As we look back on 2023, the first half of the year saw inflation continuing worldwide, tightening policies from central banks, and the continued decline of the manufacturing industry. Global trade went through a recession, which also affected Taiwan’s export demand. However, export orders recovered in the fourth quarter, and the performance of overall net exports contributed to the recovery of the economy. In terms of domestic demand, private consumption continues to drive the recovery momentum in the post-pandemic era. For investments, there was a clear decline due to weak terminal demand, corporations reducing inventory, and the high base period of the previous year. Overall economic growth slowed to 1.4% in 2023, but Taiwan still performed relatively well when compared to other major countries such as South Korean and Singapore. In the capital markets, the emergence of generative AI has driven up semiconductor stocks, which has in turn pushed the Taiwan stock market upward. In addition, the U.S. Federal Reserve stopped its interest rate hikes in the second half of the year, which led to international money returning to Taiwan stocks. The TWSE closed at 17,930.8 points at the end of 2023, a rise of 26.8% compared to the end of 2022.
The stabilization of the global financial market in 2023 coupled with increases in capital market transaction volumes have benefited the related business operations of KGI Securities and its subsidiaries such as CDIB Capital. The subsidiaries KGI Life Insurance and KGI Bank continued to focus their efforts on business expansion despite being impacted on their operating profits by rising U.S. dollar interest rates, elevated hedging costs and capital costs.
In 2023, China Development Financials consolidated net profit was NT$18.95 billion (including NT$5.4 million of non-controlling interests), the after-tax earnings per share was NT$1.13, representing a growth of 16% year-on-year. The comprehensive income for 2023 was NT$ 53.85 billion driven by recovery of bond valuations ranking number four amongst the financial holding companies.
Taiwan Ratings Corp. gave the company a long-term credit rating of "twAA-," a short-term credit rating of "twA-1+," and a "Stable" long-term outlook in August 2023. These ratings continue to affirm the group’s robust credit structure and capital levels. Furthermore, Taiwan Ratings Corp. believes that the CDF Group should be able to deliver operating performances on par with the industry average in the next two years, while the major subsidiaries will be able to maintain their capital levels.
In 2023, CDF was once again listed as a constituent stock in DJSI World and DJSI Emerging Markets for the fourth consecutive year. Its overall score ranked third internationally and second in Taiwan among the insurance industry. It also ranked in the top 5% of the S&P Global Sustainability Yearbook. The company has been included as a constituent stock in the FTSE4Good Emerging Market Index and FTSE4Good TIP Taiwan ESG Index for seven consecutive years. In addition to being included in the Top 100 Taiwan Sustainability Model Companies of the TCSA, the company has also earned an "A-" score from the Carbon Disclosure Project (CDP).
The company is actively working toward a low-carbon and sustainable environment, and is promoting low-carbon operations, supporting green energy initiatives, and building sustainable supply chains. In addition to implementing a variety of energy-saving and carbon reduction measures, since 2022 the company has also started to purchase green energy, which cumulatively accounts for 21% of the group’s electricity usage per year. It is expected that in 2024 the CDF headquarters building will become the first financial holding headquarters building with both carbon neutrality and green building certifications.
In addition to ESG, the company’s efforts on enriching customer experience and improving productivity via digital tools as part of its ABCDE strategy (A: Accelerate Digital; B: Become Employer of Choice; C: Customer Focus; D: Drive Growth, and E: Execution Excellence) has also yielded positive progress. Digitally acquired customers has increased by 29% compared to 2022, while end-to-end straight through processing (E2E STP) processes have increased by 21%, 35%, and 8% in KGI Bank, KGI Securities and KGI Life Insurance subsidiaries respectively.
With the commitment to “Become Employe of Choice,” we continued to strengthen employee wellbeing in 2023 by offering above market standard, including maternity, paternity and volunteering leaves as well as flexible working program. Recognition and feedback programs were also launched to recognize employees demonstrating CDF values-aligned behaviors. These initiatives have been well received by employees and are reflected in the 2023 OAQ employee survey with staff engagement score increasing for the third consecutive year.
