Fubon Financial Holding Co Ltd

TWSE:2881

Earnings Call Transcript 2022-Q1

[Operator]

Thank you for standing by, and welcome to Fubon Financial's First Quarter 2022 Financial Results. [Operator Instructions] This call is being recorded. If you have any objections, you may disconnect at this time.

Now I will hand the call over to your host Ms. Amanda Wang, the IR Officer of Fubon Financial Holdings. Ms. Wang, please begin.

[Amanda Wang, executive]

Thank you. Welcome, everyone. Thank you for joining Fubon Financial's first quarter results today. Let me walk you through the first part of this presentation. And we will follow up by the Embedded Value of Fubon Life for the year '21. Then we will have the Q&A session hosted by the management team.

And firstly, please turn to Page 4. In Fubon Financial's first quarter highlights, we announced the cash dividend payment includes TWD 3.50 of cash dividend and TWD 0.50 stock dividend.

And in the Holding Company's profit, we see the first quarter's result remained a strong one with TWD 46.5 billion of net profit. Assets and net worth of both shows growth.

And the subsidiary, Fubon Life, the net profit has been a strong one that top among the peers, which mainly come from the investment return and hedging improvement.

In Taipei Fubon Bank, the net profit growth mainly comes from the asset growth and also the NIM enhancement that we see the NIM -- NII expansion of over 10%.

In the meantime, the bargain purchase gain of TWD 2.8 billion from the Hyundai Cards that also contributed to the strong earnings this quarter.

In Fubon Insurance, the net profit growth is over 50%, which is mainly driven by the investment return as the capital gains performance is decent.

In Fubon Securities, net profit declined, and that mainly reflects the capital markets volatility and also a decrease in market turnover in Taiwan.

And going forward, we continue to expect the synergies, the securities to further enhance our market position.

In Jih Sun Financial Holdings, the net profit first quarter was down, mainly reflect the securities business. While its banking operation shows profit up by over 30%.

And in ESG, we have a few achievements in year-to-date, including, firstly, the participation in sustainability initiatives. We are now a member of PCAF, and also, we recently joined AIGCC. And while we are in the application process to join RE100. And all of these advocate and that we participate, that we aim to further enhance the green transition and also to enhance our disclosure.

And the awards and ratings, we are honored to get to the top position in Sustainalytics’ ESG risk ratings under the insurance companies category. And also in supplier engagement rating that we consistently to rank A-list.

In the business, we entered into the sustainability-linked load in Taipei Fubon Bank with a client.

Next, let's move on to Page 6. The net profit down by 9% while the absolute level that Fubon continue to be ahead of compared to peers.

In Page 7, the earnings contribution by subsidiaries that we can see the growth come from Taipei Fubon Bank Hong Kong and China and Fubon Insurance. Fubon Life and Security down mainly reflect the capital markets movement.

In Page 8, the asset and the net worth of the Holding Company shows sequential growth on a year-over-year basis.

On Page 9, the ROA and ROE declined that mainly reflect the numerator fluctuation while the absolute level in the ROA and ROE on an annualized basis remain well performed.

Next, let's move on to Page 11 regarding Fubon Life. The total premium came down mainly reflect the renewal premiums down. That is in line with the market trend in year '21 and first quarter this year. While we expect the pattern for a total premium could turn positive growth in '23 while the renewal premiums pattern would narrow down and decline quite meaningfully in year '23 as well.

In Page 12, the first year premium, as we can see slightly down by 4.9% in first quarter. That's largely due to the impact from pandemic. If we look at the quarter-over-quarter basis, the growth is about 18%.

In Page 13, the FYPE down that pretty much mirror movement in FYP. While on a quarter-over-quarter basis, we also show a growth of about 12% in FYPE.

In Page 14, in terms of contribution by channels, we continue to focus on internal ones, including the agency force and the Taipei Fubon Bank are increasing their contribution in the FYP and FYPE mix.

In Page 15, in investment portfolio for Fubon Life. The total amount slightly up by 5% and reached TWD 4.7 trillion. And the migration in the first quarter mainly reflects the proportion of domestic equity down. That reflects one is the realization of the capital gains; and secondly, because of the impact from the market fluctuation.

