Wed, Oct 08, 2008 - Page 12 News List

Fitch lowers rating on Shin Kong Life Insurance

By Joyce Huang  /  STAFF REPORTER

Fitch Ratings yesterday lowered its ratings on Shin Kong Financial Holding Co (新光金控) and three of its subsidiaries, including Shin Kong Life Insurance Co (新光人壽), as the life insurer faces increasing pressure to maintain adequate capitalization.

“Given the current financial turmoil and the local stock market’s poor performance in the third quarter, we believe Shin Kong Life Insurance may have a worse-than-expected portfolio, with a lower risk-based capital [RBC] ratio,” Jonathan Lee (李信佳), senior director of the rating agency’s financial institutions, told a media teleconference yesterday.

Fitch put the life insurer on Rating Watch Negative. The company’s NT$12.9 billion (US$398 million) loss in the first half of this year and the drop in the value of its assets available-for-sale reduced its total equity by 18 percent to NT$49.2 billion at the end of the first half, Fitch said, although its RBC ratio remained above the statutory minimum level of 200 percent.

Fitch Ratings had already lowered the insurer’s ratings from positive to stable to reflect its poor performance in the first half and the potential impact of the US subprime crisis and devaluing NT dollar.

Fitch said there had been progress in the parent company’s fundraising plans, including NT$8 billion in common shares and NT$4.7 billion in sub-debts, to support the life insurer’s potential capital needs.

“Despite the current unfavorable financial environment ... we believe Shin Kong Financial stands a pretty good chance of completing its recapitalization, given its past performance,” Joyce Huang (黃佳琪), an associate director of Fitch Ratings, said in the teleconference.

If the company’s recapitalization is successful, the company will be taken off Rating Watch Negative, the statement said.

However, if the fundraising plan falls through, Fitch Ratings may lower its rating further to negative, Lee said.

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