The Financial Supervisory Commission (FSC) yesterday said it has rejected Nan Shan Life Insurance Co’s (南山人壽) application to be listed on the local bourse due to the company’s low equity-to-asset ratio.
Nan Shan’s equity-to-asset ratio was 3.3 percent as of the end of last year and had climbed to 4.54 percent as of the end of February, which was still lower than a minimum of 5.5 percent required for insurers planning an initial public offering (IPO), it said.
“Nan Shan’s plan to list on the Emerging Stock Board does not meet the commission’s standards,” FSC Chairman Wellington Koo (顧立雄) said in a question-and-answer session at a meeting of the Legislative Yuan’s Finance Committee in Taipei.
Insurers who plan to go public must have a higher-than-average equity-to-asset ratio, because listed companies should have better financial abilities, as they are tasked with larger responsibilities when raising funds from the public, Koo said.
The average equity-to-asset ratio of the nation’s 23 life insurers was 5.4 percent as of the end of February, the commission said.
As Nan Shan is an independent firm, unlike most of its peers, which belong to financial holding companies, it has to enhance its financial strength, the commission added.
However, Democratic Progressive Party Legislator Wu Ping-jui (吳秉叡) said the requirement might not be good enough, as life insurers’ equity-to-asset ratios would change quickly in tandem with the valuations of global equities or bonds.
As Nan Shan had large assets totaling NT$4.2 trillion (US$136.1 billion at the current exchange rate) as of the end of last year, it would be a challenge for the firm to improve its equity-to-asset ratio, Wu added.
Koo said that the commission would use insurers’ most recent available equity-to-asset ratios when reviewing their IPO applications.
The commission received Nan Shan’s IPO application in June last year, when it was still defining a set of rules and requirements for the listing of insurers, but it reminded the firm of an impending change in regulations, Insurance Bureau Director-General Shih Chiung-hwa (施瓊華) said.
The bureau turned down the insurer’s application after it released new regulations last month, Shih said.
Nan Shan should re-examine its financial gauges to meet the commission’s IPO requirements, which also include risk-based capital ratio, real-estate investment ratio and corporate governance, the bureau said.
The company said its equity-to-asset ratio had risen to 5.4 percent as of the end of last month, and its board of directors has agreed with the management’s plan to raise NT$24.5 billion, which would lift its equity-to-asset ratio to 5.9 percent.
“We will review our qualifications according to the new regulation and strive for the commission’s approval,” Nan Shan said.
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