New China Life Raises $1.9 Billion in Initial Stock Offering
December 11, 2011, 7:23 PM ESTBy Fox Hu and Jonathan Burgos
Dec. 9 (Bloomberg) -- New China Life Insurance Co., the nation’s third-largest life insurer, raised $1.9 billion from an initial public offering, after selling shares near the bottom of a marketed range.
The state-backed company sold 358.4 million shares at HK$28.50 apiece in Hong Kong, according to a statement to the Shanghai stock exchange yesterday. It sold another 158.5 million shares in Shanghai at 23.25 yuan apiece, it said in a separate filing. The Hong Kong share sale raised HK$10.2 billion ($1.3 billion), and the Shanghai listing raised 3.7 billion yuan ($582 million).
Investors have cooled on new equity offerings even as New China Life and Chow Tai Fook Jewellery Group Ltd. are among companies hoping to raise almost $6 billion in Hong Kong in December, more than any month since October 2010, data compiled by Bloomberg show. The listing plans come with the benchmark Hang Seng Index down 17 percent so far this year.
“What we hear in news day in and day out is the European debt crisis and how the world is going into recession,” said Pauline Dan Hong Kong-based chief investment officer at Samsung Asset Management, which oversees about $72 billion. “Under such circumstances, I don’t think investors will be too keen to take on risks.”
‘Solvency Pressure’
Baoxin Auto, a Chinese luxury car dealer, yesterday priced its $415 million offering at the bottom of the range marketed to investors. Chow Tai Fook, seeking as much as $2.8 billion in what may be Hong Kong’s biggest IPO this year, is scheduled to price its offering today.
“Chow Tai Fook should do okay as people are more familiar with the name,” said Dan. “People are a little bit more positive on consumer-related stocks.”
New China Life’s rivals China Life Insurance Co. and Ping An Insurance (Group) Co. have tumbled more than 30 percent this year, with Fitch Ratings saying that the nations insurers face “solvency pressure” because of investment losses.
New China Life plans to use the proceeds to bolster its capital base, according to the offering document. Its solvency ratio, a measure of an insurer’s ability to settle claims, declined to about 87 percent at the end of September. That compares with a median solvency ratio of 212 percent at domestic rivals China Life, Ping An, and China Pacific Insurance (Group) Co., according to data compiled by Bloomberg.
Retail Demand
“Life insurer stocks have done poorly this year and there are quite a few of them already in the market to choose from,” said Nelson Yan, an investment manager who helps oversee about $90 million at Mayfair Pacific Financial Group in Hong Kong.
The price of the Hong Kong offering values New China Life at 1.05 times so-called embedded value, or net assets plus the present value of future profits. China Life Insurance Co. trades at about 1.6 times estimated 2012 embedded value in Hong Kong while Ping An Insurance (Group) Co. is valued at 1.5 times, said Olive Xia, an analyst at Core Pacific-Yamaichi International Ltd. in Shanghai.
New China Life received orders for only about 60 percent of the shares it offered to individual investors in Hong Kong, according to two people with knowledge of the matter. Retail investors are cautious after recent stock market volatility, said Terrace Chum, managing director of greater China equities for Manulife Asset Management, which oversees $199 billion.
“Although the Hong Kong economy still seems to be doing alright, we’re starting to see some retrenchment in the finance- related industry,” said Chum, who is based in Hong Kong. “Probably people want to hold on to more cash.”
Zurich Financial Services
The insurer originally offered the Hong Kong shares at HK$28.20 to HK$34.33 apiece, according to a prospectus filed to the city’s stock exchange on Dec. 1. The Shanghai shares were offered at 23 yuan to 28 yuan each.
Central Huijin Investment Ltd., a unit of China’s sovereign wealth fund, will remain New China Life’s biggest shareholder with a 31.3 percent stake following the IPO, according to the prospectus. Baosteel Group Corp., a steelmaker, has a 15.1 percent holding, while Zurich Financial Services AG is the third-biggest investor with 12.5 percent after the offering, the document shows.
New China Life was the nation’s third-largest life insurer by premium income last year, after China Life and Ping An, according to data from the China Insurance Regulatory Commission.
BNP Paribas SA, China International Capital Corp., Deutsche Bank AG, Goldman Sachs Group Inc. and UBS AG are among banks that arranged New China Life’s IPO.
--With assistance from Liza Lin in Shanghai. Editors: Mohammed Hadi, Joshua Fellman
To contact the reporters on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net
To contact the editor responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net
