The semi-official Taiwan Insurance Guaranty Fund (TIGF, 保險安定基金) yesterday halted the auction of Kuo Hua Life Insurance Co (國華人壽) after the insurer’s former owner obtained a court injunction to contest the legality of the sale.
TIGF, which was chosen by the Financial Supervisory Commission to act as a receiver for Kuo Hua on Aug. 4, 2009, was slated to auction off the insolvent company yesterday morning, but put a last-minute stop to the bidding after an emergency injunction was issued on Friday.
The court ordered a seven-day injunction at the request of a major Kuo Hua shareholder, a technology company led by the insurer’s former owner Wong Da-ming (翁大銘).
Wong challenged the fairness of favorable governance terms promised to prospective buyers under which the new owner would not be subject to capital increase requirements for the next 20 years.
However, the failure to meet these requirements is what caused the commission to take control of Kuo Hua in the first place, he said.
TIGF refuted Wong’s charges, saying the commission ordered the receivership in 2009 because Kuo Hua had incurred NT$64.6 billion in net losses and was incapable of meeting capital requirements or reversing financial problems.
“The fund is seeking legal counsel in the hope of overturning the injunction to press ahead with the auction,” TIGF said in a statement.
Chinatrust Life Insurance Co (中信人壽), Taiwan Life Insurance Co (台灣人壽), Mercuries Life Insurance Co (三商美邦人壽) and Transglobe Life Insurance Inc (全球人壽) are eyeing the troubled company, which has accumulated NT$75.3 billion (US$2.57 billion) in net losses, with liability costs averaged at 4.5 percent as of September.
The winning bidder is expected to receive record compensation of between NT$80 billion and NT$100 billion from TIGF to cover losses and negative interest spreads.
TIGF, which currently owns 99.76 percent shares in Kuo Hua after a series of capital restructuring efforts, sought unsuccessfully to secure a buyer in two previous bids.
Wong and his technology firm lodged protests against the auctioning of Kuo Hua in 2010 but the courts rejected the plea, TIGF said.
Kuo Hua is the first local life insurer to be brought under government receivership in 40 years and the ongoing legal dispute is stalling efforts to find buyers.
An arrangement for state-owned Taiwan Financial Holding Co (台灣金控) to buy Kuo Hua fell through last year because of differences over compensation and other issues.
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