 289 billion, up 11% year-on-year, or 16% excluding the impact of Taiwan dollar appreciation. Page 15 shows offshore earnings.

The offshore earnings reached NT$6.2 billion, up 5% year-on-year, driven by the recovery in deposits, loans, and investment income. Please turn to page 16 for net fee income.

Net fee income reached NT$26 billion, up 25% year-on-year. Wealth management fees grew over 30%, while credit card fees increased 40% year-on-year, supported by increased card spending.

Page 17 shows the breakdown of wealth management fees. Wealth management fees rose 31% year-on-year to NT$16 billion, with mutual funds and bancassurance fees up 24% and 48% year-on-year respectively.

Both wealth management customers and assets under management continue to show steady growth. Please move to pages 19 and 20 for Cathay Life premium performance.

Cathay Life total premium income reached NT$367 billion, up 12% year-on-year, driven by strong sales in investment-linked policies, up 37%, and the US dollar-denominated traditional products, up 10%. Total premium from high-CSM protection products also increased 5%.

On page 20, first year premium reached NT$135 billion, up 53% year-on-year, supported by strong sales of investment-linked and US dollar-denominated traditional saving products, which also drove 10% year-on-year increase in annualized premium to 44 billion. Health and accident premiums were affected by a high base in 2024, reflecting the stop-selling effect ahead of regulatory changes.

Page 21 shows the value of new business. Value of new business was NT$26 billion, up 11% year-on-year.

This growth aligns with the same drivers seen in the APE performance. Page 22 shows the cost of liability and breakeven asset yield.

The cost of liability remained flat quarter-on-quarter at 3.84%. Breakeven asset yield was 2.99%.

Please look at page 23 for the investment portfolio. Cathay Life total investment was NT$7.9 trillion, with overseas investment accounting for 69%.

Please refer to the right-hand side of the table for investment yields by asset class. Overall investment yields are shown on pages 24 and 25.

After-hedging investment yield was 3.56%, down year-on-year due to higher hedging costs and reduced capital gains, while recurring income increased. Page 25, the pre-hedging recurring yield was 3.48%, up 3 basis points, driven by higher dividend income.

The annualized hedging cost was 1.58% after adopting the new FX volatility reserve mechanism, along with regulatory forbearance measures in the second quarter. The impact of FX fluctuations on earnings is fully absorbed by the FX volatility reserve.

The annualized compulsory provision was raised to 1.5%, which increased hedging costs, but also accelerated reserve accumulations and strengthened the ability to withstand FX fluctuations. Please turn to page 26 for cash dividend income and regional breakdown of overseas fixed income.

Cathay Life recognized cash dividend income of NT$17.4 billion in the first nine months, surpassing the full-year amount of last year. On the right-hand side, Cathay Life continued to diversify fixed income investment across regions to mitigate risk, allocating 52% in North America, 18% in Europe, and the rest in Asia-Pacific and other countries.

Page 27 shows the book value and unrealized gain of financial assets. Cathay Life's book value reached NT$738 billion, up 20.5 billion from the end of last year, supported by profit contribution and the recovery in equity and bond valuations, partially offset by mark-to-market losses amid sharp Taiwan dollar appreciation.

The equity-to-asset ratio reached 9.3%, reflecting strong capital adequacy. Next, please turn to page 31 to 33 for the performance of Cathay Century.

Cathay Century's premium income grew 9% year-on-year to 31 billion, ranking second in market share. Page 33, the retained combined ratio improved to 88.4%, down year-on-year, driven by expanded underwriting capacity following adjustments to the reinsurance structure with higher retention rate, along with fewer large claim events and stable loss ratios.

This is the end of the presentation. Now, let's open to Q&A.

Good afternoon. This is Grace Chen.

Before we move into QA session, let me briefly recap the key topics and questions that came up during our earlier Chinese session, along with a few key highlights we would like to share. The audience were mainly focused on three areas: our third quarter operating performance, the outlook for next year, and key metrics as we transition to IFRS 17 and ICS.

Starting with banking, our bank continues to demonstrate strong resilience. For the full year, we are still looking at high-single-digit loan growth, with healthy momentum across all segments.

