Shin Kong Financial Holding Co (新光金控) yesterday said that its plans to sell two prime properties is aimed at improving its fixed income yield and addressing mounting unrealized losses on financial assets.
Amid widening volatility in the global equity and bond markets, Shin Kong Financial’s unrealized losses in the second quarter increased by NT$1.3 billion (US$39.68 million) to NT$29.7 billion, while the figure for its life insurance arm, Shin Kong Life Insurance Co (新光人壽), expanded by NT$1.46 billion to NT$30.8 billion.
Shin Kong Life is the group’s main subsidiary and its biggest source of income.
“We are not seeking to book profits, but to improve our shareholders’ equity,” said Shin Kong Financial senior vice president Sunny Hsu (徐舜鋆), who declined to provide details on the prospective sales.
Hsu said that a number of prospective buyers have begun due diligence studies on Shin Kong’s A8 commercial complex and the Shinkong Manhattan World Trade Building in Taipei’s Xinyi District (信義).
He said potential investors interest is lower for A8, while some who have viewed the Shinkong Manhattan building see it as an ideal choice for corporate headquarters, he added.
“Some of our properties currently generate returns of less than 2 percent, which is not sufficient for investments compared with the 4 to 5 percent yields of international bonds,” Shin Kong Financial vice chairman and president Victor Hsu (許澎) said.
Capital gains from property sales also take much longer time to book, he added.
During the first half of the year, Shin Kong Financial’s net income surged 98.7 percent year-on-year to NT$6.59 billion, or NT$0.61 per share. Net income from Shin Kong Life grew by 848 percent year-on-year to NT$3.51 billion in this period, while earnings from its banking arm, Shin Kong Commercial Bank (新光銀行), posted an 8.5 percent annual growth to NT$2.59 billion.
However, the company said that lower than expected bond yields of domestic bonds averaging at 2.4 percent have hampered Shin Kong Life’s investment returns in the first half, which came to 3.84 percent, lower than last year’s 4.4 percent.
Shin Kong Life trimmed its portfolio to NT$19.8 billion in the second quarter and plans to sell a further NT$15 billion in stocks this quarter, as the insurer aims to focus its portfolio on international equities and bonds in the second half of the year.
In an effort to improve profitability and meet consumers needs, Shin Kong Life said that as of Tuesday last week, it had converted 1,793 savings and death benefit insurance policies to long-term care and health insurance policies. The value reserve estimated of the policies at NT$530 million prior to their conversion.
The company said that such conversions can contribute a 5 to 10 percent rise in fees income and help improve embedded value ratings.
Shin Kong Financial shares yesterday gained 1.53 percent to NT$7.3 in Taipei trading, rebounding from Monday’s intraday low of NT$6.89.
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