Cathay Financial Holdings

January 29, 2003

2003 Management Presentation

2

Agenda

Cathay Financial Holdings 2002 Operation Profile

Subsidiaries’ Operation Profile

Cathay Financial Holdings 2003 Forecast & Strategy

3

CFH Operating Performance

2002 Operations

• Organization

• Cathay United Bank and Cathay Century

Insurance joined Cathay Financial

Holdings on 22th

April .

• UWCCB joined Cathay Financial Holdings

on 18th Dec.

• Integrated Marketing

• cross-selling ： U-Life cash card 、 mutual

fund 、 P&C 、 Bond-linked

product 、 ATM

policy loan 、 bancassurance

• Financial Activities

•S&P credit rating 「 BBB+ 」 on 13th May.

•700 Million ECB on 15th May

•A successful bid for 650 million shares of

Chunghwa Telecom with amount of

NT$32.7 Billion

Financials 20011 2002

CFH

NI (NT$bn) 0.137 13.085

EPS(NT$) 2 0.02 2.23

EPS(NT$) 3 ---- 1.76

ROE 0.18%%%%

14.09%

ROA 0.18%%%%

12.39%

CFH (Profoma)

Total Assets(NT$bn) 1,131 2,086

Total Revenue(NT$bn) 391 506

1：CFH only recognized Cathay life one day

income.

2：Time weighted average capital is 58.6 bn.

3：Capital (less treasury shares): NT$74.3 bn.

4

Profit Analysis – 2002 ROE

14.09%

17.90%

8.56% 9.01%

Cathay FinancialHoldings

Cathay LifeInsurance

Cathay CenturyInsurance

Cathay United Bank

ROE of Cathay Financial Holdings and Subsidiaries

Note: UWCCB merged into Cathay Financial Holdings on December 18, 2002

5

Profit Analysis – 2002 ROA

12.39%

1.06%

2.56%

0.67%

Cathay FinancialHoldings

Cathay LifeInsurance

Cathay CenturyInsurance

Cathay United Bank

ROA of Cathay Financial Holdings and Subsidiaries

Note: UWCCB merged into Cathay Financial Holdings on December 18, 2002

6

Subsidiary Contribution Analysis – Sales & Income

CUB2.1%

UWCCB6.5%

CathayCentury2.2%

CathayLife89.2%

Sales Contribution 2002

Total Sales : NT$506.3bn

UWCCB0.7%Cathay

Century1.5%

Cathaylife94.6%

CUB3.2%

Income Contribution 2002

Total Income : NT$13.1bn

Cathay FHC merged UWCCB on Dec. 18, 2002, recognizing sales and income for 14 days

7

Agenda

Cathay Financial Holdings 2002 Operation Profile

Subsidiaries’ Operation Profile

Cathay Financial Holdings 2003 Forecast & Strategy

8

Financials 2001 2002

Net income (NT$bn) 10.6 12.8 EPS(NT$) 1.81 2.39 ROE 13.62% 17.90% ROA 0.98% 1.06% 13month persistency rate 個月繼續率

90.1% 90.1% 25month persistency 83.2% 84.1% Expense ratio 16.6% 12.7% NPL ratio 2.50% 1.87%

2003 Operating Focus

Operating profile of Cathay Life

2002 Operations

• Increase in FYP and total premium income

• Stopping selling high guaranteed products

• Market share in terms of total premium 31.5%

• Expenses ratio trending down

• Continuing development of innovative products

Focus on resources re-allocation and back-office integration to facilitate cross-selling

Leverage on external resources via strategic alliance to expand market share

Recruiting high quality personnel and sales force for re-organization purposes

Capitalizing on CRM to enhance cross selling opportunities

Rolling out incentive plan for sales forces to encourage cross-selling

9

The Operation of Subsidiary – Decreasing Expense Ratio for Cathay Life

32.3%27.8%

25.8%24.1%

21.3%18.6%

17.6% 16.6%12.7%

0%

10%

20%

30%

40%

1998 1999 2000 2001 2002

Expense Ratio

The Whole Industry (excluding Cathay Life)

Cathay Life

1.Expense ratio＝（ underwriting expense+salesman subsidy+sales,general & administrative expense ） / total premium

2.The expense ratio of cathay life in 2002 is 14.6%(excluding Ginhowyi-single premium- product)

