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New Bid for AIG’s Nan Shan Raises Questions on Insurer's Future
By Lee Mayal
Special Contribution
American Insurance Group has been trying for more than a year to sell its Taiwan-based insurance subsidiary, Nan Shan Life Insurance Co. The once-favored bidder for Nan Shan, led by Hong Kong’s Primus Financial Holdings, was rejected in late August by Taiwan’s regulatory watchdog, the Financial Supervisory Commission (FSC), which said the suitor had insufficient financial clout and no track record in insurance.

Now a new wave of bidders is vying for the valuable insurer – the third largest in Taiwan – and some of them, again, have questionable and controversial backgrounds. This is especially true of Mr. Samuel Yin Yen-liang, CEO of Ruentex Group and No. 17 on Taiwan’s billionaires’ list. His initial bid for Nan Shan last year was cast aside reportedly over doubts that he had the ability to finance the acquisition over the long run.

But he’s back again and his renewed interest in Nan Shan may prove to be just as unappetizing to Taiwan’s financial regulators and politicians. One problem: Mr. Yin has strong connections to the ruling Chinese Nationalist Party (Kuomintang or KMT) and close ties to former President Lee Teng-hui. The term-limited president was expelled by KMT after the 2000 elections split-vote fiasco, which allowed the opposition Democratic Progressive Party (DPP) to win for the first time – an outcome that the KMT blamed largely on the former president.

More than politics could hold Mr. Yin’s bid for Nan Shan back. In business, he is not exactly the picture of long-term financial stability. A savvy arbitrageur, Mr. Yin is not known for buying and holding properties, but rather for quick and profitable turnovers of financial services businesses. For example, he has invested in and then sold off stakes in Pacific-Aetna Life, Guang Hua Securities, Fuh Hua Securities Investment Trust, SinoPac Bank, Grand Cathay Securities Corp. among others. He does not have a record of managing complex businesses like Nan Shan over the long haul.

His renewed bid will also raise questions about financing. The main reason: at the same time he is thinking of buying Nan Shan for what surely will be in the range of US$2 billion, he is also pursuing a separate NT$70 billion (or about US$2.3 billion) investment in Kbro Cable. These parallel offerings are fuelling concerns over his ability to fund the acquisitions as well as his long-term commitment to the companies themselves. Even if he can pull together the cash to complete the purchases with the help of third-party financing, Mr. Yin is likely to run into stiff regulatory and political opposition from the Legislative Yuan, Taiwan’s unicameral parliament, where both KMT and DPP are likely to view his bids with suspicion.

This is in part due to Mr. Yin’s close alliances with major political and business figures in mainland China. He has significant stakes in joint ventures with Chinese companies such as the hypermarket chain RT-Mart, of which he and his family own 24 percent, according to Forbes Magazine.

Mr. Yin has also been investigated in the past for financial misconduct and has allegedly been involved in international arms trades. These accusations will surely catch the attention of regulators who will scrutinize his offer for Nan Shan. Taiwan’s National Security Bureau conducted a well-publicized investigation in 2003 that placed Mr. Yin under suspicion of money laundering. Earlier, in 2000, he was suspected of having had an association with known arms dealers connected to mainland China. The allegations did not result in any charges or convictions against him, but they have continued to cast a shadow over his business dealings.

This is not to say that Mr. Yin is not a substantial and, in many ways, a respected executive in Taiwan, Hong Kong and China. He is, in fact, regarded by many corporate insiders as both a clever businessman and a generous philanthropist. His Hong Kong Guanghua Education Foundation has made major contributions to a Beijing business school and has funded more than 110,000 scholarships for students enrolled in mainland universities.

But Mr. Yin is a person who also has many detractors and AIG clearly needs to recognize this and weigh not just its own best interests but also the best interests of Taiwan in deciding who will buy Nan Shan. Rather than continuing to pursue divestment strategies that will likely run afoul of Taiwan’s government, a wiser course for AIG would be to focus on bids for Nan Shan that come from reputable, stable, local financial institutions with both the wherewithal and the interest in running Nan Shan for years to come. Thousands of Taiwan jobs are at stake. Several top companies, such as Fubon Financial Holding and Chinatrust Financial Holding, are already vying for Nan Shan and have such histories.

Which points the way to the best possible resolution: if AIG is actually interested in passing regulatory hurdles and selling off Nan Shan anytime soon, the American insurer would be well-served to raise the bar and choose a partner who takes Taiwan’s welfare into account.

Lee Mayal






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