The Financial Supervisory Commission on Tuesday imposed heavy penalties on Farglory Life Insurance Co (遠雄人壽) for breaches of corporate governance regulations in a series of real-estate development projects.
The commission fined Farglory Life Insurance NT$14.4 million (US$494,030) — the steepest fine it has ever imposed on a life insurer.
It also barred the company from launching new property development projects, extending loans to interested parties and extending loans on unsold property units for three years.
Farglory Life Insurance is a unit of the Farglory Group (遠雄集團), the core business of which is land and property development, and construction.
The commission ordered the dismissal of Far Glory Group founder Chao Teng-hsiung (趙藤雄) from the life insurer’s board of directors.
Farglory Life Insurance president George Chao (趙信清), Chao Teng-hsiung’s second son, was also ordered to leave his post along with two other executives, the commission said, adding that both Chaos would be barred from holding positions at financial institutions for the next five years.
A routine financial examination revealed that Farglory Life Insurance did not follow the rules for transactions and lending between insurance enterprises and interested parties, disregarding its internal controls, the commission said.
The commission found that from 2007, the life insurer had favored its conglomerate affiliates and had awarded contracts for 14 property development projects on its land holdings to interested parties.
Farglory Life had failed to assess the risks of using premiums paid by policyholders in pursuing its property development projects, Insurance Bureau Deputy Director-General Chang Yu-hui (張玉輝) said.
In addition, the life insurer is facing a total exposure of NT$4.9 billion from unsold property units, Chang said.
The breaches represent a total breakdown of internal controls at the life insurer, as contracts for all phases of property development projects were awarded to its affiliates instead of letting third-party bidders compete for them, he said.
About 10.3 percent, or NT$40 billion of the life insurer’s assets are tied up in ongoing property development projects, and the company’s operations would not be affected in the absence of new projects, Chang said.
Farglory Life Insurance said that chairman Roy Meng (孟嘉仁) would serve as its interim president, and that the firm is committed to recruiting industry professionals to lead its management.
The life insurer reported that its net income last year rose 123 percent to NT$1.93 billion, while maintaining strong financial resilience with a risk-based capital ratio of 300 percent. Earnings per share were NT$1.55.
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