Debt-ridden Kuo Hua Life Insurance Co (國華人壽) was officially taken over by the semi-official Insurance Stabilization Fund (保險安定基金) and Taiwan Insurance Institute (保險事業發展中心) at 5:30pm yesterday on instructions from the Financial Supervisory Commission (FSC).
“Under the government’s custody, Kuo Hua will continue its normal daily operations and honor the right of its policyholders,” FSC Chairman Sean Chen (陳冲) told a media briefing.
Chen said Kuo Hua stood a good chance of restructuring its deteriorating finances given its well-performing management team and sales talents, as well as its 10-day liquidity of up to NT$120 billion (US$3.7 billion).
As of the end of June, the life insurer had 2 million policyholders and NT$246 billion in assets, but incurred losses of NT$57.9 billion, said Huang Tien-mu (黃天牧), director general of the Insurance Bureau.
The government custody — the first of its kind among the nation’s life insurers in 40 years — will last for nine months and is subject to change depending on the takeover committee’s recommendations.
“We hope to clean up the company’s debts in less than nine months,” Chen said.
The takeover committee, to be composed of representatives from the stabilization fund and the insurance institute, will soon conduct a due diligence on Kuo Hua and draft a plan to reduce the financially troubled life insurer’s capital before any recapitalization plan, Chen said.
If the company’s original shareholders are not interested in more capital injection, Chen said the takeover committee could raise funds via private placement or resort to the stability fund, which has NT$15.5 billion available for bailing out life insurers.
Huang said the scale of the company’s capital reduction and recapitalization would be “bigger than it proposed earlier.”
The life insurer last Wednesday finalized a proposal to cut its capital by NT$2 billion before injecting NT$4 billion, which Chen said was not feasible because no shareholder had expressed an interest in injecting capital.
Insurance Stability Fund chairman Chiang Chao-kuo (江朝國) said it was too early to say how much the takeover would cost the newly founded fund, which is capitalized by premiums from domestic life insurers.
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