The Hong Kong Mortgage Corporation Limited (HKMC) today (7 October) announced the highlights of its unaudited consolidated financial results for the first six months of 2021 (1H 2021) as follows:
2021 Half-Year Unaudited Financial Results Highlights
The unaudited loss after tax of the HKMC for 1H 2021 was HK$24 million (1H 2020: HK$197 million), which was primarily due to: (a) the booking of commission expenses upfront for new mortgage insurance policies underwritten while the corresponding premium income was amortised over the life of the respective loans; and (b) the accounting loss of HKMC Annuity Limited (HKMCA), a wholly-owned subsidiary of the HKMC, as a result of maintaining prudent statutory reserves based on actuarial assumptions provided for the annuity business. As compared to the results for 1H 2020, the decrease in accounting loss was mainly attributable to the non-recurrence in 1H 2021 of the unfavourable impacts taken place in 1H 2020 from: (a) the revaluation of investments that are classified as investment securities at fair value through profit or loss amid volatile market conditions; and (b) the revaluation of USD denominated assets due to strength of the HKD versus USD.
After adjusting the amortisation impact of upfront commissions expenses for new mortgage insurance policies underwritten to match the corresponding mortgage insurance premium income being recognised over the life of the respective loans and excluding the accounting loss of the HKMCA, the adjusted profit after tax, return on equity and cost-to-income ratio for 1H 2021 would be HK$346 million, 6.0% and 27.7% respectively.
Despite the reported accounting loss of the HKMCA, the embedded value of the annuity business as at 30 June 2021 was about HK$8.1 billion, which comprised HK$6.5 billion of total equity and HK$1.6 billion of present value of future profits. The total equity included a capital injection of HK$2.5 billion during the period. This indicates that the annuity business should be sustainable in the long term.
The Capital Adequacy Ratio (CAR) of the HKMC remained solid at 24.7% as at 30 June 2021 (31 December 2020: 37.3%), well above the minimum ratio of 8% stipulated by the Financial Secretary. The solvency ratios of the HKMC Insurance Limited (HKMCI), a wholly-owned subsidiary of the HKMC operating general insurance business, and the HKMCA were about 9 times and 16 times respectively as at 30 June 2021, well above the respective 200% and 150% minimum regulatory requirements stipulated by the Insurance Authority.
Amid uncertain market conditions, the HKMC proactively communicated with the local and international investment community for debt issuance to fulfil its refinancing needs and accumulate cost-effective pre-funding to support its sizable loan purchases. With strong financing capability and liquidity position, the HKMC’s core operations remain resilient and stand ready to face any financial turbulence ahead in performing its strategic policy roles and attaining its social objectives.
2021 Half-Year Business Performance Highlights
Asset Purchase
Debt Issuance
Mortgage Insurance Programme (MIP)
SME Financing Guarantee Scheme
Reverse Mortgage Programme (RMP)
HKMC Annuity Plan
100% Personal Loan Guarantee Scheme (PLGS)
Further details of the HKMC’s unaudited consolidated financial results and financial review for 1H 2021 are set out at Annex.
The Hong Kong Mortgage Corporation Limited
7 October 2021