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Ping An Launches IPO in Hong Kong

Ping An Insurance (Group) Co, China's second largest life insurer and number three property insurer, launched its initial public offering (IPO) Monday.

Ping An is selling 1.38 billion shares, or 22.4 percent of its enlarged share capital, in the global offering. It comprises 1.32 billion shares in an international offering and 69 million shares for a Hong Kong public offering.

The offering is expected to raise approximately HK$12.867 billion (US$1.64 billion) in net proceeds if a 208-million-share over-allotment option is not exercised, the company said.

The proceeds will be used for general corporate purposes, improvement of business operations, and upgrading of information technology systems, it said.

The indicative price range is set at HK$9.59-HK$11.88 per share (US$1.23-US$1.52).

Ma Mingzhe, chairman and chief executive officer of Ping An, said: "Based on our core insurance franchise, we aim to provide a broad range of financial products and services to our customers and to consistently deliver stable profit growth and healthy shareholder returns."

He said: "We are confident that we can build on our strong market position in the face of a competitive market by developing product offerings that are profitable and tailored to the needs of our customers, as well as by leveraging our nationwide call center and centralized customer database to increase cross-selling in a cost-effective manner."

Ping An was the first major Chinese insurer to hire an international accounting firm as an external independent auditor and has since 1995 engaged an international actuarial consulting firm to conduct independent reviews of policyholders' reserves.

The company further improved its internal controls, agent monitoring and supervision and risk management after 2002 when HSBC Insurance, the insurance arm of Hongkong and Shanghai Banking Corporation Limited (HSBC), became a shareholder.

The company said earlier HSBC was ready to buy shares worth HK$1.49 billion (US$191 million) in the offering, while other major shareholders will allow their holdings to be diluted during the IPO.

The 1.32 billion shares in the institutional tranche was "oversubscribed" by institutional investors by early afternoon yesterday, Bloomberg reported.

But some institutional investors kept to the sidelines yesterday, saying they would make their decisions later during the IPO, which ends on Thursday.

The limited investment scope of Chinese insurance companies restricts Ping An's profitability, and a slowdown in life insurance premium growth this year in the mainland market made them more hesitant, they said.

Chinese insurance firms are allowed to invest only in bank deposits and bonds, and are barred from directly trading stocks. The authorities are considering broadening their investment scope, but progress has been slow so far.

Wary investors also expressed concern that Ping An is vulnerable to corporate governance risks, which had frustrated China Life Insurance soon after its IPO late last year.

"So probably we are going to wait and make our decision on the last day of the IPO," said a Hong Kong-based fund manager, who declined to be named.

Some fund managers have also said the shares are a bit pricey, noting China Life Insurance shares traded at a price-earnings ratio of 19. Ping An's HK$9.59-HK$11.88 indicative price range represents 22.9 to 28.4 times the company's forecast 2004 earnings.

The company forecasts that its profit for this year - after taxation and minority interests but before extraordinary items - will be no less than 2.76 billion yuan (US$333 million), an increase of 18.9 percent as compared to the net profit attributable to shareholders in 2003.

The shares are expected to start trading on the Stock Exchange of Hong Kong on June 24.

BOC International Holdings Limited, Goldman Sachs (Asia), the HSBC and Morgan Stanley Dean Witter Asia Limited are the joint global coordinators and joint bookrunners for this global offering.

(China Daily June 15, 2004)

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