Shin Kong Life Insurance (新光人壽) has reduced its overseas investment ratio to 39 percent to comply with the Financial Supervisory Commission’s (FSC) requirements, the company said yesterday.
To offset the impact of the adjustment, the insurer said it is looking at new investment targets, eyeing the local real-estate market.
The commission on Sept. 15 demanded that the life insurer lower its overseas investment ratio from 43 percent to 39 percent given the firm’s poor internal controls and reckless investing, which endangered its solvency.
It was a severe punishment for a life insurer, as they typically rely on foreign investments for high returns.
The commission barred Shin Kong Life from buying any local or foreign stocks and exchange-traded funds until it has lowered the ratio.
Shin Kong Life had NT$46 billion (US$1.6 billion) in foreign shares as of the end of September, down from NT$105 billion as of the end of June, as it sold foreign stocks last quarter to trim its overseas investment ratio, the company told an investors’ conference.
Foreign stocks made up 1.5 percent of its portfolio as of the end of September, down from 3.5 percent a quarter earlier, it said.
The company also disposed of some foreign bonds, but did not reveal the amount.
Since its overseas investment has been curbed, Shin Kong Life would concentrate on the domestic property investment for stable, predictable and long-term returns to help match its liabilities, Shin Kong Financial spokesman Sunny Hsu (徐順鋆) said.
“We will seek targets in the six special municipalities that are expected to generate annual rental yields of 2.1 percent or higher, to increase our recurring yield,” Hsu said.
The insurer held NT$210 billion in property investments as of the end of September, or 6.8 percent of its portfolio, which was flat from a quarter earlier, Hsu said.
There is still ample room for Shin Kong to raise its property investment, but it might not be easy to advance the investment quickly due to limited supply, he said.
Shin Kong Life reported that its pre-hedging recurring yield was 3.63 percent as of the end of September, up from 3.32 percent a quarter earlier, as it received cash dividends in the third quarter, Hsu said.
However, that was down from 4.11 percent a year earlier, as it redeemed about NT$200 billion in international bonds in the first nine months, which cut into its profit momentum, Shin Kong Life senior vice president Stan Lee (李超儒) said.
Asked if the firm’s recurring yield would improve next year, Lee said that the recurring yield would rise only if the market rates go up, adding that all Shin Kong could do is slow the downward pressure on its recurring yield by diversifying investments.
Shin Kong Life might apply to the FSC to set aside additional foreign-exchange volatility reserves by the end of this year, given heavy foreign-exchange losses due to the New Taiwan dollar appreciating against the greenback, Lee said.
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