Shin Kong Financial Holding Co (新光金控), the nation’s second-worst performer by earnings among its domestic competitors last month, is poised to see record high profits this year on the back of securitized real-estate investments, senior executives said yesterday.
However, the life insurance-centric conglomerate voiced worries over its profitability outlook in the long term if the government presses ahead with plans to tax capital gains from securities and real-estate transactions, senior vice president Sunny Hsu (徐舜鋆) said.
Shin Kong Financial posted NT$748 million in net losses last month, reversing a net income of NT$730 million (US$25.3 million) in March, as a stronger New Taiwan dollar boosted hedging costs and sapped foreign currency-denominated assets at Shin Kong Life Insurance Co (新光人壽), the group’s main source of income.
The insurer reported NT$1.2 billion in net losses last month, dragging the parent’s earnings per share (EPS) down to NT$0.26 for the first four months, higher only than China Development Financial Holding Co (中華開發金控), which had an EPS of NT$0.14, their exchange filings showed.
Hedging costs totaled NT$3.52 billion during the January-to-March period, accounting for 2.5 percent of the company’s foreign currency assets, Hsu said. The company aims to keep it below 1.5 percent, he said.
The life insurer revised downward its embedded value by 2.8 percent to NT$171 billion, including NT$85.4 billion in unrealized property gains, or NT$31.3 per share, while its appraisal value for five-year premiums stood at NT$217.3 billion, equivalent to NT$25.8 per share for the parent firm, the report indicated.
Embedded value refers to adjusted net asset value and the value of future profits of a company, 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.
Shin Kong Financial is expected to book NT$7.34 billion income this quarter from real-estate asset trust investments and an extra NT$5.2 billion dividend income in the third quarter after earning NT$2.94 billion in net profit last quarter, Shin Kong Financial president Victor Hsu (許澎) said.
However, the government’s tax reform plans and Europe’s deteriorating debt problems may constrain the development of core businesses and cause Shin Kong Financial to become conservative about its profit prospects, he said.
“The plan to raise minimum tax rates on institutional investors would weaken our earnings as domestic equities take up a significant share of the group’s investment portfolio,” Sunny Hsu said.
Of the company's total investment funds of NT$1.44 trillion, 9.1 percent were in Taiwanese shares as of March 31, the report said.
Sunny Hsu also voiced reservations about a planned property tax reform that might further curb the company's investment options.