As the year-end approaches, insurance companies are actively seeking to bolster their capital by issuing bonds, a trend that has garnered substantial market attention. China's State Financial Supervision Commission's official website revealed that Ping An Life Insurance Company of China, Ltd. (referred to as "Ping An Life") and Youzheng Life Insurance Co., Ltd. (referred to as "Youzheng Insurance") have been approved to issue unlimited-term capital bonds, or perpetual bonds, up to 28 billion and 5 billion yuan, respectively.
Ping An Life's perpetual bond issuance plan was officially approved by the Financial Supervision Commission, with an authorized amount not exceeding 28 billion yuan. Similarly, Youzheng Insurance has been granted approval to issue up to 5 billion yuan in perpetual bonds. The issuance of perpetual bonds by these two insurance companies aims to strengthen their capital strength and enhance their payment capacity.
China United Property & Casualty Insurance Co., Ltd. (referred to as "China United Property") has also been approved to issue capital supplement bonds up to 6 billion yuan. This approval also comes from the Financial Supervision Commission, aiming to help China United Property further improve its capital adequacy ratio.
According to data from the National Interbank Bond Market, as of December 20th, insurance institutions have cumulatively issued 12 capital supplement bonds and 5 insurance perpetual bonds this year, with a total actual issuance of 117.5 billion yuan, slightly higher than the total issuance scale of last year. This indicates that the demand for capital supplementation among insurance institutions remains significant this year.
Industry insiders point out that as the transition period for the second phase of the Insurance "Compensation Generation" approaches, the insurance industry is facing substantial regulatory pressure. However, due to the transformation pressure in the insurance industry in recent years, capital supplementation through equity financing has become relatively difficult. Therefore, under the relaxed regulatory policy, the demand for debt financing among insurance institutions has significantly increased.
It is worth noting that the three insurance companies approved to issue capital instruments have all successfully issued or partially issued the approved capital instruments. Specifically, Ping An Life and Youzheng Insurance successfully issued 15 billion and 9 billion yuan in perpetual bonds, respectively, on December 4th and December 10th, while China United Property issued 6 billion yuan in capital supplement bonds on December 5th.
Insurance perpetual bonds and capital supplement bonds can be used to supplement the core second-level capital and附属一级资本of insurance companies, thereby improving their overall payment capacity adequacy ratio. Among them, insurance perpetual bonds, which were officially launched in November 2023, are aimed at broadening the capital supplementation channels of insurance companies and enhancing their risk resistance capabilities.
As of the end of the third quarter of this year, the core payment capacity adequacy ratio and the overall payment capacity adequacy ratio of the aforementioned three insurance companies have remained at a high level. Specifically, Ping An Life's core payment capacity adequacy ratio and overall payment capacity adequacy ratio were 119.40% and 200.45%, respectively, Youzheng Insurance was 123.22% and 196.88%, and China United Property was 148.28% and 182.62%.
Looking at the entire insurance industry, the demand for capital supplementation this year remains strong. According to the disclosure information of the National Interbank Bond Market, as of December 20th, domestic insurance institutions have issued 12 capital supplement bonds, with a cumulative actual issuance of 83.1 billion yuan. Among them, China Life topped the list with a issuance scale of 35 billion yuan. Insurance institutions have also issued 5 perpetual bonds, with a cumulative actual issuance of 34.4 billion yuan.
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