Taiwan’s Regulator Reviews Waterland’s Proposed Acquisition of MetLife Taiwan

The sale of MetLife Inc.'s Taiwan life insurance subsidiary to security investment company Waterland Financial Holdings Co. is progressing with regulatory reviews.

While the transaction is subjected to regulatory approval, the companies have not set a time frame for completion of the deal, a spokesperson with Waterland told BestWeek Asia/Pacific.

Publicly-listed Waterland agreed to acquire MetLife's Taiwan life unit for NT$3.5 billion (US$112.5 million) in a bid to expand its business in financial services and to enhance its corporate value in the market.

Waterland said it would keep the management and company structure of MetLife Taiwan after the transaction. The investment company currently does not own any insurance business in Taiwan.

MetLife entered the Taiwan market in 1988 and established its life subsidiary, MetLife Taiwan Insurance Co. Ltd., in 2003. With about 400,000 clients, MetLife offers life, medical, personal accident, annuity and investment-linked insurance products distributed through bancassurance, agents, telephone and direct marketing channels.

The U.S.-based life insurer's Taiwan unit reported a loss of NT$208.5 million in 2009, down from a net income of NT$83.7 million a year earlier, according to MetLife's financial statement. Its premium income amounted NT$15.5 billion in 2009, up from NT$14.4 billion.

In the past two years several foreign life insurance companies, such as ING Groep N.V., Prudential plc and Aegon N.V., announced they would exit the Taiwan market. American International Group Inc.'s sale of its life unit, Nan Shan Insurance Co. Ltd., is still pending regulatory approval.

Recently, New York Life Taiwan Insurance Corp., a subsidiary of the U.S.-based New York Life Insurance Co., rebutted speculation about the sale of its Taiwan business. "Since its establishment 17 years ago, New York Life Taiwan has been receiving support of its parent company and it is committed to the long-term protection of its customers," said the insurer in a statement on May 14.

New York Life said it increased its capital from NT$2 billion in 2005 to NT$6.4 billion in 2009, demonstrating New York Life's commitment to the Taiwan market. With 300,000 policyholders, New York Life reported premium income of NT$12 billion by the end of 2009, supported by an agency network of 1,000 people.

Tightening capital pressure in home markets, the interest of local buyers in expanding market share, slow Taiwanese business growth and less complex regulatory controls on market entry and exit are factors driving acquisitions in Taiwan, according to management consultancy Celent. Life insurers operating in Taiwan also have a problem in the form of losses from changes on interest rates.

The International Financial Reporting Standard has not been implemented in Taiwan, where local insurers do not face the pressure of raising reserve funds to similar levels as European insurers. Therefore, foreign companies started to sell their businesses in Taiwan to release capital for new accounting requirements elsewhere, according to Celent (BestWire, March 2, 2010).

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