second-largest life insurer has come to the assistance of Taiwanese
financial services group Shin Kong Financial Holding (SKFH), the
parent company of Shin Kong Life Insurance (SKL), which is
currently in the throws of bolstering its capital base depleted by
investment-related losses sustained by SKL.
Assistance comes by way of a private
placement in which Dai-ichi will acquire SKFH ordinary shares and
SKL preference shares for a total consideration of NT$8 billion
($240 million).
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The investment will increase Dai-ichi’s stake
in SKFH to 14.9 percent, up from the 6.1 percent stake it acquired
in June 2006 for NT$7 billion as part of an alliance agreement with
SKFH.
SKFH’s capital-raising exercise follows an
after tax loss of NT$12.28 billion sustained in the first half of
2008, a loss primarily attributable to a NT$12.83 billion loss
recorded by SKL.
Losses sustained by SKL related to foreign
exchange hedging costs and impairment of investments in
collateralised debt instruments.
The loss left SKL’s equity capital down by
almost a third to NT$49.2 billion despite a capital injection of
NT$7 billion from a rights issue undertaken by SKFH in April 2008
and a further NT$3 billion injected into SKL from SKFH’s own
resources in June. SKFH has seen its share price slump by almost 70
percent since July 2007.
Founded in 1963, SKL boasts a customer base of
about 7 million policyholders and is Taiwan’s second-largest life
insurer based on first-year premium income in 2007 of NT$98.76
billion – giving it a market share of 13.1 percent.
However, SKL’s market share has been falling
steadily from 13.7 percent in the first quarter of 2007 to 11.7
percent in the first half 2008 based on premium income which
increased by 20 percent compared with the first half of 2007 to
NT$56.25 billion.
SKL’s product distribution is focused on tied
agents, 360 branch offices and bancassurance alliances. In 2007
agents and bancassurance accounted for 80 percent and 20 percent of
new premium income, respectively.
SKL’s primary bancassurance partner is SKGH’s
Shin Kong Bank unit which accounted for 55 percent of total
bancassurance sales in 2007.
