New | PICC to bolster capital with new rights offer
PICC Property and Casualty (PICC P&C), the mainland’s largest non-life insurer, is looking to strengthen its capital base by raising 7.2 billion yuan (HK$9.1 billion) in a rights issue to qualified shareholders.
In a filing with the Hong Kong stock exchange on Wednesday, the Beijing-based company said it will offer 0.9 rights shares for every 10 held by each shareholder.
The subscription price per H rights share is HK$7.46 and 5.92 yuan per domestic rights share. The number of H rights shares proposed to be issued is 379,777,642, while domestic rights shares total 844,594,760.
This marks the latest rights offering made by PICC P&C since May last year, when it raised 5.8 billion yuan to bolster its capital requirements.
Chen Xingyu, a Shanghai-based analyst with Phillip Securities, said the new rights issue would enable PICC P&C “to prepare for faster growth in China’s premiums business, which is in line with the government’s policy”.
“Larger industry players, such as Ping An Insurance and China Life Insurance, might also raise funds to boost solvency ratio in a bid to better prepare for future growth,” Chen said.
The State Council outlined measures in August that would accelerate the development of the country’s insurance industry, setting a target for insurance premiums to account for 5 per cent of the country’s gross domestic product by 2020.
Analysts have forecast insurance premiums on the mainland to grow by 15 to 17 per cent annually in the next six to seven years based on that government estimate.
Mainland non-life insurers have faced increased pressure over the past few years because of the cost of rising claims and more intense competition.
Chen saw the latest rights issue by PICC P&C as a positive for the company. “The rights issue is in line with market expectation, so it’s unlikely to add too much pressure on its share prices,” he said.
Shares of the company opened on Wednesday at HK$13.82, down from the previous day’s close of HK$14.18.
PICC P&C received the green light for its new rights issue from the China Securities Regulatory Commission on November 2 and the China Insurance Regulatory Commission in July.The company’s principal activities include motor insurance, commercial property insurance, homeowners insurance, cargo insurance, liability insurance, accidental injury insurance, short-term health insurance, marine hull insurance, agriculture insurance, surety insurance, and related reinsurance business on the mainland.
Its total revenue from January to June this year rose 14.3 per cent to 132.118 billion yuan, up from 115.636 billion yuan a year ago.
