Investors and media, good afternoon. I'm the spokeswoman of CDF, April Pan. First of all, welcome all of you to join the Q4 2023 performance investor conference of 2023. There are five parts. We will invite Steve, the President of CDF, to introduce the 2023 performance review and the strategy update of our ABCDE strategies.
In the ABCDE strategy update of the subsidiaries and performances review will be covered by the Presidents from the subsidiaries. The third part is our financial overview. We will invite Jenny Huang, the Chief Financial Officer of CDF, to introduce the financials from CDF. The fourth part is the performance review of the subsidiaries.
The Presidents from the subsidiaries will talk about achievements and performance highlights. Lastly is the QA. Before I invite Steve, I would like to remind you, if you need translation, you can use the Webex function. Now I hand over to our Chief Executive Officer, Steve. Stage is yours.
Thank you. Thank you, April. Good afternoon, everyone. Thank you very much for joining. I'm going to start by giving an update on our 2023 performance. Net income for last year was TWD 18.94 billion, reflecting 16% year-on-year growth. Additionally, our comprehensive income was TWD 53.8 billion. We're selected for the fourth year in a row to be included in the Dow Jones Sustainability Index.
We also aligned the brand positioning of all our consumer-facing brands with the rebrand of KGI Life. In terms of our life company, net income was TWD 10.18 billion, and their net worth increased 39% year-on-year. Life remains focused on high-value products with further VNB margin expansion to 35.5% from 30.5% the prior year. Also, our pre-hedging recurring yield was up 11 basis points to 3.86%, and we continue to have the lowest cost of liabilities.
In terms of our bank, net income was TWD 5.4 billion for an ROE of 8.26%. Our wealth management income grew by 33%. SME and personal loans continued with very strong growth of 13% and 21% respectively. Our consumer finance profits from our joint venture in China were up 143%. We also increased our stake at the end of the year to 37.6%.
KGI Bank now gets 12% of its income from overseas, up from 1% in 2021. CDIB Capital had net income of TWD 2.2 billion, a very strong growth from the prior year where we had a small loss. Also, they formed new partnerships with five industrial funds or public utility projects, and we're expecting our fee-paying AUM to increase by almost TWD 20 billion this year.
We also selected 10 potential teams to pledge match funding on National Development Council’s Regional Revitalization Initiative to support micro and small business to energize local economies. KGI Securities had net income of TWD 7.3 billion, up 102% year-on-year. Overseas contribution increased to 1 4.6% from 11.3%, particularly led by very strong growth in Singapore, where we had a record year.
We maintain our number one position in ECM and DCM, brokerage market share increased from 10.4% to 11.1%. The focus on wealth management AUM has been very successful with 31% year-on-year growth, up to TWD 443 billion. Last year also, KGI SITE became a Tier 1 subsidiary to help us accelerate our growth in asset management by focusing on institutional business and retail ETFs. I’d like to spend a few moments to give you an update on our ABC strategy.
For those of you that may recall, we put this in place at the beginning of 2021, I thought I’d share a few key highlights in each area. In terms of digital, the percent of online transactions that we now have at the bank is 87%, KGI Securities 79%, we’ve seen a doubling in our life business from 9% to 21% since 2021.
Our share of digitally acquired customers since 2021 is up 43%. Last year alone, we added over 150 features and enhancements to our applications. A new area of focus for us is AI, I’ll talk more about that in a moment. In terms of becoming employer of choice, we continue to see very good growth in our employee engagement score from 61 in 2021 to 73 in 2023.
We also continue to enhance our training and work on our values with over 179 values awards given last year. We further enhance the employee experience by improving our benefits for maternity, paternity leave, employee assistance, volunteer leave, and other programs. In terms of customer focus, our Net Promoter Score as a holding company has moved from number five to number one since 2021.
We also increased our number of active customers last year by 5%. We’ve materially increased the number of customers that have given us consent to share their information so we can help other subsidiaries meet their needs. In terms of driving growth and execution excellence, you hear more about that from the presidents. I’ll leave that to them. I just want to make two points.
