Taishin Financial Holding Co (台新金控) said yesterday it would continue efforts, including acquisitions, to diversify its product lines after securing a deal to buy the local unit of New York Life Insurance Co, allowing it access to the local life insurance market.
Taishin Financial president Joseph Jao (饒世湛) inked an agreement with Gary Benett, the US insurer’s chief executive in Asia, in Taipei to acquire 100 percent of its local unit for NT$100 million (US$3.3 million).
EARNINGS DRIVER
The bank-centric Taiwanese company has sought for years to buy a life insurer to boost its economies of scale and overall earnings, as its banking arm, Taishin International Bank (台新銀行), ranks third or fourth in the nation in terms of bancassurance sales.
“We will seek next to strengthen our product lines and services, and will embark on favorable campaigns to advance the goal,” Taishin Financial spokesman Welch Lin (林維俊) said.
With 98 branches nationwide, Taishin Bank is the nation’s third-largest credit card issuer. The lender will maintain an open platform, Lin said.
Taishin Financial would seek to gain a better understanding of New York Life Taiwan before deciding whether it should adjust its business strategy or product lines, he added.
The group also needs to demonstrate its professional competence by putting together a management team to win approval from the Financial Supervisory Commission for the acquisition, Lin said.
“The group has drawn up a list of candidates, but prefers to keep it from the public for now,” he said.
With NT$40 billion in cash on hand, Taishin Financial does not need to raise capital for the buyout, Lin said.
Taiwan Ratings Corp (中華信評), the local arm of Standard & Poor’s, said its ratings on Taishin Financial remain unchanged, given the local insurer’s small size.
“In our view, the acquisition is likely to have a limited impact on Taishin Financial’s credit profile, as New York Life Taiwan accounts for less than 3 percent of the group’s net worth as of the end of last year,” the ratings agency said in a statement.
LEVERAGE
Credit Suisse disagreed, saying the acquisition would raise Taishin Financial’s double-leverage ratio, creating pressure for a capital injection next year.
“While the deal size is small, it has large implications for the group’s capital adequacy, such as double-leverage ratio,” the foreign brokerage said in a note. “The pressure will heighten if Taishin Financial needs to inject capital into the life unit next year.”
Credit Suisse cut its ratings on Taishin Financial to neutral from overweight and lowered its target price on the stock to NT$12 from NT$14.2, the note said.
Taishin Financial shares fell 0.4 percent to NT$11.30 yesterday.
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