With the widening of interest rate spread, the capital supplementary debt and subordinated debt of insurance companies have attracted institutional attention again.
In terms of scale, according to the data of China stock market news chioce, as of February 10, there were 65 capital supplementary bonds of insurance companies, with a total survival scale of 268.35 billion yuan. The current average (arithmetic average) coupon rate of these 65 bonds is about 4.9%, the highest coupon rate is 7.5%, and the lowest is 3.3%; There are six subordinated bonds of insurance companies, with a total survival scale of 28.66 billion yuan. The total scale of the two bonds reached 297.01 billion yuan.
Due to low risk and high interest margin, compared with other financial bonds, capital supplementary bonds and subordinated bonds of insurance companies have become good targets for institutions to allocate fixed income assets. According to the research report released by Guosheng securities, the external debt rating of capital supplementary bonds and subordinated bonds of insurance companies is mainly AAA, and the survival scale accounts for 74%. At present, the interest margin of these two types of bonds has increased. Considering the importance of insurance subjects, especially major insurance companies in the financial system and low risk, the current interest margin level has formed a rare investment depression of these two types of bonds.
capital supplementary debt and subordinated debt
The total scale of is nearly 300 billion yuan
Capital supplementary bonds of insurance companies, i.e. bonds issued by insurance companies to supplement capital, with an issuance period of more than 5 years (including 5 years), and the repayment order is listed after policy liabilities and other ordinary liabilities, prior to the bonds of equity capital of insurance companies. The definition of subordinated debt of insurance companies is similar, that is, the debt raised by insurance companies with a term of more than 5 years (including 5 years) and the repayment order of principal and interest is listed after the policy liability and other liabilities, prior to the equity capital of insurance enterprises.
In the view of institutional investors, the capital supplementary debt of insurance companies is also a kind of subordinated debt. Yang yewei, a fixed income analyst at Guosheng securities, said that the subordinated debt of insurance companies has experienced a regulatory policy process from allowing the issuance of subordinated debt to capital supplementary bonds and from directional raising to public offering.
In terms of scale, as of February 10, there were 71 bonds of the above two types of insurance enterprises, with a survival scale of 297.01 billion yuan. From the perspective of bond distribution, there are 21 bonds with a survival scale of more than 5 billion yuan, among which the survival scale of China Life Insurance Company Limited(601628) , Ping An Insurance (Group) Company Of China Ltd(601318) , The People’S Insurance Company (Group) Of China Limited(601319) , Taiping Life Insurance, Xinhua Life Insurance and other insurance enterprises is higher.
The reason why insurance companies issue a large number of capital supplementary bonds and subordinated bonds stems from the high demand for capital in the insurance industry and the comparative advantages of these two types of bonds. In the view of insiders, at present, China’s insurance industry is in a new stage of business growth and transformation and development, and the supporting role of capital strength and solvency level in business development is becoming more and more important. At the present stage, the capital replenishment channels are mainly shareholder capital injection, issuance of capital replenishment bonds and profit retention channels, but the capital injection cycle of shareholders is often long, and there are problems such as dilution of equity and high requirements for return on investment; The process of capital replenishment by profit retention channels is relatively slow, which restricts the business expansion; Capital supplementary debt has certain advantages.
Li Wenzhong, deputy director of the insurance Department of Capital University of economics and trade, said that compared with the capital increase through shareholders, insurance companies are relatively less constrained in issuing bonds, shorter issuance cycle and lower issuance cost. At the same time, issuing bonds will not change the current ownership structure, which is more favorable for maintaining the equity stability and business strategy stability of insurance companies. Therefore, for some insurance companies with high core capital, it is enough to issue bonds to supplement subsidiary capital.
In terms of the channels for insurance companies to supplement capital last year, according to incomplete statistics by reporters, the scale of direct capital increase by insurance companies through original shareholders in 2021 is 29.67 billion yuan, and the scale of capital increase by introducing strategic investors is 21.3 billion yuan, with a total of 50.97 billion yuan. In contrast, the total amount of capital supplementary bonds planned to be issued by the insurance industry last year reached 69.2 billion yuan, higher than the scale of capital increase. It can be seen that insurance enterprises prefer to supplement capital by issuing bonds.
insurance capital supplementary debt and subordinated debt
turnover turnover increased significantly last year
In fact, a large number of capital supplementary bonds and subordinated bonds issued by insurance enterprises not only help insurance enterprises supplement capital, but also provide good investment targets for institutions with fixed income asset allocation needs.
Since last year, capital replenishment bonds and subordinated bonds of insurance companies have been sought after by investors.
From the perspective of the secondary market, the total turnover and overall turnover rate of capital supplementary bonds and subordinated bonds of insurance companies increased significantly last year. The annual turnover reached 216.9 billion yuan in 2021, an increase of 112.6 billion yuan compared with 2020, and the turnover rate was as high as 88%. Among them, “19 China Life Insurance Company Limited(601628) “, “20 Ping An Life Insurance” and “16 people’s property insurance” had a large turnover last year.
In terms of institutional positions, according to the data of pure debt based heavy positions, by the end of the fourth quarter of 2021, the total market value of insurance company bonds held by pure debt based heavy positions had reached 3.9 billion yuan, accounting for 0.07% of the market value of bond investment. Yang yewei said that because insurance companies can hold capital supplementary bonds and subordinated bonds with each other, and considering the characteristics of debt side funds, insurance companies may be a greater demander of the bonds of the above two insurance companies.
From the perspective of interest rate spread, since this year, the allocation advantages of capital supplementary debt and subordinated debt of insurance companies have been further highlighted. In 2021, the bond market interest rate generally declined, while the credit risk continued to rise, resulting in the concentration of investment style to highly qualified subjects and continuously reducing the interest margin. This style will continue in 2022. Under this style, this year’s low-risk and relatively high-yield financial subordinated bonds have been continuously sought after by investors. However, since the end of 2020, the interest rate spread of AAA Bank Subordinated Debt and securities company subordinated debt has continued to narrow, but the capital supplementary debt and subordinated debt of insurance companies have not narrowed significantly in this process, or even widened in the opposite direction. Therefore, Guosheng Securities believes that the current interest rate spread level has formed a rare investment depression of capital supplementary debt and subordinated debt of insurance companies.
From the perspective of special terms, most of the 71 bonds in stock contain redemption terms. Compared with the fact that bank secondary capital bonds must contain write down or share conversion clauses, the clauses of capital supplementary bonds and subordinated bonds of insurance companies are relatively friendly to investors; Compared with the subordinated bonds (non sustainable) of securities companies, it is more common for the capital supplementary bonds and subordinated bonds of insurance companies to contain terms of redemption and adjustment of coupon rate, so it is also more beneficial to investors.
The fixed income investment manager of a large insurance capital institution told reporters that the shortage of structural assets was obvious last year. Super long interest rate bonds such as bank secondary capital bonds and perpetual bonds performed well, but there may be a certain reversal this year. In this context, the demand of the market and insurance capital institutions for high-quality fixed income assets is still large this year, but the amount of local bonds may not be increased this year. Therefore, capital supplementary bonds and subordinated bonds of insurance companies are good investment targets.
