Shares of Union Insurance Co (友聯產險) soared by nearly the 7 percent daily limit yesterday, boosted by the news that US-based Newbridge Capital Inc plans to become its controlling shareholder.
The insurer's share price closed up NT$0.28, or 6.9 percent, at NT$4.34 on the TAIEX yesterday.
Union Insurance, the nation's third-largest property insurer, announced on Tuesday night that it signed a memorandum of understanding (MOU) with Newbridge, which plans to invest around US$100 million to buy new shares to be issued by Union Insurance.
"Introducing Newbridge can help strengthen our operations, provide professional management expertise, corporate governance and transparent finances, and sustain future growth," said Samuel Yu (喻志鵬), the insurer's acting president.
Before the investment project takes place, the insurer will first seek shareholders' approval to reduce capital by around NT$4 billion (US$122 million) to reflect losses before issuing new shares to bring in Newbridge's fresh capital, said Kenny Ching (鄭有利), manager of the insurer's accounting department, in a phone interview.
The company estimated it has to book losses of around NT$4.8 billion from the related investments and receivables of Rebar Asia Pacific Group (力霸亞太企業集團).
Union Insurance, more than 60 percent controlled by Rebar-related subsidiaries, has lost 20 percent of its business as its corporate image was tarnished following the Rebar scandal.
The shareholder's meeting is scheduled for mid-April and the investment deal will be closed in May, making Union Insurance an international enterprise, Ching said.
"There's no problem with our company's operations and liquidity, but the Rebar case has dealt a big blow to Union Insurance. Therefore we expect to introduce better corporate governance practices from Newbridge to improve our reputation and we're confident our business will recover," Ching said.
The original management team will stay as Newbridge aim to use the close ties Frank Wang (
Union Insurance has had a representative office in Beijing for many years but, restricted by cross-strait regulations, it still cannot be upgraded into a branch, the same situation faced by its Taiwanese peers.
Two weeks ago, Fitch Ratings Ltd downgraded Union Insurance's national insurer financial strength rating to A(twn) from A+(twn) and international rating to BBB- from BBB after the insurer wrote off NT$583.9 million related to four members of the Rebar group.
The ratings will remain unchanged until Newbridge's capital comes in and the insurer's financial statement for last year is available so that ratings firms can revaluate its financial structure, said Jonathan Lee (
Despite the short-term damage to its corporate image, Lee said Union Insurance's capital adequacy ratio was 600 percent to 700 percent, well above the government designated 150 percent to 200 percent.
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