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September 24, 2017

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A closer look at the two ailing insurance carriers

On Aug. 12 the Financial Supervisory Commission (FSC) announced its decision to place two ailing insurance carriers, namely Global Life Insurance Co. (國寶人壽) and Singfor Life Insurance Co. (幸福人壽) under government receivership, a NT$50-billion injection that shows the government is willing to avoid problems in the financial sector.

As the FSC drafts amendments to ensure that the incident will mark the end of government bailouts in the insurance sector, it is worth taking a closer look at the findings that have been made in the aftermath, especially with an eye toward the November elections.

The FSC on Aug. 12 stated that the two companies' performance started deteriorating in 2005 and 2006. 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 of this year, while Singfor Life's net worth 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 of this year.

If reported by insurance carriers abroad, similar figures would have drawn swift repercussions from regulators. Here, the ailing companies were allowed to linger in intensive care for nearly a decade and given ample time in which to show signs of improvement. The two companies continued to receive citations for inadequacies in their operations, including capital allocation management, corporate governance, internal auditing processes and overseas investment planning.

With the November elections looming on the horizon, it is worth noting that Singfor Life is known to have been established by the Kuomingtang (KMT) in 1993 as part of the ruling party's vast portfolio of assets. The company was sold to former KMT lawmaker Huang Chang-yi (黃正一) in 2006. Since then, the firm had received two citations by the FSC for irregularities relating to two land investments in Taipei's Xinyi District (信義區).

In addition, shortly after the bailout, reports came out suggesting that of the company's estimated 520,000 policy holders, 300,000 are known members of the KMT. Singfor Life yesterday denied these allegations by stating that it has only 130,000 policy holders, leaving the public confused about how such a small-scale financial institution could have accumulated a negative net worth of NT$23.9 billion.

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