China Development Financial Holding Corp (CDFHC, 中華開發金控) yesterday said that it is to fully acquire China Life Insurance Co (中國人壽) through cash payments, stocks swaps and raising capital by issuing new stocks.
“We might purchase part of China Life’s outstanding shares from its retail shareholders and gain other shares through a stock swap. We are also mulling raising new funds by issuing special stocks or common stocks,” CDFHC acting president Hsu Daw-yi (許道義) told an investors’ conference in Taipei.
The company has not finalized its financing plans, including the swap ratio and the amount of capital to be raised, but Hsu said it would do so in the near term.
“The core focus here is that we need to outline a plan acceptable to CDFHC and China Life shareholders,” Hsu said.
Last week, the Financial Supervisory Commission advised CDFHC to avoid a high leverage ratio in the acquisition, such as by solely borrowing money, while giving the company a grace period of 27 months to complete the acquisition.
CDFHC must complete the deal before June 13, 2022, when its board members’ terms expire, the commission said.
The company did not reveal when it would begin buying China Life shares, but said it would conduct the transactions “with the right tools, at the right time.”
Separately, CDFHC is optimistic that it would turn a profit this quarter after reporting a net loss of NT$488 million (US$16.2 million) in the first quarter, on expectations that containment of COVID-19 would boost the global financial market, Hsu said.
Its investment arm, CDIB Capital Group (中華開發資本), trimmed its direct investment to NT$28 billion at the end of last month, from NT$30.9 billion a quarter earlier, and would continue to do so to avoid risks, it said.
The unit lost NT$1.36 billion in the first quarter due to the declining value of its investment portfolio.
Its banking unit, KGI Bank (凱基銀行), would strive to keep its net interest margin, a gauge of banks’ profitability, at a higher level than last year, despite the central bank’s rate cut of 25 basis points last month, it said.
“We improved the gauge from 1 percent in the first quarter to 1.16 percent in the final quarter of last year by adjusting our lending portfolio and concentrating on assets that generate better interest income,” KGI president Amy Tsao (曹慧姝) said.
The bank is cautious for the second and third quarters, as lending might slow down if the pandemic continues, Tsao said, adding that her team has tightened its reviews of loan applications and quality control.
Meanwhile, China Life, which is 35 percent owned by CDFHC, would focus on increasing the profitability of new products, after its first-year premiums declined in the first quarter due to the effects of COVID-19, the company said.
This story has been corrected since it was first published, which incorrectly stated in the eighth paragraph that CDFHC reported a net loss of NT$1.59 billion (US$52.95 million) in the first quarter. The online version of this story shows the correct figure of NT$488 million (US$16.2 million).
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