In the meantime, we can see an increase in the cash position that will help us to further deploy the asset allocation going forward.

And in Page 16, in terms of the fixed income, we continue to focus on the investment grade bonds. And in face of the very high market, we will gradually to deploy and continue to allocate into mainly in the North America area.

In Page 17, the investment return for Fubon Life, as we can see from the bottom 2 lines in the table, they reached over 6.68% on an annualized basis after hedge. That is quite well performed compared to a track record. And outperformance mainly comes from one is the recurring return. You can see the interest income from the fixed income and cash dividend both increase; and secondly, from the capital gain, which mainly comes from equity positions; and thirdly, from the FX, which is a net gain.

In Page 18, in hedging and FX. As we can see from the upper left-hand side, the overall hedging result is a net gain of 56 basis points as we reduce the use of the recurring hedging instrument and also we increased the naked dollar position.

In the meantime, the FX reserve now reached TWD 19.2 billion, while we can also see the recurring return both before and after hedge basis, both shows increase year-over-year.

On Page 19, in terms of the cost of liability versus the investment return, we continue to deliver positive spread and further widening compared to the year-end December -- in '21.

While the breakeven point shows some increase year-over-year, that mainly reflects the increase of the reserve for the distributable dividend surplus for the participating policy, and that's mainly on back of the investment returns well performed.

In Page 20, in terms of the unrealized balance in Fubon Life, it reached TWD 51 billion as of end of March. The fluctuation mainly reflect the market volatility. While in the meantime, the book value and also RBC ratio continue to stay at a well-capitalized level.

In Page 22, let's move on to Taipei Fubon Bank's section. The revenue's growth may reflect the NII growth and also the bargain purchase gain. The NII growth is on back of the asset scale and also the market rate hike. While the offsetting factor mainly came from the treasury and also the fee income.

In Page 23, in terms of the total credit, it grew by 11.9%, while the retail growth is stronger at 17.7% and corporate loan at 6.9%.

The corporate loan in Page 24 mainly come from NT book. While the SME segment lead the growth driver of over 22% growth.

In Page 25, the retail business, the mortgage and also personal unsecured loans are both grew quite strongly. While we do anticipate that the mortgage growth going forward in the next few quarters may moderate at a high single-digit growth for the full year.

While the personal secured loans on back of the cross-sell support from the credit card holders contribution, we see the growth should continue to be strong.

In Page 26, in terms of the deposit, the deposits over speaking is a strong one comes from NT dollar's growth of 15% and foreign currency's growth of 32%. And in the meantime, the LDR in NT book has slightly edged up to about 86.8%, while in foreign currency's loan and bond investment trend down to about 55%.

In Page 27, the rising rate and also the asset mix adjustment led to the improvement of net interest rate margin by 1 basis point quarter-over-quarter.

In Page 28 and 29, the asset quality over speaking has remained stable.

In Page 30, the credit cards performance, we can see active card growth of over 12% and card spending of over 5%. While the cost spending is slightly down, but we continue to rank top 1 among the top 5 peers.

In Page 31, the Taipei Fubon Bank's fee income slightly down by 9%, that mainly reflects the wealth management and also the credit cards marketing expense, which we would do adjustment in second half of the year, and we expect the credit cards expense was controlled further in second half.

In the wealth management area, the sales from the insurance actually has been doing decently. The commission is up by over 14%. However, it was offset by the decline in mutual fund and structure products.

And as the market cycle as term 1 stabilized, we expect the wealth management, the momentum should resume.

In Page 32, on the overseas branches, revenue is pretty much flat while the net profit improved by over 30%, mainly on back of the provision expense improvement.

In Fubon Insurance, the direct written premium in first quarter was up by over 15%, both the commercial and personal lines growth outperformed the market average.

The net combined ratio slightly up, that reflects a high proportion in commercial lines results. And we would also like to update to the investment communities regarding the COVID-related policy data in Fubon Insurance.

Firstly, it's regarding the insurance policy regarding its current status results. The total effective policy number is about 2.31 million as of April. This policy size that translate into premium income of about TWD 4.28 billion.

