Fubon Life Insurance Co (富邦人壽) yesterday tried to allay market concerns about its foreign-exchange provisions, saying it has sufficient funds to meet regulatory requirements.
As the New Taiwan dollar strengthened against the US dollar during April and May, Fubon Life found its foreign-reserve provisions falling rapidly near the minimum required by regulators toward the end of June.
Insurance Bureau data showed that Fubon Life’s foreign-exchange provisions at the end of May stood at NT$1.92 billion (US$58.4 million), down from NT$3.48 billion at the end of last year, prompting concern over its ability to cover potential losses.
However, the looming crisis has been averted since the value of NT dollar had tumbled this month to a six-year low, following China’s move to devalue the yuan, which jolted global foreign-exchange markets.
Fubon Life said that along with the surge in the greenback, it has seen an increase in unrealized gains from its US dollar-denominated portfolio over the past three months and expects its foreign-exchange provisions to rise to between NT$5 billion and NT$6 billion at the end of this month.
Fubon Life executives also addressed the issue of whether provisioning regulatory requirements should be adjusted.
“There is an ongoing debate on whether the foreign-exchange provision requirement for insurers should be lowered, but I feel that the consensus favors the establishment of a new mechanism on appropriate adjustments to the figure,” Fubon Life senior vice president Raymond Lin (林立民) told reporters.
“We are not lobbying for a specific direction for the change and plan to support the consensus formed by our peers at the nation’s life insurance association,” he added.
Fubon Financial Holding Co (富邦金控), the parent company of Fubon Life, reported a record net income of NT$42.05 billion, or NT$4.11 per share, for the first six months of the year, rising 47.8 percent from a year ago and securing the company’s leading position among its peers.
Net income for last month came in at NT$9.5 billion.
The company’s assets grew 8.3 percent year-on-year to NT$5.58 trillion in the first half of the year, with net asset value tallied at NT$383.7 billion, cementing its position as the second-largest domestic financial holding company.
Return on assets and return on equity during the period reached record highs of 1.53 percent and 21.25 percent respectively, it said.
For this quarter, Lin said that Fubon Life would trim its utilization of investable funds from 18 percent to 16 percent.
“We feel that there would be much more viable opportunities for value investments if the TAIEX corrects to about 7,000 points,” Lin said.
Fubon Financial is also expected to book NT$12.7 billion in cash dividends from its portfolio of international and domestic stocks in the second half, bringing the total dividend windfall to NT$16.73 billion this year, Lin said.
Fubon Financial shares rose 3.2 percent to close at NT$51.90 yesterday, rebounding from Monday’s intraday low of NT$45.50, Taiwan Stock Exchange data showed.
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