New China Life targets 5b yuan IPO

PUBLISHED : Thursday, 17 November, 2011, 12:00am
UPDATED : Thursday, 17 November, 2011, 12:00am


New China Life Insurance, the mainland's third biggest life insurer, has received approval to launch its initial public offering (IPO), and is expected to raise about five billion yuan (HK$6.1 billion) from the Shanghai Stock Exchange.

The Shanghai-based insurance firm will float as many as 158.5 million yuan-denominated A shares, or 5 per cent of its enlarged capital after securing the approval of the China Securities Regulatory Commission yesterday, and also plans to raise capital on the Hong Kong market.

The insurer, 15 per cent owned by Zurich Financial, will officially kick off its Shanghai-Hong Kong dual IPO if it wins approval from Hong Kong Exchanges and Clearing today.

New China plans to sell up to 412.2 million H shares in Hong Kong, or 13 per cent of its enlarged capital.

It is not known how much the life insurer aims to raise through the dual listing, but state-owned China Securities Journal reported New China wanted to raise five billion yuan on the Shanghai bourse, which is one billion yuan less than expected.

New China will become the first mainland insurer to go public since Shanghai-based China Pacific Insurance raised 30 billion yuan with an IPO on the A-share market in 2007.

Rating agency Standard & Poor's estimated in July that mainland insurers would need to raise an additional 110 billon yuan over the next few years to support their growth.

New China is going ahead with the IPO despite a weak stock market and volatile global financial markets amid investor concern over the outlook for the global economy. Currently, the Shanghai-listed insurers trade at an average 18 times their forecast earnings for this year.

Based on the price-to-earnings multiple of 18 and the projected full-year earnings of 3.6 billion yuan by New China this year, it might raise just 3.2 billion yuan in Shanghai.

On the mainland, it remains unclear when New China can officially start the offering process, which involves another regulatory approval.

The CSRC granted the go-ahead for China Communications Construction's 20 billion yuan IPO and Shaanxi Coal Industry's 17 billion yuan fund-raising earlier this year, but neither has yet been allowed to conduct their share sale.