In terms of our end-to-end straight-through processing, which is a key metric that we look at Just since last year alone, the bank improved by 21% to 60% of all transactions being pure digital. Securities improved 35% to 58%, our life business also improved to 18%, which is an 8% improvement. As you’re aware, we continue to make very good progress on ESG, you can see a lot more information on that on page 35.
In terms of AI, as all of you know, this is a new area of focus, not only for us, but for everyone. There are two types of AI. One is traditional AI that most companies, including us, have been using for quite a few years, which is primarily around using neural networks and also decision-based trees. Generative AI is new, everyone’s in the same starting place.
We think this is an area for us to really focus on where we can create competitive advantage. On this page, you see some examples of the core technologies that we've started adopting in many of our businesses so that we can become more proficient and create real value for our customers and our staff. In summary, we continue to execute and make strong progress in our ABCDE strategy. We had a strong start to 2024 with year-on-year performance up 21%, and we look forward to continued strong performance for the rest of the year. On that, pass it on to Eric to give you an update on KGI Life.
I will talk about the ABCDE results in 2023. To build a young and energetic brand and to have consistency across the group. Starting from January 1st, we have changed our name from China Life to KGI Life. With new product design and new corporate value proposition committed to your prosperity through branding and group resource integration, we can provide comprehensive financial service to our customer and truly become customer-centric.
At the same time, in line with AI trends, we have introduced the latest generative AI for agents training. This is the first in the industry. We simulate different sales scenarios and different customer demands to improve agents' learning efficiency and sales skills, building the best team in the industry. For the transition to IFRS 17 and ICS in 2026. We continue to promote product transformation, and in 2023, we have also seen some initial results.
Our traditional foreign currency FYP reached TWD 26.4 billion, number two in the market. Protection type FYP reached TWD 20.7 billion, increased 40% YoY, number two in the market. For 6Pay plus product, FYP reached TWD 21.1 billion, number three in the market. This year, we will continue to improve our productivity and profitability and pursue stable long-term financial growth. This is regarding KGI Life, results of our ABCDE strategies.
I'll talk about KGIB's strategy progress. First of all, in accelerate digital, we continue to expand the alliance network. In 2023, we collaborated with 11 partners, including taxi, fleet, e-commerce, delivery, and rental platforms. We also won many awards. It also reflects in our retail business growth.
This year, we'll continue to be creative and provide digital convenience, improve customer experience, and expand the bank business. In terms of customer-oriented, we'll continue to expand our RM&IC team. The wealth management fee income reached 33% YoY, and this year, we'll continue to expand the business, and we expected to grow the percentage of the income in retail business.
The wealth management income improved to 60%. In terms of execution excellence, we continue to committed to ESG related credits. The green loan balance reached TWD 17 billion and improved to 6.3% YoY. We continue to expand the solar power and wind power projects. We actively participate on these ESG related loans. We will continue to support the green business and expand our corporate businesses.
Good afternoon. I will talk about CDIB Capital strategic progress for 2023. In terms of partnership, in 2023, we collaborated with healthcare, semiconductor, AI, and advanced manufacturing sustainability, and built a strong infrastructure. In terms of product innovation, in 2023, we hosted an inheritance related seminar, and we also provided private credit. We collaborated with different funds in terms of customer orientation.
In terms of investor, we started to hold knowledge-sharing seminars, total 23 in 2023. In terms of investor, we help them to obtain key resources, including senior management and cultivation services. The ecosystem will help them to identify potential opportunities of collaboration. In terms of execution excellence, we'll continue to do upstream led by our employees to improve the efficiency. We also leverage AI to create risk appetite dashboards, combining the financial data to help us understand the status of the portfolio. Now I'll hand over to KGIS.
I'll talk about the ABCD strategy progress of KGIS. In digitalization, I found out the overseas bond trading volume improved a lot. In order to help the customer our FX strategy, we launched the overseas bond trading service. Meanwhile, unlike other securities, we launched 700 bonds, and customers can choose the suitable products. Beat by the AI trend, to fulfill the needs of the high-frequency traders, we provided the real-time API connection trading service for U.S. stock market. In this way, it can improve the efficiency when the investor trade in the U.S. stock market.
