AIA listing tipped to be prime attraction

PUBLISHED : Saturday, 04 September, 2010, 12:00am
UPDATED : Saturday, 04 September, 2010, 12:00am

Hong Kong brokerages expect the coming listing of the AIA Group to be one of the most popular initial public offerings this year because of the company's leading position in Asia's insurance market.

AIA, the Asian life insurance arm of the troubled American International Group, had submitted preliminary documents to the Hong Kong stock exchange for an IPO, Reuters reported. An AIA spokeswoman, however, declined to comment on the news yesterday.

Brokers expect the insurer to raise US$15 billion to US$20 billion from the share offering, which is widely expected to take place late next month or in early November.

'The AIA listing comes at the right time as the market sentiment has been improving lately,' said Christopher Cheung Wah-fung, chairman of Christfund Securities. 'Hong Kong retail investors like to invest in a brand they know well. Since AIA has operated in Hong Kong for more than 70 years and many Hongkongers are its policyholders, this IPO has some strong selling points.'

Cheung said although AIG in the US was facing difficulties, AIA itself was profitable. 'In addition, the company is focused on Asia and China [in particular], the world's fastest-growing area. This would make the new listing one of the hottest this year.'

Louis Tse Ming-kwong, director of VC Brokerage, agreed. 'The AIA listing should be attractive because it is the largest insurance company in Asia. Such a leading market position would help it compete with smaller rivals,' he said.

Tse said that if AIA was priced at a book ratio of 1.8 to two times, in line with other financial stocks, the IPO price would be attractive.

Although some IPOs had been postponed as a result of the uncertainties over the European sovereign debt crisis in May, he said those hiccups would pre-empt AIA from setting its price too aggressively.

'Big players such as AIA would benefit from an economic recovery, so it would be a good time to invest in the insurer now when the economy hasn't yet fully recovered,' he said. The company has yet to provide any pricing or fund-raising details.

AIA's troubled parent AIG announced in July that it would go ahead with the listing to fund the repayment of a US$182 billion bailout by the US government, made during the 2008 financial crisis.

The listing was initially planned for the first half of this year, but was put on hold when British insurer Prudential offered US$35.5 billion to take over AIA in March. The deal was scrapped in June as it failed to get the support of shareholders.

AIA, which was formed in Shanghai more than 90 years ago, has a network of 320,000 agents in 15 markets covering 23 million policyholders. It is the largest insurer in Hong Kong with a market share of 16 per cent, more than two million policies and 8,000 agents.