China Life unveils plan to issue debt
By Feng Jianmin |
August 25, 2011, Thursday
|
Print Edition
Print Edition
CHINA Life Insurance, China's largest insurer, yesterday released plans to raise 30 billion yuan by issuing subordinated debt to improve its ability to fund claim payouts.
The plan was submitted to the board on Tuesday, and would boost the company's solvency ratio - capital relative to premiums written (potential claims) - by at least 40 percentage points, according to company vice president Liu Jiade.
The ratio had dropped to 164.21 percent by the end of June from 211.99 percent six months previously ago, mostly due to fluctuations in the capital market and interest rates during the second quarter, the company said. It said investment losses in equities and the lower value of debts accounted for 30 percentage points of the ratio decline.
Liu said he is "prudently optimistic" about capital markets in the second half of this year. "The level of solvency is still good and the company's investment and insurance businesses will not be restricted," he said. "But we need to prepare for possible fluctuations in capital market in the second half."
A report by China Merchants Securities said the selling of debts could sustain the company's development till 2014.
Liu said Chinese insurers have raised more than 100 billion yuan (US$15.64 billion) by issuing subordinated debt. A Standard & Poor's report said insurers will need to raise 110 billion yuan over the next three years.
But Liu said it will take time to see whether the debt can be sold in Hong Kong, a rising offshore yuan market.
He said: "The cost of selling debt in Hong Kong is lower but it takes time for regulators to published guidelines for operating in the market."
Shares in China Life Insurance dropped 3.3 percent yesterday in Shanghai after it reported a first-half profit decline of 28.1 percent from a year earlier.
Mao Junhua, an analyst with China International Capital, said the company's ability to make a profit will bottom out in the third quarter and gradually pick up in the fourth owing to growing premium revenue from bank and insurance channels.
The plan was submitted to the board on Tuesday, and would boost the company's solvency ratio - capital relative to premiums written (potential claims) - by at least 40 percentage points, according to company vice president Liu Jiade.
The ratio had dropped to 164.21 percent by the end of June from 211.99 percent six months previously ago, mostly due to fluctuations in the capital market and interest rates during the second quarter, the company said. It said investment losses in equities and the lower value of debts accounted for 30 percentage points of the ratio decline.
Liu said he is "prudently optimistic" about capital markets in the second half of this year. "The level of solvency is still good and the company's investment and insurance businesses will not be restricted," he said. "But we need to prepare for possible fluctuations in capital market in the second half."
A report by China Merchants Securities said the selling of debts could sustain the company's development till 2014.
Liu said Chinese insurers have raised more than 100 billion yuan (US$15.64 billion) by issuing subordinated debt. A Standard & Poor's report said insurers will need to raise 110 billion yuan over the next three years.
But Liu said it will take time to see whether the debt can be sold in Hong Kong, a rising offshore yuan market.
He said: "The cost of selling debt in Hong Kong is lower but it takes time for regulators to published guidelines for operating in the market."
Shares in China Life Insurance dropped 3.3 percent yesterday in Shanghai after it reported a first-half profit decline of 28.1 percent from a year earlier.
Mao Junhua, an analyst with China International Capital, said the company's ability to make a profit will bottom out in the third quarter and gradually pick up in the fourth owing to growing premium revenue from bank and insurance channels.
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