Shin Kong strengthens bancassurance to counter losses

Shin Kong Financial Holding Co (新光金控), the nation's eighth-largest financial services provider by assets, aims to strengthen wealth management and bancassurance businesses this year to counterbalance the unexpected impact from bad consumer loans, executives said yesterday.

The firm reported net income of NT$7.1 billion (US$219.8 million) for the first quarter, or earnings per share of NT$1.76, said Hsu Shun-yun (徐順鋆), manager of the accounting department, during a press briefing.

Shin Kong Life Insurance Co (新光人壽), its flagship subsidiary, performed solidly, posting net profits of NT$7.9 billion during the January-to-March period, contributing 110 percent to the group's bottom line.

Shin Kong Bank (新光銀行), its banking arm, recorded losses of NT$1 billion at the same time after setting aside reserves of NT$2 billion to cover worse-than-expected consumer loan defaults during the first quarter, including NT$1.3 billion reserved to write off credit card debts.

"We don't know whether the card debt problem has peaked, but we expect the impact will ease off during the second half of the year," spokesman Victor Hsu (許澎) said.

Due to the card loan problem, Hsu said Shin Kong Bank (新光銀行) might only break even this year, making no contribution to the group's earnings, as more reserves are expected to be set aside, he said.

Shifting operational strategies, the bank will focus more on wealth management, with 100 specialists in personal finance recruited during the first half of the year and another 50 in the second half.

Bancassurance, a combination of banking and insurance services, is another driving force the bank has targeted this year.

With achievements from bancassurance accounting for one-third of its first year premiums, the bank has launched tailor-made products to boost revenues.

In addition to Shin Kong Financial, Taishin Financial Holding Co (台新金控) is also seriously affected by credit and cash-advance card loan defaults.

To the surprise of most investors, Taishin's board meeting on Thursday announced that no stock dividend would be issued for last year as the bottom line slid significantly from the projected NT$11.08 billion profit to a loss of NT$3 billion.

Taishin Financial's banking arm, Taishin International Bank (台新銀行), is the nation's largest cash card issuer and the second-biggest credit card operator.

Looking ahead, Shin Kong Financial will continue to market investment-linked policies, which accounted for 60 percent of its life insurer's first year premium during the first quarter, up by 197 percent over a year ago.

As the insurer has invested 35 percent of its working capital — the regulatory ceiling — in foreign markets, including equities and fixed income, Hsu said the company will apply for a higher investment portfolio as soon as amendments to the Insurance Law (保險法) are approved by the legislature. One of the modifications would enable local insurers to raise

their overseas investment ceiling to 50 percent of their working capital.