Shin Kong Financial Holding Co (新光金控) said yesterday it may increase its net worth by about NT$28.25 billion (US$9.53 billion) due to accounting rule changes this year on real-estate values, but it does not plan to recognize the increase at present.
Instead, the life insurance-focused conglomerate is planning to write the value increment off as special reserves that may be used later to strengthen its capital or lift its bottom line, Shin Kong Financial spokesman Sunny Hsu (徐舜鋆) said.
Both Cathay Financial Holding Co (國泰金控) and Fubon Financial Holding Co (富邦金控) have obtained regulatory approval to reflect the benefits in their income statements.
Shin Kong plans to re-evaluate 15 of its properties, in line with the “fair value” accounting requirement, and expects their worth to rise by NT$28.25 billion from the point of purchase, Hsu said.
Real-estate investments have made significant income contributions to Shin Kong Life Insurance Co (新光人壽), the firm’s main subsidiary, despite unstable earnings over recent years due to excessive market volatility, the group’s report said.
Last year, Shin Kong Financial reported NT$9.82 billion in net profit, jumping 79 percent from a year earlier, earnings per share of NT$1.16, while income at the life insurance unit more than doubled to NT$5.53 billion, thanks to property gains and lower hedging costs, the report said.
The life insurer is set to recognize NT$7.63 billion in gains this quarter from divesting office space last month in a building that houses the popular Eslite Bookstore (誠品書店) on Dunhua S Road (敦化南路), it said.
Foreign exchange costs dropped to 1.3 percent last year, from 1.5 percent, after strategy adjustments paid off, the report indicated.
However, first year premiums, a gauge of insurers’ core business, stood at NT$68.47 billion last year, down 10.6 percent from 2011, and are likely to remain flat this year, the company said.
Shin Kong Commercial Bank (新光銀行) experience more stable earnings than its insurance affiliate, as net income grew 36 percent from 2011 to NT$2.26 billion, thanks to strong sales of wealth management products.
The lender’s net interest margin stood at 1.41 percent at the end of last year and it forecast that margins may hover around 1.4 percent this year.
Fee income accounted for 18.8 percent of profits and the bank aims to raise the share to 19 percent this year and to more than 20 percent in the medium and long term, it said.
Shares in Shin Kong Financial closed up 1 percent to NT$9.12 yesterday, outpacing the TAIEX’s 0.13 percent rise, Taiwan Stock Exchange data showed.