And the total effective policy number was about another 15,000 in May. And there are around 1 million policies that are still in our review underwriting process. And we estimate the effective policy number will be reduced to about 1.55 million in third quarter as the policies maturities.

And regarding the COVID-related insurance claims status, the cumulative amount is about TWD 710 million from 18,000 claims cases since the inception of the product that launched in year '21 and also year-to-date as of April. And the gross loss ratio is about 15%.

And the COVID-related claim payment and provision are reflected in our preliminary earnings results in April as well. The settled claim was about TWD 140 million from 4,000 claim cases in April.

And additionally, the claim reserves that include in the outstanding claims and also incurred but not reported, which is so-called, IBNR reserves, that is a total of TWD 280 million in April.

And a more recent update is during the first 2 weeks of May, the settled claim was TWD 390 million from 11,000 claim cases.

And going forward, we expect the claim payment may increase from the unsettled claims that including the reported and also unreported ones in May. And factors, we continue to watch carefully, including the pandemics development, the quarantine skyline from the government and also the clarification on claim payment standards.

And reserve would also increase accordingly to reflect in the monthly results. And therefore, in the monthly release during the next few months, we plan to disclose the monthly claim payment to update to the investment community. And regarding the reserve status, the outstanding claim reserve and also the IBNR reserve are a total of TWD 280 million as of April.

And on top of that, the release of the special reserve to offset part of the losses has been under discussion with insurance association and also our regulator. The special reserve is TWD 15.5 billion outstanding. And also in addition, some of the COVID-related policies under the reinsurance coverage.

Okay. So if we may move on to Page 36. In Fubon Securities, the net profit in first quarter down by over 55%. That mainly reflect the index, volatility and also the market turnover trend down. While we expect the potential synergies upon the merger with Jih Sun securities.

In Page 38, in Fubon Bank China, the loan and deposit balance both grow steadily, while the net interest margin shows improvement of 13 basis points that from the bottom and also margin that both led to the net profit increase of over 21%.

While the NPL ratio increased, that mainly reflect the economic development and also epidemic. And going forward, the strategy will aim to strike a balance between the earnings growth and also asset quality.

And next, I would like to introduce Ms. Grace Chiu, Senior Management from the HR team to walk you through Fubon Life's Embedded Value 2021. Thank you.

[Grace Chiu, executive]

Thank you. Please turn to Page 40, the value creation summary for Fubon Life. The first part is the In-Force Value Creation. Benefit from the historical high net worth and high increase in valuable in force after cost of capital. The embedded value reached TWD 976.5 billion, also a historical high record. Strong growth of 25% compared to last year accordingly.

The new sales value creation, the combination effect of COVID-19 pandemic and favorable investment environment boost the sales of single premium investment products lower the regular premium. In year 2021 the VNB is TWD 17.8 billion, a decrease 27% versus previous years. The embedded value per share of Financial Holding Company is TWD 82.5 also the highest record ever.

Page 41, the movement amounted for adjusted net worth. This page shows the net worth movement between year '20 and '21 and how it is adjusted for the embedded value calculation. The 2021 statutory net worth is 599.1 billion or 23.7% increase from previous year, mainly contributed from the highest record of earnings to TWD 102.3 billion in 2021, an additional TWD 24 billion financial asset appreciation during the period.

The negative impact of JPY 11.7 billion reflects the cash dividend remitted to the Holding Company and some reporting currency impact of NTD appreciation.

The adjustment made to calculate adjusted net worth are similar to previous years. Firstly, at the special reserve, this could be treated as available capital from regulators perspective.

Secondly, remove the unrealized capital gain of fixed income assets from the accounting book to align with the book yield return assumptions used for VIF calculation.

Lastly, at the own use real estate appreciation, which was not recognized in accounting group.

Page 42, the movement analysis for Value of In-Force before cost of capital. The expected earnings and required return explains how VIF rolled over 1 year. TWD 31.2 billion earning is transferred to the net worth and a winding of 10% discounting rate contributed TWD 47.8 billion. The economic assumption change, the impact is very minimal of TWD 0.1 billion.

