Cathay Financial Holdings

April 25th, 2003

Management Presentation 2003 1Q 　

2

Agenda

2003 1Q Operational Results of Cathay FHC

2003 1Q Operational Results of Each Subsidiaries – Cathay Life– Cathay Century– UWCCB– CUB

Banks Integration – UWCCB & CUB

3

Cathay FHC - Strong Financial Performance

Income & EPS

10.6013.09

21.02

7.25

1.81

2.83

2.23

0

5

10

15

20

25

2001 2002 2003E 2003 1Q

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Net income EPS

NT$bn

Total Shareholders’ Equity & ROAE

Total Assets & ROAA

144

75 136151

21.1%14.7%12.4%

0

50

100

150

200

2001 2002 2003E 2003 1Q

0%

5%

10%

15%

20%

25%Total assets ROAA

118.6124.5110.974.8

25.3%17.9%14.1%

0

50

100

150

2001 2002 2003E 2003 1Q

0%5%10%15%20%25%30%

Book value ROE

Note: Non-consolidated basis

Source: Company reports

NT$bn

NT$bn

4

Cathay FHC – Operational Results

Financial Figures ($NT bn) 2002 FY 2002 1Q 2003 1Q

Insurance Premiums $ 286.7 $ 50.3 $ 57.0

Investment Income $ 11.0 $ 2.5 $ 3.8

Net Policy Reserve $ 161.9 $ 24.2 $ 26.6

Commission & Fee Income $ 3.7 $ 0.7 $ 1.0

Interest Income $ 82.3 $ 20.7 $ 20.1

Interest Expense $ 15.1 $ 4.6 $ 2.5

Benefits & Claims $ 125.9 $ 26.8 $ 29.2

Net Income (after tax) $ 13.1 $ 4.9 $ 7.3

EPS $ 2.23 $ 0.85 $ 0.97

5

2003 1Q - Performance Achievement

0.3

1.33

6.5

13.1

21.0

0.14 (45.5%)

0.4 (29.4%)

1.87 (28.8%)

5 (38%)

7.25 (34.5%)

Cathay Century

CUB

UWCCB

Cathay Life

CFH

2003 1Q (Achievement Ratio)

2003 Proforma Figure

NT$Bn

6

Subsidiary Contribution Analysis – 2003 1Q

Sales Contribution 2003 1Q Asset Allocation 2003 1Q　

Total Sales: NT$7.25Bn Total Revenue: NT $113.7Bn Total Asset: NT$2128.1Bn

Revenue Contribution 2003 1Q

CUB6.2%

UWCCB25%

Cathay Century

1.7%Cathay

Life67.1%

CUB2.5%

UWCCB6.3%

Cathay Century

5.1%

CathayLife

86.1%

CUB8.3%

UWCCB30.5%

CathayCentury

0.5%

CathayLife

60.7%

7

21.14%

1.53%

5.64%

1.96%2.17%

CFH CathayLife

CathayCentury

CUB UWCCB

Profit Analysis – 2003 1Q

ROE Analysis

ROA Analysis

25.26%27.74%

19.67%

13.61%11.84%

CFH CathayLife

CathayCentury

CUB UWCCB

Note: ROA, ROE have been annualized.

8

76.193.6

70.395.0

62.7 61.3

1998 1999 2000 2001 2002 20031Q

46.3 42.3 37.7 36.8 34.2 35.8

1998 1999 2000 2001 2002 20031Q

21.3 18.6 17.6 16.6 14.6 13.8

1998 1999 2000 2001 2002 20031Q

Cathay FHC has been focusing on improving operation efficiency

% Expense ratio of Cathay Life

% Efficiency ratio of UWCCB

Operation efficiency improvement

Integrate IT and data warehousing systems and centralize CRM development to share customer base

Integrate back-end platforms and operation to reduce administration costs

Source: Company reports

% Combined ratio of Cathay Century Ins.

9

Agenda

2003 1Q Operational Results of Cathay FHC

2003 1Q Operational Results of Each Subsidiaries – Cathay Life– Cathay Century– UWCCB– CUB

Banks Integration – UWCCB & CUB

10

Cathay Life – Operational Results

Financial Figures ($NT Bn) 2002 FY 2002 1Q 2003 1QTotal Premium Income $ 280.6 $ 48.8 55.3$ FYP $ 84.5 $ 7.4 10.5$

Claim & Benefit Expense $ 122.9 $ 26.2 28.3$

Net Commission Expense $ 21.5 $ 4.7 4.4$

Net Provision in Policy Reserve -$ 156.8 -$ 24.6 27.0-$

General & Admin Expense $ 14.2 $ 3.8 3.7$

Net Income (after tax) $ 12.8 $ 5.1 5.0$

EPS($) $ 2.4 $ 0.9 1.0$

Financial Ratio 2002 FY 2002 1Q 2003 1Q13 mo. Persistency Ratio 90.1% 90.3% 90.2%25 mo. Persistency Ratio 84.1% 83.2% 84.6%Expense Ratio 14.6% 16.3% 13.8%ROAE 17.9% 28.1% 27.7%ROAA 1.1% 1.8% 1.5%NPL ratio 1.9% 2.7% 1.7%

Note: ROA, ROE have been annualized.

