Taishin Financial Holding Co (台新金控) said yesterday it is in talks with New York Life Insurance Co to extend an acquisition contract, after the Financial Supervisory Commission on Tuesday thwarted its attempt to buy the insurer’s local unit over concerns about its financial strength.
The conglomerate, which riled the government in February by pushing a merger between Chang Hwa Commercial Bank (彰化銀行) and its main subsidiary Taishin International Bank (台新銀行), insisted it is financially healthy and attributed its weaker-than-sector capital adequacy to uncertainties over Chang Hwa Bank.
“We are seeking to extend the buyout agreement, which expired on March 31,” Taishin Financial spokesman Welch Lin (林維俊) said by telephone.
Taishin Financial struck a deal with the US life insurance giant in August last year to acquire its local unit for NT$100 million (US$3.3 million) because New York Life is seeking to exit Taiwan and focus on its home market.
The commission on Tuesday rejected the buyout attempt, saying Taishin Financial has a double leverage ratio of 119 percent, higher than the 109 percent average of its peers.
Jean Chiu (邱淑貞), deputy director-general of the FSC’s banking bureau, said the reading indicated Taishin has expanded on borrowed money and it neeeds to keep the ratio below 110 percent.
In addition, Taishin Bank has yet to show concrete improvement after ranking second-worst in number of consumer complaints over the last two years, Chiu said.
Lin said Taishin Financial respected the commission’s ruling, which came as a surprise, nevertheless.
“Taishin Financial meets all statutory requirements, as the statutory requirement is set at 125 percent for the double leverage ratio, though we agree the lower the reading, the better the company’s capital strength,” Lin said.
The company would have a double leverage ratio of 80 percent in the absence of Chang Hwa Bank, where the group is the largest shareholder with 22.5 percent of the shares and the government the second-largest with 20 percent, Lin said.
Taishin will not sell Chang Hwa shares, which it bought in 2005 for NT$36.57 billion, or NT$26.12 per share (compared with NT$17.4 yesterday), in exchange for majority control of its board and the right to run the lender, Lin said.
Taishin Financial does not have any plans to raise new capital in the foreseeable future given the small amount required for the buyout, he said.
That bodes ominously for the company’s planned expansion into the life insurance industry, as local Chinese media said Yuanta Financial Holding Co (元大金控) is also eyeing New York Life.