In the first quarter of 2022, the upsurge of “blood supplement” of insurance enterprises remained. On April 5, according to incomplete statistics by the reporter of Beijing business daily, in the first quarter of 2022, nine insurance companies issued capital and share increase announcements or completed capital increase, with a total planned capital increase of 23.494 billion yuan. Another six insurance companies issued capital supplementary bonds, with a total bond issuance scale of 16.5 billion yuan. Overall, the total amount of “blood supplement” of insurance enterprises in the first quarter of 2022 was 39.994 billion yuan.
Capital is the “blood” and bottom card of insurance companies. The sustainable and stable development of insurance companies is inseparable from the support of capital. Behind the intensive capital increase and bond issuance is the internal demand of insurance companies to improve their solvency and supplement the “ammunition depot” of capital.
with a total amount of nearly 40 billion yuan, insurance companies are busy “replenishing blood”
In the queue of capital and share increase, there are three insurance companies that have received the approval of the cbcirc and have completed capital and share increase, namely China Post life, Xinmei life and China Netherlands life. There are six insurance companies that plan to increase their capital but have not been approved, including Bank of China Samsung Life Insurance, Taikang pension, etc., which are expected to increase their capital by 15.255 billion yuan, while only two insurance companies disclosed their capital increase and share expansion plans in the same period in 2021.
In addition to relying on shareholders to increase capital, insurance companies are also issuing bonds intensively. In the first quarter of 2022, six insurance companies issued capital supplementary bonds, with a total bond issuance scale of 16.5 billion yuan, lower than 22.5 billion yuan in the same period in 2021. Among them, Taiping Life Insurance and ICBC AXA Life Insurance received capital supplementary bonds with a wholesale bank amount of 5 billion yuan, which was the largest amount of capital supplementary bonds obtained by the wholesale bank during the two years. The other four wholesale bond companies are Beijing life insurance, PICC Health, CCB life insurance and Guolian life insurance, with wholesale bond amounts of 500 million yuan, 3 billion yuan, 2 billion yuan and 1 billion yuan respectively.
From the perspective of the main body of the company, the 15 insurance companies that plan to “replenish blood” in the first quarter of 2022 are mainly life insurance companies. In addition to Guoshou property insurance and Taiping technology insurance, the other 13 are life insurance companies. In particular, banks are often seen as insurance companies, such as CCB life, which issued bonds of 2 billion yuan, ICBC AXA Life, which issued bonds of 5 billion yuan, and Bank of China Samsung Life and China Netherlands life, which plan to increase capital.
Why is the demand for “blood supplement” of life insurance companies stronger this year? Senior actuary Xu Yuchen analyzed that there are two main reasons for insurance companies to increase capital and issue bonds. On the one hand, the rapid development of business requires more capital to meet the solvency requirements; On the other hand, the performance loss of insurance companies in the process of operation will also accelerate the consumption of capital. Xu Yuchen further said that the performance of the whole life insurance industry was sluggish in 2021, and the fluctuation of the capital market also affected the investment income of insurance companies. The net profit of some life insurance companies may be lower than expected and need to supplement capital.
In addition, the second generation of compensation phase II project launched in 2022 also puts insurance companies under solvency pressure. People in the industry believe that almost all insurance companies will be affected after the switching of regulatory rules, and the implementation of the second generation of compensation phase II project will exert great downward pressure on the solvency adequacy ratio of insurance companies. Xu Yuchen also said that the phase II project of the second generation of compensation has strict capital recognition, improved the actual capital and minimum capital measurement standards of long-term equity investment, significantly improved the risk factors, and clearly stipulated that insurance companies should not include the evaluation and appreciation of investment real estate into the actual capital. At the same time, the minimum capital should be measured based on the underlying assets of actual investment in accordance with the principle of “full penetration and penetration to the end”, Some insurance companies are greatly affected by this and need to supplement capital.
As for the positive action of “blood replenishment” of banking insurance enterprises, Xu Yuchen analyzed that banking insurance enterprises rely on the parent company’s banks, with fast business development and faster consumption of capital. If they want to further develop their business in 2022, they need to replenish capital. The reporter of Beijing business daily further combed and found that the performance of most banking insurance companies achieved rapid development last year. For example, in 2021, the insurance business income of BOC Samsung Life was 14.339 billion yuan, a year-on-year increase of 87%.
see through the intention of increasing capital and shares, and find cooperation with funds
The trend of raising funds to subscribe for shareholders can reflect the pursuit of insurance companies from the side. The capital increase of most insurance companies is mainly subscribed by the original shareholders, such as Fosun Prudential Life Insurance, Taikang pension and Guoshou property insurance.
China Life Insurance Company Limited(601628) said in the relevant announcement that the purpose of this transaction is to increase the registered capital of Guoshou property insurance to meet the requirements of industry supervision on the capital adequacy ratio of Guoshou property insurance and the business development needs of Guoshou property insurance. This transaction will help improve the anti risk ability of Guoshou property insurance, better develop strategic businesses such as catastrophe insurance, liability insurance and “agriculture, rural areas and farmers” insurance, and promote Guoshou property insurance to actively implement and serve the national strategy. At the same time, Guoshou property insurance is an important part of the insurance sector of China Life Insurance Company Limited(601628) group. The healthy development of Guoshou property insurance helps to improve the synergy of property and life insurance linkage.
Insurance companies such as China South Korea life insurance and Xinmei life insurance expand the team of shareholders by issuing additional shares. They plan to introduce external investors while obtaining financial support, optimize the ownership structure and promote strategic coordination. Previously, in an interview with the Beijing business daily, Xinmei life said that the capital increase of Xinmei life is to further enhance its capital strength. Xinmei life will combine the resource endowment of its partners to achieve win-win cooperation under the complementarity of industrial ecological advantages. Zhejiang Orient Financial Holdings Group Co.Ltd(600120) also said in the relevant announcement that after the capital increase is completed, China South Korea life will rely on the empowerment of new shareholders, fully grasp the regional advantages of the Yangtze River Delta and seize the opportunity of rapid development of the industry.
While insurance companies actively seek “blood supplement”, there is a certain contradiction between the rapid development of business and the limited capital increase channels, and the regulatory authorities have been committed to expanding the capital supplement channels of insurance companies. In November 2021, the people’s Bank of China and the China Banking and Insurance Regulatory Commission issued the notice on matters related to the issuance of non fixed term capital bonds by insurance companies (Exposure Draft), which represents that insurance companies are expected to supplement capital by issuing perpetual bonds in the future.
However, insiders said that relying on shareholders to increase capital or issue bonds is not a permanent solution, and improving their “hematopoietic” ability is the foundation for the long-term development of insurance enterprises. Xu Yuchen also believes that whether it is capital increase, share expansion or bond issuance, it is an exogenous “blood transfusion” method. After the initial stage of establishment, insurance companies should increase their capital strength, improve solvency and reduce external “blood transfusion” through their own profits.