In terms of become employer of choice, we introduced the smart eKYC to optimize the authorization or adjustment of customer transaction limit, and simplify the application process to reduce the burden of our employees. In terms of customer-oriented, since Taiwan's society becoming an aging society, we obtain the highest number of RFA certification among our peers, and to improve the skills of our FAs. By the end of 2023, we are the highest among the peers.
We have 22 FAs obtaining the certificates. In terms of drive growth, to deepen the collaboration within the groups, we can provide one-stop service to the group customers. We trained more than 1,000 KGI Life salesperson to obtain the certification for securities specialist exam, and we also obtained the approval from the FSC. Now we're going to submit the application to the security and trading agencies. If we obtain the approval, we can expand the sales team and provide one-stop service to the group customers. Next, I'll hand over to our Chief Financial Officer.
Thank you, William. I'll talk about the financial overview for 2023. Please go to slide page 14. The 2023 net income is TWD 18.94 billion. Because we have seen a recovery in our OCI, it also affected our net worth. The ROAE shown here is only 8%. However, if we include the OCI rebound and do the calculation of ROAE, it's actually higher than 8% listed here.
Our EPS of 2023 is 1.13 NTD. Our total asset has amounted to TWD 3.6 trillion, up 3% comparing to last year. Total equity also is up 26% to TWD 263 billion. The end of year earnings per share is TWD 14.27 per share. Our net worth is also on the rise. Next page. In terms of the profitability of our subsidiaries, KGI Life's net income is TWD 10.2 billion, although it is slightly compromised because of the hedging cost.
OCI of KGI Life has also rebounded by TWD 30 billion. KGI Bank's net income is TWD 5.4 billion, down 1.1%. This is coming from the negative carry of the bonds. If the rate will be cut in the near future, this will reduce the effect of negative carry. In terms of CDIB, because of valuation return, our performance has picked up from the negative of TWD 0.3 billion to positive TWD 2.2 billion.
KGIS has seen a triple growth in terms of net income. In terms of brokerage, wealth management, and investment, KGIS has seen significant growth comparing to 2022. Next page is the capitalization of the group. Our double leverage ratio has gone down from 128% in 2022 to 122% in 2023. This is coming from our OCI rebound. We have picked up.
If you see the subsidiaries capital adequacy ratio, they are well above the regulatory limits. Our capital is very strong. Taiwan Ratings has recently ensured that our rating is double A minus. The long-term outlook is stable. That will be all from me. Now I will hand over to Eric on KGI Life's performance.
This is the 2023 performance of KGI Life. Let's look at page 18. 2023, our FYP is affected by the rate rise. This has affected to the momentum of the insurance industry. However, KGI Life has made adjustment in our product strategy. We focus on US dollar policy, long-term policy, and protection-based policy. Our product structure has been optimizing. From the slide here, you can see in the FYP, we have the highest ratio in terms of traditional regular payment products.
The first FYP for the traditional product has amounted to about 90%. In terms of asset and liability allocation, since we focus on foreign policy, our foreign policy waiting has amounted to 58% in terms of its contribution to total policy income. In terms of sales channel, KGI Life, in addition to maintaining a multiple channel sales, we also enhance on our self-owned agencies channel.
In terms of the FYP distribution for agency has already climbed up to 31%. Since this channel is focusing on long-term and protection-based products, although the FYP accounts for 30%, if we look at its CSM, it actually contributes more than half of the total income. The next page is the operational performance. Because of the decline in premium, our VMP has dropped by 13% comparing to the previous year.
Since we are focusing on high margin CSM products, our VNB margin has amounted to 35.5%. If we exclude the IOP, this figure will be 39.2%. In terms of investment spread, because of the rise of hedging costs, our investment return is at 3.31%, while our COL is 3.03%, maintaining a stable positive spread.
