China Life targets 29b yuan from IPO
Mainland company set to become the first insurer to list on domestic market
China Life Insurance, the nation's largest provider of life insurance, is seeking to raise as much as 29 billion yuan in a listing on the Shanghai stock market.
In what will be the first insurance stock on the mainland market, the Hong Kong and New York-listed firm plans to issue up to 1.5 billion shares, or 5.3 per cent of its total enlarged share capital, it said in a statement published by the China Securities Regulatory Commission. The securities regulator will review the request on Friday.
Based on the firm's closing price of HK$19.02 in Hong Kong yesterday, the 1.5 billion shares will be worth 28.53 billion yuan. The company said it intended to use the new funds to enlarge its capital base.
The initial public offering, approved by the insurer's shareholders in October, was spurred by the central government urging large overseas-listed companies to come to the domestic market. Hong Kong-listed Ping An Insurance (Group), the second-largest life insurer, also said recently it would issue up to 1.2 billion A shares at the start of next year but had not yet received official approval to proceed.
Chinese investors, especially institutional investors such as fund management firms holding a total of more than 270 billion yuan in assets, highly rate the China Life listing, because of the country's fast-developing insurance sector.
Also, the limited choice of big firms in the stock market as well as the fast-expanding managed assets made the big insurance stock more valuable.
'Better to choose expensive but right stocks, instead of cheap but wrong ones in the A-share market,' said Zhu Ping, the chief investment officer of Guangfa Funds Management. 'There are not enough good companies in the domestic market right now, which is a problem in China's economy.'
Mr Zhu expects China Life will be listed by the end of this month or the beginning of next month.
The value of the insurer's Hong Kong shares have almost tripled since the beginning of this year, as investors pile into the country's emerging insurance sector, seeing it as a proxy with residents' fast income growth.
The China Insurance Regulatory Commission said in October it aimed to double insurance revenue to more than one trillion yuan in five years with managed assets reaching five trillion yuan.
China Life, as the leader in the life insurance sector, had benefited from the fact that life insurance products are more complicated than other forms of coverage, making it difficult for rival firms to challenge its leading position, said Luo Jing, an analyst with Guotai Junan Securities.
Mr Luo said the listing would help the insurer increase its payment ability to more than 300 per cent from 250 per cent.
After the listing, parent China Life Insurance (Group)'s stake in the listed subsidiary will drop to 68 per cent from 72 per cent. The state-owned parent cannot sell its shares for three years from the listing.
It raised more than 27 billion yuan in the listing in Hong Kong and New York in December 2003.
The firm benefits from the country's policy of encouraging insurers to invest in diversified sectors such as stocks and direct investment and a 10 per cent stake in Huishang Bank. It also bought stakes in electricity distributor China Southern Power and Citic Securities, the country's largest listed brokerage.
China Life's stock rose 1.6 per cent yesterday following the announcement of the A-share listing.