Fubon Life Insurance Co., a unit of Taiwan’s second-biggest financial company by assets, plans to buy as much as $3 billion of overseas properties after rules on insurers’ real estate investments were eased.
Fubon Life wants to buy $2 billion to $3 billion and expects to reach that target in the next four to five years, Vice Chairman Howard Lin said in an interview yesterday in Taipei. The company, with about $70 billion in assets under management, is looking for its first overseas purchase, he said.
Taiwan’s Financial Supervisory Commission in April allowed insurers seeking stable returns to invest in real estate abroad, after limiting them from purchasing domestically to rein in commercial property prices on the island. Insurance companies accounted for about 40 percent of commercial property transactions on the island, which rose to the highest since at least 2008, before the ban last year.
“Rents in Taiwan are not rising as fast as prices, so investment margins on domestic properties are quite low,” said Lin, who was appointed chief investment officer of parent Fubon Financial Holding Co. (2881), on Oct. 1. “When you allow insurers to buy overseas properties, they can choose from more buildings and it’s certainly a good thing for them.”
Fubon Financial rose 3.2 percent to close at NT$42.00 in Taipei, the biggest gain since June 27.
Real estate investment in Taiwan rose to NT$302 billion ($10.3 billion) in 2012, up 13 percent from a year earlier, fueled by demand from insurers including Fubon Life, Cathay Life Insurance Co. and Nanshan Life Insurance Co., according to figures compiled by CBRE Group Inc., the world’s biggest commercial realtor.
An index compiled by broker DTZ Holdings Plc shows office prices in Taiwan rose to the highest since at least 2005 at the end of 2012.
The commission in April recommended six cities for insurers to buy properties: New York, London, Toronto, Frankfurt, Shanghai, and Ho Chi Minh City. Overseas real estate purchases by Taiwanese insurers will have to be approved by the commission.
Fubon will also look at Tokyo and Paris, Lin said, adding that the company wants properties with a gross margin of more than 4.5 percent. Fubon Life’s property investments in northern Taiwan have a margin of about 3 percent, while its investments in central and southern Taiwan have a margin of 4 percent to 4.5 percent, he said.
Fubon Life aims to raise its real estate holdings to about 5 percent to 10 percent of total investments, from about 5 percent, Lin said.
The company is among a few big Taiwanese insurers that so far meet the commission’s capital ratio rule, allowing them to invest in overseas properties, according to CBRE.
In August, the government lifted some restrictions, including a ban on buying of domestic commercial property by insurers with financial irregularities. It kept some measures implemented in November to control office prices, including asking insurers to avoid investing in properties in Taiwan with an annual yield below 2.875 percent.
Fubon Life, which has about $3 billion invested in domestic real estate, Cathay Life and Shin Kong Life Insurance Co. are among insurers that had their ban on property investment lifted this year.
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