Wed, Mar 09, 2011 - Page 12 News List

Shin Kong back in profit on falling NT dollar, hedge costs

By Crystal Hsu  /  Staff Reporter

Shin Kong Financial Holding Co (新光金控) swung back to a profit last month on falling foreign currency exchange and hedge costs after the local currency weakened against the US dollar, company executives said yesterday.

The financial group, which relies heavily on its life insurance arm, Shin Kong Life Insurance Co (新光人壽), aims to focus on selling protection-oriented traditional and health insurance products this year to boost recurring income, senior vice president Sunny Hsu (徐舜鋆) told an investor conference.

“The group reported a net profit of NT$3.31 billion [US$112.7 million] last month, reversing a net loss of NT$1.76 billion in January,” Hsu said, attributing the gains entirely to a weakening NT dollar.

The local currency shed 2.4 percent against the greenback last month based on the average intraday rate of exchange as recommended by the Accounting Research and Development Foundation (會計研究發展基金會) to replace the central bank’s closing rate as benchmark, Hsu said.

The foreign exchange factor helped profits to stay in the black at NT$1.55 billion as of last month, translating into earnings of NT$0.18 per share, Hsu said.

Shin Kong Life posted NT$3.06 billion in net profit last month, contributing 92.59 percent to the group’s earnings, the report showed.

The insurer used a mix of hedging strategies, with traditional hedges taking up 78.5 percent and aimed at a range of 70 percent to 80 percent in the medium and long-term, Hsu said.

The macro-environment improved despite the central bank’s mild interest rate hikes.

First-year premiums picked up 22 percent to NT$83.17 billion last year from NT$68.19 billion a year earlier, giving the insurer a market share of 7.2 percent, the report said.

Total investment totaled NT$1.39 trillion last year, with 34.2 percent channeled to overseas instruments and another 7.4 percent to domestic real estate properties, the report said.

Local equities accounted for 7.6 percent and generated a 5.21 percent return, Hsu said.

Cash positions stood high at NT$181.87 billion, or 13.6 percent, owing to a lack of investment instruments, Shin Kong Financial president Victor Hsu (許澎) said.

“We took part in several property auctions, but failed,” Victor Hsu said, adding the company is cautious about purchases of undeveloped land plots as they must meet “the prompt and profitable utilization” requirement.

Shin Kong Commercial Bank (新光銀行), the banking subsidiary, reported a net income of NT$264 million last month, from NT$198 million, as core businesses improved further amid economic recovery, bank president Lai Chin-yuan (賴進淵) said.

The lender aims to expand its assets above the US$20 billion scale in two years to qualify for overseas expansions, Lai said.

Before that, the bank plans to strengthen services to Taiwanese customers abroad via its branch in Hong Kong, which is slated to start operations in the second quarter, Lai said.

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