Volatile global equity markets during the second and third quarters dragged down Fubon Financial Holding Co’s (富邦金控) book value per share and caused its insurance unit to report an unrealized loss on its financial assets, according to the latest company statistics released on Wednesday.
Book value dropped to NT$34.7 per share as of the end of September, compared with NT$36.3 over the same period last year, Fubon Financial said.
In addition, Fubon Life Insurance Co (富邦人壽) posted an unrealized loss of NT$24.65 billion (US$753.8 million) from its available for sale position as of the third quarter, its parent company said.
That was a sharp contrast to an unrealized gain of NT$22.42 billion Fubon Life booked at the end of the second quarter, mostly derived from its equity positions.
While as of the end of last month, Fubon Life still reported an unrealized loss of NT$4.2 billion, compared with Cathay Life Insurance Co’s (國泰人壽) NT$3.4 billion unrealized gains, analysts said equity market risk would remain manageable going forward as global stock markets have started to stabilize this quarter.
Fubon Life’s recurring yield is likely to rise from 3.92 percent in September, as equity investment only accounts for 15.1 percent of its total investment assets and the insurer is continuing to shift its investment allocation from domestic to overseas bonds, analysts said.
“Whether Fubon Life can improve its fixed income return [68 percent of investment assets] going forward is a more important question to ask,” Daiwa Capital Markets analyst Christie Chien (簡民惠) said in a note on Wednesday. “Given the [US] Fed’s upcoming rate hike, the answer is likely positive.”
US Federal Reserve policymakers signaled in their Federal Open Market Committee (FOMC) statement on Oct. 28 that they are preparing to raise the benchmark federal funds rate target next month if the US economy makes additional progress toward their goals of maximum employment and stable prices.
Despite the plunge in unrealized gains, Fubon Life generated NT$38.8 billion, or 67 percent of total profits, for Fubon Financial in the January-to-September period, with first-year premiums rising 4.3 percent year-on-year to NT$341.3 billion during the period.
From January to September, Fubon Financial’s aggregate net income rose 8.6 percent year-on-year to a record high NT$58.18 billion, or earnings per share of NT$5.69, compared with last year’s NT$53.58 billion, or earnings per share of NT$5.24.
In the first nine months, Fubon Financial’s total assets grew 13 percent year-on-year to NT$5.86 trillion. During the period, return on equity was 20.31 percent, the highest in the company’s history, the firm said in a statement.
Meanwhile, Fubon Financial also said that it is planning new fundraising for potential merger and acquisition activities in Southeast Asia or China, after its board approved issuing 558 million new common shares, raising up to NT$25 billion in new capital.
“With NT$10 billion in preferred stocks, we estimate the raising of NT$35 billion in total capital, with a 7.3 percent share count dilution,” Yuanta Securities Investment Consulting Co (元大投顧) analyst Peggy Shih (施姵帆) said in a note yesterday.
The company plans to file for regulatory approval of the fundraising plan by the end of this year.
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