Shin Kong Life to Record US $ 66 Million Gain on Sale of Stake in Loss-Making Insurance JV

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Shin Kong Life, one of Taiwan’s largest life insurers, is expected to post a gain of CNY 428 million ($ 66.3 million) on the sale of its remaining 25% stake in an insurance joint venture. life deficit in mainland China.

The gain is expected to be accounted for by the Taiwanese insurer in its financial statements for this year.

Shin Kong Financial Holdings, the parent company of Shin Kong Life, announced the news on June 29.

Shin Kong Life’s board of directors has approved the sale of its 312.5 million shares (25% stake) in Beijing-based Dingcheng Life.

The transaction amounts to CNY 462.5 million, with the sale price of CNY 1.48 per share. The buyer is the conglomerate Hodo Group, headquartered in Wuxi. The sale is pending CBIRC approval to complete.

As Shin Kong’s share in the company’s net assets has been eroded to CNY 34.5 million due to annual losses, the gain on the agreed sale is calculated to CNY 428 million.

A spokesperson for Shin Kong Financial Holdings said the sale was part of the group’s adjustments to its regional business strategies since at least 2018.

Background

Shin Kong Life started the 50-50 life insurance business with the airline and hotel conglomerate HNA Group, headquartered in Haikou. The company was first named Shin Kong-HNA Life. The two partners of Shin Kong-HNA Life apparently disagreed on several issues. The life insurer has suffered losses every year and has been sanctioned by regulators for failing to meet solvency requirements.

In a major upheaval in 2018, Shin Kong Life sold a 25% stake and the HNA Group sold its entire 50% stake to other investors. With the introduction of new shareholders, the CBIRC approved a capital increase for Shin Kong-HNA Life from CNY 500 million to CNY 1.25 billion (Shin Kong Life’s stake was nominally valued at CNY 312.5 million. CNY).

The rejuvenated insurer was renamed Dingcheng Life Insurance on June 10, 2019. But it continued to report net losses for 2019 and 2020. Accumulated losses as of December 31, 2020 amounted to CNY 1.07 billion, or more than 80% of the share capital.

HNA Group

The HNA Group, headquartered in Hainan, made global headlines in the mid-2010s with acquisitions such as hotel chain Radisson and airport ground services company Swissport. It had humble beginnings, as it was founded in 1993 as Hainan Airlines with just one plane.

The Chinese government cracked down on aggressive deals by Chinese companies in 2017 to reduce systemic financial risk. Groups affected included the HNA and the late Anbang insurance group. HNA declared bankruptcy in January 2021 after failing to restructure its mountain of debt. The company has stakes in other insurers, namely Bohai Life and Sinosafe General Insurance.


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