Mercuries Life eyeing growth opportunities

RIDING IT OUT::Despite the fallout from the US Fed’s decision to scale back its stimulus program, the insurer remains upbeat on its prospects at home and abroad

By Crystal Hsu  /  Staff reporter

Thu, Jul 11, 2013 - Page 13

Local insurer Mercuries Life Insurance Co (三商美邦人壽保險) is looking for opportunities to expand its presence in China and Southeast Asia this year, while seeking to boost premiums at home, senior executives said yesterday.

“We aim to grow our overall premiums to NT$115 billion [US$3.82 billion] this year,” chief financial officer Winston Yang (楊棋材) said at a celebration for the company’s 20th anniversary.

That figure would be 3.7 percent higher than the NT$110.89 billion in premiums the company recorded last year, despite market expectations of a slowdown linked to the effect of a high base of comparison.

However, the insurer’s goal may well be achievable after its gross premiums reached NT$61 billion in the first half of the year, while its first-year premiums stood at NT$23.8 billion, company data showed.

Like many of its peers, Mercuries Life took a hit in net value last quarter after bond prices dropped significantly after the US Federal Reserve signaled that it may begin winding down its quantitative easing (QE) program.

Yang forecast the company’s net worth to decline by about 10 percent at the end of last month from NT$24 billion on March 31, after US benchmark 10-year bond yields gained 100 basis points and their local counterparts increased by 30 basis points. Bond yields and prices move in opposite directions.

Mercuries Life invests 65 percent of its working capital of NT$569 billion in bond holdings and places an extra 25 percent in other assets to generate fixed income, Yang said.

The possible QE slowdown in the US is likely to have a greater impact on other insurers given their larger bond holdings, Yang said.

“Interest rate hikes should benefit life insurers in the long run, enabling their funds to generate better earnings despite present corrections,” Yang added.

Mercuries Life chief executive officer Roy Meng (孟嘉仁) said the company is looking for acquisition and partnership opportunities at home and abroad to increase the firm’s economic scale.

The firm is weighing the possibility of tapping Indonesian, Malaysian and other emerging markets to take advantage of their fast-growing per capita income, Meng said, adding that the company plans to file applications in the fourth quarter to set up a representative office in Beijing.

At home. the insurer is also considering becoming involved in public construction projects but advised the government to issue securities based on the projects to allow better liquidity, he said.

“A medium-sized insurer, Mercuries Life cannot afford to make long-term investments without the benefit of interest payments,” Meng said.

The company has an updated embedded value of NT$58.5 billion as of December last year, rising 19.5 percent from a year earlier with earnings per share of NT$50.5, according to company statistics.

Mercuries Life is due to release its first-half earnings results on Monday.