Taishin Financial Holding Co (台新金控) yesterday said it would not need to raise fresh capital as it has abundant cash from selling Chang Hwa Bank (CHB, 彰化銀行) shares.
The solvency ratio of its insurance unit remains adequate despite interest rate hikes by global central banks, it said.
“We just raised about NT$19 billion [US$590.6 million] in cash after selling 1 billion shares of Chang Hwa Bank in August and plan to use the money for mergers and acquisitions, or to strengthen the working capital of our subsidiaries,” Taishin Financial president Welch Lin (林維俊) told a virtual investors’ conference.
Photo: Kelson Wang, Taipei Times
The company still holds about 510 million CHB shares and can sell them if needed, he added.
While several local life insurers require capital injections from their parent companies as their equity-to-asset ratios fell below the 3 percent minimum amid plummeting bond investments, Taishin Life Insurance Co (台新人壽) does not have such issues, Lin said.
“We use the accounting method of amortized cost for all of our bonds investments. Therefore, our investment value is not affected by rate hikes at all,” Lin said, adding that Taishin Life’s equity-to-asset ratio as of the end of June was 7.08 percent and its risk-based ratio was about 400 percent.
Taiwanese life insurers are allowed to use different accounting methods — amortized cost, fair value through comprehensive income (FVOCI), and fair value through profit and loss (FVTPL).
Those using FVOCI or FVTPL are vulnerable to plunging bond prices when the market rate goes up.
In the first nine months of this year, Taishin Financial saw its net profit fall 53.6 percent to NT$9.48 billion, or earnings per share of NT$0.58, it said.
The retreat in profit reflected reductions in the handling fees and wealth management income of Taishin International Bank (台新銀行), as well as a plunge in the net profit of Taishin Securities Co (台新證券) in light of tumbling equities in Taiwan, the company said.
The bank’s net interest margin — a closely-watched gauge of banks' profitability — rose to 1.26 percent at the end of last month, thanks to interest rate hikes by the central bank, it said.
Lin said he expects Taishin Financial to distribute cash dividends next year as he is positive about the company’s profit growth this quarter.
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