Next is on the investment portfolio. We focused on the liability and asset management and the long-term return. We use fixed income as the main investment position, and we also seize other opportunities. We didn't make much change to our investment portfolio, but the portfolio change reflected in this chart also reflects the valuation changes. The investment return is also listed here. Here, for overseas contribution, they are the return before hedging. Next on page 21, investment performance.
Because of the new money return increase, our recurring yield has been up by 11 basis points to 3.86%. In terms of hedging cost and hedging structure, 66% of the hedging is done through currency swap and NDF. Because of the U.S. dollar depreciation, our hedging cost has amounted to 1.53%, and the FX reserve balance has amounted to TWD 9.77 billion. Next, I'll hand over to Wayne.
Now is the KGI Bank's performance. In terms of profitability, our net revenue of 2023 has amounted to TWD 13.6 billion. Our fee income also seen a 12% growth annually, especially in our wealth management income, also grew by 33%. The spread is also widening stably, amounted to 2.1% in 2023. In terms of NIM is at 1.32%. As for our asset quality, we've observed that our asset has been quite stable. Our NPL ratio is also maintaining flat.
In addition, we are actually adjusting our loan mix. Here you can see in terms of the institutional financing, we have did some adjustment. We focus on retail lending. We have seen double-digit growth in terms of SME lending and consumer loans. In terms of deposits in 2023, the demand deposit, our CASA ratio has climbed up to 41%.
Although our loan scale didn't grow too much. This is also affected by the post-pandemic environment. We want to increase our loan and deposit scale to enhance our business income. Our NTD demand deposit has grown quite significantly. We hope by doing so, it can introduce stable growth to our bank.
Let's invite Melanie Nan from CDIB.
The 2023 performance review. Please go to page 26. First of all, in terms of AUM. In the first part, the AUM commitment from TWD 50.4 billion in 2022 to TWD 52.1 billion in 2023, excluding the funds of 2023. Among the TWD 52 billion, USD accounted for TWD 51 billion, and NTD accounted for TWD 27 billion. For principal investment composition, the total number grew from TWD 30.2 billion from 2022 to TWD 34.2 billion, including the private credit and corporate inheritance and other instruments.
In terms of the geography, Taiwan accounted for 39%. Next page. In terms of the operational performance, we have stable income from fee income and new businesses. The fee income slightly dropped to TWD 574 million from TWD 622 million in 2022 because some of the funds already in the exiting period, and we are still raising the new funds. Therefore, we can see this transitional effect.
Like Steve mentioned, in 2023, we initiated a lot of fund investment. We collaborated with Hon Hai Innolux and Japan National Fund. We launched a lot of the invest projects. This year, we believe the fee income will see further growth. As for return on investment, on the right side, ROI improved from 1.7% from 2022 to 11.8% in 2023, compared with the MSCI World Index, is more stable.
That is due to our asset allocation includes direct investment and fund investment, and in private credit and private fund, we have multiple investment instruments. Therefore, our ROI is more stable. On the bottom part, that is the new business growth momentum. Like I mentioned earlier, we launched a new investment for non-equity alternative asset management. That is mainly on private bond. It has grown from TWD 251 million in 2022 to TWD 333 million in 2023.
The cash income grew from TWD 2.5 billion to TWD 3.2 billion in 2023. The investment return is around 11.6%-11.8%, and it is the stable growth momentum of CDIB. We also provide other products. That is all from me.
Next, we will move to KGIS.
Thank you. I will talk about the 2023 performance of KGI Securities in page 29. On the left side, we can see the net revenue. Benefiting from the boom market, all of the revenues of growth and totaled TWD 15 billion, the annual growth is 35%. On the top right, we can see customers' AUM reached TWD 443 billion. Compared with the previous year, we see a 31% year-on-year growth.
Wealth management and asset management, they both grow. On the bottom right, it is the wealth management related revenue. We built a customer-focused wealth management business. In 2023, the growth rate is over 50% and reached TWD 1.86 billion. Next page. On the top-left, the net income composition. Our net income is TWD 7.3 billion. Overseas contributed 14.6%, contributed more than TWD 1 billion.
The Singapore branch obtained record high net income, and they also work on professional institutional investors. In Singapore, the brokerage market share ranked number one. On the bottom left is the ROAE comparison with the industry average. The darker green is KGIS, and the lighter green is industry average. In 2023, our ROAE is 13% and slightly better than the industry average. Lastly, on the right side, that's our market positions. All of the business are growing. We still maintain our leading positions. Next, I'll hand back to April.
Thank you, William, and all the presidents and their summary. Now we'll move on to the Q&A session. We'll first invite institution investor and analyst to raise their questions first. Please remember to click the hand-waving button to show us that you have a question. The first question is from Jamie from JPMorgan
Can you hear me?
Yes, we can hear you.
I have the following questions. First is for KGIB.
Sorry, Jamie, can you speak up?
For KGIB, I know that your slide says your NIM increased the swap revenue. Can you describe Q4, the adjusted NIM and the NIM excluding swap? Can you give us the figure and the whole year swap revenue for the previous year? What will be your outlook for NIM for this year? Questions for KGI Life.
Can you share with us if the C3 risk increase, how would it affect your RBC? Other lifers announced that they have the plan to raise long-term debt. For KGI Life, if you consider the ICS to be incorporated in 2026, would there be a need to issue sub-debt for long term? If you do need that, what will be the amount?
Next is the FX reserve. What is your limit for FX reserve this year? In terms of the recurring yield, I remember from the last call, you expect this year you will see a 5 - 10 basis point increase. I'm not sure if you have changed this guidance. Lastly is your dividend policy. Since your OCI has rebounded by TWD 30 billion, I wonder, could you use that to pay out dividend? If we look at the previous year's cash dividend payout, the ratio is about 50%-60%. Please tell us the plan, and will you be paying dividend in cash this year or in stock as well?
Okay, thank you. You asked questions about KGIB and KGI Life as well as our dividend policy. I will now first hand over to Wayne to answer.
If we exclude the swap position, our NIM is at about 1.05%. The 2024 outlook for NIM, if we include swap, we want to maintain at about 1.3%, and our spread will be maintained at 2.1%. For KGI Life, we'll hand over to the chief actuaries to answer the RBC issue.
Hi. Regarding the situation and plan from IB for C3, the changes will be around 10+%. Our RBC will still be above 300 considering the changes. Due to sufficient RBC for sub-debt issuance, now we do not have such plan. IB has announced localization for ICS and transition measures. This will help support lifers in Taiwan. Our COL is lower compared to others, and we also continue to value AON. Based on the information we have now, there is no problem in terms of the transition.
Next, I will hand the floor to Lauren regarding FX reserve.
According to the formula, the upper limits is TWD 19.8 billion, and for recurring yield, the guidance remains the same. It will continue to grow by 5 - 10 basis points. Thank you.
The dividend policy, we'll hand over to Steve.
In terms of the dividend, as you know, our policy is to maintain a consistent dividend policy. In terms of 2022, as you know, that was an exceptional year. Now that the OCA valuation has rebounded, obviously, our plan is to resume a dividend. The ratio that you quoted was before the 100% acquisition of China Life, which hopefully has an impact on that. I think 2022 is probably a better guidance. At this stage, obviously subject to the board and the regulator, our plan is to pay in cash only.
Are there other questions from analysts or institutional investors? Okay, Peggy from Morgan Stanley.
Can you hear me now?
Yes.
Okay. Thank you. I want to ask about KGI Life. Last year, FYP and VNB were both in decline. This year, the market's January, February sales of policies doing better. What will be your outlook and what will be your goal for FYP and VNB? Comparing to other insurance companies, they are all building up CSM and focusing on high-margin products. What will be your CSM goal in terms of amount for 2024? That's the first question.
Next question is on COL. Last year, it increased by five basis points. What will be your estimate for increase of cost of liability for this year and next year? Third question has to do with the hedging cost. The hedging strategy for KGI Life has been quite stable, I think it's at about 45%, judging from the historical data. What will be your outlook for this year if Fed is to cut rates? What will be the impact for your hedging cost? That'll be all.
