Bloomberg News

PICC Said to Raise $3.1 Billion in Hong Kong Initial Offer

November 30, 2012

PICC Said to Raise $3.1 Billion in Hong Kong’s Biggest 2012 IP

A man walks past a People's Insurance Co. of China Group (PICC) subsidiary office in Beijing. Photographer: Keith Bedford/Bloomberg

People’s Insurance Company (Group) of China (1339), the nation’s biggest property insurer, raised HK$24 billion ($3.1 billion) in Hong Kong’s largest initial public offering in two years, people with knowledge of the matter said.

PICC Group sold about 6.9 billion shares at HK$3.48 apiece, near the bottom of a marketed range, said the two people, asking not to be identified because the information is private. The IPO is the largest in Hong Kong since October 2010, when AIA Group Ltd. (1299) raised $20.5 billion, data compiled by Bloomberg show.

The insurer defied a 78 percent slump in the value of Hong Kong IPOs this year, thanks in part to $1.82 billion of pre- negotiated investments with American International Group Inc. (AIG:US) and 16 other so-called cornerstone investors, to complete the offering. Before the sale, companies had raised $3.5 billion in Hong Kong IPOs this year, the lowest for similar periods since 2001, data compiled by Bloomberg show.

“Liquidity is helping, and good companies with reasonable valuations can attract investors,” said Binay Chandgothia, a Hong Kong-based portfolio manager at Principal Global Investors, which oversees about $250 billion.

An external spokeswoman for PICC Group declined to comment on the final price.

Founded in October 1949, PICC Group offers property, casualty, life and health insurance products. It had about 130 million individual customers and 2.4 million institutional clients at the end of June, according to the prospectus.

China’s Stake

PICC Group is the biggest property insurer in China with 163 billion yuan in premium income for the first 10 months of this year, according to the website of China Insurance Regulatory Commission.

The shares were originally marketed at HK$3.42 to HK$4.03 each, according to a prospectus for the offering, which accounts for about 16.7 percent of the insurer’s enlarged share capital. Based on the percentage, the sale values PICC Group at $18.6 billion.

China’s Ministry of Finance, which held an 88.7 percent stake in PICC Group before the IPO, will own 72.5 percent after the sale, the prospectus shows.

The offering values PICC Group at 19.1 times earnings of $975 million for the 12 months through June 30, Bloomberg data show. That compares with 10.6 times for Hong Kong-traded PICC Property & Casualty Co. (2328), in which PICC Group has a 69 percent stake, and 34.6 times for China Life Insurance Co.

China International Capital Corp., Credit Suisse Group AG, Goldman Sachs Group Inc., and HSBC Holdings Plc managed the share sale as joint sponsors.

Cornerstone Investors

Cornerstone investments from companies including AIG, Tokio Marine Holdings Inc. (8766) and China State Grid Corp. accounted for about 59 percent of the IPO, compared with an average of 26 percent for eight other Hong Kong offerings worth at least $1 billion in the last two years, data compiled by Bloomberg show.

Cornerstone investors were allotted a guaranteed amount of stock in exchange for the promise that they won’t sell PICC shares within six months.

China’s Social Security Fund acquired 11.3 percent of PICC Group for 10 billion yuan ($1.61 billion) in June last year, according to a statement on the fund’s website. That transaction valued the insurer at about 90 billion yuan.

PICC Group demanded a premium to the 90 billion yuan valuation because the pension fund bought its shares at a discount, people with knowledge of the matter said Nov. 12. The Social Security Fund’s stake in the company will fall to 10.9 percent after the offering, PICC Group’s prospectus shows.

China’s insurance market expanded at an average 19 percent annual pace in the past decade to become the world’s sixth biggest, while insurers’ assets jumped 10 times, according to the industry regulator.

The country’s improving economic outlook is helping boost confidence in Hong Kong IPOs, said Michiya Tomita, a fund manager at Mitsubishi UFJ Asset Management Co., which oversees $70 billion. Confidence in the Chinese economy is at the highest in more than a year, according to a Bloomberg investor poll.

“China’s fundamentals are coming back and an influx of money to Hong Kong is also supporting the market,” he said.

To contact the reporter on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net


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