Negative impact of TWD 11.3 billion from the noneconomic assumption is due to the assumption changes made to reflect less favorable actual experience. The value of new business before cost of capital contributed additional TWD 17.4 billion. The risk discount rate assumption is lower from 10% to 9% to reflect the decreasing of key parameters due to determining discount rate. We will elaborate more afterwards. The 2021 VIF before cost of capital reached TWD 565.2 billion, grew 16.3% compared to last year.

Page 43, the movement analysis for VNB. 2021 FYP grew at 4.6%. Favorable investment market posted the sales of single premium investment products and lower regular premium policies. The economic assumption change impact is only $0.8 billion to reflect the increasing interest rate environment.

Noneconomic assumptions reduced VNB by 1.5 billion to reflect higher expense assumption resulting from less new policies issued. The risk discount rate is reduced to 9 %. We will elaborate more later.

Page 44, we summarized the economic assumptions here for your easy reference.

Page 45, the portfolio return is calculated the Value of In-Force. This page shows return curve for this 2021 is very, very close to 2020. The economic assumption change impact on Page 42 is only TWD 0.1 billion for VIF before CoC.

Page 46. VNB portfolio return. Compared to 2020 VNB return, the 2021 return curve is slightly higher in the early period, very close in the middle, slightly high in the ultimate to reflect increasing interest rate environment.

Page 47, the discount rate. The CAP model is used to determine the risk discount rate as usual. The key parameters include risk-free rate, equity plus country risk premium and a beta of Fubon Financial Holding Company. We have been using average of the past 10 years data to calculate equity plus country risk premium and the beta of Fubon Financial Holdings.

The data shows decreasing trend in recent years. The parameters are lower accordingly as shown in the table here. The resulted equivalent RDR is less than 9%. We then use 9% for value creation -- value calculation.

Page 48. We follow the latest RBC regulation and determine the cost of capital at 200% RBC level.

Page 49 and Page 50 show the sensitivity results. This meant to provide a sense on how these 2 assumptions drive changes to different value metrics.

Now I will pass the call over to [indiscernible] Deloitte Consulting. Thank you.

[Unknown Executive]

Good afternoon, everyone. This is Dao Ming Director of Deloitte Consulting. We are honored to have been engaged by Fubon Life again for the review of this year Embedded Value and Value of New Business. Similar to previous years, the scope of this-year review includes reasonableness review of the assumptions of Fubon Life in this valuation as well as the overall EV and VNB results.

A higher level review of the actuarial model and policy data used by Fubon Life in this valuation and review of the calculation historically for the course of capital, adjusted net worth and the Value of In-Force movement analysis.

With respect to risk discount rate assumption applied by Fubon Life. The assumption, derivation methodology has been consistent using the CAPM approach. Similar to the previous years, Fubon Life 4 data points, including [indiscernible] based on the current risk-free rate, long-term risk free rate as well as In-Force and New Business equivalent RDR. This [indiscernible] RDR lies between 7.46% and the 9.7%. And Fubon Life RDR assumption for both In-Force and New Business at 9% for this year's valuation.

With respect to the investment return assumption, Fubon Life has adopted a consistent derivation methodology. The initial risk-free rate for both NTD and U.S. dollar has been updated to [indiscernible] level based on market information, while keeping the long-term level the same as last year. The investment return assumption for all asset class has been calculated up to reflect the company's greatest asset mix and investment strategy.

Based on our review, without investment return assumption and adjusted net worth internally consistent, the overall investment return assumption lies within a reasonable range.

Fubon Consulting has also reviewed all noneconomic assumptions applied by Fubon Life. All assumptions have been updated to reflect the company's related experience in line within a reasonable range. Through a review of the movement analysis for the Value of In-Force and VNB and various sensitivities. We the overall EV and VNB results for this year to run within a reasonable range. This is the old company's briefing on our review of Fubon Life's EV results. Detailed findings can be found in the opinion letter issued by Deloitte Consulting. Thank you.

[Unknown Executive]

Thanks for your presentation. In the very beginning, we would like to introduce management teams in this call today. Mr. Jerry Harn, President of Fubon Financial Holding, and we also have Mr. Roman Cheng, President of Taipei Fubon Bank; Ms. Tsai-Ling Chao and Ms. Grace Chiu from Finance and Actuarial Division; and [ Ms. Cather Pao ] from Investment Planning in Fubon Life; Mr. Victor Chen and Mr. Raphael Lin from Fubon Insurance, [ Mr. Wasson Zhang ] and Ms. [indiscernible] from Fubon Bank China and Dr. Rick Lo from Economic Research in Fubon Financial.