The following are the highlights each main business segment's performance in 2023:
(I) Life Insurance Business
KGI Life Insurance uses a customer-centric approach based on meeting customers' needs at
different life stages such as protection, increasing value, retirement, inheritance, etc., while also
helping customers achieve comprehensive protection planning. Its product types cover life
insurance, retirement, accident insurance, medical insurance, long-term care, financial
management, protection, and others. KGI Life Insurance develops long-term, protection-based
products with rigorous asset liability management and risk control and is committed to improving
the protection of people in Taiwan. Moreover, KGI Life Insurance has spent years developing its
sales staff, channels, bancassurance, brokers, financial services, group insurance, and ecommerce to continue expanding its scale of operations, increase its market share, and provide
policy holders with comprehensive services. Differentiated products are offered based on the
goals and special qualities of each channel to maintain sales advantages and balanced
development.
Due to fluctuations in financial markets, KGI Life Insurance's new contract premium income in 2023 was NT$52.3 billion, while total premium income totaled NT$159.6 billion. The market share of new contract premiums was 7.8%, ranking fourth in the market. Though the market environment was challenging in 2023, our long-term sales strategy of focusing on high-value commodities produced clear results, with income from high-value commodity premiums hitting NT$21.1 billion and placing third in the industry in market share. Premium income from protection-based products was NT$20.7 billion, an increase of 39% compared over 2022 and ranking second in the industry in market share. Premium income from traditional foreign currency commodities was NT$26.4 billion, ranking second in the industry in market share. KGI Life Insurance will continue to focus on foreign currency insurance policies and protection-based products and will actively increase the proportion of sales of installment-based products to create long-term value for the company.
In terms of sales staff and channels, recruitment and training are enhanced through in-depth cultivation of new employees, guidance from senior colleagues, digital training systems, and the introduction of the latest generative AI technology. Through our talent selection models and alliances with strategic partners, we are actively bringing in diverse and elite talent while also developing and promoting colleagues with high potential. The combination of our management models and digital AI platforms, have overhauled the customer experience and allowed us to build a sales team with professional expertise and the latest digital skills as a key part of our ABCDE strategy in accelerating digital and customer focus.
Regarding corporate governance and sustainable operations and development, KGI Life Insurance has established a comprehensive sustainable governance structure. The board of directors and functional committees serve to integrate and supervise the company’s various departments to promote ESG sustainability and develop related business. The company works under the framework of four major strategic axes: deepening stewardship, guiding sustainable finance, creating inclusiveness and mutual benefit, and realizing low-carbon transformations. In particular, the company has been recognized through a variety of awards in 2023 both at home and abroad for its contributions in climate governance, fair treatment of customers, and digital innovation. These include the Green Leadership award at the Asia Responsible Enterprise Awards (AREA), the Best Initiative in Diversity and Inclusion award from the Asset magazine, 2 and two awards from the Insurance Asia Awards: ESG Initiative of the Year and Digital Insurance Initiative of the Year. KGI Life Insurance also ranked among the top 25% in the Financial Supervisory Commission’s Assessment of the Implementation of Treating Customers Fairly Principles by Financial Institutions for the fifth time. Moreover, as a responsible investor, KGI Life Insurance is actively responding to the risks and opportunities that climate change brings to its investment portfolio by gradually reducing the carbon emissions of its investment portfolio as well as implementing corresponding climate action plans. The company’s initiatives in sustainable investment led to it winning the three awards of the Influential Institution Award, Sustainability Themed Investing, and Shareholder Action Award at the Taiwan Sustainable Investment Awards (TSIA) in 2023.
On January 1, 2024, China Life officially changed its name to KGI Life Insurance to bring it in line with the name and identification of other consumer facing subsidiaries including KGI Bank, KGI SITE and KGI Securities. A new official website, Line account, and mascot “KGI Ah Fu” were also introduced at the same time as the name change. In the future, KGI Life Insurance will continue to integrate the resources of the entire group and leverage its new brand image to deepen its communications and interactions with customers as well as provide more comprehensive financial services, thereby becoming an insurance company dedicated to improving customers’ lives.
(II) Banking Business
Retail Banking, Wholesale Banking, and Global Markets are the three main developmental
pillars of KGI Bank. In addition to focusing on building fintech applications and creating
integrated digital service solutions based on customer experiences, KGI Bank also aims to
become customers’ most recommended bank by focusing on customer needs and delivering high
quality professional services. In terms of the personal financial business, KGI Bank aims to meet
the varied financial requirements of individual customers through a comprehensive selection of
products, such as personal housing loans, credit loans, wealth management, and diverse payment
solutions.
