Shin Kong Financial Holding Co (新光金控) vowed yesterday to strengthen internal risk management and be more conservative this year, after reporting NT$21 billion (US$602.6 million) in after-tax losses for last year.
“We will make every effort to weather this downturn,” company president Victor Hsu (許澎) told an investors’ conference, adding that its Aglo risk system would be completed by the year’s end.
Shin Kong’s NT$21 billion loss on investment losses and rising exchange hedging costs was the biggest among the nation’s 14 financial service providers and a sharp drop from its net profits of NT$5 billion in 2007.
Its earning per share was pushed into the red with a loss of NT$3.8 per share last year, down from a NT$1.02 earning per share in 2007.
The losses came mostly from subsidiary Shin Kong Life Insurance Co’s (新光人壽) unprofitable investments. However, its banking subsidiary saw a mild earnings hike of NT$220 million last year.
Shin Kong Life Insurance, the nation’s second-largest life insurer, incurred NT$1.37 billion and NT$5.47 billion in impairment losses from collateralized bond obligations (CBOs) and collateralized debt obligations (CDOs) respectively last year.
It also reported NT$12.55 billion in foreign exchange losses and hedging costs.
Income from first-year premiums (FYP) also saw a 9 percent year-on-year decline to NT$89.8 billion last year.
Chief financial officer Winston Yung (容覺生) attributed the decline to a higher base last year after the company saw 51 percent year-on-year growth in FYPs in 2007.
Like many of its rivals, the biggest challenge for Shin Kong this year will be negative spread, triggered by the central bank’s interest rate cuts, since the insurer still has to pay higher rates on its older policies.
To make up the losses, Hsu said the firm was considering liquidating investments in properties or equities for one-time gains, even though this might not be the best time for a sale.
A Yuanta Securities Corp (元大證券) analyst was pessimistic about Shin Kong Financial’s options this year.
“It’s under increasing capital pressure and has had a hard time locating investors for its capital-raising plan,” Renee Yang (楊文靚) said yesterday by telephone.
She said the deteriorating credit environment at home would spell more bad news for the company’s future earnings since its equity investments remain concentrated in financial shares, which are declining.
Shares of Shin Kong Financial dropped NT$0.01 yesterday to close at NT$7.5 per share.