The Financial Supervisory Commission (FSC) on Wednesday said that it would scrutinize the financial health of the buyer of Prudential Life Insurance Co of Taiwan (保德信人壽) after local media reported that potential buyers submitted bids on Monday.
“The buyer’s financial strength must be solid enough to support the newly acquired life insurance business, and we will check its double leverage ratio and other gauges that show capital adequacy,” a Banking Bureau official told the Taipei Times by telephone.
Financial strength is critical as local life insurers must adopt International Financial Reporting Standards 17 in five years, which have stricter rules on the calculation of liabilities, the official said.
The buyer must be knowledgeable and competent in the insurance business, protect the rights of policyholders and honor all old policies, the official said, adding that the buyer is expected to retain part of the business’ staff and commit to operating it long-term.
Ruen Chen Investment Holding Co (潤成投資) had to commit to not selling Nan Shan Life Insurance Co (南山人壽) for a decade when it acquired the insurance company in 2011, the official said.
The commission rejected Taishin Financial Holding Co’s (台新金控) application to acquire New York Life Insurance Taiwan Corp (紐約人壽) in 2013, and turned down IBF Financial Holdings Co’s (國票金控) application to acquire MetLife Taiwan Insurance Co (大都會人壽) in 2010, the official added.
“The FSC has the power to veto a sale, so sellers in the financial industry usually take into account the commission’s criteria when reviewing buyers’ profiles, as they do not want to waste their time by selecting a buyer that would fail the regulator’s assessment,” a market analyst said.
The local unit of US-based Prudential Financial Inc on Wednesday confirmed that it is exploring strategic options, including a sale, but did not elaborate.
Taishin Financial Holding Co (台新金控) on Tuesday announced in a regulatory filing that its board of directors on Monday approved tendering a bid for an insurance company, without naming the company for the sake of confidentiality.
The Chinese-language Economic Daily News reported that First Financial Holding Co (第一金控) and Union Bank of Taiwan (聯邦銀行) had participated in the tender.
“It is understandable that some financial conglomerates without insurance units sought to acquire the foreign insurer, as the deal would give them new profit momentum, although they would face more pressure to retain capital adequacy,” Huang Der-yeh (黃達業), emeritus director of National Taiwan University’s Center for the Study of Banking and Finance, said by telephone.
Prudential Life Insurance Co of Taiwan, which began operations in 1990, has 700 sales personnel and 300 employees.
Its net worth fell to NT$7.2 billion (US$240.59 million) at the end of March, from NT$9 billion at the end of last year, company data showed.
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