Asset injection from parent comes just before the mainland insurance giant's dual listing in Hong Kong and New York China Life Insurance has inherited net assets worth 29.6 billion yuan (HK$27.8 billion) before a planned US$2.5 billion dual listing of 25 per cent of its shares in Hong Kong and New York, according to a filing to the US Securities and Exchange Commission. The listing, which values China Life at about US$10 billion, will be the world's biggest initial public offering this year. China Life is attempting to raise almost four times the amount PICC Property and Casualty garnered from its listing in Hong Kong last month. The asset injection from China Life's parent, China Life Insurance Group, comprises a wholesale transfer of cash, bank deposits, securities and buildings. Inherited liabilities include 44 million individual and group life insurance policies, annuity contracts and long-term health insurance policies. The parent injected its better quality assets into China Life, while the policies transferred were written after 1999. Life policies issued in China before 1999 carried high guaranteed returns to policy-holders. Including them in the listing vehicle would make it a harder sell to potential investors. In return, the parent will be given 20 billion shares, or a 74.7 per cent stake in China Life, the mainland's biggest life insurer. The money raised from the dual listing will be used for 'general corporate purposes' and to expand the insurer's capital base. Pre-marketing of China Life's H-share issue in Hong Kong - which is to coincide with listing of American depositary receipts in New York - is set to start on Monday. A global roadshow will begin on December 1. Trading is expected to begin on December 17 on the New York Stock Exchange, and in Hong Kong the following day. China Life's distribution and sales network includes 650,000 exclusive agents in 8,000 offices in China and another 78,000 non-dedicated intermediaries such as banks and post offices. Last year, gross premiums and policy fees amounted to 47.07 billion yuan - more than twice the 2000 level. Eighty per cent was generated from individual policies, followed by accidental and health policies, with 11 per cent and group policies with just 1 per cent. That gave China Life a market share of about 45 per cent last year. Net premiums earned last year came in at 45.2 billion yuan, while net investment income was 4.34 billion yuan. On a pro forma basis, the H shares had a net profit of 4.52 billion yuan last year. China Life has set up a joint venture to help manage the group's US$40.57 billion worth of investment assets. The listed company will have a 60 per cent stake in the venture, while the parent will have 40 per cent. On June 30, China Life said its net assets amounted to 36.18 billion yuan - with a solvency level more than 2.8 times the minimum required level. '[China Life] has sufficient working capital and may continue to operate its business according to its existing form and its current scale of operations within 12 months after the restructuring,' it said. However, the company said it was exposed to negative spreads - meaning the rate of return earned on insurers' investment, meant to support insurance obligations, were not able to cover the rates guaranteed to policy-holders. Interest rates were cut seven times from April 1996 to June 1999, and China Life said it was still adversely affected by the cuts. It highlighted the investment mismatch problem it faced - with the duration of its assets being shorter than that of its liabilities - and the lack of an effective tool to hedge interest-rate risks. It also cited its limited experience in making claims and its not-too-effective risk management and reporting systems. China Life said it had plenty of scope for growth, given its monopolistic position and the nation's low penetration rate of just 2.2 per cent (the proportion of premiums to its gross domestic product) last year and its low life insurance density (life insurance premiums per capita) of just 177.04 yuan last year.