S&P Puts Taiwan’s Mingtai on CreditWatch/Positive

April 26, 2005

Standard & Poor’s Ratings Services announced that it has placed its “A-” insurer financial strength and long-term counterparty credit ratings on Taiwan-based Mingtai Fire & Marine Insurance Co. Ltd. on CreditWatch with positive implications.

S&P also affirmed its “BBB-/A-3” counterparty credit ratings on First Financial Holding Co. Ltd. (First FHC), which wholly owns Mingtai Insurance, and its “BBB/A-3” ratings on First Commercial Bank Ltd. (FCB), which is the core operating subsidiary of First FHC. The rating outlooks on First FHC and FCB are stable.

“The CreditWatch placement follows an announcement on April 22, 2005 that First FHC had agreed to sell Mingtai Insurance to Japan-based Mitsui Sumitomo Insurance Co. Ltd. (MSI, AA-/Stable/A-1+) for Taiwan dollar 8.4 billion [U.S. $266 million] in cash,” said S&P. “Mingtai Insurance might benefit from its new ownership in terms of additional financial flexibility and business development prospects. The proposed transaction is expected to close in the third quarter of 2005.”

S&P noted that the “resolution of the CreditWatch placement is subject to shareholders’ and regulatory (both Taiwan and Japan) approval. This is the first case in Taiwan of a financial holding company divesting an operating subsidiary.”

The rating agency said it would “assess the impact of the ownership change on Mingtai Insurance’s business strategy and financial profile, with a view to further rating action. The ratings on Mingtai Insurance continue to reflect the company’s position as the second largest insurer in Taiwan’s non-life insurance market, its consistently satisfactory operating performance, and adequate capitalization.”

S&P added that these “strengths are partly offset by Mingtai Insurance’s high usage of reinsurance, and the potential for operational volatility amid an intense competitive environment.

“The ratings affirmation on First FHC and FCB reflects the expectation that the divestment of Mingtai Insurance will not materially affect the group’s financial profile and business operations. Mingtai Insurance contributed less than 5 percent of the group’s consolidated net worth and profit since it joined the group in July 2003. First FHC aims to focus on its core banking business and plans to position itself in the domestic market. First FHC’s double leverage ratio will fall to about 90 percent from its current level of 99 percent as a result of the divestment, and is expected to remain at a manageable level over the medium term.”

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