This capital increase is difficult to fundamentally help China-Korean Life Insurance.
text/Daily Financial Report After the implementation of Chengyi
second-generation phase II project, the solvency of many insurance companies declined in the first quarter of this year, which also stimulated more insurance companies' demand for capital increase and bond issuance and other capital replenishment.
Although, there are many people who are ready for the future and have been preparing for it since last year. But the reality is that after the arrival of the "project", nearly 80% of insurance companies still find it difficult to change the situation of their declining solvency, and some insurance companies even have to apply for a transition period. Of course, there are also some insurance companies that continue to carry out "self-rescue" actions.
Not long ago, the China-Korea Life Insurance Co., Ltd. (hereinafter referred to as "China-Korea Life")'s capital increase project took 4 months to finally receive regulatory approval.
According to the Daily Financial Report, since this year, China-Korea Life Insurance's solvency indicator has declined for two consecutive quarters and has now approached the regulatory red line. After the completion of this capital increase, five new state-owned shareholders will be introduced, and the company's registered capital will also be expanded to 3.0012 billion yuan.
without saying anything, the approval of this capital increase will naturally alleviate China-Korea Life's urgent needs, but at this stage it has not yet emerged from the "shade" of business. It is still difficult to predict how far such "thrust" can help it go.
led to the capital increase and was approved for approval
Since last year, insurance companies have been particularly busy on the track of "replenishing blood" of capital increase. Since the first quarter of this year, after the second-generation phase II project was officially implemented, the solvency of many insurance companies has been in a hurry, and the pace of insurance companies' capital increase and "replenishing blood" has been further accelerated.
According to statistics from the China Banking and Insurance News, in the first half of this year, the China Insurance Industry Association disclosed a total of 15 insurance institutions to change their registered capital, with a total amount of 35.3607 billion yuan planned to increase capital and expand shares, far higher than 18.3198 billion yuan in the same period last year. Among them, it includes China-Korea Life Insurance's capital increase plan.
On March 25, 2022, Zhejiang Oriental issued an announcement stating that after extensive solicitation of capital increase projects of China-Korea Life Insurance, five prospective investors completed the delisting of the Zhejiang Property Exchange on March 18, and after competitive negotiations, the capital increase agreement was signed on March 24. Four months later, the capital increase project has finally been officially approved.
In fact, this capital increase was already in sight as early as April last year. At that time, China-Korea Life Insurance was listed on the Zhejiang Property Exchange, with the capital increase listing price not less than 1.21 yuan/1 yuan registered capital, and the total amount of funds raised would be no less than 1.818 billion yuan.
In the capital increase plan, 1.501 billion yuan is included in the registered capital, and the excess is included in the capital reserve. However, it is worth noting that in the capital increase list, the original shareholder Hanhua Life Insurance Co., Ltd. (hereinafter referred to as "Hanhua Insurance") did not participate in the capital increase.
, and shareholder Zhejiang Oriental Financial Holding Group Co., Ltd. (hereinafter referred to as "Zhejiang Oriental") will subscribe to 250 million yuan of registered capital, and the remaining 1.251 billion yuan will be subscribed by five external investors, including Zhejiang Changxing Financial Holding Group Co., Ltd. (hereinafter referred to as "Changxing Financial Holding"), Wenzhou State-owned Financial Capital Management Co., Ltd., Wenzhou Electric Power Investment Co., Ltd., Wenzhou Transportation Development Group Co., Ltd. and Guotai Junan Zhengyu Investment Co., Ltd. After the capital increase is completed, Zhejiang Oriental will hold 33.33% of the shares, making it the largest shareholder of China-Korea Life Insurance; due to the failure to participate in the capital increase, Hanhua Insurance's shareholding ratio dropped from the original 50% to 24.99%, making it the second largest shareholder of China-Korea Life Insurance. Among the strategic investors introduced, Changxing Financial Holdings holds 20.23% of the shares, ranking third among shareholders.
Equity Change Joint Venture to Chinese-funded
Judging from the equity structure after the capital increase, Chinese capital holds a total of 75.01% of the shares, while foreign-funded Hanhua Insurance holds a 24.99% stake. According to the Foreign Investment Law, China-Korea Life Insurance will change from a Sino-foreign joint venture insurance company to a foreign-funded Chinese insurance company.
