China United Property Insurance’s bond issuance to ease capital pressure

It could raise the financial leverage ratio to ~30%.

Fitch Ratings sees China United Property Insurance (CUPI) complete its capital supplementary bond issuance plan by end-2024, easing pressure on its narrowed capital buffer but raising the financial leverage ratio.

Fitch no longer expects China Orient Asset Management Co., Ltd. (COAM), CUPI’s ultimate parent, to provide substantial financial support to CUPI; given COAM's modest capital buffer and the challenges posed by the downturn in China’s property market and broader economy.

CUPI's capital buffer remains thin, with its Prism score at the lower end of the 'Adequate' level as of June 2024. The comprehensive solvency ratio decreased to 190% by the end of the second quarter (Q2 2024) from 196% at the end of Q4 2023. 

Fitch expects this to improve slightly after CUPI completes its bond issuance, raising the financial leverage ratio to around 30%, up from 10% in the first half of 2024.

Investment risk remains a concern, particularly with CUPI's exposure to the property sector and the shift towards asset management products. 

Fitch-defined risky assets accounted for 58% of shareholders' capital in mid-2024, down from 69% at the end of 2023.

CUPI's underwriting profitability is stable, with a combined ratio of 96% in the first half of 2024, though the return on equity (ROE) fell to 3.7% in 2023. 

The company's favourable profile is supported by its operating scale, business diversity, and strong position in the agricultural insurance market, where it holds nearly 12% of direct premiums.