Mainland insurer aims to sell 1.5 billion shares in Shanghai offering next month
China Life Insurance, the nation's biggest life insurer, plans to sell up to 40 per cent of its mainland initial public offering to a clutch of strategic institutional investors next month, according to sources.
The Hong Kong-listed insurer is likely to sell 30 to 40 per cent of the 1.5 billion A shares to large institutional investors with strong finances including ones helping the insurer expand its sales channels or big buyers of insurance products, according to a source close to the deal.
The final decision on the investors, how much each would get and the length of their lock-up period had yet to be made, the source said.
Normally strategic investors are compelled to hold the stakes for one year.
China Life's Hong Kong shares surged 10.19 per cent to HK$22.70 yesterday, peaking at HK$23.10 during the day, the highest since its listing in 2003.
Based on the current H share price, the insurer could raise more than 34 billion yuan in its Shanghai public offering.
The company will be the first insurer listed in the mainland. Its next-biggest rival, Ping An Insurance (Group), which is also planning a domestic share sale, saw its share price surge by a record 8.77 per cent yesterday to close at HK$35.95.
China Life's A-share price could be decided only after the mainland institutional investors drew orders and gave their preferred price, the source said.
Hong Kong fund managers expect huge demand for China Life's A shares will help boost the H-share price.
'The insurer's A-share price definitely will move up, which in turn will boost the H-share price,' said Paul Pong, the managing director of Pegasus Fund Managers.
'Also, the insurance industry is safer than the banking sector since it has better liquidity.
'The insurers are also better than banks because of their ability to invest in various financial services, including banks.'
China Life has been following the regulator's policy encouraging insurers to invest assets in diversified sectors, such as stocks and direct investment.
The insurer bought a 20 per cent stake in Guangdong Development Bank and a 10 per cent stake in Huishang Bank. It also bought stakes in electricity distributor China Southern Power and Citic Securities, the country's largest listed brokerage.
Yuan Li, an assistant chairman of the China Insurance Regulatory Commission, last week said that the regulator would encourage insurers to invest more and be more involved in the management of commercial banks.
China Life was still waiting for the regulator's final confirming document yesterday afternoon to launch its pre-briefing to investors. Publicity for the IPO is due to begin today.
The road shows will be held in Beijing, Shanghai, Guangzhou and Shenzhen later.
The insurer yesterday reported a 16 per cent increase in the premium income to 173 billion yuan in the first 11 months.