Statistics show that there are 10 insurance companies that have successfully issued capital supplement bonds this year. Among them, Ping An Life issued 20 billion yuan, the largest scale; Xinhua insurance issued 10 billion yuan; PICC Property Insurance and China post insurance issued 8 billion yuan and 6 billion yuan respectively.
From the perspective of the term varieties of capital supplementary bonds of insurance companies, they are all 5 + 5 terms, that is, the issuers redemption right with conditions at the end of the fifth year, and the bonds bear interest on an annual basis. Generally, if the issuer fails to exercise the redemption right, the bond interest rate in the next five years will rise by 1%. When the long-term interest rate is low and the non redemption interest rate will rise, the insurance companies will generally choose to exercise the redemption right.
Zhou Jin, managing partner of Chinas financial industry of PWC, said in an interview with Securities Daily that the number of insurance companies issuing capital supplementary bonds has increased and the amount is relatively high, which is consistent with previous expectations, indicating that the development of the insurance industry is increasing the demand for capital, while issuing capital supplementary bonds is a better choice, with good liquidity and fast issuance speed.
According to a researcher from a leading securities firm, the number and scale of insurance companies issuing capital replenishment bonds have grown rapidly this year, partly because the insurance companies may redeem some bonds in the early stage and increase the issuance at the low interest rate.
According to the data, from the perspective of bond face rate, there are great differences among different insurance companies, with the highest of 6.25% and the lowest of 3.30%. On the whole, bond interest rate is in a downward trend compared with previous years. Six of the above-mentioned capital supplement bonds issued by the 10 insurance companies have a nominal interest rate of less than 4%. From the perspective of the capital supplement bonds issued by the stock insurance companies in 2019, the coupon rate of all the bonds is higher than 4%, the coupon rate of four bonds is between 4% and 5%, and the other five bonds are all higher than 5%.
According to the researcher of the securities firm, the nominal interest rate of capital supplementary bonds has a great relationship with the fundamentals and credit rating of insurance companies. Many insurance institutions will set an interest rate range before the official issuance. Some institutions with better comprehensive conditions will successfully issue at the lower limit of interest rate, while those with smaller scale or low credit rating will most likely price at the upper limit.
In addition, from the perspective of the subscription of bonds issued by insurance companies, most of them are more recognized by investors and have been oversubscribed, which is also a major reason for insurance companies to actively issue capital supplementary bonds.
It is expected that the scale of bond issuance will be at a high level in the future
Insurance companies issue capital supplement bonds mostly to supplement capital to improve solvency and create better conditions for business development. For example, Xinhua Insurance said that the raised funds of the bonds will be used to supplement the subsidiary capital of the company, enhance its solvency, create conditions for the sound development of the business, and support the sustainable and steady development of the business. At the same time, the use of market-oriented and securitization financing means is conducive to improving its debt structure.
Xinhua insurance also said that the issuance of capital supplement bonds will further promote the implementation of the 1 + 2 + 1 strategy with life insurance business as the main body, wealth management and health care industry as the two wings and technology empowerment as the support, adhere to the principle of returning to the original, focus on value growth, improve the layout of health care, wealth and technology sectors, realize the double wheel driven growth of assets and liabilities, and help The business develops rapidly, forming the core advantage of market competition.
According to the information released by the CIRC, in the first quarter of this year, the overall solvency of the insurance industry was sufficient. However, due to the impact of the epidemic on the premium side and the investment side and other factors, more than 50% of the property insurance companies and 70% of the life insurance companies comprehensive solvency declined by different ranges. Industry insiders generally believe that this years economic environment is more severe, and there is greater downward pressure on the solvency of insurance enterprises.
From the perspective of insurance companies that have issued capital replenishment bonds this year, most of them have sufficient solvency, while only a few of them are relatively tight. However, according to the business needs, the premium income of Chinas insurance industry continues to maintain a medium and high-speed growth. At the same time, assets are greatly affected by the volatility of the stock and bond market, so some safety cushions need to be left. However, it takes a long time for insurance companies to issue bonds, and some insurance companies will take precautions based on their own actual situation. At the same time, some insurance companies compare the interest rate cost of issuing bonds. In the downward cycle of interest rate, some insurance companies will issue new bonds to replace old ones to reduce the cost of liabilities. From the perspective of the cost of issuing bonds, since this year, in order to counter the negative impact of the new crown epidemic on the economy, the central bank has adopted a loose monetary policy, with market interest rates falling sharply and enterprise financing cost rate falling. The yield to maturity of 10-year Treasury bonds has been from the beginning of the year 3.2% Down to the near future 2.48% Therefore, its a better time to issue bonds. The researcher of the securities firm predicted that in the future, the scale of capital replenishment bonds issued by insurance companies would remain at a high level.
Source: responsible editor of Securities Daily: Yang qian_nf4425