Fitch Ratings says Taishin Financial Holdings Company, Ltd's proposed all-cash acquisition of New York Life Insurance Taiwan Corporation (New York Life Taiwan) has no immediate impact on the ratings of the Taishin group, including the non-operating holding company and its subsidiaries. The transaction is scheduled to be completed by Q113, subject to regulatory approvals.
Fitch expects the acquisition to only slightly increase financial leverage at the holding company level and have limited impact on the group's financial profile. New York Life Taiwan's asset size (TWD78.7bn at end-Q112) only represents around 3% of Taishin group's consolidated assets on a pro-forma basis. Meanwhile, the deeply discounted acquisition price (TWD100m or a mere 2% of New York Life Taiwan's equity value as of end-Q112) mitigates the potential negative impact arising from New York Life Taiwan's legacy policies of high guaranteed rates.
New York Life Taiwan is one of the small life insurance companies in Taiwan with around 0.5% market share in terms of total premium. The need for fresh capital arising from a negative spread problem is largely mitigated by its relatively low carrying cost of insurance liabilities compared with peers in Taiwan. Fitch views that the acquisition is likely to facilitate the group's strategy of diversifying revenues and enhancing its wealth management business. Nonetheless, this may bring about challenges including the stretching of management resources and a potential cannibalisation of its well-developed bankassurance sales through its existing open-platform insurance product offering.
Taishin group's ratings are as follows:
Taishin Financial Holdings Company, Ltd:
Taishin International Bank:
Taishin Securities Co., Ltd: