The Conflict between Russia and Ukraine has escalated, and the current situation in Ukraine is still changing rapidly, and the future is uncertain.
The conflict in Ukraine also affected Taiwan, and a few days ago, Cathay Financial Holdings recognized the expected credit loss of NT$2.6 billion for investing in Russian bonds, which is the first financial holding company in Taiwan's financial industry to record investment losses after the intensification of the war between Russia and Ukraine.
Cathay Financial Holdings took the "first shot" and withheld a loss of 2.6 billion yuan in Russian bonds
Ukrainian residents flee the fighting
The crisis in Ukraine broke out, and the war between Russia and Ukraine is still intensifying. The war clouds are thick, and the escalation of the conflict between Russia and Ukraine has also affected Taiwan's financial industry. Cathay Financial Holdings announced on March 6 that it had recognized an expected credit loss of NT$2.6 billion for investing in Russian bonds in February.
Cathay Financial Holdings lost NT$2.6 billion in withholding investment in Russian debt, the first financial holding company in Taiwan's financial industry to admit to being affected by the Ukrainian crisis.
Cathay Financial Holdings Group is the largest financial holding company in Taiwan, which owns Cathay Financial Holdings, Cathay Life, Cathay World Bank, Cathay Property & Casualty, Cathay Securities, Cathay Investment, Cathay Investment Advisory, etc.
On March 6, Cathay Financial Holdings announced in its announcement that factor company Cathay Life recognized a loss of NT$2.6 billion in Russian bond investment in February, and Cathay Life's february after-tax profit was reduced from the original ultra-NT$5 billion to NT$3.08 billion after tax.
Parent company Cathay Financial Holdings made an after-tax profit of NT$5.23 billion in February, and a cumulative after-tax profit of NT$22.35 billion in the first two months of this year, which is a new high in the same period of the calendar year. Its after-tax surplus per share was NT$1.69, which is expected to be in the top two profits of financial holding companies.
Cathay Financial Holdings Building directly opposite Taipei Railway Station
Cathay Financial Holdings listed two major reasons for the investment loss of Russian bonds:
First, the NTD depreciated by 0.69% against the US dollar in February this year, and the Asian currency depreciated less than the NTD in the same period and many such as the renminbi still appreciated. Against this backdrop, Cathay Life's monthly exchange loss in February exceeded NT$8 billion.
Second, after the Russian-Ukrainian conflict, international sanctions against Russia have gradually escalated, especially on February 28, a new round of sanctions to freeze the assets of the Russian central bank, which has had an impact on Russia's debt credit outlook, and the three major international credit rating agencies have successively downgraded their sovereign bond ratings. In view of the increased risk of interest collection of Russian bonds, according to its own risk control and accounting principles, it also recognized that the investment loss of Russian bonds was NT$2.6 billion, accounting for about 13% of the accounting book amount of its investment in Russian bonds.
Cathay Financial Holdings said that in the future, it will still consider whether to add accruals or recovery depending on the development of the Ukrainian crisis events and the changes in the credit risk of Russian bonds.
Incidentally, due to the change in exchange interests, Cathay Life added NT$4.6 billion in foreign exchange capital in one go, and the balance of capital reached NT$16 billion, a new high in 26 months. Cathay Financial Holdings said that its company still has sufficient financial resilience, and will seek medium- and long-term investment opportunities in the future when the market fluctuates, and will also enter the market at a low price to increase investment.
Cai Hongtu, Chairman of Cathay Financial Holdings
A few days ago, when attending the NTU talent recruitment fair, Li Changgeng, general manager of Cathay Financial Holdings, said that its exposure to risk in Russia only accounted for about 0.3% of the total investment part, and from past experience, Russia had no reason to default.
Li Changgeng further analyzed that Russia's foreign exchange reserves in 1998 were about $15 billion, and there was no default during the Crimean crisis in 2004. At present, Russia's foreign exchange reserves reach $630 billion, and unless the war worsens to an uncontrollable point, Russia should not default, otherwise it will be very difficult to raise funds in the financial markets in the future.
Li Changgeng believes that according to past experience, wars usually have a greater impact on the capital market first, but they are also very short-lived, which is different from the impact on fundamentals after the war.