Next, we would like to open for the Q&A session. Operator, please take questions from the audience. Thank you.

[Operator]

[Operator Instructions] Our first question is coming from Chung Hsu of Credit Suisse.

[Chung Hsu, analyst]

I have a few questions, and I'll start with the bank. I think in the Chinese session, management mentioned that we maintained a double-digit loan growth target this year. And first quarter loan growth is really quite good. But I think during the call, you mentioned that the mortgage growth for the rest of the year was moderate from 17% to high single-digit. Just curious what other loan segment will make up for this slowdown in mortgage?

My second question is on margin. I'm a bit confused. If you look at margin in the first quarter, it was down year-over-year. Is this all because of low mix shift. You are growing consumer loans quite rapidly. Is it because you grow mortgage and that's dragging your overall loan spread and margin on a year-over-year basis? And are you still keeping your margin guidance for 2022?

And my third question is on the P&C insurance based on what Amanda mentioned, the number of policies claimed as Amanda claimed. It seems like each policy is about [ TWD 35,000 ] to [ TWD 40,000 ] claim. My question is 2 part. One is, is this fair to assume that from now on at least in the next 2, 3 months, every claim is about similar amount like TWD 35,000 to TWD 40,000.

And if based on the number of policy, it should be somewhere between 2.3 million to 3 million policies. It's my calculation of TWD 8 billion to TWD 9 billion of claim for every 10% infection rates in Taiwan. Is that something reasonable without considering you received anything, any special reserve, et cetera?

My last question is on your EV number, you adjusted your investment return assumption by a few basis points. But when I look at your presentation, 40 -- I believe it is in Slide 42, the economic assumption change is almost 0. Just curious what -- is there anything else that is included in the economic assumption is 0.1 to be exact.

[Amanda Wang, executive]

Okay. Thank you, Chung. So we'll have Mr. Roman Cheng's comment first. Thank you.

[Yao Hui Cheng, executive]

Thank you for your question about our total loan outstanding and the growth numbers. In the first quarter of this year, Fubon Bank registered 12% loan growth for the first quarter and mainly contributed by the SME lending increased by 23% and the unsecured consumer finance increased by 35%. The mortgage loan increased also by 17.6%.

For the going forward in the second half, I think altogether, our loan growth can remain as strong as the growth number in the first quarter, which is 12%. So with this path, we can continue our 12% loan growth all the way down to the end of this year.

In terms of the NIM, yes, the first quarter NIM slightly reduced mainly because of our loan growth actually fly to quality assets. But considering the rate hike for both NT dollar and the U.S. dollar interest rate. So we -- based on our assumption, we think the total NIM by end of this year can increase by 11 basis points. I hope this answers your question.

[Chung Hsu, analyst]

Can I follow up for second half this year, is still going to be further shift to quality? Or is there going to be a more stable, meaning we can capture that entire benefit from [indiscernible] ?

[Yao Hui Cheng, executive]

Yes, quality will still remain the top priority. But because of the rate hike, our NIM can naturally improve without sacrificing our quality.

[Amanda Wang, executive]

I think, Chung, your second question regarding [ CNC ] you are trying to seek the guidance for per policy's claim payment of TWD 35,000 to TWD 40,000, whether it is reasonable or not, right? You want to take the guidance, right?

[Chung Hsu, analyst]

Yes.

[Amanda Wang, executive]

Okay, sure. Yes, please.

[Yao Hui Cheng, executive]

For the policy, have 3 coverage. One is infection rate, the second one is quarantine, how many quarantine and the third one is hospital cash. According to the government figures, January to April data 1 infection is 7 quarantine. But from this month 17 quarantine that will be decreased a lot mainly less than 3. So the figure here needs to be evaluated.

