Shin Kong adjusting growth strategy

PORTFOLIO CHANGE::The group is increasing its investments in steady, high cash dividend yield stocks after its third-quarter profits tumbled 80 percent sequentially

By Crystal Hsu  /  Staff reporter

Fri, Nov 02, 2012 - Page 13

Shin Kong Financial Holding Co (新光金控) said yesterday sales of foreign currency-based insurance policies may accelerate this quarter as their costs are set to rise significantly next year on lower assumed interest rates.

The Financial Supervisory Commission on Oct. 23 cut assumed interest rates by up to 1 percent for first-year life insurance premiums in line with the monetary easing by global central banks amid an economic slowdown.

The rate change, due to take effect on Jan. 1, is expected to drive local life insurers to raise policy costs to ensure sustainable earnings in a tough business environment.

“Expectations of higher purchase expenses may boost sales in the remainder of the year and benefit Shin Kong Life Insurance Co (新光人壽),” the group’s flagship company and main source of income, Shin Kong Financial senior vice president Sunny Hsu (徐舜鋆) told a quarterly conference with investors in Taipei.

The conglomerate posted NT$2.63 billion in net income in the July-September period, slumping 37.7 percent from a year earlier and 79.7 percent from the second quarter because of lower dividend income, company data showed.

Cumulative profits totaled NT$10.29 billion for the first nine months, translating into earnings of NT$1.22 per share.

Shin Kong Financial is expected to earn NT$5.5 billion in cash dividends this year, down from NT$6.1 billion last year, Hsu said.

The life insurance unit, which has an estimated NT$139.59 billion of investment funds in local shares, is cutting stakes in volatile stocks while increasing positions in companies that pay high cash dividends, Hsu said.

He refused to comment on media reports that the company incurred huge losses from its investment in smartphone maker HTC Corp (宏達電).

“We don’t comment on individual shares, but have raised holdings in stocks [with stable prices] to 50 percent of equity funds, closer to our target of 60 percent,” Hsu said.

Shin Kong Life posted NT$1.65 billion in net profits last quarter, down 50.9 percent from the year-ago level, as a worsening global slowdown took its toll on investments at home and abroad, Hsu said.

He voiced concern that returns on overseas investments might drop going forward, after hovering at about 4.61 percent as of the end of September, as companies restructure debt repayments after the US Federal Reserve introduced new money-printing measures to stimulate growth, Hsu said.

Foreign-exchange hedge costs may trend down for the rest of the year after averaging 1.57 percent in the first three quarters, compared with 1.74 percent in the first half, as its strategy adjustments paid off, Hsu said.

The insurer aims to cut the expense to 1.5 percent even though the local currency strengthened against the US dollar in the last two months, Hsu said.

Shin Kong Commercial Bank (新光銀行) reported NT$1 billion in profits last quarter, up 7.2 percent from a year earlier, as the lender benefited from a larger economies of scale, Hsu said.

Shin Kong’s stock advanced 0.26 percent yesterday, slightly outpacing the TAIEX’s 0.19 percent gain, Taiwan Stock Exchange data showed.