The Ministry of Economic Affairs (MOEA) yesterday rejected a Hong Kong consortium’s application to buy a local life insurance subsidiary from its parent American International Group (AIG) Inc.
AIG is in talks with the consortium about a possible appeal of the decision that would have to be made to the Cabinet within 30 days.
Vice Minister of Economic Affairs Hwang Jung-chiou (黃重球) said panel members withheld approval of the consortium’s proposed purchase of Nan Shan Life Insurance Co (南山人壽) after the Financial Supervisory Commission (FSC) raised concerns that the buyer has insufficient funding for future capital increase needs and long-term commitment.
The consortium, comprising China Strategic Holdings Ltd (中策集團) and Primus Financial Holdings Ltd (博智金融), won the bid in October last year to acquire a 97.5 percent stake in Nan Shan from AIG for US$2.15 billion.
The application has drawn scrutiny as some suspect the consortium’s funding came from China, while others voiced concerns about the rights of Nan Shan employees and policyholders. The local insurer hires 37,000 agents and has 4 million customers.
The FSC issued a four-point statement yesterday evening, urging AIG to continue running Nan Shan.
“We hope AIG will continue to operate Nan Shan now that its planned sale has been rejected,” FSC Vice Chairman Wu Tang-chieh (吳當傑) told reporters.
The commission has informed AIG of the rejection and will talk to the cash-strapped company to help work out solutions for Nan Shan’s sustainable development, Wu said.
The FSC also will help protect the rights of Nan Shan employees and policyholders, Wu said. The 40-year-old insurer has a net worth of NT$140.3 billion (US$4.37 billion), accounting for one third of the industry in Taiwan.
Huang Tien-mu (黃天牧), director-general of the FSC’s insurance bureau, said the commission was especially concerned about whether Nan Shan buyers would commit to the insurer’s long-term operations because the sale involves a large number of employees and customers.
“About 50 percent of [life insurance] policyholders have dealings with Nan Shan,” Huang said. “The commission doesn’t want to see any development that may upset the industry.”
The FSC refused to elaborate on how it would help AIG solve its financial woes.
Chinatrust Financial Holding Company (中信金控), which earlier expressed a strong interest in buying Nan Shan, said yesterday it respected the government’s decision.
However, the nation’s third-largest financial service provider remained evasive on the Nan Shan purchase, saying the situation is different after AIG chief executive officer Robert Benmosche recently told media that AIG would not sell its Taiwanese unit to other institutions.
Benmosche reportedly made the comment after paying a visit to FSC on Aug. 11. Local media reports quoted him as saying that AIG might cut Nan Shan staff by 60 percent if the sale fell through.
Lan Wei-ting (藍維鼎), board member and spokesperson for Nan Shan’s labor union, said yesterday that the union is glad to see the government has rejected the deal.
“Throughout the negotiation process, [the consortium] has been extremely dishonest and showed no sincerity to negotiate with the labor union nor answer the labor union’s requests,” he said.
The union now hopes future potential buyers will show a sincere effort to negotiate terms with the union and comply with regulations governing employee benefits and rights, he added.
DPP Legislator Pan Meng-an (潘孟安), who has pressed hard on behalf of Nan Shan’s union, said through his aide he welcomed the development and urged the government to take over the insurer if AIG carries out threats of mass layoffs.
Meanwhile, Council of Labor Affairs (CLA) vice minister Pan Shih-wei (潘世偉) said that the council “is neither for nor against” the deal.
Pan said that throughout the evaluation process, the CLA has maintained that it demands protection of Nan Shan employees’ job benefits and rights, including requiring that the consortium sign an agreement to recognize the employee relationship between the company and its workers, and is therefore responsible for the employees’ labor pension and labor and health insurance coverage.
ADDITIONAL REPORTING BY SHELLEY HUANG, WITH BLOOMBERG
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