Ping An bond sale to 'boost solvency'
Ping An Insurance, the mainland's second-biggest insurer, has no plans to raise more funds in the next two to three years because a pending convertible bond issue is expected to boost its working capital sufficiently. Alex Ren Huichuan, its president, said Ping An was still awaiting regulatory approval to sell 26 billion yuan (HK$32 billion) of convertible bonds. The process normally takes six to nine months.
Ping An unveiled the bond sale plan in December, just nine months after raising HK$19.5 billion through a share placement in Hong Kong.
'Our businesses will be well-supported following the bond issuance,' Ren said yesterday.
'It will also be sufficient to boost our solvency margin ratio.'
Ping An's solvency margin ratio - a measure of an insurer's ability to settle claims - stood at 166.7 per cent at the end of last year, 31.2 percentage points lower than the previous year. But it was still well above the 150 per cent mark, a level seen as healthy and stipulated by the China Insurance Regulatory Commission.
The ratio could jump to 190 per cent if the bonds were converted to stock.
Ping An, 16 per cent owned by HSBC, reported a net profit of 19.48 billion yuan in 2011, up 12.5 per cent from a year earlier, driven by fast-growing banking operations and higher premium income.
Ping An's banking businesses generated a net profit of 7.98 billion yuan last year, a jump of 176.8 per cent from 2010.
The insurer completed its acquisition of Shenzhen Development Bank last year, taking another step towards transforming itself into a financial conglomerate.
Life insurance premiums rose 13.9 per cent to 187.3 billion yuan while non-life insurance premiums climbed 33.9 per cent to 83.7 billion yuan.
'We maintain our 'outperform' rating on Ping An, given its solid operations across its financial platforms and the continued benefits it derives from its diversified revenue sources, especially in the challenging environment in 2011,' senior CCB International analyst Kenneth Yue said.
Timothy Chan, deputy chief investment officer of Ping An, said the insurer, also the world's second-largest by market value, would increase investments in fixed-income products this year.
'There are still quite a few uncertainties in the stock market,' he said. 'We will continue to take a cautious approach to investments.'
Ping An posted a 7.7 per cent growth in investment income last year, earning a combined 11.4 billion yuan despite a 21.7 per cent drop in the mainland's key stock indicator.
The insurer allocated 58.2 per cent of its assets to buy bonds and 8.6 per cent for stocks last year.
Chan predicted the A-share market would recover this year in an orderly pace.
The Shanghai Composite Index has advanced 9.3 per cent so far this year and Ping An has said this can also help it increase the solvency margin ratio. 'The market rally had a positive impact on the solvency ratio,' chief financial officer Jason Yao Bo said. 'But we can't rule out market volatility.'