Nan Shan Life will reclassify its financial assets

  • By Kao Shih-ching / Staff Reporter

Nan Shan Life Insurance Co (南山人壽) is set to reclassify its financial assets in a bid to improve its financial strength, with three other local life insurance companies likely to follow suit in the near term, it said. the Financial Supervisory Commission (FSC) yesterday.

The asset reclassification is expected to increase Nan Shan Life’s net equity by over NT$300 billion ($9.42 billion) and push its equity-to-asset ratio, a solvency indicator, to over 5%. at the end of this month, compared to minus 0.59% at the end of last month, the company said in a statement on Tuesday.

“Under International Financial Reporting Standards 9 (IFRS 9), our reclassification would be backdated to October 1 and our equity would no longer be materially affected by rate changes,” Nan Shan Life said in the statement.

Photo courtesy of Nan Shan Life Insurance Co

Nan Shan Life said it was confident about its cash flow and solvency, adding that the rights of its policyholders would not be affected by volatility in global financial markets.

After Nan Shan Life, Cathay Life Insurance (國泰人壽), China Life Insurance Co (中國人壽) and PCA Life Assurance Co (保誠人壽) are expected to reclassify their assets to improve their financial profile, said FSC Chairman Thomas Huang (黃天牧). a meeting of the Legislative Assembly Finance Committee yesterday.

Lawmakers slammed Huang and the commission for allowing insurance companies to reclassify their assets, saying the move was an attempt by insurers to ‘dress up’ their financial statements, which is likely to create a loophole in financial oversight .

Democratic Progressive Party (DPP) lawmaker Kuo Kuo-wen (郭國文) suggested that the FSC consult with the International Accounting Standard Board on whether the reclassification is legal under IFRS9, as the question aroused a controversy in Taiwan.

DPP lawmaker Kao Chia-yu (高嘉瑜) demanded that Huang promise that Nan Shan Life would not be vulnerable to a financial crisis in the next five years.

Huang said he will closely supervise the insurer every day during his tenure.

He added that the decline in net equity of life insurers was not due to operational problems, but to rapid rate hikes by central banks.

As the four life insurers have more than 17 million policyholders, allowing them to reclassify their assets should reassure policyholders, Huang said.

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