UNDATED, Sept 10: China Pacific Insurance (Group) Co Ltd (CPIC), the mainland’s third-biggest insurer, is raising HK$10.4 billion ($1.3 billion) by selling new shares to investors, including Singapore sovereign wealth fund GIC, to bolster its capital base.
CPIC, which was nursed back to health by U.S. Private equity firm Carlyle Group, joins a list of Chinese insurers waiting to tap the equity markets to shore up their capital levels.
Besides the Government of Singapore Investment Corp, CPIC’s private share placement is supported by Norges Bank, the Central Bank of Norway, and Abu Dhabi Investment Authority, the insurer said in a statement on Monday.
CPIC is selling 462 million new Hong Kong shares at HK$22.5 each, compared with Friday’s close of HK$23.0. The insurer’s shares were down 1.5 percent at HK$22.65 by midday on Monday, compared with a 0.2 percent rise in the benchmark Hong Kong share index.
GIC will boost its stake in CPIC to 10.6 percent of the total Hong Kong-listed shares, while Norges Bank is raising its holding to 8.4 percent and ADIA to 2.8 percent, CPIC said. The three institutions now own between 0.9 percent and 2.9 percent of the insurer’s Hong Kong-listed shares.
CPIC needs approval from the Hong Kong stock exchange and from Chinese regulators, including the China Insurance Regulatory Commission and the China Securities Regulatory Commission for the issue, it added. The company is giving itself up to four months to secure all the approvals.
TURNAROUND STORY
Volatile market conditions, however, have affected some Chinese insurers’ capital-raising plans. State-owned PICC Group has secured the Hong Kong exchange’s approval for a planned IPO of up to $3 billion but is yet to launch the offer.
CPIC is one of the biggest turnaround stories in the country’s insurance sector in which Carlyle invested about $800 million between 2005 and 2007 for a 17 percent stake.
Over the past two years, Carlyle has raised more than $4 billion from selling CPIC stakes, which puts the buyout firm on course for its biggest-ever cash exit, when it completely sells out of CPIC.
Carlyle still owns a 3.5 percent stake in CPIC, according to Thomson Reuters data, valued at about $1 billion.
Last week, U.S. Asset manager Waddell & Reed Financial Inc sold a $325 million stake in CPIC for HK$22.4 a share.
However, CPIC’s private placement, which is under a general mandate rather than a separate shareholder vote, is raising some concern among analysts about its structure and timing.
‘The apparent lack of a lock-up period, at least as far as we can see in the exchange filings, will not put investors’ minds at ease,’ KBW insurance analyst Stanley Tsai wrote in a research note.
He added that CPIC is already flush with cash and that the capital raising is happening at a time when interest rates are falling and there is little new business growth.
China was the sixth-biggest insurance market in the world, with 4.8 percent of global premium volume as of end-2011, according to Swiss Re. Total premiums shrunk 6.4 percent on an inflation-adjusted basis in 2011, compared with a global average decline of 0.8 percent.
Goldman Sachs was the sole bookrunner for CPIC’s private placement, CPIC said. (agencies)
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