3.Other source of data: The Association of Life Insurance

10

Item 2001 2002 Short Term Investment

Listed Stocks 51.0 37.5

Corporate Bonds 12.2 12.9

Government Bonds & Bank Debenture 6.1 30.9

Mandate Funds 47.9 42.5 Direct Foreign Investment 52.0 77.4 Beneficiary Certificate 53.4 61.2 Bill

0.1 24.7 Investment Linked Product 0 0.3 Loss Reserve (7.0) (5.1) Subtotal 215.7 282.3 Long Term Investment Long Term Equities 10.7 57.2 Loss Reserve 0 (0.9) Long Term Bond 91.5 157.4 Real Estate 88.1 94.2 Subtotal 190.3 307.9

Cathay Life – Long Term and Short Term Investments

NT$bn

11

2003 Operating Focus

The Operation of Subsidiaries – Cathay Century Insurance

2002 Operations

(1) Revenues ： Underwriting premium ：

NT$5.8B ， YoY Growth Rate ： 23.2%(2) New products ： personal casualty insurance 、 group casualty insurance 、 Personal comprehensive insurance 、 marriage insurance etc.

Financials 2001 2002

Net Income (NT$mn) (((NT$(NT$mm)

359 235

EPS (NT$) 1.55 1.01

ROE 13.52% 8.56%

ROA 3.86% 2.56%

Loss ratio 65.6% 37.7%

Expense ratio 29.4% 25.0%

Combine ratio 95.0% 62.7%

• The total underwriting premium of 2003 is NT$6.6B ， the business plans as follows:

• Leverage the resources of FHC to create synergy and enhance investment yield • Strengthen product innovation and marketing performance

• Promote group business

• Strategic alliance

12

2003 Operating Focus

The Operation of Subsidiaries – UWCCB

2002 Operations

Deposits:NT$539B Loan:NT$385B Outstanding Credit Cards:0.86M cards

Write-off of NPL:NT$22.2B ， NPL rate as of Dec. 2002 : 3.04%

Electronic financial service ：• Investment account - 0.27M • Debit card : 2.13M cards (increase by 0.16M cards) • Automatic transaction - 86%

Financials

2001 2002

Net Income (NT$bn) 5.26 (8.81)

EPS (NT$) 1.39 (2.22)

ROE 8.19% (14.78%)

ROA 0.77% (1.30%)

Loan Deposit ratio 74.55% 77.91%

Cost Income Ratio 36.81% 34.17%

NPL ratio 6.17% 3.04%

• Collaborate with FHC in business plans and cross selling

• Promote corporate banking ， and develop business of Greater China according to

government policy

• Promote retailing banking and private banking

• Promote e - banking

13

The Operation of Subsidiaries – Cathay United Bank

2002 Operations

• Total deposit NT$158.8bn 、 Total loan

NT$130.7bn. Launched CUB Platinum card

in 2002. Numbers of cards issued : 1.8mm

• Financial service centers established,

developing private banking market

EPS (NT$)

Financials

2001

2002

NI (NT$ bn) 1.09 1.12 0.88 0.91

ROE 9.63% 9.01% ROA 0.79% 0.67% NPL ratio 3.47% 4.36%

Sales / NPL 2.53 1.86 Loan/ Deposit 83% 78%

2003 Operating Focus

•Head office will move to Cathay Financial Building at Shin-Yi District on Feb. 17 th, 2003. The opening party will be held on Feb. 20th.•Establish wealth management system, leverage integrated synergy.•Provide superior offshore bonds, foreign currency deposits and other products and services.•U-Life cash cards, vehicle loans and housing loans, to enhance the consumer banking business.•Enlarge the credit card business for fee income.

14

Agenda

Cathay Financial Holdings 2002 Operation Profile

Subsidiaries’ Operation Profile

Cathay Financial Holdings 2003 Forecast & Strategy

15

2002 2003E

Cathay Financial Holdings

Net Income after Tax (NT$bn) 13.09 21.02

EPS (NT$) 2.23 2.83

ROE 14.09% 17.86%

ROA 12.39% 14.66%

Cathay Financial Holdings: 2003 Financial Forecast

16

Future Plans and Operating Strategies

For Cathay Financial Holdings• Enlarge integration synergy• Provide extensive financial services• Develop Greater China market

• For Subsidiaries• Improve investment performance of Cathay Life and

Cathay Century Insurance • Enlarge the growth of consumer banking for UWCCB and

CUB

Thank You