Taiwan Life hit by US loan crisis

BACKLASH: Several local financial institutions have disclosed their exposures in structured-investment vehicles, with total losses close to NT$15.6 billion

By Kevin Chen  /  STAFF REPORTER

Mon, Oct 29, 2007 - Page 12

Taiwan Life Insurance Co (台灣人壽), the nation's eighth-biggest life insurer by assets, will book a NT$262 million (US$8 million) charge for the third quarter to reflect losses related to its offshore US mortgage product-linked investments, the company said in a statement late on Friday.

So far this year, the company has written down NT$690 million losses on its overseas investment amid the US credit crisis, after booking a NT$428 million loss in August for the first half.

Based on the 513 million common shares issued, the latest writedowns were likely to dent Taiwan Life's third-quarter earnings by NT$0.51 per share.

For the first three quarters of this year, the total writedowns were estimated to have slashed NT$1.34 in earnings per share.

Taiwan Life has yet to unveil its third-quarter balance sheet. Listed companies in Taiwan are required to submit their third-quarter results to the stock regulator by Oct. 31.

Shares of Taiwan Life were 0.69 percent higher at NT$58.6 on Friday. The announcement about the writedowns was unveiled after the stock market closed.

The Taipei-based insurer, whose chairman Chu Ping-yu (朱炳昱) was indicted by prosecutors earlier this month on allegations of insider trading, has seen its share price rise 30.8 percent since the beginning of this year.

In a filing sent to the Taiwan Stock Exchange late on Friday, Taiwan Life said it would write down NT$164.998 million on investment of NT$698 million collateralized bond obligations (CBOs) issued by E.Sun Commercial Bank (玉山銀行).

The company said it would also write down NT$97 million on NT$431 million bond investments (Tbrna2005-2X PPN3) in the third quarter, the filing said.

In the first half of this year, Taiwan Life booked NT$428 billion losses on its US$15 million investment in Bear Stearns High Grade Credit Strategies Fund after the fund collapsed in July because of the credit crunch in the US.

Taiwan Life's latest writedowns came after SinoPac Financial Holdings Co (永豐金控) said last week it would book a US$6 million loss on its US$350 million investments in structured-investment vehicles (SIVs) as of last month, SinoPac spokesman Richard Chang (張立荃) said on Oct. 24.

Aside from SinoPac, several local financial institutions have recently disclosed their exposures in SIVs, with total losses estimated at NT$15.6 billion, Sherry Lin (林淑娥), an analyst at Credit Suisse, said in a report on Oct. 17.

While local financial institutions' exposures to CBOs, SIVs and collateralized debt obligations linked to US subprime mortgage products were expected to have limited downside impact on their financial performance, "sentimental impact could continue to drag the sector's near-term performance," Lin said in the report.

The Financial Supervisory Commission last week asked local financial institutions to reassess their exposures to subprime mortgage products and possible asset impairments, the Chinese-language Liberty Times (the Taipei Times' sister newspaper) reported on Friday, citing commission chairwoman Susan Chang (張秀蓮).

The commission is expected to announce the latest losses of local financial institutions from the US credit turmoil this week, the paper said.

On Aug. 10, the commission said domestic financial institutions held about NT$71 billion in investments linked to subprime mortgage-related instruments, including NT$40.4 billion exposures by local banks.