Taiwan's insurance stocks fell after Taiwan Life Insurance Co (台壽保) announced a NT$428 million (US$13 million) first half loss from investing in a Bear Stearns Co fund containing US subprime mortgages.
Taiwan Life's shares tumbled 4.6 percent to NT$58.60 when the market closed yesterday. Larger rivals Cathay Financial Holding Co (國泰金控) and Shin Kong Financial Holding Co (新光人壽) also dropped after they disclosed holdings of collateralized debt obligations (CDO) containing subprime home loans.
"Concern about the subprime problem has finally hit home for Taiwan investors," said Michael On, who manages US$100 million at Beyond Asset Management Co in Taipei.
The nation's life insurers have invested up to 35 percent of their assets overseas to bolster returns amid low interest rates at home. They are among companies from Japan to Australia that have gotten burned by the meltdown in the risky US mortgages, a slump which has spread through all the global credit markets.
The sub-financial and insurance industry index on the bourse fell 0.8 percent yesterday, adding to a 5.7 percent plunge on Wednesday. The measure is the second-worst performing on Taiwan's benchmark index this year with a 1.9 percent decline.
Taiwan Life has written off its entire investment in the Bear Stearns High Grade Credit Strategies fund, it said in an e-mailed statement.
Cathay Financial, owner of Taiwan's largest life insurer, has invested NT$1.8 billion in CDOs containing subprime home loans, chief strategy officer Lee Chang-ken (李長庚) said in a telephone interview yesterday.
Shin Kong, which owns the No. 3 life insurer, has invested as much as NT$11.7 billion in such instruments, chief financial officer Winston Yung (
Both Lee and Yung said their companies bought the CDOs during 2004 and 2005. Shin Kong shares fell 5 percent yesterday and Cathay Financial shares slipped 1 percent.