Shin Kong Financial Holding Co’s (新光金控) life insurance arm had an embedded value of NT$110.1 billion (US$3.4 billion) at the end of last year, or NT$14 per share, company executives said yesterday.
That was 36.4 percent higher than an embedded value of NT$80.7 billion, or NT$12.9 per share, at the end of 2008, company president Victor Hsu (許彭) told an investors’ conference.
Embedded value refers to adjusted net asset value and the value of future profits of a firm, while appraisal value is based on a projection of future cash flow from the company’s assets as well as from its current and future operations.
The company forecast a five-year appraisal value of NT$158.4 billion as of last year, up 34.4 percent year-on-year, and a 10-year appraisal value of NT$220.7 billion, up 37.1 percent year-on-year, company actuary Lin Han-wei (林漢維) told yesterday’s conference.
“Based on these appraisal values, our new business margins would have grown to 19.2 percent last year from 11.9 percent in 2008,” Lin said.
Shin Kong vowed to strengthen its capital adequacy this year and Hsu said the life insurance subsidiary would receive a capital injection of NT$5 billion this quarter — proceeds from the sales of its securities arm to MasterLink Securities Investment Advisory Co (元富證券) last month, in addition to proceeds from a sale of a commercial property in Neihu to Fubon Life Insurance Co (富邦人壽) for NT$4.7 billion on Monday.
The company’s life insurance and banking arms would further raise capital of between NT$3 billion and NT$6 billion via the issue of subordinated debt, Hsu said.
On Wednesday, however, Fitch Ratings downgraded its ratings on the company’s outstanding debt by two notches to A.
“The downgrade reflects the debt issue’s feature of loss absorption through coupon and principal deferrals once the capital adequacy ratio falls below the regulatory minimum requirement of 100 percent,” the ratings agency said.
Amid improving business, Shin Kong nevertheless reported a net loss of NT$2.93 billion for the first quarter after writing off losses, including a loss of NT$930 million in collateralized debt obligations, NT$4 billion in hedging costs and a provision of NT$500 million, Hsu said.
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