New China Life Insurance Co., the state-backed insurer seeking as much as $2.3 billion in an initial public offering in Hong Kong and Shanghai, received enough orders to cover its institutional books for both listings, said two people with knowledge of the transaction.
The insurer, part owned by Zurich Financial Services AG (ZURN), is offering 358.4 million shares at HK$28.20 ($3.62) to HK$34.33 apiece in the Hong Kong portion of the IPO, of which up to 95 percent will be allocated to institutional investors, a sales document shows. The Hong Kong institutional book was covered on the first day underwriters took orders, said the people, who declined to be identified because the process is private.
“At the end of the day, life insurance in China is a big business and it’s a growing business,” said Andrew Sullivan, principal sales trader at Piper Jaffray Asia Securities Ltd. “Companies within the sector are going to remain popular with investors.”
Companies are planning to sell as much as $7 billion of new shares in Hong Kong before the end of 2011, betting on a revival in investor appetite after the value of IPOs slumped almost 70 percent this year. Chow Tai Fook Jewellery Group Ltd., which is seeking to raise up to $2.8 billion, received bids for all the stock available to money managers in its first day of order taking, people with knowledge of the matter said.
New China Life may sell 158.5 million shares in Shanghai, the company said this month. The Shanghai offering would raise 4.5 billion yuan ($698 million), based on the same pricing as the Hong Kong sale.
New China Life plans to sell almost half of the Hong Kong portion of its IPO, or $780 million of stock, to so-called cornerstone investors including Great Eastern Holdings Ltd. (GE) and Malaysia’s sovereign wealth fund, people familiar with the matter said.
Funds may be attracted to the IPO because New China life could become an index constituent given its size, Piper Jaffray’s Sullivan said. “It’s far more an institutional play than a retail play,” he said.
The company plans to start trading in Hong Kong on Dec. 16, the terms show.
The insurer is seeking funds to bolster its capital, according to the sale document, after shares in major Chinese rivals plunged on declining solvency ratios. China Life Insurance Co. (2628) and Ping An Insurance (2318) (Group) Co., the country’s two biggest insurers, have fallen 39 percent and 41 percent respectively in Hong Kong trading this year.
PICC Rights Offer
Chen Wenhui, deputy chairman of the China Insurance Regulatory Commission, said this month that sources of “capital replenishment” for insurers are “limited” and that the country should allow companies in the industry to sell subordinated bonds. PICC Property and Casualty Co. yesterday announced plans to raise 5 billion yuan through a rights offer.
Central Huijin Investment Ltd., a unit of China’s sovereign wealth fund, is New China Life’s biggest shareholder with a 38.8 percent stake. Zurich Insurance Co., a unit of Zurich Financial, is the third-biggest investor with 15 percent, according to a Nov. 11 filing from New China Life.
Companies have raised $15.9 billion this year via Hong Kong IPOs, compared with $49.1 billion for the same period last year, according to data compiled by Bloomberg. HKT Trust, the telecommunications business trust sold by PCCW Ltd., rose to HK$4.55 on its first day of trading in Hong Kong yesterday from the IPO price of HK$4.53.
BNP Paribas (BNP) SA, China International Capital Corp., Deutsche Bank AG, Goldman Sachs Group Inc. and UBS AG are among banks arranging New China Life’s IPO.
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