Taikang and Ping An entered the market via relay. During the year, 23.7 billion yuan of perpetual bonds were “put into” insurance companies. New capital replenishment tools helped accelerate “blood replenishment”

(Photo source: Visual China)

Blue Whale News, February 28 (Reporter Shi Yu)Perpetual debt has been a key word in the insurance industry in the past two years. Since the supervision opened the gate for insurance institutions to issue perpetual bonds in 2022, the issuance pace of insurance companies has gradually accelerated. The reporter noticed that in recent days, insurance companies such as Bank of Communications Life Insurance, Taikang Pension, Taikang Life Insurance, and Ping An Life Insurance have successively issued a total of 23.7 billion yuan in perpetual bonds. Both the issuance scale and the issuing entity are expanding.

Perpetual debt, a capital replenishment tool, is being upgraded from a water test option to a strategic preference.

Behind the industry’s active replenishment of capital, firstly, it will pay for the solvency pressure under the implementation of the second generation project, add the risk of interest rate spread loss, and promote insurance companies to accelerate the construction of defenses for capital strength. Secondly, the reduction in bond issuance costs caused by the downward coupon rate also adds attractiveness and motivation to insurance companies.

However, what cannot be ignored is that behind the blood-replenishing competition, the survival picture of leading institutions and small and medium-sized insurance companies is becoming increasingly divided. Among the issuers of perpetual bonds and capital-supplementary bonds, AAA rating agencies are the absolute main force, while there are many problems among small and medium-sized institutions seeking to increase capital.

Four insurance companies issued 23.7 billion yuan in perpetual bonds, new faces entered the market

Since 2025, the wave of bond issuance by insurance companies has not abated, with perpetual bonds taking the lead, and insurance companies such as Bank of Communications Life Insurance, Taikang Pension, Taikang Life Insurance, and Ping An Life Insurance have entered the market.

Ping An Life today released an announcement on the issuance of unfixed-term capital bonds (Phase I) in 2025. The 25 Ping An Life Perpetual Bonds 01 issued have a basic issuance scale of 8 billion yuan, with an excess issuance right of no more than 5 billion yuan. The actual total issuance amount is 13 billion yuan, with a coupon rate of 2.35%, and a value date of March 3.

A few days ago, Taikang Life Insurance and Taikang Pension simultaneously issued perpetual bonds. Taikang Life Insurance has a coupon rate of 2.35%, starting on February 27; 25 Taikang Pension Perpetual Bond 01 issued by Taikang Pension has a total issue of 2 billion yuan, starting on February 26, with a coupon rate of 2.48%.

Taikang Life Insurance is the first insurance company in China approved to issue perpetual bonds. In August 2022, the Central Bank and the former China Banking and Insurance Regulatory Commission jointly issued the “Notice on Matters Related to the Issuance of Unfixed-Term Capital Supplementary Bonds by Insurance Companies”, clarifying that insurance companies may issue unfixed-term capital supplementary bonds to supplement core secondary capital.

In September of the following year, Taikang Life Insurance was approved to issue perpetual bonds of no more than 20 billion yuan. In November, the first phase of 23 Taikang Life Insurance Perpetual Bonds 01 was issued, with a total issue amount of 5 billion yuan and a coupon rate of 3.7% at the time of issuance.“” In 2024, Taikang Life Insurance will issue perpetual bonds again, with a total bond issuance of 9 billion yuan and a coupon rate of 2.48% at the time of issuance.

BOCOM Life also completed its first test of perpetual bonds this year. On January 22, the regulatory approval approved Bank of Communications Life to issue open-term capital supplementary bonds of no more than 2.7 billion yuan. One month later, the bond was issued with a basic issuance scale of 2 billion yuan, with additional rights of no more than 700 million yuan. The final amount of 2.7 billion yuan was fully issued with a coupon rate of 2.2%.

(Issuance of perpetual bonds by insurance companies in the first two months of 2025; Cartography: Blue Whale News)

The coupon rate of perpetual bonds falls, institutions are waiting for an opportunity to act

In the two months since the beginning of the new year, four institutions have issued a total of 23.7 billion yuan in perpetual bonds. Compared with the total scale of 2.5 billion yuan, Sino-British Life Insurance and Caixin Jixiang Life Insurance, the two insurance companies that issued capital supplementary bonds this year, the number of issuing institutions and the scale of issuance have become more mainstream.

Looking at the extended timeline, since insurance companies began to issue perpetual bonds in 2023, the scale of perpetual bonds issued by insurance companies in 2023 and 2024 will be 35.77 billion yuan and 35.9 billion yuan respectively, and the corresponding capital supplementary bonds issued will be 76.4 billion yuan and 81.6 billion yuan respectively. Although it is not possible to get a full picture based on the comparison of data for the two months at the beginning of this year, it is undeniable that the importance of perpetual bonds as a capital replenishment channel for insurance companies is increasing.