As of the end of 2023, the overall credit balance for personal finances was NT$159.9 billion, representing an increase of 7.5% compared to 2022. In terms of corporate finances, the bank endeavors to provide institutions and corporations at home and abroad with the most suitable solutions and offers customized professional services to corporate customers through the bank's professional division of labor and diversified financial products. As of the end of 2023, the overall credit guarantee balance for corporate finances was NT$274.4 billion. In terms of the financial market operations, in the face of rising interest rates, KGI Bank continues to dynamically adjust its hedging strategies and strengthen its risk management to establish asset configurations that yield stable returns. Furthermore, the company provides bill bond underwriting, financial product marketing, and asset management in response to the investment expansion and hedging needs of various channels.
For overseas business, KGI Bank's investment in Suyin KGI Consumer Finance Co., Ltd in the Mainland China region has achieved strong results, with profits of RMB 389 million in 2023, representing a growth of 143% for the year. KGI Bank also completed a capital increase in the company at the end of 2023, raising its equity ratio from 36.17% to 37.63%. In the future, Suyin KGI Consumer Finance Co., Ltd will continue to endeavor to develop the Mainland China market and achieve stable growth in overseas consumer financing.
The bank also applies innovative digital financial services to ensure customers have comprehensive and meaningful services, including the launch of a new mobile banking app in late 2022. As the first app in the industry with “all-in-one” functionality, the app boasts a smooth and simple application interface to allow customers to simultaneously apply for multiple products. Additionally, the bank uses scientific and objective tools to collect customers’ views and requirements in order to optimize the speed of customer service as part of our ABCDE strategy to accelerate digital and enhance the customer experience.
KGI Bank’s efforts to improve its customer service have been recognized through many industry awards, including the Best Customer Experience Enterprise Award at the Customer Service Excellence Awards (CSEA) (also known as the Golden Horse Awards of the customer service sector), the Silver Award for Domestic Banks and from the Evaluation of Taiwan’s Service Industry organized by Commercial Times, the Silver Award for Banks from the 2nd Taiwan Best Customer Center Award, the Best Customer Satisfaction Award for Wealth Management Banks and Securities Companies organized by Business Today, and the Best Customer Service Center Senior Manager Award and Best Customer Service Management Team Award issued by the Taiwan Contact Center Development Association. KGI Bank also continues actively implementing fair treatment of customers and promoting inclusive finance. In 2023, the bank continued to actively expand the accessibility of financial services through digital innovation and designed customized loan products for disadvantaged groups who often do not have proof of income and thus have difficulty receiving loans from banks. For this, KGI Bank was awarded the top prize in the National Brand Yushan Awards, which was presented by the President of the ROC. Furthermore, the bank's active efforts to build an "inclusive financial ecosystem" were recognized by the Commercial Times with the Excellence Award for Inclusive Finance in the Digital Financial Awards, as well as Best Service Innovation Enterprise from the CSEA's Best Customer Experience Enterprise Awards.
Regarding responsible finance and sustainable development, KGI Bank released its first Task Force on Climate-Related Financial Disclosures (TCFD) report in 2023. Climate risks and opportunities are now taken into consideration when formulating operational strategies, and the effect of climate change on operations is regularly reviewed. Through these efforts, the bank will establish further measures for climate governance and management and will help customers promote low-carbon transformations for their enterprises. Moreover, the bank continues to promote and implement the FSC Green Finance Action Plan. It is actively participating in the financing of benchmark large-scale renewable energy power plants in Taiwan and is collaborating with the rest of the finance industry to expand the influence of green finance. As of the end of 2023, KGI Bank’s green credit balance reached NT$17.07 billion (based on the definition of the Joint Credit Information Center), a significant increase of 48.3% over December of 2021, the base year. Additionally, the promotion of green deposits has been expanded to include religious groups, tertiary educational institutions, and non-profit organizations, which have responded with positive feedback and participation. In 2023, KGI Bank was awarded the bronze award from the 2023 Taiwan Sustainable Action Award. From green deposits to green credit, KGI Bank has successfully leveraged the power of finance to guide corporate transformations and thoroughly realize Taiwan's sustainable development. Our continued focus on accelerating the growth of our retail franchise and expanding our coverage both domestically and overseas for our clients will further enhance the growth of our banking franchise.
