Fubon Financial to Buy ING’s Taiwan Unit

Fubon Financial Holding Co Ltd. said it agreed to acquire ING Life Insurance Co. Ltd. in Taiwan for $600 million (447.7 million euros), just a day after parent ING Groep N.V. announced it would get a 10 billion euro capital injection from Dutch government for its insurance and banking units.

The acquisition will make Fubon the second largest life insurer in Taiwan. The merger of Fubon Life Assurance and ING Life is scheduled to be completed in the first quarter of 2009, according to a joint statement. The acquisition will boost Fubon's total life insurance assets from NT$361 billion (8.3 billion euros) to about NT$1 trillion.

ING will be paid in shares and subordinated debt securities of Fubon Financial. The transaction will result in ING holding 5% of Fubon Financial's shares, which represents a value of about 165 million euros based on the closing stock price of Oct. 17. The transaction will cause ING a book loss of 427 million euros after taxes, ING said.

"We commit to keep ING Life Taiwan policyholders' rights and interests unchanged post the acquisition," said Fubon Financial Chairman and Chief Executive Daniel Tsai. The merger will significantly boost Fubon's insurance revenue in Taiwan by adding ING's 2.2 million customers to Fubon Financial's 6.5 million customers.

Following the deal, ING said it will not pull its fund management operations out of Taiwan. "In addition to our 5% 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 insurance.

ING first entered Taiwan in 1987, then merged with Aetna's life insurance operations in Taiwan, acquired in 2001. The Dutch insurer earned NT$73.3 billion in premium and made NT$1.3 billion in profit in the first half of this year, ranking as the fifth largest life insurer with a market share of 6.8%, according to Victor Kung, president of Fubon Financial.

With 8,100 agents accounting for 8.9% of agency market share, ING's distribution network is one of the major attractions for Fubon. "ING Life Taiwan's strong tied agent network will greatly enhance Fubon's distribution capabilities," said Fubon Financial Vice Cchairman Richard Tsai in a statement.

ING's agent distribution network, "complementary" product portfolio, strong market growth and "healthy" investment strategy were cited as some of attractions for the deal, said Kung in a presentation. ING's premium income grew 12% from 2003's NT$88 billion to 2007's NT$136 billion. In addition, ING's "conservative" asset portfolio with about 50% of the assets invested in Taiwan government bonds "supports a stable return and reduces earning volatility," said Kung.

As the leading banking and financial institution in Taiwan, Fubon Financial is pursuing expansion in overseas markets. Earlier this year, it planned to list its exchange-traded funds in Hong Kong to attract local and China investors seeking exposure to Taiwanese investments. It is also considering listing new shares in the Hong Kong Stock Exchange.

In China, Fubon Financial and Fubon Insurance are now waiting for Chinese regulatory approvals for retail banking and insurance operations. Once approved, the group will become the first Taiwanese company to have operations in both retail banking and insurance in China. Fubon Financial is also looking to acquire a 19.99% stake in Xiamen City Bank through its subsidiary Fubon Bank Hong Kong.

Founded in 2001, the publicly-listed Fubon Financial holds banking and insurance subsidiaries such as Taipei Fubon Bank, Fubon Bank Hong Kong, Fubon Life Assurance, Fubon Insurance, Fubon Securities and Fubon Asset Management.

With a market share of 13%, Fubon Life Assurance recently won a bid to use a piece of government-owned land for property development in Hisn-i district of Taipei for 50 years. Fubon Financial will pay a royalty charge of NT$3.7 billion for the 6,373 square meters of land and rent equivalent of 5% of annual land value.

(By Iris Lai, Hong Kong bureau manager: [email protected])