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New China Life seeks $800m in overseas IPO
(bloomberg)
Updated: 2005-04-04 16:08 New China Life Insurance Co., the nation's
fourth-biggest insurer, may raise as much as $800 million in an initial public
offering overseas, scrapping plans for a Shanghai share sale, its President Guan
Guoliang said.
The life insurer is selecting investment banks to arrange a possible sale
this year, Guan said in a phone interview from his Beijing headquarters last
week. The company shelved plans for a local currency listing in China, Guan
said, after the Shanghai Composite Index slumped by a third in the past year.
Staffs of New China
Life Ningbo Branch help an elder woman buy insurance policy in this
November 2003 file photo. The life insurer is planning an overseas IPO to
raise US$800 million. [newsphoto] | "The recent
decline on the mainland's stock market has reduced its appeal to companies
seeking to go public," said Yue Yuanbin, an investment banker with Guotai Junan
Securities Co. in Shanghai.
China's insurance market grew 11 percent to 431.8 billion yuan last year as
the government encouraged the nation's 1.3 billion people to turn to commercial
insurers for protection to allow for lower welfare benefits. New China Life is
among life insurers in China that were warned by regulators that their rapid
growth has left them with insufficient capital.
"We need capital for future business development," Guan said, declining to
identify the banks pitching for the IPO. "We won't consider it if it only gives
us a few hundred million."
Rewarding Investors
The company would be the fourth China insurer to sell shares overseas after
China Life Insurance Co. and Ping An Insurance Co., the top two life insurers,
and PICC Property & Casualty Co., the biggest general insurer. The
companies, none of which chose to sell shares in Shanghai, have all rallied
since their debuts.
Shares of China Life Insurance have risen 43 percent since the stock's IPO in
December 2003. Shares of Ping An Insurance gained 18.5 percent since its IPO
last June. PICC has risen 36 percent since it first traded in November 2003.
Karen Chan, an insurance analyst at Nomura International in Hong Kong, said
the price of New China Life may have to reflect moderating growth in China's
insurance market as it matures. The industry's premiums expanded 27.1 percent in
2003 and 44.7 percent in 2002.
"Premium growth has been slowing in China so investors interest will depend
on the valuation," said Chan.
China Life trades at 24.5 times analyst estimates for its 2005 earnings,
according to Thomson Financial. By contrast, Manulife Financial Corp., Canada's
largest insurer, trades at 13.2 times forecast earnings.
Capital
New China Life collected 18.74 billion yuan of premiums last year, about half
the amount collected by China Pacific Insurance Co., the nation's third-biggest
insurer by premiums, according to the insurance regulator's Web site.
New China Life was set up in Aug. 1996 and has 34 branches and 120,000 staff,
the company said on its Web site. The company, which has been planning to sell
shares to the public since 2001, sold a combined 24.9 percent stake to Zurich
Financial Services AG, International Finance Corp., Japan's Meiji Life Insurance
Co. and Netherlands Development Co. in 2000.
New China Life reached the regulator's capital reserves requirement this year
after it sold 1.35 billion yuan ($163.1 million) of subordinated debt to boost
capital, Guan said.
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