The Financial Supervisory Commission (FSC) yesterday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$939,415) for a reckless investment that endangered its solvency, and suspended its chairman Eugene Wu (吳東進) for poor supervision.
The penalty is the second-highest in a single case after Nan Shan Life Insurance Co (南山人壽) was fined NT$30 million in September last year and its chairman Du Ying-tzyong (杜英宗) suspended for two years, the commission said.
In three rounds of special and regular examinations conducted since last year, the commission found that Shin Kong Life had given too much power to an asset and liability management committee on investment decisions, without any checks, Insurance Bureau Director-General Shih Chiung-hwa (施瓊華) told a news conference in New Taipei City.
Photo: Kao Shih-ching, Taipei Times
The committee, led by Wu, increased its investment by NT$96.66 billion in several US stocks and exchange-traded funds in two consecutive days in January, ignoring warnings from the insurer’s risk management department, Shih said.
However, as US stocks tumbled, the insurer’s value-at-risk, a measure of the risk of investment loss given market conditions, increased to 43.33 percent by the end of March 27, which was 2.75 times higher than the 15.73 percent limit set by the insurer’s board members, Shih added.
The investment also caused the insurer’s equity-to-asset ratio, a key solvency gauge, to fall to 2.2 percent as of the end of March, below the regulatory minimum of 3 percent, she added.
“Even though the firm’s risk-based capital ratio dropped below the board member’s goal of 250 percent, the committee did not discuss how to improve it. There were no minutes of the committee’s meetings, which indicates poor internal controls,” Shih said.
Wu, who should have ensured the firm’s financial strength and solvency, on the contrary weakened them by allowing the committee not to report to the board of directors and appointing more than half of the committee’s 16 members, so the commission suspended his chairmanship and barred him from becoming a board member until his term ends in June 2023, she said.
“We expect the insurance company to get back on track by overhauling its mechanisms for investment and risk management while Wu is absent,” Shih said.
The commission also dismissed Shin Kong Life vice president and chief investment officer James Yuan (袁宏隆), as he ignored risks by taking on fixed-income stocks with poor liquidity, asking the firm’s research team to revise reports so that the investment team could invest in targets and make at-the-close orders in the local stock market to boost its asset valuations.
The commission said that it has lowered the insurer’s ratio of overseas investment to a total investment of 39 percent, from 43 percent, which means that the firm can only sell its foreign assets and cannot buy any new targets until the ratio drops, it added.
The commission did not set a deadline for Shin Kong Life to trim the ratio, but demanded that it not buy any local or foreign stocks and exchange-traded funds before the adjustment is completed, Shih said.
ELECTRONICS BOOST: A predicted surge in exports would likely be driven by ICT products, exports of which have soared 84.7 percent from a year earlier, DBS said DBS Bank Ltd (星展銀行) yesterday raised its GDP growth forecast for Taiwan this year to 4 percent from 3 percent, citing robust demand for artificial intelligence (AI)-related exports and accelerated shipment activity, which are expected to offset potential headwinds from US tariffs. “Our GDP growth forecast for 2025 is revised up to 4 percent from 3 percent to reflect front-loaded exports and strong AI demand,” Singapore-based DBS senior economist Ma Tieying (馬鐵英) said in an online briefing. Taiwan’s second-quarter performance beat expectations, with GDP growth likely surpassing 5 percent, driven by a 34.1 percent year-on-year increase in exports, Ma said, citing government
SMART MANUFACTURING: The company aims to have its production close to the market end, but attracting investment is still a challenge, the firm’s president said Delta Electronics Inc (台達電) yesterday said its long-term global production plan would stay unchanged amid geopolitical and tariff policy uncertainties, citing its diversified global deployment. With operations in Taiwan, Thailand, China, India, Europe and the US, Delta follows a “produce at the market end” strategy and bases its production on customer demand, with major site plans unchanged, Delta president Simon Chang (張訓海) said on the sidelines of a company event yesterday. Thailand would remain Delta’s second headquarters, as stated in its first-quarter earnings conference, with its plant there adopting a full smart manufacturing system, Chang said. Thailand is the firm’s second-largest overseas
‘REMARKABLE SHOWING’: The economy likely grew 5 percent in the first half of the year, although it would likely taper off significantly, TIER economist Gordon Sun said The Taiwan Institute of Economic Research (TIER) yesterday raised Taiwan’s GDP growth forecast for this year to 3.02 percent, citing robust export-driven expansion in the first half that is likely to give way to a notable slowdown later in the year as the front-loading of global shipments fades. The revised projection marks an upward adjustment of 0.11 percentage points from April’s estimate, driven by a surge in exports and corporate inventory buildup ahead of possible US tariff hikes, TIER economist Gordon Sun (孫明德) told a news conference in Taipei. Taiwan’s economy likely grew more than 5 percent in the first six months
SUPPLY RESILIENCE: The extra expense would be worth it, as the US firm is diversifying chip sourcing to avert disruptions similar to the one during the pandemic, the CEO said Advanced Micro Devices Inc (AMD) chief executive officer Lisa Su (蘇姿丰) on Wednesday said that the chips her company gets from supplier Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) would cost more when they are produced in TSMC’s Arizona facilities. Compared with similar parts from factories in Taiwan, the US chips would be “more than 5 percent, but less than 20 percent” in terms of higher costs, she said at an artificial intelligence (AI) event in Washington. AMD expects its first chips from TSMC’s Arizona facilities by the end of the year, Su said. The extra expense is worth it, because the company is