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HK Mortgage Corporation Reports Significant Profit Decline Amid Property Price Drop in First Half of 2024.

HK

HK Mortgage Corporation Reports Significant Profit Decline Amid Property Price Drop in First Half of 2024.
HK

HK

HK Mortgage Corporation Reports Significant Profit Decline Amid Property Price Drop in First Half of 2024.

2024-10-07 15:00 Last Updated At:10-08 10:10

HKMC's financial results highlights for first half of 2024

The Hong Kong Mortgage Corporation Limited (HKMC) today (October 7) announced the highlights of its unaudited consolidated financial results for the first six months of 2024 (1H 2024) noted below.

2024 half-year unaudited financial results highlights

The unaudited profit after tax of the HKMC for 1H 2024 was HK$9 million (1H 2023: HK$1,175 million (Note)). The decline in profitability was primarily due to the unfavourable impact of property price drop in 1H 2024 on the reverse mortgage business as compared to the favourable impact of property price rebound in 1H 2023.

After excluding the accounting results of the 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 Hong Kong Financial Reporting Standard 17 "Insurance Contracts" (HKFRS 17) at consolidation level in respect of the loan portfolios with insurance cover provided by the HKMC Insurance Limited (HKMCI), another wholly-owned subsidiary of the HKMC operating general insurance business, the adjusted profit after tax, annualised return on equity and cost-to-income ratio for 1H 2024 would be HK$468 million, 6.2 per cent and 22.4 per cent respectively (1H 2023: HK$365 million, 5.2 per cent and 26.6 per cent respectively).

Despite the reported accounting loss of the HKMCA, the embedded value of the annuity business as at June 30, 2024, was about HK$14.0 billion on the basis of the Insurance Ordinance, which comprised HK$11.3 billion of total equity and HK$2.7 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 of the HKMC remained solid at 20.7 per cent as at June 30, 2024, well above the minimum ratio of eight per cent stipulated by the Financial Secretary. The solvency ratios of the HKMCI and the HKMCA were about 22 times and 16 times respectively as at June 30, 2024, well above the respective 200per cent and 150per cent 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.

2024 half-year business performance highlights

Asset purchase

Debt issuance

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Mortgage Insurance Programme (MIP)

SFGS

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DLGS

Reverse Mortgage Programme

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Annuity business

Further details of the HKMC's unaudited consolidated financial results and financial review for 1H 2024 are set out in the Annex.

Note: After adoption of HKFRS 17 with effect from January 1, 2023, accounting adjustments are required to be made at consolidation level in respect of the loan portfolios with insurance cover provided by the HKMCI. The Group has finalised the accounting adjustments when the 2023 audited financial statements were prepared. Accordingly, the comparative figures reported in this press release have been restated with the same accounting treatment applied consistently.

DH responds to media enquiries on air-conditioning interruption in private hospital

In response to media enquiries regarding the air-conditioning interruption that occurred at St. Teresa's Hospital in July 2024 for about an hour, the Department of Health (DH) today (May 14) gave the following response:

Regulatory regime

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The DH regulates licensed private hospitals in accordance with the Private Healthcare Facilities Ordinance (Cap. 633) (the Ordinance). The Code of Practice for Private Hospitals (the CoP) issued by the Director of Health in accordance with the Ordinance sets forth licensing and operating standards for private hospitals, including the relevant requirements for hospital facilities and equipment.

The CoP stipulates that hospital installations and equipment must be kept in good operational order and requires hospitals to have contingency plans for emergencies (such as fire and the cessation of water or electricity supply). It also sets out that healthcare engineering systems (including electrical installations, specialised ventilation systems and medical gas supplies) must be properly maintained to meet the service need and ensure patient safety. Reportable events for private hospitals are also set out in the CoP.

The DH regularly reviews and updates regulatory standards for private healthcare facilities, together with the experts of the Advisory Committee for Regulatory Standards for Private Healthcare Facilities in accordance with the established mechanism of the Advisory Committee. The DH will also continue to review the CoP in accordance with the mechanism in order to protect the interest of the public.

Investigation work

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Regarding the incident at St. Teresa's Hospital, the DH was notified by a doctor on September 2, 2024, about an air-conditioning interruption in the operating theatres on the second floor of the hospital concerned in the evening of July 31, 2024, which lasted approximately one hour.

Although air-conditioning interruption is not a reportable event of private hospitals, the DH considered that the incident might have potential patient safety concerns and therefore promptly initiated an investigation on the same day (September 2, 2024) the notification was received. The DH sent staff to conduct an inspection at the hospital concerned, checked relevant documents, evaluated the effectiveness of its contingency measures, assessed the environmental condition of the operating theatres during the interruption and followed up on the remedial actions.

According to the investigation, the incident involved a malfunction of the air-conditioning system used to regulate the room temperature which lasted for about one hour. During which, 10 surgeries were performed in various operating theatres. The hospital explained that dehumidifiers were immediately deployed in the operating theatres where higher risk surgeries were being performed, including the one where the doctor was performing an operation. According to the hospital and the nurses on site, the severity of condensation in the operating theatre did not result in water dripping onto the surgical site of patients. The ventilation system used for infection control in the operating theatres (including air filtration equipment, hourly air change rate and a positive pressure environment) was operating normally. Apart from immediately responding to the incident, the hospital has also worked with its contractor to identify the cause of the incident and take measures to prevent recurrence of similar incidents.

In addition, the hospital conducted prompt follow-up by conducting air sampling of the operating theatres and surveillance on conditions of patients who underwent surgeries during the affected period for infection, with no abnormality detected. Based on the available evidence gathered, the DH considered that there was insufficient evidence to show that the hospital has breached the requirements of the Ordinance or the CoP.

Complaint handling

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The Ordinance also provides for a complaints handling mechanism against private healthcare facilities, which includes the establishment of the statutory Committee on Complaints Against Private Healthcare Facilities (Complaints Committee), with the DH serving as the Secretariat, to handle complaints lodged by patients against licensed private healthcare facilities (including private hospitals).

There were media enquiries on whether the DH had received any complaints from patients. According to the DH's existing records, the DH received a call on September 12, 2024, from a member of the public who enquired about the complaint procedure against private healthcare facilities, and mentioned the air-conditioning system of St. Teresa's Hospital was not functioning properly when underwent surgeries. The Secretariat explained to the enquirer the function of the Complaints Committee and statutory procedures of lodging a complaint promptly. The Secretariat on the following day (September 13, 2024) sent information on the complaint procedures with complaint form and statutory declaration form to the email address provided by the person as requested. The enquirer confirmed receipt of the concerned information and forms by email but since then, the Complaints Committee has not received any complaint from the concerned enquirer in relation to this incident.

The DH has completed investigation based on all available information, but will continue to closely monitor licensed private healthcare facilities. If there is new and concrete evidence, the DH will take appropriate actions as necessary to safeguard patient safety.

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