Taipei, Nov. 27, 2009 (CENS)--Taiwan Ratings Corp. (TRC) recently placed its long-term and short-term counterparty credit ratings on the following entities of the Chinatrust Financial Holding Co. Group on CreditWatch with negative implications, including the the `twAA-` long-term and `twA-1+` short-term counterparty credit ratings on Chinatrust FHC; and the `twAa` long-term and `twA-1+` short-term counterparty credit ratings on Chinatrust Commercial Bank (CTCB).

The CreditWatch placements follow the group`s announcement that it has signed a memorandum of understanding with the Hong Kong-based China Strategic Holdings Ltd. group to acquire a 30% stake (valued at US$660 million or NT$21.2 billion) in Nan Shan Life Insurance Co. In return, China Strategic will acquire 1.17 billion shares in Chinatrust FHC (approximately 9.95% stake valued at NT$20.8 billion) through the financial holding company`s planned 2.5 billion new common shares issuance.

The CreditWatch placement reflects TRC`s view that the Chinatrust FHC may face higher business and operating risks from managing its new life insurance business in partnership with the China Strategic. Bank-centric Chinatrust FHC has a limited track record managing life insurance risks in Taiwan`s intensely competitive insurance market, particularly the problem of negative spread where the average guaranteed rate to existing policyholders outweighs the yield on invested assets.

In addition, Chinatrust FHC may require additional resources to manage Nan Shan Life`s large in-force book, regardless of Nan Shan Life`s future strategic or investment association with the group.

(by Ben Shen)