Recently, the International Monetary Fund (IMF) said that although the current situation in Ukraine is still changing rapidly and the future prospects are full of great uncertainty, the economic consequences have been very serious. The escalation of the conflict between Russia and Ukraine has led to a recent sharp rise in international oil prices and international wheat prices. At the time of writing, the lightweight low-sulfur crude oil futures of NYMEX, the world's largest commodity futures, reached $124.15, and the futures prices of corn, wheat and soybeans on the Chicago Board of Trade rose across the board. Li Changgeng's view is this: he believes that Russia and Ukraine, which are the major exporters of natural gas, grain and some metals, are bound to worry about short-term inflation. But he said that compared with the past two or three decades ago, the coordination of market mechanisms is much better.
The war-clouded Crisis in Ukraine
According to statistics, by the end of December 2021, the amount of violent risks in Taiwan's financial industry in the Russian-Ukrainian conflict reached NT$229.171 billion.
Among them, in the insurance industry, Taiwan's financial industry has a huge amount of NT$147 billion against Russia and zero for Ukraine. In terms of investment trusts, Taiwan's financial sector is exposed to NT$21.4 billion in Russia and NT$5.08 billion in Ukraine.
In terms of outbound investment trusts, the amount of exposure of Taiwan's financial industry to Russia is NT$35.4 billion, and the amount of risk for Ukraine is NT$15 billion. In addition, on the banking side, the amount of risk to Russia is NT$5.285 billion and the amount of risk to Ukraine is NT$0.06 billion.
Judging from the above statistics, the insurance industry is the most affected by the impact of the Ukrainian crisis, which can also understand why Cathay Life, a subsidiary of cathay pacific financial holdings under the Cai Hongtu family, has recognized a loss of NT$2.6 billion for withholding Russian bond investment. From the degree of damage to Cathay Financial Control, we can also see the impact of the Russian-Ukrainian conflict on Taiwan's financial industry.
A financial fraud case has torn the richest man, the Cai family, apart
Cathay Life is a subsidiary of Cathay Financial Holdings, which is part of the Tsai Hongtu family and is also the largest private enterprise in Taiwan, the Linyuan Group. Linyuan Group is the first private enterprise giant to break through the 10 trillion level and the asset scale of Taiwan is the first.
Incidentally, Cathay Life, a subsidiary of Cathay Financial Holdings, is the first brand of life insurance in Taiwan, and its business scope covers Taiwan, including the southeast coastal provinces of the mainland, ranking first in the island's market share. Founded in 1957, the Linyuan Group of the Cai Hongtu family was established as Cathay Life in August 1962, and by 1993, the Linyuan Group was already the first enterprise group in Taiwan. Cathay Financial Holdings, founded in 2001.
From Cai Hongtu's grandfather Cai Fu'an to the "four brothers" of the Cai family, Cai Wanchun, Cai Wanlin, Cai Wande, and Cai Wancai, the Cai family was already the "richest man in Taiwan". Cai Hongtu is the son of Cai Wanlin, the third generation of the Cai family, and by the time of his sons Cai Zonghan and Cai Zongyan, he has been "rich for four generations".
The former chairman of Cathay Life, concurrently held by Tsai Hongtu, resigned as chairman of Cathay Life in June 2017 due to Taiwan's implementation of the "separation of property and gold" policy and the promotion of corporate governance regulations that separate ownership and management rights. Since then, As chairman of Cathay Financial Holdings, Cai Hongtu has controlled various subsidiaries including Cathay Life.
In 2015, Ant Financial increased its holdings in Cathay Pacific Property & Casualty
Over the years, the Cai Hongtu family has worked closely with many private companies on the mainland.
As early as 2015, Cathay Pacific Property & Casualty, which was established in the mainland, introduced Ant Financial to invest RMB 1.2 billion through capital increase and share expansion, and became a contributor to 60% of Cathay Pacific's shares. At that time, in addition to Cai Hongtu, chairman of Cathay Financial Holdings, Jack Ma, then executive chairman of Alibaba Group, and Peng Lei, then CEO of Ant Financial, attended the signing ceremony held in Hangzhou.
Also through the guidance of Ant Financial, Cathay Pacific Property & Casualty has entered the blue ocean market of Internet industry insurance.
It is said that Cai Hongtu was at an international conference and "hit it off" with Ma Yun, who has known him for many years. In addition, Cai Hongtu's eldest son Cai Zonghan and Alibaba's "second in command" Cai Chongxin are also acquainted. In addition, when Alibaba went public in the United States, Cathay Life, a subsidiary of Cai Hongtu, also participated in the investment.
It is worth mentioning that Cathay Pacific Property & Casualty was unable to make money for more than 6 years after "landing", but Ant Small and Micro invested 16% of the "ZhongAn Online Property and Casualty Insurance" to make a profit after only 1 year of establishment, which is why Cai Hongtu found Ant Financial as a strong shareholder.