(III) Venture Capital/Private Equity Business
The overall capital market stabilized in 2023, which was beneficial to CDIB Capital's evaluations
of its investment positions, which saw a significant increase compared to 2022. In particular, the
OTC positions outperformed market returns for the same period.
In 2023, CDIB Capital continued to establish strategic partnerships with key industry leaders, expand its investment know-how, and strengthen its competitive advantages in fund management and its fundraising channels as part of its drive growth and execution excellence ABCDE strategy. The company also established an office in Japan to work with local investors and expand its reach to outside the Greater China region. In addition to pursuing the company's traditional private equity business, the overseas team also explored and expanded its selection of niche products and sales channels that fulfill the requirements of high net worth (HNW) customer groups. This includes the issuance of the first batch of beneficiary notes in the fourth quarter via the private credit team’s collaborations through the group. These sales channels will be further expanded in 2024. Additionally, the overseas team with offices in Hong Kong, China and the United States has started planning an investment framework for a fund of funds, which will help build more diversified products befitting HNW customers. A total of approximately NT$1.67 4 billion in new assets under management were added in 2023, including: (1) our China team completed the establishment of the Taiwanese business fund, and the first round of the fund closed at RMB168 million; (2) our Taiwan team obtained a total management fund quota of NT$600 million from the National Development Fund's Management Plan for the Entrusted Investments for Strengthening the Investment in SMEs, and has made investment allocations accordingly; (3) our overseas team issued the first batch of beneficiary notes and continued to conduct sales promotions. The cumulative committed investment scale for managed assets reached NT$46.9 billion at the end of 2023, with the investment regions mainly being Taiwan, Mainland China, and North America. NT$3.1 billion in investment allocation and NT$2.2 billion in investment recovery were completed in 2023. A total of NT$37.1 billion was allocated for direct investments and around NT$13.1 billion was recovered. A total of NT$12.6 billion was returned to investors through fund distribution or capital reduction.
Furthermore, the company's management team has organized or jointly organized many online and offline activities, such as CDIB Capital Lectures and family office forums, to connect existing and potential investors and create a stakeholder ecosystem. The company has also increased the channels for diverse credit lines in order to improve the flexibility of the company's capital utilization and has gradually increased its operating leverage to make the company's overall capital utilization more efficient. In terms of the company's sustainable development and net-zero goals, the total green investment outstanding grew 17% compared to the base year of 2020, and it is expected that in 2024 the first closing will be completed for Kai Hong Energy, which was established for the purpose of green energy investments. In response to the National Development Council's Incentives for the Youth to Engage in Regional Revitalization, the company has contributed to helping micro and small-sized enterprises and has organized many activities on regional revitalization and volunteering. The results for reducing the company’s carbon emissions from its own operations and investments and financing also exceeded the annual targets, which is a clear demonstration of CDIB Capital's successful implementation of ESG.
(IV) Securities Business KGI Securities provides customer-centric services and pursuing win-win circumstances with customers while providing customized financial planning and investment solutions that best fit their needs.
KGI Securities has maintained its competitive position in the industry in a variety of business areas. In 2023, the market share of the company's brokerage business was 11.1%, the second highest in the industry, while the scale of the assets under management in the company's wealth management business reached a record high. The company again ranked first with a 18.2% share on the foreign institutional investor brokerage market and second with a 19.4% share of the securities lending business market, thus showing that its professional research and services have received widespread recognition by international corporations. In addition, the company launched its foreign securities custody business in October 2023, while also actively expanding its sources of securities in order to satisfy the varying requirements of customers. In the company's capital market business, there were 33 cases of underwriting of initial listings and secondary market fundraising, accounting for a 14% market share and leading the market for eleven consecutive years. The total amount underwritten was NT$37.0 billion, and the company's market share of 25% ranked first in the industry. For bonds, the underwriting of primary market company bonds in NTD and international bonds combined to reach NT$117.2 billion, signifying a market share of 12.2% and ranking first in the industry. In terms of derivatives, the issued call (put) warrants totaled NT$93.6 billion and 12,356 warrants, with market shares of 19% for both. The annual warrant transactions accounted for 15% of the market, ranking second in the market.
