Wed, Mar 30, 2011 page11

• Taishin Financial still has plans for insurance sector

  STRENGTHENED RESOLVE: The firm’s president said its bid for MetLife Taiwan had reinforced his beliefs about the benefits of owning an insurance company

  • By Crystal Hsu and Kevin Chen / Staff Reporters
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  Taishin Financial Holdings Co (台新金控) remains interested in acquiring an insurance company to increase its earnings, but will give top priority to strengthening its existing businesses, president Lin Keh-hsiao (林克孝) said yesterday.

  Lin made the remarks after the company lost the bid for MetLife Inc’s Taiwanese unit to Chinatrust Financial Holding Co (中信金控) on Monday.

  “It is favorable for Taishin to own a life insurance company, which could boost the group’s overall performance,” Lin said. “We already have a strong bancassurance team and we want to take further advantage of it.”

  For the same reason, Chinatrust Financial, the nation’s third-largest financial services provider, on Monday announced its intention to buy MetLife Taiwan Insurance Co (大都會人壽) for US$180 million in a bid to expand into the domestic insurance market and eventually across the Taiwan Strait.

  The deal is scheduled to be completed in the second half of the year, pending regulatory approval.

  Bancassurance, a business model whereby insurance companies use bank sales channels to sell insurance products rather than rely on sales agents, accounts for 70 percent of the nation’s first-year premiums.

  Lin refused to comment on MetLife Taiwan — as is required of bidders — except to say that the review deepened his belief that owning a life insurer was beneficial.

  “The issue [of acquisition] does not sit on top of Taishin Financial’s agenda,” he said. “We joined the bid [for MetLife Taiwan] because the opportunity presented itself. Taishin will continue to strengthen its existing businesses.”

  While the group did not rule out creating its own life insurance firm, acquiring existing ones is easier because they are already equipped with a competent professional management structure, Lin said.

  Despite reviving talks of consolidation among state-run financial firms, Taishin Financial will hold on to its 22.5 percent stake in Chang Hwa Commercial Bank (彰化銀行) for the foreseeable future, Lin said, adding that mergers of state-run banks by their private peers would be beneficial because of increased synergy.

  FITCH RATINGS

  Meanwhile, Fitch Ratings Ltd yesterday said Chinatrust Financial’s proposed cash acquisition of MetLife Taiwan would have no immediate impact on its rating and those of its subsidiaries because of the relatively small size of the transaction.

  “Fitch expects the acquisition to only modestly increase financial leverage at the holding company level, with limited impact on the group’s financial profile, while the rating for Chinatrust Group has already factored in the possibility that it will pursue modest diversification opportunities,” the UK ratings agency said in a statement.

  Based on Fitch data, the US$180 million deal represents about 5 percent of Chinatrust Group’s consolidated assets on a pro forma basis.

  However, MetLife Taiwan’s capital strength could be a risk. As of the end of last year, the insurer had a risk-based capital ratio of 205 percent, just 5 percentage points higher than the regulatory minimum of 200 percent, according to Financial Supervisory Commission data.

  However, both Fitch Ratings and Citigroup Global Markets said yesterday they believed Metlife Taiwan would need no immediate capital injection, citing the insurer’s relatively conservative investment portfolio and the low cost of its insurance liabilities compared with its peers in Taiwan.

  MetLife Taiwan has about 88 percent of its investment portfolio in the form of government and corporate bonds, with equities accounting for less than 1 percent, Citigroup analyst Bradford Ti (鄭溫煌) said in a note yesterday.
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