Asia Insurance Summer Series: Life company analysis: dividends need cash, not just IFRS profit

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Asia Insurance Summer Series: Life company analysis: dividends need cash, not just IFRS profit

structural differences across bonds and prefer must-pay structures and issuers with madhukar.ladha@jpmorgan.com

strong balance sheets to support distributable resources. J.P. Morgan India Private Limited, J.P. Morgan

Tower, Santacruz(E), Mumbai - 400098, SEBI

• Earnings beats may not mean dividend upside. IFRS-17/9 can recognise Registration: INH000001873, (91-22) 6157-3000.

value before it becomes distributable cash, so investors should be cautious in Jemmy S Huang AC

treating earnings revisions, beats and misses as direct signals for cash profit or (886-2) 2725-9870

dividend capacity. Strong accounting profit, including OPAT, does not jemmy.s.huang@jpmorgan.com

J.P. Morgan Securities (Taiwan) Limited/ J.P.

automatically translate into higher dividends. We therefore expect accounting Morgan Securities (Asia Pacific) Limited/ J.P.

earnings revisions to become a weaker signal for both share price performance Morgan Broking (Hong Kong) Limited

and dividend forecasts under IFRS-17/9. Dan Wang

(86-21) 6106-6349

• Low payout does not mean low distribution quality. A frequent investor dan.wang@jpmorgan.com

question is why life insurers’ dividend payout ratios have become more volatile SAC Registration Number: S1730524080001

following IFRS-17/9 adoption. In our view, a low payout on reported net profit J.P. Morgan Securities (China) Company Limited

may still represent a reasonable distribution of genuinely available capital after Julia Kim

adjusting for unrealised gains, required capital and liquidity buffers. (852) 2800-8540

Conversely, a high stated payout may be less sustainable without recurring julia.c.kim@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited/ J.P.