Mon, May 01, 2006 - Page 12 News List

Nan Shan keeps focus on healthy financial profile

By Jackie Lin  /  STAFF REPORTER

Compared with its rivals, Nan Shan Life Insurance Co (南山人壽) has taken a relatively conservative approach to operating its business, making maintaining a healthy financial structure its priority.

This principle was repeated by chairman Edmund Tse (謝仕榮) during an interview in Hong Kong last week about the company's investment strategies in real state and possible mergers of Taiwanese banks, as well as plans to develop bancassurance and investment-linked insurance products.

"I don't encourage the company to grow too quickly or take a hasty approach to become the biggest player. Our goal is to do the best and make sure the company is moving toward sustainable development," Tse said.

Tse also serves as senior vice chairman of American International Group Inc (AIG), the fourth largest multinational in Forbes magazine's top-2,000 list last year.

Nan Shan, an AIG subsidiary, is the nation's third-largest life insurer with more than 30,000 agents. As of last July, Nan Shan's assets surpassed NT$937 billion (US$29.4 billion), serving 3.4 million customers with more than 6.8 million effective policies, according to the company's Web site.

Reflecting its cautious investment philosophy, Nan Shan invests nearly half of its working capital in government bonds, which Tse said was a smart move years ago as now interest rates are dipping.

In recent years, market rates have become the biggest challenge for insurers and Taiwan is following in the footsteps of Japan and entering a low-interest-rate era. Rates for Taiwan's 10-year government bonds, for instance, dropped to 1.7 percent before climbing back to 1.9 percent recently.

Bonds and real estate

"Luckily we adopted a conservative manner in the past and bought a significant amount of government bonds, including 30-year products. Nan Shan should be Taiwan's biggest corporate buyer of government bonds. Now it is extremely difficult to plan new investments as rates are low," Tse said.

Nan Shan is hunting for real-estate projects, based on the belief that the once-gloomy property sector is taking off.

"Taiwan's real estate investment returns have been flat over the past decade, as depreciation and poor profitability choked most insurers. Now I feel that it's time to invest," Tse said.

He added that the company prefers commercial buildings over residential projects, because they offer steady returns.

As part of this plan, Nan Shan is proposing to work with retailers, including Carrefour Taiwan and Costco President Taiwan, to acquire land and build shopping centers for prospective retailers in exchange for rental income.

AIG's units

AIG's eight local subsidiaries operate businesses in the insurance, finance, credit card, investment and securities sectors, with combined assets topping NT$985.3 billion in June last year, rivaling most financial-holding firms.

But Tse said that the group has no plans to transform itself into a financial-holding company as it would be subject to more regulatory restrictions in Taiwan.

While many foreign financial institutions have recently expressed interests in acquiring local lenders, AIG is not considering taking over commercial lenders just to maximize cross-selling effects, Tse said in the interview.

"We're an expert in insurance but know little about the operations and risk management of a banking institution. It is not our policy to do something we have not mastered," Tse said.

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