The Hong Kong Mortgage Corporation Limited (HKMC) today (3 June) announced the highlights of its audited consolidated financial results1 for 2023 noted below.
2023 Financial Results Highlights
The audited loss after tax of the HKMC for 2023 was HK$260 million (2022: profit after tax of HK$2,163 million). The accounting loss was primarily attributable to (a) the increase in insurance contract liabilities for the annuity business driven by the reduced discount rates2 reflecting the relatively lower market interest rates at the end of the year as compared to that of the previous year; and (b) the negative impact of property price drop on the reverse mortgage insurance business. These were partly mitigated by the favourable return from the placements with the Exchange Fund and the increase in amortisation of unearned profits from the accumulative mortgage insurance business.
After excluding the accounting results of HKMC Annuity Limited (HKMCA), a wholly-owned subsidiary of the HKMC operating annuity business, the impact of property price changes on the reverse mortgage insurance business, and the effect of valuation and corresponding adjustments as required by HKFRS 17 at consolidation level in respect of certain loan portfolios with insurance cover provided by HKMC Insurance Limited (HKMCI), another wholly-owned subsidiary of the HKMC operating general insurance business, the HKMC’s adjusted profit after tax, return on equity and cost-to-income ratio for 2023 would be HK$724 million, 5.3% and 28.1% respectively (2022: HK$445 million, 3.2% and 34.5% respectively).
Having included the capital injection of HK$2.5 billion during the year, the embedded value of the annuity business as at 31 December 2023 was about HK$13.9 billion on the basis of the Insurance Ordinance, which comprised HK$11.4 billion of total equity and HK$2.5 billion of present value of future profits. This indicates a sound financial position of the HKMCA to develop its business in the long term.
The Capital Adequacy Ratio (CAR) of the HKMC remained solid at 21.6% as at 31 December 2023, well above the minimum ratio of 8% stipulated by the Financial Secretary. The solvency ratios of the HKMCI and the HKMCA were about 13 times and 18 times respectively as at 31 December 2023, well above the respective 200% and 150% minimum regulatory requirements stipulated by the Insurance Authority.
Amid uncertain market conditions, the HKMC adopted prudent prefunding strategy and proactively communicated with local and international investment communities for debt issuance to support its sizable loan purchase and fulfil its refinancing needs. With strong financing capability and liquidity position, the HKMC’s core operations remain resilient and stand ready to cope with any financial turbulence ahead in performing its strategic policy roles and attaining its social objectives.
2023 Business Performance Highlights
Asset Purchase and Securitisation
Debt Issuance
Mortgage Insurance Programme (MIP)
SME Financing Guarantee Scheme
Dedicated 100% Loan Guarantee Schemes
Reverse Mortgage Programme (RMP)
Annuity Business
100% Personal Loan Guarantee Scheme (PLGS)
Further details of the HKMC’s consolidated financial results and financial review for 2023 are set out at Annex.
The Hong Kong Mortgage Corporation Limited
3 June 2024
1 From 1 January 2023, the HKMC has adopted Hong Kong Financial Reporting Standard 17 “Insurance Contracts” (HKFRS 17). As required by the accounting standard, the HKMC applied the requirements retrospectively with comparative figures previously published under Hong Kong Financial Reporting Standard 4 “Insurance Contracts” (HKFRS 4) restated from 1 January 2022, the transition date. Further information on the impact of this change is set out in the Financial Review section of this announcement.
2 Discount rates for calculating insurance contract liabilities are derived from the risk-free yield curve and a premium adjusting for the liquidity characteristics of insurance contracts. As at 31 December 2023, the risk-free yield curve was generally lower than that as at 31 December 2022 due to a decline in the yield curve in the fourth quarter of 2023 on expectation of aggressive US interest rate cuts in 2024.