For insurance institutions, the actual capital includes core capital and subsidiary capital. The issuance of capital supplementary bonds can replenish the subsidiary capital. Among the core capital, the core tier-one capital can be replenished through common shares, capital companies, and subordinated convertible bonds. Supplied by bonds, and core second-level capital can be replenished by perpetual bonds.

The core purpose of insurance companies is to improve capital adequacy ratios and solvency. All issuing institutions have stated that the funds raised will be used to supplement the issuer’s core secondary capital, improve solvency, create conditions for healthy development, and support the continued and steady development of the business.

“As a capital replenishment tool, perpetual bonds have relatively low cost and high market activity, which can effectively improve the efficiency of core capital replenishment. A relevant person in charge of a life insurance company pointed out to reporters that at the same time, the order of repayment of perpetual bonds is relatively low, and there is a risk of write-down or conversion. Correspondingly, there are relatively high requirements on the issuer’s own strength, shareholder support, and credit rating. In fact, companies that currently issue capital supplementary bonds are mainly heads.& rdquo;

The reporter sorted out and found that after perpetual bonds were opened to insurance institutions, a total of 12 insurance institutions issued 17 perpetual bonds, mainly large-scale head insurance companies and bank-based insurance companies relying on shareholder resources. The main credit rating is AAA.

(Issuance of perpetual bonds by insurance companies; Cartography: Blue Whale News)

It should be noted that the current coupon rate on bond issuance has a significant downward trend, and the reduction in bond issuance costs has also given insurance companies more motivation. The reporter has incomplete statistics that the coupon rates of the seven perpetual bonds issued by insurance companies in 2023 are all higher than 3%, and the overall coupon rates are in the range of 3.25%-3.7%. However, after 2024, there is no coupon rate higher than 3%. The overall coupon rate is in the range of 2.2%-2.5%. For perpetual bonds issued in the first two months of this year, there is no longer a coupon rate of 2.5%.

Taking Ping An Life, which has recently issued perpetual bonds, today, Ping An Life disclosed an announcement on exercising the redemption option for the 2020 capital replenishment bonds. The 20 Ping An Life issue it redeemed has issued is 20 billion yuan, and the interest rate of the bonds during the current interest-bearing period is 3.58%. If the redemption right is not exercised at the end of the fifth year, the bond interest rate will be adjusted to 4.58%. Compared with the 2.35% coupon rate finalized today, redemption is obviously more cost-effective.

“Lower coupon rates are one of the factors that attract insurance companies to issue bonds and can reduce financing costs, but they are usually not the decisive factor. The relevant person in charge of the above-mentioned life insurance company pointed out to reporters that each institution has its own capital replenishment plan and pace, and relevant decisions are often advanced based on its own needs and pace.

Pressure on solvency drives the industry to replenish ammunition

Insurance institutions are actively expanding capital replenishment channels and willing to use new tools to replenish ammunition. The main reason is still facing solvency pressure.

“The second phase of the second generation of compensation has adjusted the relevant content of actual capital, and the identification of actual capital has become more strict. While consolidating capital quality and optimizing capital risk measurement, it has also caused short-term fluctuations in the solvency of insurance companies. Regulatory data also confirms this trend, and life insurance companies face a more obvious decline in solvency when combined with the current risk of spread loss.

Naturally, not all insurance institutions have faced emergencies where their solvency approaches the red line. Many insurance companies have laid out in advance based on the mentality of defensive reserves.

“The company hopes to maintain its solvency at a high level. In particular, the operating qualifications of some businesses are set with relevant limits on solvency. In order to ensure that the company’s solvency meets the standards when extreme risks occur, the company chooses to replenish capital in advance., an insurance company that issued capital-supplemented bonds told reporters.

In parallel with issuing bonds, there is also the pace of capital increase of insurance companies. In recent years, many insurance companies have also replenished capital through the capital increase path. Behind this, on the one hand, shareholders have given their strength, and some institutions have difficulty meeting the threshold of issuing bonds.

“Paying attention to changes in solvency and replenishing capital in a timely manner are the company’s key tasks. Some insurance institutions also told reporters that the company’s equity structure is relatively complex, and the coordination of the capital increase plan may take a long time and involve more procedures.

Currently, with the interest rate center declining, insurance institutions, especially life insurance companies, are facing the pressure of interest rate spreads and is effective in replenishing blood. More importantly, we must also focus on how to make blood, optimize product structure, do a good job in asset and liability management, and consolidate profitability. It is the foundation for the continued survival of insurance institutions.