Cai Wanchun
The Linyuan Cai family is the home of taiwan's richest man. As early as the time of Cai Hongtu's father, Cai Wanlin, he was already the richest man in Asia. What we call the "four brothers of Cai" usually refers to the four brothers Cai Wanchun, Cai Wanlin, Cai Wancai, and Cai Wande, in fact, there are five brothers in the Cai family, and it is these four brothers who started the business; among them, the youngest brother, the old five Cai Wande (formerly known as "Cai Wande"), was born in 1932, died in 2018, and was the chairman of Cathay Hospital before his death. With the death of Cai Wande, it also marks the end of the first generation of the Cai family of Linyuan Group!
At the end of January, Bloomberg sorted out the top 20 wealthies in Asia in 2021, of which the only one in Taiwan was Cathay Financial(Fubon Financial) of Cathay And Fubon, ranked 6th with $28.6 billion, and its wealth is more than the Lee Jae-yong family of South Korea's Samsung Group.
The eldest of the four Cai brothers, Cai Wanchun, the founder of the Linyuan Group, was originally a native of Zhunan, Miaoli, and his father, Cai Fu'an, was originally from Jinjiang, Fujian. Cai Fu'an was originally a sharecropper with five sons and two daughters, and the Minnan saying often says that "five men and two women" is a rich family.
Cai Wanchun, who first worked in Shiseido in Japan, later took his younger brothers Cai Wanlin and Cai Wancai north to develop, relying on "Maruwan soy sauce". By 1957, Cai Wancai took over as chairman of the board of directors of the Taipei Tenth Credit Union ("Ten Letters") and began to enter the financial industry, which was later taken over by his brother Cai Wanlin.
In 1979, Cai Wanchun suffered a stroke, and he took the lead in dividing the Linyuan Group into three, of which Cai Wanlin exchanged the right to operate with his nephew and Cai Wanchun's second son Cai Chenzhou for Cathay Life, and acquired Four companies, Cathay Life, Cathay Construction, Mitsui Project and Cathay Automobile Industry, which were later changed to Cathay Group. After Cai Wancai got Cathay Pacific Property & Casualty Insurance, he later formed the Fubon Group.
Cai Hongtu's father, Cai Wanlin, founder of Cathay Pacific Group
It is also the "Ten Letters Case" that sensationalized the whole taiwan, so that Cai Wanchun's vein slipped down from the peak. In 1983, Cai Chenzhou was elected as a public opinion representative and concurrently served as the chairman of the Shixin Council.
Later, the government financial authorities found that Shixin had irregular lending phenomena and ordered improvements, and by 1985, after the outbreak of the "Ten Letters Case", there was a run, and Cai Chenzhou also included his brothers Cai Chennan and Cai Chenyang, who were also implicated, which led to a business crisis, and Cai Wanchun's vein declined. Due to the separation of the brothers, Cai Wanlin and Cai Wancai's two families, although they were affected a little, they were not a big problem.
After the "Ten Letters Case", in addition to eating lawsuits, Cai Wanchun's room was even more deeply hit. For example, the Dunnan Financial Building in a section of Dunhua South Road in Taipei City was started by Linyuan and later forced to sell to Sunbeam Group, and it was not until 2011 that it was bought back by Cai Wanlin. Another example is to come to the hotel, but also had a beautiful scenery, and later was bought back by Cai Chenyang to reorganize the family business.
The Cai family's "Ten Letters Case", together with the Wang Youzeng family's "Liba Case", the Wang Yuyun Family's "ZTE Case", the Xu Shengfa Case, and the Taiwan Runyin Loan Fraud Case, are also known as Taiwan's five major financial fraud cases. The "Ten Letters Case" once caused the cai family, the richest man, to fall apart, and there were many such cases on the island, such as Gu Qiyun, the eldest son of Gu Zhenfu, who had lost investment due to the Internet bubble, resulting in the division of the Gu family's property. In 2001, after the spin-off, Gu Zhenfu established the Hexin Group, and Gu Liansong established the CITIC Gold Group.
Entrepreneurship and operation, risks are everywhere, all the time, the "Ten Letters Case", including this time affected by the Russian-Ukrainian conflict, are risks, depending on how to deal with it. In any case, the Cai family became the richest family, but also in the inheritance of the way, to the third generation of Cathay Cai Hongtu and his cousins Fubang Cai Mingzhong, Cai Mingxing brothers here, and pushed the Cai family to a career peak.
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