China United Property Insurance (CUPI) has announced that it had successfully issued CNY6bn ($825m) of capital supplementary bonds in the national interbank bond market.
The issuance met with a huge response, with a total subscription 3.6 times the issuance size. The number of participating institutions exceeded 70, including large state-owned commercial banks, city commercial banks, fund companies, insurance companies and securities companies.
The term of the bonds are 5+5 years, with an annual coupon rate of 2.47%.
CUPI said in its statement, "The successful issuance of this capital supplementary bonds will significantly improve the company's solvency adequacy ratio and enhance its capital strength. It will also lay a solid foundation and create favourable conditions for the sustained and healthy development of our business.
Several other insurers have also issued capital supplementary bonds this year. CUPI’s bond coupon rate lies between China Life’s 2.15% on a bond issuance of CNY35bn in September 2024 and Huatai Life’s 2.90% on a bond issuance of CNY800m in November.
On 1 August, Fitch Ratings announced that it had downgraded CUPI’s Insurer Financial Strength (IFS) Rating to 'BBB+' from 'A-'. The rating outlook given was ‘Stable’. Fitch removed the rating from ‘Rating Watch Negative’, on which it was placed in March 2024.
Fitch said that the rating downgrade reflected the removal of a one-notch uplift from CUPI's standalone credit quality due to linkage with its ultimate parent, state-owned China Orient Asset Management Co (COAM, ‘BBB+/Stable’), whose rating was downgraded by Fitch in June 2024 from 'A-'. The downturn in China's property market and broader economy poses a persistent threat to COAM's asset quality and earnings. Fitch did not consider financial support for CUPI from COAM as likely.
The ‘Stable’ outlook for CUPI underscored Fitch's expectation that the insurer would complete its capital supplementary bond issuance plan by end-2024, which will ease pressure on its narrowed capital buffer but raise the financial leverage ratio.
CUPI had a 4.1% share of the domestic non-life sector by premiums in 2023 and remained one of the leading agricultural insurance providers, accounting for nearly 12% of market direct premiums, noted Fitch.