Wed, Nov 01, 2017 - Page 12 News List

CDFHC eyes gains with bigger China Life stake

By Ted Chen  /  Staff reporter

China Development Financial Holding Corp (CDFHC, 中華開發金控) yesterday said it expects to yield synergistic gains from its newly acquired presence in the life insurance market.

CDFHC in September became the biggest shareholder in Taipei-based China Life Insurance Co (中國人壽) by increasing its stake in the insurer to 34.96 percent.

The acquisition is part of CDFHC’s capital reallocation efforts as it transitions from low-leverage direct investments into a well-rounded financial company utilizing higher leverage and offering a full array of services.

Following the acquisition, CDFHC’s total assets swelled from about NT$900 billion to NT$2.3 trillion (US$29.8 billion to US$76.2 billion), ranking it 10th out of the nation’s 16 financial holding companies.

CDFHC aims to increase China Life’s policy sales through the branch networks of its subsidiaries, KGI Bank (凱基銀行) and KGI Securities Co (凱基證券), to generate improved premium income and profit, CDFHC spokesperson Eddy Chang (張立人) told an investors’ conference in Taipei.

Amid continued deregulation, many life insurance-centric financial holding companies have been using their insurance units to spearhead overseas acquisitions, Chang said, adding that China Life’s investments in China’s CCB Life Insurance Co (建信人壽保險) represent a valuable foothold to tap the Chinese market.

CDFHC plans to improve China Life’s returns by helping it build an alternative investment portfolio, which is the specialty of its asset management subsidiary, CDIB Capital Group (中華開發資本), he said.

CDIB can help address China Life’s more conservative asset allocations, which favor fixed income investments and underweights equity investments, he added.

With its expertise in the alternative asset classes of venture capital and private equity, CDIB would be able to boost China Life’s investment returns by 10 basis points, Chang said.

CDIB has inked an alternative asset consultation contract with China Life, which could potentially funnel up to 2 percent, or NT$20 billion, of assets managed by the life insurer into alternative asset classes, he added.

“In the current low interest rate environment, alternative asset classes are particularly viable for life insurers looking for long-term investments,” Chang said.

“Venture capital and private equity investments take place very early on to gain a low price of entry, and return prospects are helped by lower price-to-earnings ratios,” Chang said, adding that CDIB has experience ensuring against share dilution in subsequent rounds of fundraising.

CDFHC reported that net income in the first half of this year rose 87.39 percent annually to NT$3.54 billion, with earnings per share of NT$0.24.

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