Mon, Dec 24, 2012 - Page 13 News List

INTERVIEW: Transglobe expects Kuo Hua to show early profit

Transglobe Life Insurance Co raised eyebrows on Nov. 27 by winning the bid for the insolvent Kuo Hua Life Insurance Co with a record subsidy of NT$88.37 billion from the government to cover Kuo Hua’s losses. Transglobe chairman James Liu recently spoke to the media, including ‘Taipei Times’ staff reporter Crystal Hsu, on how his company plans to use the funds and put the ailing Kuo Hua on the right course

Taipei Times: When will Transglobe Life Insurance Co (全球人壽) integrate Kuo Hua Life Insurance Co (國華人壽)?

James Liu (劉先覺): We aim to integrate Kuo Hua’s assets and liabilities, including its employees, in the first quarter of next year. The integration is positive for the sector and society as a whole after the Financial Supervisory Commission put Kuo Hua under the receivership of the Taiwan Insurance Guaranty Fund (保險安定基金) in August 2009.

There won’t be a name change and Kuo Hua will become an empty legal entity afterward. After the integration, Transglobe will strive to become one of the top six insurers by accounts of first year premiums next year. A top-five ranking may be overambitious.

Kuo Hua has been a good insurance company in light of its information technology, administrative abilities and sales performance. First year premiums amounted to NT$5 billion [US$172.1 million] for the first nine months, despite the unfavorable operating environment. Transglobe will seek to maximize synergy benefits — the real challenge following the integration.

TT: Is it true that Transglobe intends to retain 50 percent of Kuo Hua employees, both in-office workers and sales agents?

Liu: We will have to discuss the matter with Kuo Hua’s receiver, the Taiwan Insurance Guaranty Fund.

The fund has drawn up a plan detailing how buyers should handle Kuo Hua’s 2,700 employees after conferring with the workers’ union. All bidders understood and accepted the arrangements before joining the auction last month. It is not convenient for me to reveal the details before the dust settles.

Transglobe knows how to integrate product lines, employees and operations as the company has become experienced in mergers and acquisitions since entering the local market in 1994.

In the past 18 years, we acquired American Family Life Assurance Co (美國家庭人壽保險), Transamerica Life Insurance Co (全美人壽), AXA Life Insurance Co (安盛國衛) and Aegon Life Insurance (Taiwan).

TT: How will Transglobe use the record compensation and become profitable after acquiring Kuo Hua?

Liu: We will use the fund to prop up Kuo Hua’s financial health and maintain the rights and benefits of 2 million existing policies.

We intend to use the funds over two to three years as the company’s investment officials see fit. There is no urgency or a timetable to allocate the funds.

On principle, Transglobe allocates 85 percent of its investment funds to fixed income assets, mainly US bonds, since they are less risky. Currently, foreign investments take up 40 percent of our assets under management. We invest the remaining 15 percent in equities and real estate properties. Stock investments account for 5 percent of our portfolio.

We expect to turn a profit the first year after the acquisition is completed. It is not an unrealistic challenge based on our knowledge of the company’s financial state.

However, it is premature for such talk. The macro-environment, especially interest rates, has much to do with insurers’ profitability. There seems to be a small ray of hope that global central banks will start to reverse monetary policy next year as the world’s economy is gradually emerging from a slowdown.

TT: Will Transglobe adjust its business strategy after the integration?

Liu: Transglobe prides itself as being a pension-planning expert and will continue to emphasize long-term insurance policies through multi-sales channels: namely sales agents, bancassurance and insurance brokerage. Kuo Hua’s sales operations will assume an important role at Transglobe in the future.

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