On September 30, 2025, TIAN AN Property Insurance Company Limited (hereinafter referred to as "TIAN AN Property Insurance" or "the Company") issued an announcement stating that "the 2015 Capital Supplementary Bond should have matured and been redeemed on September 30, 2025. However, due to the inability to ensure that the solvency adequacy ratio remains no less than 100% after repaying the principal and interest of this bond and maintaining the ability to settle the principal and interest of other liabilities, the Company is unable to repay the principal and interest of this bond to bondholders."
We believe that TIAN AN Property Insurance's inability to pay its capital supplementary bond on schedule complies with the contractual provisions. The bond's failure to pay on schedule demonstrates that under the current domestic regulatory environment, insurance companies' capital supplementary instruments can function as intended for loss absorption according to their contractual agreements.
Regulatory authorities have adopted a "new establishment succession + bankruptcy" risk disposal plan for TIAN AN Property Insurance. For the insurance business legally conducted by TIAN AN Property Insurance, subsequent insurance responsibilities will not be negatively affected by this capital supplementary bond payment default event.
Shenneng Property Insurance Company Limited (hereinafter referred to as "Shenneng Property Insurance"), which has taken over TIAN AN Property Insurance's insurance business, was jointly established by eight entities including Shenneng Investment Management Co., Ltd. and Shanghai International Group Co., Ltd., and was founded in January 2024. When the National Financial Regulatory Administration approved Shenneng Property Insurance's acquisition of TIAN AN Property Insurance's insurance business, it required that the transfer should not harm the legitimate rights and interests of policyholders, insureds, and beneficiaries.
Shenneng Property Insurance's actual controller is Shenneng (Group) Co., Ltd., a local state-owned enterprise wholly owned by Shanghai SASAC. Local state-owned capital participation in insurance company risk disposal can fully leverage local governments' resource endowments and information advantages, implement territorial responsibilities, and conduct risk disposal more effectively. This approach also helps construct a central-local collaborative risk-sharing mechanism, preventing excessive risk concentration at the central level.
Insurance company capital supplementary bonds will not be directly written down, but due to subordinated clauses and deferred payment clauses, their credit risk remains higher than insurance companies' general debt. Unlike commercial banks' Tier 2 capital bonds, insurance company capital supplementary bonds do not contain write-down or conversion clauses but include deferred payment clauses. Insurance companies can only repay principal and interest when they can ensure that the solvency adequacy ratio remains no less than 100% after bond repayment.
As the first insurance company capital supplementary instrument in recent years domestically that failed to pay on schedule, we expect that TIAN AN Property Insurance's 2015 capital supplementary bond will not be directly written down before the company formally declares bankruptcy liquidation. However, after bankruptcy liquidation, bond investors may not be able to recover full principal and interest.
On June 13, 2025, the National Financial Regulatory Administration revoked TIAN AN Property Insurance's business license. According to the company, it "has actively communicated with bondholders and fully cooperated with bondholders' relevant demands, and will make coordinated arrangements and处理 for this bond in the company's subsequent risk disposal work."
For capital supplementary instruments issued by small and medium-sized insurance companies with poor business stability and weak financial strength, investors need to heighten attention to their payment risks.
We note that among the insurance companies taken over in the same batch as TIAN AN Property Insurance, TIAN AN Life Insurance Company Limited (hereinafter referred to as "TIAN AN Life Insurance") still has one capital supplementary bond issued in 2015 that remains outstanding. This bond will mature in December 2025. Both this bond and TIAN AN Property Insurance's 2015 capital supplementary bond experienced their first interest deferral in 2020, with bond interest accrued during the risk disposal period.
In October 2023, regulatory authorities issued an announcement approving Zhonghui Life Insurance Company Limited (hereinafter referred to as "Zhonghui Life Insurance") to acquire TIAN AN Life Insurance's insurance business and corresponding assets and liabilities, requiring Zhonghui Life Insurance to effectively protect the legitimate rights and interests of insurance consumers and creditors. It should be noted that TIAN AN Property Insurance's transfer announcement did not mention creditor rights.
We will closely monitor the final disposal results of these two capital supplementary bonds issued by TIAN AN Property Insurance and TIAN AN Life Insurance. We believe that if creditors ultimately suffer actual losses, it will have certain impacts on domestic insurance companies' future issuance of capital supplementary instruments, mainly including increased issuance costs and higher investor qualification thresholds.
According to the bond's prospectus, the company can only repay principal and interest when it determines that the solvency adequacy ratio remains no less than 100% after repaying the capital supplementary bond principal and interest. The last time TIAN AN Property Insurance disclosed solvency-related data was on April 30, 2020, when it reported core solvency adequacy ratio and comprehensive solvency adequacy ratio of 191.74% and 237.24% respectively as of the end of Q1 2020. On July 17, 2020, the former CBIRC issued an announcement to take over four insurance companies including TIAN AN Property Insurance and two trust companies. Since then, TIAN AN Property Insurance has not disclosed solvency-related information.