The Haney Group looks at recent developments with the lifting of strict rules for property holding by Insurance companies as the Taiwanese Government starts a buying spree led by Fubon Life Insurance Co.
The Haney Group a boutique equity research and management firm based in Hong Kong founded by a diverse private wealth consortium of financial professionals, with a combined knowledge of the stock markets, tax legislation, legal compliance and market analysis. Priding themselves in giving the very best service to their institutional investors, high net worth individuals and private investors today commented on Taiwanese companies, in particular insurance providers having had a long history of diversification into commercial properties on the island nation.
This market has slowly been shrinking for investors as government controls limit rent increases in commercial buildings and strict regulation on capital to asset ratios have seen profit margins decrease in most areas. With the lifting of some of these regulations, new life has entered the sector with many of the largest investors undertaking large-scale acquisition strategies.
Fubon Life Insurance Co, itself owned by Fubon Financial Holding Co, is the second largest such Taiwanese financial company by asset value and is the first to respond to the changes by announcing an investment plan of up to $3 billion in overseas property purchases over the next 5 years. The move is aimed to capitalize on offshore properties where Fubon expects to achieve between 4-5 percent margins on returns as opposed to some of its Taiwanese holdings that are limited to only 3 percent primarily in the North of the country.
“The easing of the regulations on insurers holding property especially overseas has come at a very opportune time for the industry, the largest of these companies has more than enough capital to meet the lower standards and the ability to seek out the best performing assets absent artificial controls will see their bottom lines rise accordingly. When you also look at the lowered overall property values on offer at the moment they can and will treat it as a buyer’s market,” commented David Roberts, the Senior Vice President of Mergers and Acquisitions at The Haney Group.
Taiwan’s real estate investment had risen 13 percent in 2012 to be valued at $10.3 billion, 40 percent of which was handled by the country’s insurers before the tightening of regulations. With news of the approval for renewed investment by larger insurers, Fubon saw its share value gain 3.2 percent bringing its ROI for the year to date to 36.69 percent. With Fubon’s increased assets of more productive properties set to increase by nearly double from 5-10 percent of their total value, most analysts forecast continuing increases in returns for the company’s shares.
“While it wouldn’t be accurate to say that the restrictions on insurers have had an adverse effect, a quick look at performance by the larger entities like Fubon disproves that notion, they certainly have been having a breaking effect on growth. Now that Fubon and others are free to pursue higher returning properties overseas in select cities, it is not unreasonable to expect increased growth and revenue rates. We will of course continue to track the performance of Fubon and her competitors ensuring that we have all the information to best advise our clients,” added David Roberts, the Senior Vice President of Mergers and Acquisitions at The Haney Group.