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FSC orders takeover of insurance carriers

TAIPEI, Taiwan -- Financial Supervisory Commission (FSC) Chairman Tseng Ming-chung (曾銘宗) yesterday announced that the commission has ordered the Taiwan Insurance Guaranty Fund (保險安定基金) to take over two troubled insurance carriers, namely Global Life Insurance Co. (國寶人壽) and Singfor Life Insurance Co. (幸福人壽).

Tseng emphasized that the move is designed to ensure that the two companies will be able to meet all obligations to their clients and preserve the interests of all affected policyholders and employees.

FSC findings indicate that the two companies' financial conditions have been deteriorating rapidly since 2005, and have been lacking progress toward improvement.

Rapid Deterioration in Global Life, Singfor Life Net Worth Figures

Global Life's net worth has declined from 2006's minus NT$100 million to minus NT$8.3 billion in 2008 and minus NT$25.2 billion as of the end of June this year, while Singfor Life's net worth has deteriorated from 2005's minus NT$100 million, to minus NT$16.4 billion in 2008 and to minus NT$23.9 billion in June this year. The net worth of the two companies has continued to tumble on a quarterly basis.

In particular, the FSC deemed a capital injection plan by Global Life via a land trust scheme as unfeasible, citing the inadequate cash contribution by shareholders proposed by the company.

Tseng stated as early as 2005 and 2006 that the two companies' financial conditions had met international criteria for government takeovers, however, time was extended for the Global Life and Singfor Life to produce improvements. The two companies, however, failed to furnish tangible results, said Tseng, adding that since becoming flagged by the regulator, it had continued to perform below expectations. In addition, since becoming flagged, the two companies have received numerous citations over inadequacies in their operations, including capital allocation management, corporate governance, internal auditing processes and overseas investment planning.

Tseng noted that while the takeover officially took place at 5:30 p.m. yesterday, regulatory officials have been embedded at the two companies for the past two years, monitoring them .

Meawhile, the FSC noted that it is mulling over relevant amendments to the Insurance Act (保險法) that will enable regulators to take swift intervention measures against ailing financial institutions before their conditions deteriorate further.

FSC Drafts Contingencies

In addition, the FSC stated that they are preparing to launch a program designed to elevate the competitiveness of the insurance sector, helping local carriers adapt to the coming challenges of Taiwan's growing elderly population, leverage Internet technology in insurance policy sales, improve capital utilization efficiency and strengthen market presence in the Asia-Pacific markets.

Tseng stated that the two companies' missteps are not representative of Taiwan's insurance sector, adding that the incident will hopefully mark the end of government takeovers and bailouts, an outcome not welcomed by regulators.

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