[Chung Hsu, analyst]

I do mind. We cannot use the TWD 35,000 to TWD 40,000 per case. My question is 2 parts. One is per case can we use TWD 35,000 to TWD 40,000. I guess, on what management just said, it's not easy or straightforward. But the second part of question is, should we use 2.3 million. What's the total outstanding policy numbers you'll use to if you try to quantify from the claim number for the year.

[Amanda Wang, executive]

I think for the full year estimate is always a moving number. So what we can share with the investment is the actual results that we see so far. Yes. So we share with the market right, we talked about the current effective number. And also, we talked about after the peak, it's likely to come down to 55 million in third quarter in terms of the effective policy number.

So it's actually come with a pattern, it's not a fixed number. So I think what the management we can do is, we will disclose on a timely basis. Going forward, every month, we will disclose the claim amount, the claim cases so that I think the market can get up-to-date results.

[Chung Hsu, analyst]

Okay.

[Amanda Wang, executive]

I think your third question is regarding the Embedded Value's assumption. So I will have Grace to reply on that.

[Grace Chiu, executive]

Okay. On Page 42, you mentioned the economic assumption change is only 0.1 billion, while the interest rate curve has been slightly increased. So the economic assumption change here actually includes to effects from the economic part.

First of all is the portfolio return assumption, which is positive TWD 2.9 billion. On the negative side is from the currency, the NTD appreciation which is negative TWD 2.8 billion. So the combined result is TWD 0.1 billion.

And in terms of the percentage change, the portfolio return assumption increased the Value In-Force by 0.6 percentage and the currency effect reduced by 26%. So the net-net, near 0.

[Operator]

And next question is from Jemmy Huang, JPMorgan.

[Jemmy Huang, analyst]

Also a couple of questions here. First one, also related to the company policy. I think in the Chinese session, you mentioned that based on your estimate, the Q1 insurance don't need any capital injection. So can I try to clarify, that means based on your estimation, the RBC ratio after all these potential claims can stay above 200%, overall stay above 250% based on your estimate.

And then this kind of estimate would you view this as a base case estimate or a fair case estimate. And then when you do this calculation, do you take into account any potential release of the special reserve or not?

And my second question on COVID-related policy is that even though you mentioned by the end of the third quarter, the effective policies will be down to TWD 1.55 million but when we look at potential trends, should we look at the total outstanding -- total policies you sold or look at the effective policy. My question here is because if I got infected, I have 2 years' time -- period of time to make my plan. So even if your effective policy down to 1.55% -- TWD 55 million by the end of third quarter, the expired policies, the mature parties, they still have the right to make claims. So just trying to mature my understanding is right that on this front.

And then the second question is on the banking side. I think also in the transaction, you mentioned the other income [indiscernible] Bank. After excluding the [indiscernible] the losses is due to investment losses on Line Bank. But I would assume the profit or loss contribution from my bank using equity method. So it shouldn't just happen in the first quarter this year, but already happen over the past couple of quarters already. And -- but over the past couple of quarters, other income at Taipei Fubon Bank is couple of hundred million every quarter.

So in addition to the investment losses, is there any other reason to contribute to the negative figures on other income at Taipei Fubon Bank this quarter.

My third question is also on Embedded Value. Overall cost of capital increased by more than 20% year-on-year. How much is due to the increase in the interest rate risk. And then if we -- excluding that, what is the underlying cost of capital increase on a year-on-year basis.

[Amanda Wang, executive]

Thank you, Jemmy. We will have our P&C's management team reply first. Thank you.

[Unknown Executive]

At this moment, we don't have plan to inject capital, considering end of last year, our RBC ratio is 369%. And this year first quarter, our RBC ratio is 382%.

And also, we have combined assets is TWD 129 billion. And our net worth is TWD 41.5 billion. In our cash and equivalent cash is TWD 118 million and consider our April and May pay claim. In April, we paid TWD 140 million claim, and we reserve -- claim reserve is TWD 280 million. That includes outstanding loss and IBNR reserves. So already reflect the potential trend in April.

In the first 2 weeks of May, our pay claim is TWD 390 -- TWD 3.9 billion -- sorry, it's TWD 390 million. So based on the daily pay claim, we don't have pressure to inject out capital. But you know the peak may occur in May and June. So we will evaluate when our second quarter financial statement, we will check our RBC ratio whether it's suitable. Of course, we'll maintain our sufficient capital and evaluate at that time. So at this time being, we don't have plan to inject capital.