The “LOHAS 1-on-1 Expert Runs with You” service, which provides investors with free consultations for the most appropriate asset allocation planning, is the first in the industry to utilize the Online-Merge-Offline framework and transcend the traditional service model that allows customers to have real dialogs with financial experts. Furthermore, the company remains committed to digital transformations and innovations as key part of its ABCDE strategy. For example, theȸOpen Campusȹon e-Strategy App offers a variety of investment information services without having to log in, the Eagle Eye system ensures customers can find the right timing for transactions, and the RSP Daily Deduction, fixed-amount products allows customers to flexibly adjust their investment strategies. At the same time, to meet customers’ diverse financial management requirements, the podcast " Financial Talk with Podcaster " was launched in order to examine financial issues from an everyday perspective and help customers add value to their lives. The Taiwan stock investment video channel “KGI Stock Rising” was also created in collaboration with KGI SIAC to help investors develop the right concepts for investment. With its outstanding financial expertise and services and its comprehensive deployment in the AsiaPacific region, KGI Securities' professional team has received multiple awards from financial media outlets, competent authorities, international corporations, and professional organizations at home and abroad. The company has become firmly established as a leading brand in the industry, having won a total of 77 domestic and foreign awards in 2023 and setting new records for awards for two consecutive years. These awards encompass wealth management, customer service, digital innovation, research, and analysis, ESG, sustainable finance, and other areas.
KGI Securities continues to make significant progress in the promotion of sustainable finance and the fair treatment of customers, including the establishment of a Sustainability Committee under the Board of Directors, which is responsible for leading the company's sustainable development and net-zero policies as well as promoting diverse green finance products and services. The company has also voluntarily disclosed its 2022 Sustainability Report, which has undergone external assurance from third-party accountants in a manner that is more rigorous than regulatory requirements. The underwriting amount of sustainable development bonds in 2023 was NT$18.65 billion, representing an annual growth of 125%. Furthermore, in the spirit of “fairness and empathy, treating guests as treating yourself,” the company was the first in the industry to optimize the interface in its KGI e-Strategy App to be handicap-accessible, thereby becoming the first securities company in Taiwan to have passed the app accessibility certification from the Taipei Parents' Association for the Visually Impaired. The company also commissioned the Duofu Barrier-free Life and Transportation Development Association to provide consultations on handicap-accessible environment assessments, and accordingly has also become the first securities company to have received the accessible environment certification. This represents a new milestone in the fair treatment of customers. These efforts have allowed KGI Securities to gain the trust and support investors as well as build a stronger foundation for future development.
CDF has long been championing education projects via China Development Foundation, KGI Charity Foundation, and our subsidiaries, such as "Heritage 100 & Tutoring 100," "Perfect Nutrition," and "Scholarship for skilled vocational high school students," in advocating the development of a sustainable society. We aim to implement the core value of the "co-creation of society" and related United Nations' Sustainable Development Goals (SDGs). Furthermore, the company continues to promote corporate volunteer projects. In 2023, the total number of service hours of the group reached a record high, exceeding a total of 100 thousand hours, enhancing the attention paid to environmental protection, care for the disadvantaged, elderly care, and local creation by the group’s employees. Aided by thriving social enterprises and innovation, we integrate resources from the group, social enterprises, and local creative teams to create a mutually beneficial model for a sustainable local revitalization ecosystem. Volunteering has enhanced the employees' identification with the company's ESG philosophy, creating positive engagement for our staff and our partners.
Looking ahead to 2024, global trade will gradually pick up again and manufacturers inventory levels will taper off, and emerging application fields such as AI, high-performance computing, and automotive electronics will see expansion. These factors are expected to help the economic momentum of Taiwan, where the manufacturing industry accounts for a relatively high percentage of the economy. Regarding domestic demand, the growth of private consumption is expected to still maintain positive growth given the relatively high disposable income and private consumption. As for fixed investments, semiconductor manufacturers are continuing to invest in advanced processes to satisfy the demand from AI applications, while green energy investments will also play an important role. Overall, it is projected that economic growth in Taiwan will recover further in 2024 compared to 2023.
Finally, we would like to thank all our employees for their hard work as well as our clients, regulators, and our shareholders for their continued support. We remain committed to pursue steady long-term development and embrace innovation and talent to deliver sustainable financial solutions to our clients, shareholders, and to the community.
Sincerely,
Alan Wang, Chairman
Paul Yang, President