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 to lift capital with 5.8b yuan rights issue
A planned rights issue would help PICC Property and Casualty, the mainland's biggest non-life insurer, to record faster premium growth and business expansion, analysts said.
But shares in PICC fell 2.55 per cent to close at HK$9.94 in Hong Kong despite analysts' positive views on the rights issue.
"The rights issue will help the company bolster its capital base to help it prepare for stronger premium income growth in the medium term," said Chen Xingyu, an analyst with Phillip Securities. The operating environment of the mainland's property and casualty insurers had been improving since late last year on better investment income, he said. "PICC P&C is likely to look for business expansion this year as the momentum improves."
A research note by Deutsche Bank said the rights issue would boost PICC's capital, adding that the ratio between the company's actual capital and minimum capital required by the regulator to maintain solvency would increase to 200 per cent upon the completion of the rights issue. The ratio was 175 per cent at the end of last year.
PICC on Monday said it planned to raise 5.8 billion yuan (HK$7.2 billion) in the rights issue of 930 million A shares at 4.30 yuan apiece and 418 million H shares in Hong Kong at HK$5.38 each, which would be a 47.25 per cent discount on its Monday closing price.
The insurer's major shareholders, People's Insurance Company of China Group and American International Group, have agreed to subscribe to the offering, according to the insurer's statement to the Hong Kong stock exchange.
The hefty discount of PICC's offering showed the insurer was under capital pressure, Chen said.