New China Life to offer shares in HK, Shanghai
China's third-largest insurer New China Life Insurance aims to strengthen its capital base after a global H-share offering to raise up to nearly HK$12.36 billion.
The insurer's solvency margin ratio stood at 86.6 per cent at the end of September, which is below the 100 per cent level required by the China Insurance Regulatory Commission. The ratio was at 106.1 per cent on June 30.
'After undertaking our H-share global offering and A-share public offering on the mainland, we believe the ratio will increase,' Gong Xingfeng, chief actuary of New China Life, said yesterday. New China Life aimed to boost the ratio to 150 per cent. The ratio refers to the size of an insurer's capital relative to premium written, and is a measure of risk.
'The decline of our solvency margin ratio ... was primarily due to the negative impact on the fair value of our investment assets from the volatile PRC capital markets and, to a lesser extent, the continued growth of our insurance business,' the company said.
About 358.42 million H shares will be offered under the global placement, of which about 5 per cent will be initially offered in Hong Kong. The target price range is HK$28.20 to HK$34.33 a share. Each board lot has 100 shares.
The company intends to grant an over-allotment option to international purchasers, which will allow it to issue up to an aggregate of 53.763 million additional H shares. The Hong Kong offering commences today and shares are expected to begin trading on December 15.
The insurer generated gross written premium of 91.68 billion yuan (HK$112.03 billion) last year and 50.66 billion yuan in the first six months this year. Its market share rose from 8.2 per cent in 2009 to 8.9 per cent last year. It expects a net profit of over 2.71 billion yuan this year, up from nearly 2.25 billion yuan last year.
The company is also offering 158.54 million A shares which could raise 3.92 billion yuan at a mid-range offer price of 25.5 yuan per share in Shanghai.