- 2024-09-22
- News
Huatai Life Boosts Capital and Issues Debt to Strengthen Finances
Adequate capital is the cornerstone of the stable operation of insurance companies. On November 26th, the reporter learned from the official website of the Shanghai Clearing House that Huatai Life Insurance Co., Ltd. (hereinafter referred to as "Huatai Life") has completed the issuance of its 2024 capital replenishment bonds.
It is reported that the total issuance amount of this bond is 800 million yuan, with a coupon rate of 2.90%, starting from November 25, 2024, with a term of 10 years. The raised funds will be used to replenish Huatai Life's capital, enhance solvency, and create conditions for the continuous and stable development of the business.
It should be noted that from 2022 to 2024 is the transition period for the implementation of the second phase of the Solvency II project, during which a large number of insurance companies have applied to use the transition period policy, choosing to implement some regulatory rules in steps, with the latest full implementation by 2025.
"As the transition period policy ends, it is expected that a large number of insurance companies will choose to alleviate capital pressure through bond financing and other means," said Liu Xinqi, the chief analyst of non-bank financials at Guotai Junan.
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Consecutive losses for three quarters
This issuance of capital replenishment bonds is already the second "blood transfusion" for Huatai Life this year. On January 2, the Beijing Financial Regulatory Bureau issued a reply regarding the change of registered capital of Huatai Life, agreeing to increase the company's registered capital from 3.6325 billion yuan to 4.3125 billion yuan.
Specifically, Huatai Life issued additional shares to its shareholders Huatai Insurance Group and Chubb North America Insurance Holdings Limited, with 544 million yuan and 136 million yuan respectively. After the capital increase, Huatai Insurance Group's shareholding ratio increased from 79.68% to 79.7304%, while Chubb North America Insurance Holdings Limited's shareholding ratio remained unchanged at 20%.
"This capital injection has strengthened the company's capital strength and provided a strong capital backing for the company's future innovation and growth in the insurance business," Huatai Life stated.
At present, insurance companies mainly replenish capital through two major ways: equity financing and debt financing. Liu Xinqi analyzed that due to the transformation pressure of the life insurance industry, the industry's growth has been under pressure in recent years, which is not conducive to the pricing and return of equity assets, making it difficult for insurance companies to replenish capital through equity financing; in contrast, debt financing has the advantages of fewer constraints, shorter issuance cycles, and lower issuance costs, so the demand for debt financing has increased significantly under the background of regulatory policy relaxation.
Behind the continuous release of "blood transfusion" signals is the pressure brought by the tight solvency. The latest disclosed solvency report shows that as of the end of the third quarter of 2024, Huatai Life's core and comprehensive solvency adequacy ratios were 160.15% and 186.20%, respectively, both of which have declined to varying degrees from the end of the previous quarter, and it is expected that they will further decline to 156.64% and 182.50% by the end of next quarter.
In terms of performance, since the beginning of 2024, Huatai Life's profitability has always been pessimistic. In the first three quarters of this year, Huatai Life's insurance business income was 3.235 billion yuan, 2.583 billion yuan, and 2.099 billion yuan, respectively, showing a downward trend; net profit has been in a loss state for three consecutive quarters, with losses of 286 million yuan, 203 million yuan, and 265 million yuan, respectively, resulting in a cumulative net loss of 754 million yuan.
Looking at the longer timeline, Huatai Life's performance downturn has long been revealed. From 2019 to 2023, the company achieved insurance business income of 6.182 billion yuan, 6.246 billion yuan, 6.474 billion yuan, 7.112 billion yuan, and 7.312 billion yuan, respectively, maintaining a general stable growth, but the growth rate has obviously slowed down.
Looking at the performance of net profit during the same period. In 2019, Huatai Life's net profit reached a peak of 506 million yuan, and the following year it began to decline. From 2020 to 2021, the company's net profit decreased to 412 million yuan and 282 million yuan, respectively. In 2022, Huatai Life suffered a profit slump, with net profit turning negative to -225 million yuan; in 2023, the loss further expanded, with net profit dropping to -893 million yuan.
The high level of surrender amounts is an important factor that cannot be ignored. From 2019 to 2023, Huatai Life's surrender amounts were 310 million yuan, 346 million yuan, 499 million yuan, 508 million yuan, and 650 million yuan, respectively. The solvency report for the third quarter of 2024 shows that only the "Huatai Life Wealth Gold Account Annuity Insurance (Universal Type)" product has a surrender scale of 477 million yuan within the year.
Consecutive adjustments in the senior management
In recent years, the foreign giant "Chubb" has gradually increased its stake in Huatai Insurance Group through equity transfers, thereby achieving absolute control. Huatai Insurance Group has thus become the first insurance group in the country to transition from "domestic capital" to "foreign capital".
Under major changes, Huatai Life, as a life insurance company under Huatai Insurance Group, has also experienced a series of senior personnel adjustments.
In February of this year, Zheng Shaowei, the former general manager of AIA Life Jiangsu Branch, joined Huatai Life as the acting head of the company, exercising the general manager's authority and being fully responsible for the company's daily management work.
Looking at the resume, Zheng Shaowei is a veteran in the insurance industry with over 30 years of experience, holding qualifications as a Certified Financial Planner and a Registered Financial Planner. After graduating from university in 1991, Zheng Shaowei joined AIA's Malaysian branch, starting his career, and later served in several well-known life insurance companies at home and abroad, until he returned to his "old employer" in 2011, successively serving as the general manager of AIA Life Beijing Branch and Jiangsu Branch.
However, the solvency report for the third quarter shows that Zheng Shaowei did not successfully promote to the position of general manager of Huatai Life, but has been serving as the senior deputy general manager since August this year. That is to say, since the former general manager of Huatai Life, Liu Zhanguo, resigned in July 2022, the position has been vacant for more than two and a half years.
The reporter learned that in addition to Zheng Shaowei, Huatai Life has also successively introduced several key figures from AIA Life. Among them are Yao Naiwei, the former general manager of AIA Sichuan Branch, and Wang Wenxu, the former deputy general manager and director of the marketing channel business development of AIA Beijing Branch. The former is now the general manager of Huatai Life Beijing Branch, and the latter is now the deputy general manager and chief marketing officer of Huatai Life.
In August of this year, Huatai Life announced that, with the approval of the Beijing Financial Regulatory Bureau's qualification, Zhang Bei will serve as the chairman of the company's seventh board of directors.
Similar to the previous chairman, Li Cunqiang, Zhang Bei, who is 53 years old, has long served in Huatai Life and its shareholders. He has been the chairman of Chubb Insurance Co., Ltd. since March 2016 and a director of Huatai Insurance Group since April 2011. He was appointed as the vice chairman of Huatai Insurance Group in June 2022.
In the same month, Huatai Life introduced a new development strategy, clarifying the strategic system of "one strategic core (customers), two strategic propositions (focus, innovation), and three strategic pillars (healthcare 3.0, elite agents 3.0, digitalization 3.0)".
The company further proposed that in terms of healthcare, it aims to create a full-cycle, multi-scenario, high-quality healthcare service system to meet customers' diversified, systematic, and one-stop healthcare service needs; in individual insurance, it aims to create a modern, high-quality individual insurance team suitable for the middle class and affluent customers; in digitalization, it aims to establish a customer-centered full-process service system and build a new digital ecosystem.
With consecutive capital increases and bond issuances, the new leader in place, and the joining of AIA veterans... Whether Huatai Life can turn the tide and get out of the loss quagmire at the new starting point still needs to be tested by time.
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