It is worth mentioning that the five new shareholders introduced by the capital increase are all state-owned enterprises. Among them, 4 are local state-owned enterprises in Zhejiang Province and 1 is a subsidiary of a veteran securities company. In fact, in recent years, many local state-owned capital has gradually increased its holdings in insurance companies.For example, in early July, Zhuhai Huachuang, a subsidiary of Zhuhai State-owned Assets Supervision and Administration Commission, increased its capital, and its shareholding ratio increased to 32.9%, becoming the largest shareholder of Hengqin Life Insurance.
. State-owned capital in various places has supported insurance companies. On the one hand, insurance companies can provide financial support for regional economic development, and on the other hand, local state-owned assets can also bring business resources to insurance companies and form a situation of coordinated development.
In this regard, China-Korea Life Insurance stated that it will rely on the empowerment of new shareholders, fully combine regional advantages and customer characteristics in the Yangtze River Delta region, and innovate products and services to create a demonstration sample of common prosperity for insurance services around serving the real economy and protecting people's livelihood.
For the main purpose, China-Korea Life Insurance's capital increase this time is mainly to alleviate the company's solvency pressure. Because since last year, its solvency indicator has dropped sharply. As of the end of the second quarter of 2022, the company's core solvency adequacy ratio has dropped to 73.35%, and the comprehensive solvency adequacy ratio has dropped to 107.14%, approaching the regulatory red line.
was approved for capital increase. In its second quarter solvency report, it is predicted that by the end of the next quarter, the company's core solvency adequacy ratio will increase to 330.02%, and the comprehensive solvency adequacy ratio will increase to 360.08%.
is still "carrying the weight forward"
was established on November 30, 2012. Its headquarters is located in Zhejiang. The company currently has nearly 40 branches in Zhejiang, Jiangsu, Anhui and other places. Before this capital increase, China-Korea Life Insurance had made two capital increase.
At the beginning of its establishment, the original shareholders of China-Korea Life Insurance were Zhejiang International Trade Group Co., Ltd. (hereinafter referred to as "Zhejiang International Trade") and Hanhua Insurance. At that time, both parties each invested 250 million yuan. But in 2016, Zhejiang Oriental acquired 50% of China-Korea Life Insurance's equity from Zhejiang Guomao.
The reason why Zhejiang Guomao chose to withdraw may be related to the continued losses of China-Korea Life Insurance, but it is obvious that Zhejiang Oriental still has high expectations for China-Korea Life Insurance. Therefore, when the equity of both parties is transferred, a bet agreement is signed. Zhejiang International Trade promises that China-Korea Life Insurance will make a positive profit after deducting non-recurring gains and losses in 2021, that is, China-Korea Life Insurance will make a profit in 2021. Otherwise, Zhejiang Guomao will make up for the difference in cash according to the shareholding ratio until China-Korea Life Insurance makes a profit.
After this, in order to promote the development of China-Korea Life Insurance, Zhejiang Oriental joined hands with Hanhua Insurance to increase its capital by 500 million yuan in the same proportion in 2017 and 2019, and the registered capital of China-Korea Life Insurance has also increased to 1.5 billion yuan. However, China-Korea Life Insurance's performance has not improved for a long time, with a cumulative loss of 786 million yuan from 2012 to 2019.
Until 2020, China-Korean Life Insurance finally turned losses into profits and achieved a net profit of 8.1636 million yuan. However, the good times did not last long. In 2021, China-Korea Life's operating income fell from 1.256 billion yuan in 2020 to 1.173 billion yuan, a year-on-year decrease of 6.57%, of which insurance business revenue decreased by 3.32% year-on-year to 971 million yuan, investment income decreased by 16.53% year-on-year, and net loss reached 117 million yuan.
It is more noteworthy that in 2021, China-Korea Life Insurance's operating expenses increased from 1.247 billion yuan in 2020 to 1.29 billion yuan, a year-on-year increase of 3.42%. Among them, the surrender payment increased by 60.82% year-on-year to 111 million yuan.
Therefore, the high surrender funds increase the pressure on their cash flow, and it basically requires a large amount of new funds to cope with liquidity risks, which requires a higher income for new premiums, which then creates greater pressure on new business. This is also the difficulty faced by some insurance companies that have previously relied on investment-oriented businesses to transform and develop security businesses.
By this year, the operating conditions of China-Korea Life Insurance are still not optimistic. In the first half of the year, the total insurance business revenue was 667 million yuan, and the net loss has reached 116 million yuan. In general, compared with the diversified business structure of large insurance companies and early transformation, small and medium-sized insurance companies like China-Korea Life cannot avoid certain operating difficulties. Whether this battle to increase capital will improve China-Korea Life's performance, the Daily Financial Report will continue to pay attention to whether it will continue to pay attention to whether China-Korea Life's performance will improve.
