China Life Insurance

China Life sees IPO drawing 800b yuan

PUBLISHED : Tuesday, 26 December, 2006, 12:00am
UPDATED : Tuesday, 26 December, 2006, 12:00am

Mainland insurance giant to raise up to 28.3b yuan in initial public offering after pricing stock at a lower than expected range

China Life Insurance, the country's biggest life insurer, said it expects to attract as much as 800 billion yuan in subscriptions when it sells A shares to institutional and individual investors in the mainland's first initial public offering in 2007.

The shares in China's first listed insurer, which opened its books yesterday, will attract bids worth between 600 billion yuan and 800 billion yuan, chief investment officer Liu Lefei said in an online presentation yesterday. On that basis, mainland investors may subscribe for between 21 and 28 times the shares available.

The insurer priced the stock at a lower than expected range of 18.16 yuan to 18.88 yuan yesterday, or a discount of 7.4 per cent to 3.7 per cent compared with the company's average H-share price of HK$19.51 in the 30 days to December 22.

The Hong Kong stock surged by more than 18 per cent since December 15.

'The price is good for us,' said Zhu Ping, chief investment officer of Guangfa Funds Management which controls 30 billion yuan. 'However, the supply is not much.'

The Hong Kong and New York-listed insurer, which plans to sell 1.5 billion A shares, or 5.3 per cent of its total enlarged share capital, will raise as much as 28.3 billion yuan from the domestic share sale.

It followed Industrial & Commercial Bank of China in shortening the public subscription period by one day to three days after the Shanghai Stock Exchange gave the green light to this arrangement.

Public investors, including individuals and institutions, can subscribe today for the stock without a limit on how long they have to hold the shares, at a price in the upper range of 18.88 yuan, China Life said in a statement to the exchange. The extra money will be refunded if the final price is lower, the statement said. The final price will be announced on Thursday.

'Shortening the process may be a little risky, as there may be delays in transferring money from banks,' said an investment banker familiar with the process. 'The sponsors may face some risk if they miscalculate the final subscription rate.'

China Life, with nearly 50 per cent share of the mainland life insurance market, will continue to focus on developing business in large and mid-sized urban cities as it seeks to attract more high and middle-end customers, chairman Yang Chao said in yesterday's online presentation to potential investors.

The company said it expects its insurance premiums this year to keep pace with the country's overall life insurance industry.

China Life, which also invests in various projects, plans to put more money into infrastructure projects next year, including highways, ports, airports, electricity and energy, with an expected return of as much as 8 per cent, Mr Liu said.

The insurer owns 20 per cent of Guangdong Development Bank and has a 10 per cent stake in Huishang Bank.

The company has also bought stakes in electricity distributor China Southern Power and Citic Securities, the country's largest listed brokerage.

The insurer has permission to invest US$1.4 billion outside the mainland, up to 10 per cent of which would be spent on H shares and the rest on government and corporate bonds, Mr Liu said.