Moody's ups Cathay Financial to A3

Moody's Investors Service said it upgraded the long-term issuer rating of Cathay Financial Holding Co. to A3 from Baa1, upgraded insurance financial strength rating of Cathay Life Insurance Co. Ltd. to A1 from A2 and insurance financial strength rating of Cathay Century Insurance Co. Ltd. to A2 from A3. The A3/prime-1 long- and short-term deposit ratings, Baa1 subordinated debt rating and the C- financial strength rating of Cathay United Bank are not affected.

The outlook is stable.

These rating actions conclude the review for possible upgrade initiated Aug. 25, 2006, which was prompted by the rating upgrades of its key operating subsidiaries, Cathay Life Insurance and Cathay Century Insurance, the agency said.

Cathay Financial exhibits a strong dependence on its subsidiaries for future cash flows due to its sole function as a financial holding company, Moody's said. The rating also considers its intention to maintain modest financial leverage and strong capitalization in order to protect its financial health, Moody's added.

However, given the company's reliance on its subsidiaries for cash flow, an aggressive use of financial leverage would reduce its financial flexibility and pressure its financial strength, the agency said, but added that in this context, it also maintains strong liquidity to offset the risks of unexpected cash flow difficulties.

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