Dai-ichi Mutual to increase stake

Dai-ichi Mutual Life Insurance Co, Japan's second-largest life insurer, will raise its stake in Shin Kong Financial Holding Co (新光金控) through a share purchase of nearly NT$7 billion (US$219 million), the Taiwanese financial service provider said yesterday after its board approved the sale by issuing common shares.

After completing the deal, Dai-ichi's holdings in Shin Kong Financial -- Taiwan's eighth largest financial group by assets -- are estimated to reach about 6 percent from current 1.6 percent, Victor Hsu (許澎), spokesman of Shin Kong Financial, said in a telephone interview yesterday.

Shin Kong Financial plans to sell 25 million shares at NT$28 per share to Dai-ichi after Shin Kong Financial's ex-dividend date.

The exact share price will be determined by the average market prices of five trading days appointed by the two companies, Hsu said.

The two firms also plan to exchange personnel and work together on reinsurance transactions, Dai-ichi said in a statement yesterday.

Aside from deepening the two companies' strategic relations, Dai-ichi's investment will help stabilize Shin Kong Financial's share price, Hsu said.

Dai-ichi has been one of the re-insurers of Shin Kong Life Insurance Co (新光人壽), Shin Kong Financial's flagship unit, since 1974. The two companies signed their latest reinsurance contract in April.

Shares of Shin Kong Financial rose NT$0.75 to NT$31.75 yesterday in Taipei.

During the annual shareholders' meeting yesterday, Shin Kong Financial also approved the acquisition of Shinkong Investment Trust Co (新光投信) for NT$36 per share, or a total of NT$1.57 billion.

After financial regulators approve the investment, Shin Kong Financial plans to combine Shinkong Investment Trust and its own subsidiary New Light Asset Management Co (新昕投信) within six months.

The investment will help Shin Kong Financial to expand its business in asset management, with its market share in the sector to increase from 0.4 percent to 3 percent as the nation's 13th largest asset management company, Hsu said.

A dividend of NT$1.3 per share, including NT$0.65 in cash and NT$0.65 in stock, was also approved at yesterday's meeting.

For the first quarter of the year, Shin Kong reported after-tax earnings of NT$7.14 billion, or NT$1.75 per share, making it the most profitable financial holding company in the nation.

Shin Kong Financial may be targeting Shinkong Insurance Co (新光產險), the nation's third-largest non-life insurer, as a possible merger target, according to a recent report released by BNP Paribas Securities (Taiwan) Co.

This possible takeover would create multiple synergies for the two firms, Jesse Wang (王嘉樞), head of research at BNP Paribas Securities, wrote in the report.

A merger with a financial holding company would also increase Shinkong Insurance's competitiveness amid the accelerated consolidation in the sector since the middle of last year, Wang said.

Taiwan's second largest non-life insurer Mingtai Fire and Marine Insurance

Co (明台產物保險), for example, was acquired by Japan's Mitsui Sumitomo

Insurance Co from First Financial Holding Co (第一金控), the report said.

Smaller rival Taiwan Life Insurance Co (台灣人壽) also acquired the troubled

Kuo Hua Insurance Co (國華產物保險), the report said.