Net policy reserve = policy reserve – policy reserve writeback

11

• Improve sales performance Reward summit

• Reinforce organizational capacityPremium sales performance calculation

• Strengthen sales forceCombination of the sale of cross-selling products and insurance sales quota

• Constitute professional and efficient marketing teamUS recruiting programTransformation of sales manager

Cathay Life – Operating Activities

12

Cathay Life – Operating Indicators

Expense ratio

Persistency ratio

32.3%27.8%

25.8%24.1%

13.80%

21.3%18.6%

17.6% 16.6% 14.6%

0%

5%

10%

15%

20%

25%

30%

35%

1998 1999 2000 2001 2002 2003Q1

Industry(Cathay excluded)

Cathay Life

90.2%89.8% 90.1% 90.1%87.4%

80.7%84.6%84.1%83.2%

79.8%

61.6%

70.9%

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

1998 1999 2000 2001 2002 2003Q1

13 mo.

25 mo.

13

NT$ bn

Cathay Life – Investment PerformanceITEM 2002 2003 1Q

Short-term Investments

Listed Stocks 37.5 42.1

Corporate Bonds 12.9 10.8

Govt. bond & Fin. Debenture 30.9 29.2

Appoint purpose trust fund 42.5 49.6

Overseas Investments 77.4 89.7

Beneficiary certificate 61.2 63.7

Short-term notes 24.7 24.5

Allowance for valuation loss -5.1 -5.1

Total 282.0 304.5

Long-term Investments

Stocks 57 58.4

Allowance for valuation loss -1 0

Bonds 157 141

Real Estate 94 94

Total 307.9 293.7

14

Cathay Life – NPL ratios

1.50%1.68% 1.63%

2.49%

1.87%1.73%

2.03%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

1997 1998 1999 2000 2001 2002 Mar-03

Percentage

15

Cathay Century – Operational Results

Note: ROA, ROE have been annualized. Other operating cost include General & admin expense.

Financial Figure (NT$ mm) 2002 FY 2002 1Q 2003 1Q

Premium income $ 6,184 $ 1,582 $ 1,829

Recovered reserve $ 3,337 $ 813 $ 3,532

Other operating revenues $ 1,403 $ 206 $ 356

Insurance claims payment -$ 3,056 -$ 601 -$ 853

Provision for reserve -$ 3,728 -$ 1,006 -$ 3,611

Other operating costs -$ 3,917 -$ 915 -$ 1,137

Net Income (after tax) $ 235 $ 101 $ 136

Financial Ratio 2002 FY 2002 1Q 2003 1Q

Net Expense Ratio 25.0% 24.4% 24.7%

Net Combined Ratio 62.7% 58.1% 61.3%

Solvency Margin 125.9% 116.5% 107.4%

Retention Ratio 60.9% 65.4% 60.9%

ROAA (after tax) 2.6% 4.4% 5.6%

ROAE (after tax) 8.6% 14.2% 19.7%

16

•Meet customers’ demands for one-stop shopping and cross-selling through distribution channels of each subsidiary

•Achieve cost savings by sharing group’s resources to enhance profits

•Integrate information platforms and CRMs of subsidiaries to better

serve customers

•Refine performance evaluation system of capital and gain access to

emerging investment opportunities aligned with international practice

•Pursue scale of economics and leverage advantages of each subsidiary

under the holding company structure

Cathay Century – Operating Activities

17

UWCCB – Operational ResultsFinancial Figure (NT$ mm) 2002 FY 2002 1Q 2003 1Q

Interest Income $ 29,256 7,818$ $ 6,079

Interest Expense 11,124$ 3,575$ $ 1,789

Net Interest Income 18,132$ 4,243$ 4,290$

Provision for loan losses 24,736$ 1,475$ $ 786

Non Interest Income 3,591$ 1,117$ 1,127$

Non Interest Expense 7,756$ 2,084$ $ 2,211

Net Income (after tax) -$ 8,807 1,525$ $ 1,870

Financial Ratio 2002 FY 2002 1Q 2003 1QNet Interest Margin 3.9% 3.9% 3.6%

Gross Loan* / Deposit Ratio 76.3% 70.7% 74.4%

Fee Income to Revenue Ratio 5.9% 4.5% 7.8%

Efficiency Ratio (Cost / Income) 34.2% 37.0% 35.8%

ROAA (after tax) -1.3% 0.9% 1.1%

ROAE (after tax) -14.8% 9.3% 13.6%

NPL Ratio (6mo.) 3.0% 6.9% 2.8%

NPL Ratio (3mo.) 5.0% 9.4% 4.3%

Coverage Ratio 52.2% 13.5% 52.1%

BIS Ratio 11.4% － －

Note: ROA, ROE have been annualized.

