Lackluster stock market hurting Taiwan insurers

The nation's lackluster stock market has been hurting local insurers, denting profitability and affecting outlook ratings.

Shinkong Life Insurance Co (新光人壽), the nation's second largest life insurer, yesterday posted a loss of NT$700 million (US$20.83 million) for the previous month, the first time this year it has been in the red. The poor performance is mainly due to an increased reserve for potential losses from its stock investment.

"The market was pretty weak last month," Winston Yung (容覺生), deputy chief financial officer of parent company Shinkong Financial Holding Co (新光金控), told a press conference yesterday.

Its relatively high holding of underperforming finance stocks also contributed to the widening potential loss, Yung said.

As of last month, Shinkong Life held NT$47.5 billion worth of Taiwan stocks, or 5.24 percent of its total investment of NT$907.7 billion. This figure was down from NT$48.2 billion, or 5.34 percent of its total portfolio valued at NT$902.3 billion in September.

The TAIEX yesterday gained 0.29 percent to close at 5,988.37. However, last month the benchmark index finished 8.3 percent down on the monthly high of 6,142 points, according to figures released by the Taiwan Stock Exchange.

Meanwhile, Standard & Poor's said yesterday it had revised its outlook on First Insurance Co Ltd (第一產險), which is rated 10th among 15 local players in terms of direct premiums written, from stable to negative, while retaining its "BBB" rating.

"The outlook revision reflects the deterioration in the company's investment performance as a result of increased and relatively high exposure to equity investments, and risk concentration in several large investments," S&P credit analyst Jacphanie Cheung said in a statement released yesterday.

Despite the bad slump in the insurance sector, the industry's considerable working capital -- ?amounting to some NT$5.5 trillion -- is very attractive to the government, which needs more funding for its domestic construction projects.

To this end, the Financial Supervisory Commission yesterday announced that it has lifted the ceiling on insurers' investment in private offerings of stocks capitalized in local construction schemes from 2 percent to 5 percent.

Insurers can utilize the capital to invest in urban renovation, transportation and residences for the elderly, commission spokesman Lin Chung-cheng (林忠正) said.

Lin did not comment when asked if the relaxation had been made to facilitate future fundraising for the cash-strapped Taiwan High-Speed Rail Corp (THSRC, 台灣高鐵). THSRC is slated to announce its new financial plan in the middle of this month.

Premier Frank Hsieh (謝長廷) said yesterday that the Cabinet hoped to attract NT$200 billion in private funding for 46 public and private urban renovation projects. This would create value in excess of NT$220 billion, he said. He added that another 70 private projects would generate value of NT$340 billion in the next three years.