China Life plans USD2.5b share offering

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Last updated at: (Beijing Time) Friday, November 07, 2003

China Life plans USD2.5b share offering

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China Life Insurance Co., which controls three-quarters of the nation's life insurance market, plans to sell as much as US$2.5 billion of its shares in Asia's biggest initial offer this year, people involved in the sale said. Trading of China Life's shares in Hong Kong may start as early as next month. The company may file for a U.S. sale this week, they said. The offerings would give the Beijing-based insurer more money to strengthen its business operation.

China Life's sale follows last week's US$695 million offering by PICC Property & Casualty Co., the first Chinese insurer to sell shares abroad. Public orders for stock exceeded shares on sale by 135 times. Companies in Asia have sold US$15.7 billion of shares since July 1, or 15 percent more than the US$13.6 billion sold in the entire second half of 2002.

"The revenue potential is very good and it shouldn't be a difficult sale," said Raymond Chan, managing director of Hong Kong-listed Pacific Century Insurance Holdings Ltd. "The major uncertainty is its ability to retain customers in the future."

Insurers in China sold 305.4 billion yuan (US$37 billion) of policies last year, 45 percent more than a year earlier. That was 3 percent of China's gross domestic product in 2002. China Life expects premiums to increase 20 percent in 2004 from this year, the people said.

PICC started trading in Hong Kong recently after selling 3 billion shares at HK$1.80 each.

China Life is expected to increase profit 18 percent to 5.4 billion yuan this year. Its gross premiums may rise 13 percent to 53 billion yuan in 2003 and reach 64 billion yuan next year, the people said.

China Life last year paid 31 billion yuan in claims on accident, health and death coverage and future benefits of life policies. The claims may rise 15 percent to about 36 billion yuan this year, the people said. The high growth in gross premiums written may also boost the company's investment income by 60 percent to 6.9 billion yuan this year, they said. China Life, Ping An Insurance Co. and rivals are seeking funds as they try to replace the government in providing health and welfare for the nation's 1.3 billion people. The initial share sale will give overseas investors the first chance to participate in China's life insurance market.

China Life wants to tap the strong demand for State-owned companies in Hong Kong. The Hang Seng China Enterprises Index, which tracks mainland companies, surged 94 percent this year, compared with a 33 percent gain in the benchmark Hang Seng Index.

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