[Yao Hui Cheng, executive]

For the policy we issued last year, the peak is on May, it's around 1.3 billion. And then on June and July is around 0.6 billion. That means that this month, there will be 1.3 billion policy will be expired. And then the next month, we have the other 0.6 million policy expired. So total, up to the third quarter, the effective policy is 1.5 billion.

[Amanda Wang, executive]

I think, Jemmy, you asked about the hurdle RBC rate, right, in our assessment. I think we -- basically, we still follow 200% as a hurdle from the Insurance Bureau's perspective.

[Yao Hui Cheng, executive]

Our policy issued over 1 year's policy. So the last year effective policy will expire. So in July, we estimate, we have 1.55 million effective case, that is 1 year policy.

[Amanda Wang, executive]

So Jemmy, for the P&C part, is it okay with you?

[Jemmy Huang, analyst]

Okay. Can I follow up on one question is for all the claims that you received so far, is there any rough split between the infected cases, hospitalization cases versus the quarantine cases. Is there any rough split?

[Unknown Executive]

One, infected. 7, quarantined and 0.5 hospital.

[Amanda Wang, executive]

Okay. So that's our P&C part. And next, let's move on to banking part. [indiscernible], please?

[Unknown Executive]

Thank you for your question regarding the other income. The other income in first quarter together is TWD 3 billion. This combines TWD 2.8 billion, bargain purchase came from our investment in Hyundai Credit Card and the TWD 200 million net investment gain from our investment in Fubon China pay and the net of the losses from Line Bank Taiwan. So that's basically the combination of our other income of TWD 3 billion.

[Amanda Wang, executive]

Okay. So next Grace, please?

[Grace Chiu, executive]

Total capital increase, there are a couple of reasons behind that. One, first of all, the increase of our portfolio because in our investment portfolio at end of the year 2021. The position is much increased not only from the new investment in equity, but also about appreciation of unrealized capital gain for the equity position. So in terms of using the countercyclical risk factor charge, the cost of capital increased account for some big parts of the COC increase.

And for the interest rate increase, we used the new regulation and this also contribute some -- about mid-single-digit impact for our 24% change.

So firstly, I would like to say the most bigger part is, first of all, our investment portfolio. The second part is because the policy natural growth. The Value In-Force becomes bigger from year to another year. Hope this answers your questions.

[Operator]

And the next question is coming from [ Alex Ye ] of UBS.

[Unknown Analyst]

My first question is on your dynamic insurance policy. So there is some discussion that the CDC might my downgrade category of COVID from current Level 5 to Level 4 of dynamic diseases in the future. So I'm wondering in your terms of your policy. So as the payout related to what category of pandemic of the COVID discussed by [indiscernible]. Would that reclassification help your claim pressure?

And second on the bank part. So the non-NTD loans, the growth was weak. And I'm wondering what are the reasons behind? And do we expect your overseas operation to see a pickup in the loan demand and growth in the second half.

[Unknown Executive]

We are not -- we'll not change the downgrade, the current, we are not change according to the policy.

[Amanda Wang, executive]

And the banking business, probably.

[Unknown Executive]

Our NT dollar loan growth in the first quarter was 16%, still remained high. I think you -- what you are referring to should be the foreign currency denominated loans.

Yes. In terms of the year-on-year growth number, the foreign currency-denominated loan growth is negative 7%. For the reason that from last year, we -- because of the market situation, we restructured our foreign currency denominated loan portfolio. However, if we use quarter-on-quarter numbers, our foreign currency denominated loan portfolio increased by 13% in first quarter this year. So if you need a projection for the whole year, I think for the whole year, our U.S. dollar, our foreign currency-denominated loan portfolio will increase by low teens this year.

[Operator]

[Operator Instructions]

[Amanda Wang, executive]

Okay, operator, if there's no further questions, then can you please confirm again?

[Operator]

[Operator Instructions]

[Amanda Wang, executive]

Thank you, ladies and gentlemen, for your participation in this call today. Welcome to contact our IR team if you have further questions. Thank you.