E.Sun Financial Holding Co (玉山金控) plans to inject at least half a billion dollars to revive a struggling life insurance firm it is acquiring, as part of its broader ambition to become a more prominent player in Taiwan’s increasingly competitive financial sector.
The Taipei-based financial holding company plans to transfer around NT$17 billion (US$544 million) in cash — drawn from the group’s profits — to Mercuries Life Insurance Co (三商美邦人壽) next year and in 2027, E.Sun chairman Joseph Huang (黃男州) said in an interview on Monday.
The group also has plans for Mercuries Life to further strengthen its financial position by issuing at least US$100 million in US dollar-denominated subordinated bonds in Singapore next year.
Photo: Wang Yi-sung, Taipei Times
Earlier this month, E.Sun emerged as the winning bidder to acquire Mercuries Life — an insurer that has repeatedly failed to meet Taiwan’s regulatory capital requirements — in a US$1.6 billion share-swap deal expected to be completed in August next year.
While the acquisition will give E.Sun long-sought exposure to the insurance business, ratings agencies have cautioned that the merger could weaken the group’s overall credit profile in the short term.
E.Sun will face the immediate challenge of having to improve Mercuries’ capital situation and adopting stricter accounting rules for Taiwan’s insurance companies starting in January next year.
“The capital issue was what we considered most carefully in this deal,” Huang said, wearing the group’s signature green-tinted suit — a uniform required for all senior executives during public appearances, embodying the bank’s culture of uniformity and discipline. “We plan to exceed the regulator’s expectations by bringing Mercuries Life’s capital level above the regulatory standard in less than half the expected time.”
Acquiring Mercuries turns E.Sun into the fifth largest of Taiwan’s 13 financial groups — excluding a fully owned state bank — with assets totaling NT$5.9 trillion as of September. Prior to the deal, E.Sun ranked eighth.
Issuing US dollar debt is “a very cheap way to raise capital” for Mercuries Life, according to Huang, as the insurer can reinvest the proceeds in US bonds, reducing the effective cost to just 70-80 basis points — the spread between the bond’s coupon and the expected yield from the reinvested assets. “It also eliminates currency mismatch risk,” he said.
“If market conditions worsen significantly and E.Sun’s earnings fall short of expectations, I can issue preferred shares as a last resort to boost capital,” Huang said.
He expects Mercuries to return to profitability next year and generate around NT$10 billion in profit within three years, contributing roughly a fifth of the parent group’s earnings.
E.Sun will retain all of Mercuries’ staff and seek to hire more talent to revamp the insurer’s investment team. In the early 2020s, a string of poor investment decisions involving inverse exchange-traded fund resulted in heavy losses and regulatory fines, severely eroding the firm’s capital and ultimately paving the way for its sale.
E.Sun was founded in 1992 as a commercial bank before later expanding into securities, venture capital, and more recently asset management. The purchase of Mercuries Life is seen as a crucial step in E.Sun’s effort to build a full-stack financial services platform.
Despite the New Taiwan dollar’s historic appreciation versus the greenback in May causing headaches for local insurers through the rest of the year, Huang believes that pressure from exchange and interest rates will ease as currency hedging costs decline, supported by the new reserves system and a potential change in accounting rules aimed at further reducing the foreign exchange burdens.
Policy sales are also expected to recover as the US Federal Reserve begins cutting interest rates, he said. “So we feel the timing is right to make the acquisition.”
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