Net interest margin should hold roughly around the 2024 full-year level. Fee income remains robust, and we are targeting double-digit growth for the year.

Credit costs will stay around 20 basis points level, supported by better than expected recoveries, and the cost-to-income ratio should be around 50%. Looking ahead to next year, we expect continued growth across loans, net interest income, and fee income.

The core banking trends remain optimistic. For Cathay Life, we saw a solid rebound in third quarter after navigating through the market volatility in second quarter.

Business momentum this year have been very strong. Both investment-linked products and traditional saving products delivered robust growth, creating a relatively high base for this year.

Looking into next year, growth in saving products may be more moderate, but we do expect high-CSM health products to grow. For the first nine months of this year, our new business CSM reached 60 62 billion Taiwan dollars, and for next year, we are targeting around 75 billion Taiwan dollars.

On the investment side, we expect recurring yield to reach about 3.5% next year. Concerning IFRS 17 adoption, as we have been shifting towards value-driven products strategy ahead of our peers for many years, IFRS 17 will have a positive impact on our insurance liabilities at transition.

However, under IFRS 17, liabilities are measured on a market value basis, and the US dollar assets backing US dollar liabilities will also be reclassified from amortized cost to fair value OCI. This will result in a negative impact on reported shareholders' equity at transition.

However, the combined value of shareholders' equity and after-tax CSM will be higher than the shareholders' equity reported under the current accounting standard. We have accumulated a sizable CSM balance, and we expect CSM release to grow by about 10% to 15% annually over the first 5 years, with a release rate of around 5% initially, gradually rising over the longer term.

Our liability cost on an asset basis will largely decline from 3.4% to about 2.2% to 2.3%, creating positive spreads under the investment results. Under IFRS 17, net income will also be more predictable and stable, should be broadly comparable to earnings in a normalized year under current accounting standard.

For capital, we are targeting an ICS ratio in the range of 125% to 140% upon adoption, which could create a healthy buffer for financial markets volatility. Lastly, on next year's dividend policy, given that our earnings this year have been very strong, probably the third highest in our history, we will consider our full-year results, investors' expectations, and peers' dividend yield, and our goal is to provide a dividend yield that is competitive within the industry.

These are the key highlights.

Thank you. Any question?

Thanks for the presentation. Just one question from me still on the IFRS 17 transition.

I think we talked about the changes on the cost of liability and also the impact of trading gain parts. The other two parts I want to figure out is I think currently your P&L already embedded the mortality and loading gains.

That part should be offset by the CSM release. Just trying to understand what would be the more normalized mortality and loading gain levels that we have been observing maybe over the past 5 years.

Then another part is the first year surplus strain. I think that part should also be amortized under IFRS 17.

What's the roughly first year surplus strains that you've been incurring in recent years on the annual basis? Thanks.

Thanks.

I think the first one, actually, the mortality and loading gain actually will reflect in the CSM release, most of them. Actually, you will consider the CSM release mainly is our mortality and loading gain for the next year.

This is the first one. Second one, actually, for the IFRS 17, we will no longer have so-called the surplus strain.

It means that when we sell the new business, once they are profit, we will have first year that will have the CSM release. Actually, this is quite benefit for us.

If we have very strong new business growth, actually that will reflect at once. That will reflect 5% of the new business release in the first year.

Can I follow up? Should we assume the CSM release in the future will be bigger or similar to the mortality and loading gain embedded in...

Jemmy, I will tell you in the next month, okay? In the first month next year.

The number I think we will release that you will...

Sure. Sure.

Clear.

Another follow-up question is I think the cost of liability 2.2% to 2.3%, supposedly this will move up in the coming years, right?

What's

the trend? If we look at 5 years away from now, maybe let's say 2030 or 2031, what's the magnitude of the increase?

Just a rough...

I think that I will tell you also in the first January, okay?

No problem.

Let me clarify one figures. For the first nine months of this year, our new business CSM reached $68 billion Taiwan dollars, not $62.

Sorry. Okay.

Okay. Thank you.

Thank you so much for your participation in today's conference call. If you have any further questions, please feel free to contact our IR team.

Thank you.

Thank you. Bye-bye.