On September 26, Hong Kong Mortgage Corporation Limited (HKMC) announced its interim results for 2025. The financial summary shows that the company's unaudited consolidated net profit after tax for the first half of 2025 was HK$53.3 million (first half of 2024: HK$9 million). The profit increase was primarily attributable to higher returns from Exchange Fund deposits; reduced negative impact from property price movements on the rapidly growing reverse mortgage business in the first half of 2025 compared to the same period in 2024; increased foreign exchange gains from cash and debt investments held under favorable market conditions; and increased net interest income. However, part of the profit was offset by increased accounting losses from annuity business insurance performance, reflecting the spillover effects of annuity increases and discount activities launched in 2024, which drove up new policy numbers.
For a better assessment of financial performance, after excluding (i) the financial results of The Hong Kong Annuity Company Limited (HKAL), a wholly-owned subsidiary of HKMC engaged in annuity business, (ii) the impact of property price changes on the reverse mortgage business which is long-term in nature, and (iii) the impact of consolidated financial accounting adjustments for loan portfolios covered by insurance provided by Hong Kong Mortgage Corporation Insurance Limited (HKMCI), another wholly-owned subsidiary of HKMC engaged in general insurance business, the adjusted net profit after tax, annualized return on equity, and cost-to-income ratio for the first half of 2025 were HK$874 million, 6.2%, and 14.2% respectively (first half of 2024: HK$468 million, 6.2%, and 22.4% respectively).
As of June 30, 2025, the embedded value of the annuity business calculated under the Insurance Ordinance (Chapter 41) was approximately HK$21.6 billion, including total shareholders' equity of HK$18.5 billion and present value of expected future profits of HK$3.1 billion, reflecting HKAL's solid financial position to support the long-term development of annuity business.
According to capital adequacy guidelines, the calculation of capital adequacy ratio follows the consolidated basis of consolidated financial reporting and excludes regulated subsidiaries that must comply with other adequate capital maintenance requirements (namely HKAL and HKMCI regulated by the Insurance Authority). After excluding the investment costs of unconsolidated regulated subsidiaries, HKMC's capital adequacy ratio remained at a robust level of 18.7% as of June 30, 2025 (December 31, 2024: 19.9%), well above the 8% minimum requirement set by the Financial Secretary.
Based on the solvency adequacy ratios calculated under the Insurance (Valuation and Capital) Rules Chapter 41R under the risk-based capital regime, the solvency adequacy ratios of HKAL and HKMCI as of June 30, 2025 were approximately 2.2 times (December 31, 2024: 1.7 times) and 3.7 times (December 31, 2024: 4 times) respectively, well above the statutory minimum requirements set by the Insurance Authority.
Given the uncertain market environment, HKMC adopts a prudent pre-funding strategy and proactively maintains communication with local and international investment communities regarding bond issuances to support large-scale loan purchases and meet refinancing needs. Based on strong financing capabilities and liquidity levels, HKMC's core business remains flexible and robust, and is well-prepared to respond to financial turbulence in order to fulfill its strategic policy role and achieve social objectives.
