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David Evans

It's dominant position, profitability and robust growth are spurring investment in the insurer, says chairman

The development of China's insurance market received another significant boost today with the successful listing of China Life Insurance (China Life)  on the Hong Kong stock exchange.

China Life is the latest mainland insurer to seek an overseas listing after PICC Property & Casualty  made its trading debut last month. China Life will no doubt be hoping its shares mirror the impressive performance of those of PICC, which jumped 50 per cent on their first day of trading.

'The economy of China has been experiencing robust growth in recent years,' said Wang Xianzhang,  chairman  and president of China Life during a roadshow in London.

'With the rise in personal income and living standards, demand for insurance products, especially life insurance, has spurred the development of China's insurance market.

'In comparison with developed countries, our insurance industry is still in an early stage of development and shows great potential for additional growth.

'As a result of China's reform efforts in the social welfare system and commitment to better regulate the financial and insurance industries, China's life insurance market is expected to flourish.'

China Life's US$3 billion initial public offering (IPO) through a dual listing on the Hong Kong and New York exchanges makes it the biggest this year. The insurance company will use the net proceeds from the global offering for general corporate purposes and to strengthen its capital base.

China Life  offered about 6.5 billion H shares  (made up of American depository  receipts and H shares), excluding one billion H shares available to cover over-allotments.

An H share is a share in a mainland-incorporated company  listed in Hong Kong.

The offer comprises 91 per cent primary shares issued by China Life and 9 per cent  secondary shares sold by its parent. The new shares represent 25 per cent of the enlarged share capital before over-allotments.

The price range for the offer to the public in Hong Kong was between $2.95  and $3.61  per H share.

The IPO    received significant support from local tycoons. Hong Kong businessmen bought US$500 million, or 18 per cent, of the H shares and this is bound to fuel interest in China's No1 insurer, which has a 45 per cent share of the mainland life insurance market.

Mr Wang said China Life was in discussions with potential strategic investors.

'There are lots of parties interested in China Life because of our dominant position, profitability, and growth,' he said. 'Therefore, we set our standards quite high.'

However, he stressed that this was a separate issue from the company's IPO.

In anticipation of the huge demand for the offering, China Life printed 2.2 million application forms for retail investors and 400,000 for brokerages.

'As the leading and most recognised life insurance company in China, China Life intends to capitalise on its leading market position, unrivalled customer base, unparalleled nationwide distribution network, celebrated life insurance brand name and its successful post-restructuring platform to achieve sustainable and profitable growth,' Mr Wang said. 'Ultimately, we aim to maximise long-term value for our shareholders. We believe that China Life is well positioned to capture the many high-growth opportunities in what is potentially the largest insurance market in the world.'

China Life's modern-day operations date back to 1949 and the establishment of the People's Insurance Company of China (PICC)  by the government of the time.

By the mid-1950s, PICC had near monopoly status because at this time all foreign companies had withdrawn their operations from China.

In 1958, the government suspended virtually all of PICC's domestic insurance business. This lasted until the economic reforms of 1979, when PICC's domestic property and casualty insurance business was revived.

PICC's life insurance business resumed operations in 1982, with the company remaining the only life insurance provider in China. Initially, the life insurance market focused principally on the group insurance sector, and life insurance products lacked diversity.

In the late 1980s, more life insurance companies began to enter the market, with the establishment of two Chinese companies Ping An Insurance Company of China  and China Pacific Life Insurance  and the entry of foreign insurance companies.

Distribution channels for individual life insurance products began to emerge and agency sales forces began to be developed. Meanwhile, China's first insurance law was introduced in 1995 and the China Insurance Regulatory Commission  was established in 1998 to regulate the industry.

China Life is ranked the No1 life insurer in  China. China International Capital Corporation (CICC), Citigroup Global Markets, Credit Suisse First Boston and Deutsche Bank are joint global co-ordinators, joint global book runners, joint sponsors and joint lead managers.   CICC and Lehman Brothers are financial advisers to China Life.



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