Shanghai-based Cathay Lujiazui Life Insurance (CLLI), a joint venture between Taiwan’s Cathay Life Insurance Co and Shanghai Lujiazui Finance & Trade Zone Development Co, has received the green light from China’s insurance regulator to nearly double its registered capital.
The China Insurance Regulatory Commission (CIRC) says in a statement on November 22 that it has approved an application from CLLI to increase its capital to 3 billion RMB (US$454 million) from the current 1.6 billion RMB.
This is the second time CLLI is increasing its capital. In 2014, the company quadrupled its capital to 1.6 billion RMB from an initial 400 million RMB.
The National Business Daily, a Mainland financial daily, quoted a CLLI spokesperson as saying that the two joint venture partners will each fork out 70 million RMB for the latest increase.
“The rapid growth of new businesses over the past two years has significantly eaten up its registered capital. As such, its shareholders agree to increase the capital in order to reinforce its solvency and compensation capability,” according to the spokesperson.
CLLI did not respond to a question from Asia Asset Management (AAM) on the timing of the capital increase.
According to a Beijing-based insurance professor, CLLI’s capital adequacy ratio has dropped from 286% in the fourth quarter of 2015 to 186% in the third quarter of 2017, versus the CIRC’s “acceptable bottom line” of 120%.
“Capital adequacy ratio is very significant for insurers,” he tells AAM, speaking on condition of anonymity, adding that a stable capital adequacy ratio is a prerequisite for Mainland insurers to expand their business scale.
CLLI suffered a loss of 17.57 million RMB in the third quarter of this year, bringing its accumulated losses for the first nine months of 2017 to 42.47 million RMB.
CLLI had total AUM of about 3.92 billion RMB at the end of 2016.
