People’s Insurance Company of China Group (PICC) was founded in 1949, and has 2.42 million institutional insurance clients and about 130 million individual insurance customers. It is controlled by China’s Ministry of Finance, with an 88.7 per cent stake, while the National Social Security Fund (NSSF) holds the remaining 11.3 per cent. It was due to hold an initial public offering in Hong Kong in November 2012.
PICC builds listing base on 17 cornerstone investors
Biggest mainland non-life insurer lines up 17 cornerstone investors in initial public offering to raise up to HK$27.8 billion
Ray Chan and George Chen
People's Insurance Co (Group) of China (PICC) has taken out some insurance on its planned initial public offering of shares in Hong Kong.
The state-owned insurer has lined up an unusually large number of so-called cornerstone investors - at least 17 so far - to ensure the success of its offering, which could raise HK$27.8 billion and be the biggest Hong Kong listing in two years.
The Beijing-based company, the country's biggest non-life insurer, plans to sell 6.9 billion new shares, which is equivalent to 16.67 per cent of the enlarged capital. The new shares are expected to be priced within an indicative range of HK$3.42 to HK$4.03 a share. The firm's price-to-embedded value ratio, a common measure for insurance companies, is set at between 1.2 times and 1.6 times in the current fiscal year ending March, compared with an industry average of 1.4 times, according to three people with direct knowledge of the transaction.
The new listing will be the biggest in Hong Kong since AIA, the Asian life insurance unit of US insurance giant American International Group (AIG), raised US$20.5 billion in 2010.
According to the people, the cornerstone investors are expected to subscribe to about US$1.85 billion of shares, or more than half the total offer.
Among the 17 cornerstone investors lined up are AIG, China Life Insurance, French reinsurer SCOR and Russian Insurance, a Moscow-based state-owned company. Other investors include such big Chinese state-owned enterprises as State Grid, China's largest power distributor, and Sinomach, China's largest heavy machinery maker.
Under terms of the PICC deal, in return for their shareholdings, all the cornerstone investors have promised not to sell their respective stakes for at least six months.
"AIG's strong participation in the PICC offering makes perfect sense because the US insurer holds 9.9 per cent of the Hong Kong-listed PICC Property and Casualty," a unit of PICC group that was listed in 2003, a person familiar with the deal said, adding that the purchase should be viewed as a long-term strategic investment decision and collaboration in product development, as well as reflect the gradual opening of China's financial markets.
AIG, which was once one of the world's largest insurance companies but had to be bailed out by the US government during the 2008 global financial crisis, plans to invest US$500 million in the IPO, according to industry sources. Jon Diat, a New York-based AIG spokesman, declined to comment.
Institutional investors will begin applying for shares from today. Pricing of the new shares will be set on November 30, and they will be traded from December 7.
China International Capital Corp, Goldman Sachs, HSBC and Credit Suisse are the sponsors of the PICC deal, while 14 banks are acting as underwriters.