financial services company Fubon Financial Holding Company (FFH) is
to acquire Netherlands bancassurer ING’s Taiwan life insurance unit
ING Antai Life in a non-cash deal worth $600 million has not been
well received by ratings agency Moody’s.
Following the release of details of the deal Moody’s announced
that while affirming FFH’s Baa1 issuer rating it had changed its
outlook to negative from stable. According to Moody’s, bonds rated
Baa are viewed as medium-grade obligations, being neither highly
protected nor poorly secured and cannot be regarded as having
outstanding investment characteristics.
Though the deal will increase FFH’s share of Taiwan’s life
market to about 14 percent, making it the country’s second-largest
life insurer, Moody’s explained that it had changed its outlook to
negative primarily because of the significant negative spread
carried by ING Antai high-guarantee and long-duration policies sold
by ING Taiwan prior to 2001. Moody’s added that it also remains
concerned about the capital adequacy at FFH’s Fubon Life unit
because its capital position has weakened. This situation is due
mainly to mark-to-market losses associated with its equity
investments which made up 16.9 percent of its investment portfolio
as at 30 June 2008.
The $600 million consideration to be paid by FFH for ING Antai
will be financed by the issue of new shares and Tier 2 qualifying
subordinated bonds to the Netherlands bancassurer. Following
closure of the transaction ING will have a 5 percent stake in FFH
worth €165 million ($205 million) based on FFH’s closing share
price on 17 October 2008. The transaction will result in ING
sustaining an after-tax book loss of €427 million.
In a statement, ING said the sale of ING Taiwan was in keeping
with its strategy of actively managing its businesses, allocating
capital to those that generate the highest return.
“In addition to our 5 percent shareholding in Fubon, we remain
committed to the Taiwanese market through our funds management,
real estate and wholesale banking activities,” said Hans van der
Noordaa, ING’s executive board member responsible for Asia-Pacific
ING established ING Antai in 1987 and in 2001 merged it with the
acquired Taiwan life insurance unit of US insurer Aetna. ING Antai,
which has a number of distribution channels including 18,000 tied
agents, reported gross premium income of €656 million in the second
quarter of 2008, down from €854 million in the second quarter of
2007. Profit after tax in both periods was reported as zero.
In addition to Fubon Life, FFH’s interests include Taipei Fubon
Bank, general insurer Fubon Insurance, Fubon Securities and Fubon
Asset Management. As at 30 June 2008 FFH had shareholders equity of
NT$156.8 billion ($4.67 billion) and total assets of NT$1.9