Global Life facing punishment

MANAGEMENT INTERFERENCE::The FSC said it was considering disqualifying the insurer’s top executives, but ruled out placing it under government receivership

By Crystal Hsu  /  Staff reporter

Sat, May 11, 2013 - Page 13

The Financial Supervisory Commission (FSC) is mulling punitive action against Global Life Insurance Co (國寶人壽) after the unlisted insurer failed to heed the regulator’s warning not to interfere with Long Bon International Co’s (龍邦) board reshuffle.

“Insurers are not allowed to influence the management decisions of companies in which they own stakes to bolster their investment gains,” Joanne Tseng (曾玉瓊), director-general of the commission’s Insurance Bureau, said by telephone yesterday.

“The commission will mete out punitive measures against Global Life as soon as possible,” Tseng said.

The top insurance regulator, which began stationing officials at the insurer on Wednesday to investigate the alleged regulatory violations, refused to set a date for the punitive action.

The insurer on Tuesday cast its vote in the recent board election at Long Bon, a Greater Taichung-based firm primarily engaged in hotel services, and property leasing and distribution.

The insurer owned a 6.5 percent stake in Long Bon as of May 6, falling within the 10 percent regulatory limit for insurance companies. Long Bon stock has slumped 20 percent this year, underperforming the broader market, which has risen 7.54 percent.

On Thursday, the commission said it was mulling the severest measures against Global Life, including disqualifying the company’s top executives.

FSC Vice Chairwoman Jennifer Wang (王儷玲) said the commission would not rule out the possibility of government receivership after dispatching two officials to Global Life to look into the matter.

However, the commission changed its tone later on Thursday, saying in a statement that receivership was not under consideration for the time being.

Global Life said in a statement on its Web site it had no intention of interfering in Long Bon’s management by taking part in the board election.

“By doing so, Global Life aims to better understand the company in which it has an investment so it may better protect its interests,” the statement said.

The insurer threw its support behind Long Bon’s corporate nominees to the board with a view to helping the company’s stable and smooth operation, the insurer said.

It added that the move would also benefit Global Life and its policyholders.

Global Life offers life, health, annuity, accident, travel-safety and multi-purpose insurance, as well as investment-linked products.

The company has capital of NT$575 million (US$19.3 billion), but incurred a net loss of NT$3.16 billion last year, or a loss per share of NT$36.35, company data showed.

The insurer has a capital adequacy ratio of below the required 200 percent minimum, together with Singfor Life Insurance Co (幸福人壽) and Chaoyang Life Insurance Co (朝陽人壽).

Their negative net worth recently led the Control Yuan to fault the commission for failing in its role as a supervisor.

The commission said on Thursday it respected the reprimand, adding that it would consider drawing up an exit mechanism for financially stressed insurance companies.