Hong Kong IPO for China Pacific

2 December 2009 by Stafford Thomas

China Pacific Insurance, China’s third-largest life insurer, has been given the go-ahead by the China Securities Regulatory Commission to proceed with an initial public offer (IPO) on the Hong Kong Stock Exchange (HKSE).

China Pacific, which has a primary listing on China’s Shanghai Stock Exchange, anticipates issuing up to 990 million new shares in the IPO at a minimum price of CNY23.52 ($3.4) per share. This indicates targeted proceeds of about CNY23.5 billion for the IPO.

The planned IPO is China Pacific’s second attempt to list on the HKSE, its first attempt in 2008 had to be aborted in the wake of the global financial crisis.

The flexibility provided by the Hong Kong listing will particularly suit US private equity firm Carlyle Group which has a significant equity investment in the insurer. Carlyle’s close association with China Pacific began in December 2004 when it paid some $400 million for a 24.9 percent stake in China Pacific’s life insurance business.

Just prior to China Pacific’s IPO on the SSE in December 2007, Carlyle exchanged its holding in the life business for a 19.9 percent stake in China Pacific itself. Following the IPO, Carlyle’s stake in Pacific Life fell to 17.3 percent.

Based on China Pacific’s closing share price on the SSE on 27 November, Carlyle’s stake was worth $4.65 billion.

In the first 10 months of 2009, China Pacific reported total unaudited premium income of CNY85.4 billion, an increase of 3 percent compared with the same period in 2008. Of total the life insurance business, China Pacific Life, was responsible for premium income of CNY56.2 billion, down 4.6 percent from CNY58.9 billion reported in the first 10 months of 2008.

In the first 10 months of 2009, China Life, China’s largest life insurer, reported unaudited premium income of CNY254.7 billion while Ping An, the country’s second-largest, reported unaudited life premium income of CNY112.2 billion.