Sunshine’s US$824 million IPO a boost for Hong Kong even as Beijing insurer prices stock offering at lower end of range

Sunshine sells 1.15 billion shares at the bottom of the price range it marketed to investors
International institutional investors show greater interest in the offering than local retail investors

IPO

Enoch Yiu

Published: 2:25pm, 8 Dec, 2022

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Beijing-based insurer Sunshine Insurance has priced its initial public offering (IPO) at HK$5.83 per share with the aim of raising HK$6.42 billion (US$824 million).

The IPO, which is also a boost for the city’s ambitions of becoming an insurance fundraising centre, is the city’s fourth-largest new listing this year based on Refinitiv data.

Sunshine priced 1.15 billion new shares in the IPO at the bottom of the HK$5.83-HK$6.45 range it marketed to investors when the deal was launched on November 30, according to a company filing with the stock exchange.

“There are already a lot of large insurance companies listed in Hong Kong, which means investors have a lot of choice in this sector. Sunshine Insurance will face keen competition from its peers,” said Louis Tse Ming-kwong, managing director at Wealthy Securities.

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The insurer will be the 18th such firm to list in Hong Kong. Sunshine’s IPO, however, underscores Hong Kong’s push for more mainland Chinese and international insurers to set up in the city. John Lee Ka-chiu, the city’s leader, on Monday unveiled a road map for developing the local insurance industry with the aim of turning Hong Kong into a risk management hub.

International institutional investors have shown greater interest in the offering than local retail investors. The offering was undersubscribed by retail investors, with only 1,877 applications for 14.5 million shares representing 12.6 per cent of the stock on offer.

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“Retail investors usually like quick returns from IPOs. They may not like to invest in insurance stocks, which deliver good returns to investors who hold them for the medium and long term,” Tse said.

The 110.51 million unsubscribed shares were reallocated to the international offering, which was oversubscribed 1.3 times. After the reallocation, international investors hold 98.74 per cent of the total shares on sale.

The total funds raised will increase to HK$7.4 billion if the overallotment option is exercised. The shares will start trading on Friday under the stock code 6963.

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The 17 other insurers listed in Hong Kong represented 5.5 per cent of Hong Kong’s total market capitalisation as of April, according to stock exchange data. These include some of the biggest mainland Chinese insurers, such as China Life and Ping An Insurance, as well international players such as AIA, which is Asia’s largest insurer, and the UK’s Prudential.

Founded by Zhang Weigong in 2004, Sunshine operates mainly through Sunshine Life, which offers about 130 products covering life, health and accident insurance, according to its IPO prospectus. Its net profit rose 6 per cent to 6.02 billion yuan (US$863 million) last year.

Sunshine Life was ranked 12th by size among mainland Chinese life insurers in 2020 with a market share of 1.7 per cent, according to government data. It also offers property and casualty insurance through Sunshine P&C.

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Sunshine’s IPO comes against the backdrop of a bleak year for listings in Hong Kong. FWD Group, the Hong Kong-based insurer backed by tycoon Richard Li Tzar-kai, for instance, decided in June to postpone its listing because of market volatility in the city.

KPMG, however, expects Hong Kong to climb back into the top three spots among IPO markets globally for this year as a whole.

“After a slow start, Hong Kong’s market saw a surge in fundraising in the second half of 2022 that accounted for more than 80 per cent of the full-year proceeds, while other global markets were yet to recover,” said Louis Lau, partner of KPMG China. “With this returning momentum, Hong Kong is now poised to return to the top three global IPO hubs this year.”

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The Hong Kong market is also expected to remain among the top listing destinations in 2023, with a solid pipeline of more than 120 companies seeking IPOs with the aim of raising HK$180 billion from around 90 deals, KPMG said.

Hong Kong recorded 69 IPOs in the first 11 months of 2022, and accounting firm PwC expects this tally to reach 80 by the end of December. This will bring the year’s total funds raised to HK$105.6 billion, which is 68 per cent lower than last year, according to PwC estimates.

The city ranked fourth among the world’s largest fundraising destinations through the first 11 months of the year, after being on top seven times in the past 13 years.

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