New China Life Insurance's high equity allocation could raise risky-asset ratio

The company’s financial leverage ratio increased to 12% by mid-2024.

New China Life Insurance Company Ltd.'s (NCI) higher allocation to equities is expected to push the company's risky-asset ratio beyond Fitch Ratings’ metrics, despite exposure to non-standard financial assets has decreased.

The insurer has increased its allocation to stocks, equity-related funds, and investments in associates and joint ventures, which now total 101% of its equity capital, up from 64% in 2023. 

Some equity investments may be allocated to participating funds that share returns with policyholders, but the overall increase in risk exposure remains a key factor in Fitch’s assessment.

NCI's capital metrics are expected to remain in line with its rating category despite a slight moderation. 

The company’s financial leverage ratio increased to 12% by mid-2024 from 8% at the end of 2023, following a $1.38b (CNY10b) capital supplementary bond issuance in June. Despite this rise, the leverage remains below Fitch’s threshold for an IFS 'A' rated life insurer.