Calculation Examples for Article 8, Paragraph 2 of the Regulations on Management of Consolidated Capital Adequacy of Financial Holding Companies

Calculation Examples for Article 8, Paragraph 2 of the Regulations on Management of Consolidated Capital Adequacy of Financial Holding Companies

I. Background Explanation: Financial Holding Company A holds 100% shareholding in Subsidiary B Life Insurance Company and Subsidiary C Property Insurance Company. Subsidiary B Life Insurance Company was approved by the competent authority at the beginning of Year 115 to apply the Notes on Optional Transition Measures for Insurance Industry Own Capital and Risk Capital (hereinafter referred to as Optional Transition Measures), with a transition period of 15 years. The capital surplus information from capital nature bonds for the aforementioned subsidiaries at the end of Year 114 is as follows:

II. Assuming other item amounts remain unchanged, Financial Holding Company A calculates the capital surplus from capital nature bonds to be deducted from the group eligible capital total for insurance subsidiaries (listing only Year 115 to Year 117) as follows:

Unit: New Taiwan Dollar Millions

	Year 115 End of June & End of December	Year 116 End of June & End of December	Year 117 End of June & End of December
	50	300	550
	(0 +50) Note 1	(250+50) Note 2	(500+50) Note 3

Note 1: B Company [7,500×1/2×(15-15)/15] + C Company (100×1/2) Note 2: B Company [7,500×1/2×(15-14)/15] + C Company (100×1/2) Note 3: B Company [7,500×1/2×(15-13)/15] + C Company (100×1/2)

III. If Subsidiary B Life Insurance Company issues Tier 2 subordinated bonds of 1.5 billion on April 1, Year 116, and other items remain unchanged, Financial Holding Company A calculates the capital surplus from capital nature bonds to be deducted from the group eligible capital total for insurance subsidiaries (listing only end of Year 115 to end of Year 117) as follows:

Unit: New Taiwan Dollar Millions

	Year 115 End of June & End of December	Year 116 End of June & End of December	Year 117 End of June & End of December
	50	350	650
	(0 +50) Note 4	(300+50) Note 5	(600+50) Note 6

Note 4: B Company [7,500×1/2×(15-15)/15] + C Company (100×1/2) Note 5: B Company [(7,500+1,500)×1/2×(15-14)/15] + C Company (100×1/2) Note 6: B Company [9,000×1/2×(15-13)/15] + C Company (100×1/2)

IV. Continuing the previous example, if Subsidiary B Life Insurance Company terminates the application of Optional Transition Measures early at the beginning of Year 117, then Financial Holding Company A calculates the capital surplus from capital nature bonds to be deducted from the group eligible capital total for insurance subsidiaries in Year 117 as 4.55 billion (9 billion × 1/2 + 100 million × 1/2).

Unit: New Taiwan Dollar Millions

Company	Capital Surplus (1)	Capital Nature Bonds Amount Included in Eligible Capital (Excl. Tier 1 Restricted Capital) (2)	Capital Surplus from Capital Nature Bonds (Excl. Tier 1 Restricted Capital) (3)=Min[(1),(2)]
B Company	10,000	7,500	7,500
C Company	8,000	100	100