China Life Insurance Co (中國人壽) said yesterday its shareholders had approved a private placement proposal, which would allow the medium-sized local life insurer to raise NT$4.375 billion (US$134.5 million) in new capital and improve its financial structure.
The insurer said in a stock exchange filing that its shareholders had given the green light to the capital injection plan, which was agreed to by the company’s board of directors in late October.
The Taipei-based insurer planned to issue as many as 350 million new shares, at NT$12.5 per share through private placement and would use the funds to increase its operating capital and fortify its capital structure, China Life said in an Oct. 31 filing. Private placement refers to the sale of a large tranche of securities to a small group of investors.
China Life, which had its financial strength rating downgraded by Fitch Ratings on Dec. 9, has viewed the capital-raising move as a key to offsetting its continued capital erosion after the company posted large marked-to-market equity losses for the third quarter amid the current unfavorable investment environment.
China Life is among local life insurers that have geared up to raise new capital to enhance their capital strength after adverse movement in the domestic stock market or suffering from US subprime mortgage-related and structured note investments.
The company’s shares closed 2.44 percent higher at NT$12.6 yesterday after the release of shareholders’ approval of the deal. The stock has declined 30.4 percent this year to date.
Local rival Shin Kong Life Insurance Co (新光人壽) is also on a mission to improve its RBC ratio to 250 percent, as the company said on Thursday that its board approved a plan to raise fresh capital by issuing up to 274.1 million new common shares to improve its financial structure.
The nation’s second-largest life insurer said in a statement that it expected to raise the funds at NT$23 per share via a private placement.
Shin Kong Financial Holding Co (新光金控) will subscribe to all of the new shares issued by its life insurance unit for a total of NT$6.3 billion (US$194.1 million), the company said in a filing with the Taiwan Stock Exchange.
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