PICC set to raise up to HK$5.1b ( 2003-10-14 15:53) (Agencies)
China's largest property insurer, PICC Property and Casualty, plans to raise
up to HK$5.109 billion (US$654 million) from an initial public offering in Hong
Kong, banking sources said yesterday.
The stock listing will be the largest in Hong Kong this year, and will make
PICC the first of several Chinese insurance giants to sell shares in overseas
markets.
"There are no such companies on the market, pure China plays giving exposure
to financial institutions. The demand is definitely there," said Jacky Choi, a
fund manager at Value Partners in Hong Kong.
The company's IPO will test investor appetite for upcoming share sales of
other Chinese insurance giants.
PICC is offering 3.0052 billion shares, or 28 per cent of its enlarged share
capital, at HK$1.30-HK$1.70 each, a source said. The size of the deal may be
increased by up to 15 per cent under a greenshoe option.
The insurer plans to use proceeds from the IPO to increase its paid-in
capital and improve its solvency margin.
PICC and the IPO's joint bookrunners, Morgan Stanley and China International
Capital Corp (CICC), met more than 150 analysts and fund managers in Hong Kong
yesterday to market the deal.
Official pricing is expected on October 30, with trading in PICC shares set
to begin on Hong Kong's main board on November 6.
The listing candidate won a vote of confidence last week when American
International Group, the world's largest insurer by market value, said it
planned to take a 9.9 per cent stake in the Chinese company.
Based on the indicative price range, PICC is marketing the IPO shares at
about 10.5 to 13.7 times forecast 2003 earnings on a fully-diluted basis, and at
one to 1.2 times book value.
"It sounds reasonable, given that it's the largest property insurer in
China," said Kenny Tang, associate director at Tung Tai Securities. "It's a high
growth industry, and there is growing demand for insurance on the mainland."
PICC expects to earn at least 1.43 billion yuan (US$172.71 million) this
year, up from just 278 million yuan (US$34 million) in 2002, according to its
preliminary listing document.
The company's net profit plunged 80 per cent last year partly due to an
increase in the number of claims and a higher net loss from the trading of
securities.
PICC dominates China's property and casualty insurance market with a near 70
per cent share in terms of premiums. But its share has been falling in the past
few years amid increased competition and that trend may continue in the near
term, the company said in its document.
PICC's net earned premium rose five per cent to 36.38 billion yuan (US$4.4
billion) last year.
Its net earned premium is expected to grow by 8.5 per cent this year to 39.48
billion yuan (US$4.77 billion), and by 15.6 per cent in 2004 to 45.64 billion
yuan (US$5.5 billion), Morgan Stanley wrote in a recent research note to fund
managers.
The bank forecasts PICC's net profit to jump nearly 60 per cent to 2.35
billion yuan (US$284 million) next year, thanks to higher investment income and
net earned premiums.
PICC was formed in July this year when its parent, formerly known as the
People's Insurance Co of China, injected all of its commercial insurance
operations into the listing vehicle.
China Life Insurance, the country's largest life insurer, is set to follow
PICC with a share offering in Hong Kong by the end of this year that could raise
about US$2 billion.
China's second largest life insurer, Ping An Insurance, also eyes an IPO in
the territory.