Thank you, Peggy. About the FYP and CSM, we'll hand over to Eric to answer.
Peggy, last year, the industry was affected by macroeconomy. We think the worst scenario had already happened last year. This year, moving forward, we maintain a positive view for FYP growth. We will have double-digit growth, but just like what you said, in 2026, we need to transition to IFRS 17 and ICS. We continue to focus on protection-type product, foreign currency products. This is our goal moving forward. We will not pursue the absolute number, but rather focus on CSM and the quality of our products. For CSM, I will pass the floor to Rochelle.
Hi, Peggy. Just like what Eric said, we continue to focus on high CSM product. In 2023, our CSM compared to last year has improved by double-digit. In 2024, we also expect double-digit growth as well. This is our target.
For COL, to have better ALM, we focus on the sales of USD policies. The COL of USD policy is higher, this year we expect an increase by three to five basis points for our COL. For hedging strategy, I will respond. Indeed, if rate cut by the Fed and also increase rates in Taiwan, it will reduce hedging point cost. FX fluctuation is still uncertain. For hedging strategies, we will maintain a stable approach to have the flexibility and also to adjust our hedging ratio accordingly.
Our next question is coming from Tina, from Capital Investment.
Can you hear me?
Yes.
I have a few questions here. First is to Life, your investment strategy. Last year, you have increased more position in Taiwan stock and overseas bond. What will be the adjustment to your investment position? Also last year, what is your dividend income? Will you be aggressively trying to gain more dividend income, or you will focus on allocating your equity and gaining capital gain?
Next question is on KGIB's In terms of loans performance was quite flat last year. What will be the outlook for loans and the fee for your company this year? Your cost of credit, because in the fourth quarter we've seen an increase in your NPL. Is it coming from the case of London that you mentioned in the previous call? What is the provision status and what is the credit outlook for this year?
Okay. Thank you, Tina. For KGI Life's question, we'll hand over to Lauren.
Good afternoon. For investment strategy, we continue to focus on stable investment portfolio allocation. We are positive for corporate income growth, so we will focus on high dividend equity. Will we buy more stock because of dividends? Because of the fluctuation of stock, we will remain the flexibility. For dividend income, we will adjust based on market condition. For bonds, we continue to bring up our recurring yield. Our USD policy, this will continue to be our focus, and we will purchase overseas bonds to increase their yield. For the bank, I will pass the floor to the bank.
This year, our loan size, our anticipation is quite aggressive. We aim to grow loans by 10%, especially we want to grow the personal loan percentage. We are also going to adjust the structure of our corporate lending. Our focus is to increase the overseas lending. In terms of strategy, this year, we also focus on fee income and raising our CASA ratio. You mentioned our asset quality, because we expect to grow loan balance, so our credit costs will be maintained at about 15 - 20 basis points. For that single case of NPL case, we made the relevant provision, and we don't expect to see great losses coming from that.
Peggy you are raising your hand. Please, the floor is yours.
I'm sorry, that was a mistake.
Now we'll hand over the floor to the media.
Shu Xian from Financial Times. I'm sorry, we didn't catch you. Now we do. Sorry, I think you're on mute.
What about now?
Yes.
Okay. I want to ask the question about OCI recovery, you said about TWD 30 billion. Can you put it into distributable earnings? If you can, what will be the amount, and how will it affect the dividend payout this year? You are still using this quarter's earnings to do the dividend payout?
Okay, thank you for your question. We'll hand over to Jenny.
Yes, Shu Xian, the question you raised. The OCI recovery can be partly converted, but this has to do with some technical issue. Our main focus on the dividend payout will be still coming from our profits.
Are there other questions from the media? Okay. Thank you for the questions. That's all for today's investor conference. Later, you can find the recordings from today on our website. You can also download the PowerPoint on the investor relation page. If you have other questions, we welcome you to contact us via email or phone. Lastly, thank you for participating, and wish you healthy and fortune. Thank you