18

• Accelerate pace of banks integration

• Establish co-franchises with Cathay Life, provide easy access to ATM policy loans,

and get written consents from customers for cross-selling purposes

• Focus intensively on mortgage loans with a net increase of NT$3.95 billion

• Launch cash cards, platinum credit cards and small-sized consumer credit loans

• Train 30 dedicated financial advisors, and have proprietary “Information system for

FAs” in place

• Establish centralized loan management department for credit and debt quality control

• Set up Mainland China development team and visit Taiwanese businessmen in

Mainland in preparation for coming operations of Shanghai branch

• Provide direct financing, guarantee, and A/R factoring services to Taiwanese

companies in Mainland China.

UWCCB – Operating Activities

19

Cathay United Bank – Operational Results

Financial Figure (NT$ mm) 2002 FY 2002 1Q 2003 1Q

Interest Income 8,839 2,164 2,270

Interest Expense 3,877 1,102 781

Net Interest Income 4,961 1,062 1,488

Provision for loan losses 2,041 368 783

Non Interest Income 1,697 332 626

Non Interest Expense 3,257 659 876

Net Income (after tax) 1,118 244 390

Financial Ratio 2002 FY 2002 1Q 2003 1Q

Net Interest Margin 3.4% 2.9% 3.7%

Gross Loan / Deposit Ratio 78.5% 86.0% 80.6%

Fee Income to Revenue Ratio 12.5% 9.7% 14.2%

Efficiency Ratio (Cost / Income) 44% 44% 37%

ROAA (after tax) 0.7% 0.6% 0.9%

ROAE (after tax) 9.0% 8.2% 11.8%

NPL Ratio (6mo.) 4.4% 4.1% 4.2%

NPL Ratio (3mo.) 10.2% 16.2% 9.4%

Coverage Ratio 40.5% 50.0% 43.2%

BIS Ratio 8.3% － －

Note: ROA, ROE have been annualized.

20

CUB – Operating Activities

•Roll out U-LIFE cash cards, mortgage and auto loans to increase weighting

of consumer banking

•Initiate to launch Master World cards in anticipation of fee income surge

•Set up wealth management system, intensify trainings for FAs, leverage

group resources for revenue synergies

• Establish VIP center, first rated safes to cater to demands of high net worth

clients

•Innovate financial products, and seek strategic alliance with foreign partners

to enrich product offerings

•Have 2nd generation credit card system and tele-marketing on track

•Establish multi-distribution channels

21

2003 1Q Operational Results of Cathay FHC

2003 1Q Operational Results of Each Subsidiaries – Cathay Life– Cathay Century– UWCCB– CUB

Banks Integration – UWCCB & CUB

Agenda

22

Banks integration – Accelerating operating capacities

TimetableScheduled to complete integration in 6 months

Organizational structure for integrationSteering committee on top and followed by 7 execution teams, including

Administration & Personnel, IT, Corporate Banking, Consumer Banking, Credit Card, Wealth Management, Finance & Risk Management as well

Key themes for integration…….– Bank integration– Assurbanc– Bancassurance

Cathay United Bank, post integration, is ranked #3 private banks in Taiwan with 112 franchises and total assets of more than NT$840 bn

23

Comparison of CUB and UWCCB

Note: The consolidated capital is NT$43.18 bn. The above figures are based on proforma basis. Market shares are calculated based on total assets at the end of 2002.

2003 1Q (NT$ bn) CUB UWCCB Combined

Total Asset 180.50$ 660.00$ 840.50$

Shareholder Equity 13.36$ 55.90$ 69.26$

Deposit 161.00$ 540.40$ 701.40$

Loan 135.80$ 402.00$ 537.80$

Market Share 0.80% 2.90% 3.7%

Corporate : Consumer 38:62 58:42 53:47

Fee Income Ratio 14.19% 7.84% 10.0%

No. of Branches 28 84 112

No. of ATM 102 706 808

No. of Employee 1,519 2,520 4,039

24

Cathay has developed a comprehensive blueprint for its banking platform integration…

IT structureIT structure

Centralize IT systems for UWCCB’s and Cathay United’s credit card business

EIP (Enterprise Info Protocol) and EAI (Enterprise Application Integration) in process

Obtain written consents to share customer information among subsidiaries

Form Product and Marketing Committee to determine cross-selling strategy

Leverage CRM system to segment consumer banking customer base

Credit risk control

Credit risk control

Centralize credit policy and monitoring for major exposure Data sharing for real estate appraisal system

Cleaner asset portfolio is the consistent policy

Corporate banking

Corporate banking

Treasury function integration Centralize marketing strategy for corporate clients One trading team

Consumer banking

Consumer banking