China Life Sold $3.62 Billion of Shares, People Say (Update1)
By Bei Hu
Dec. 27 (Bloomberg) -- China Life Insurance Co., the country's largest life insurer, raised 28.3 billion yuan ($3.62 billion) selling shares at the top end of a range marketed to investors, two people with direct knowledge of the offering said.
China Life sold 1.5 billion yuan-denominated shares at 18.88 yuan apiece, according to the people, who declined to be identified before an official statement scheduled for Dec. 28.
China is progressively scrapping cradle-to-grave welfare benefits for the nation's 1.3 billion people, spurring demand for life insurance and pension savings products. Beijing-based China Life is raising funds to meet that demand, in the first domestic share offering by one of the nation's insurers.
``Insurers will add diversity to the number of financial stocks quoted in China,'' Dorris Chen Huanming, a financial industry analyst at BNP Paribas in Shanghai, said. ``So far, domestically-listed financial companies are mostly second-tier national banks.''
The government is encouraging the nation's largest companies, many of which have sold shares in Hong Kong and New York, to sell stock at home to help expand the stock market and soak up excess savings.
Industrial & Commercial Bank of China, the country's largest commercial bank by assets, raised $22 billion from initial public offerings in October, including 46.64 billion yuan from selling shares in Shanghai. Bank of China Ltd., the country's second- largest commercial bank by assets, sold nearly 20 billion yuan of shares in a Shanghai offering in June.
Top of Range
China Life set a price range for the A-share offering, equivalent to 5.3 percent of its share capital, of 18.16 yuan to 18.88 yuan apiece. The final price for the stock was 22.9 percent below the record HK$24.35 closing price of China Life's Hong Kong-quoted H shares on Dec. 22, before a holiday break.
China Life's shares were HK$2.30, or 9.5 percent, higher at HK$26.65 at the midday break in Hong Kong.
The new, yuan-denominated shares will start trading in Shanghai by January 11 next year, most probably on Jan. 9, people involved in the sale said earlier.
China Galaxy Securities Co. and China International Capital Corp. arranged the share sale. Xu Xu, an official in the president's office of China Galaxy, Tracy Hu, a Beijing-based spokeswoman at CICC, and Cao Qingyang, a spokesman at China Life's headquarters in Beijing, declined to comment.
Sale Proceeds
The proceeds of the sale will bolster capital and may help fund acquisitions by China Life, which last month agreed to buy 20 percent of Guangdong Development Bank for 5.67 billion yuan.
Total life insurance premiums in China rose 11 percent to 379.8 billion yuan in the first 11 months of 2006 from a year earlier, according to the China Insurance Regulatory Commission.
China Life, which also has shares traded in New York, had 172.5 billion yuan of policy sales, according to the commission.
Ping An Insurance (Group), which has the second-biggest share of China's life insurance market, had 62.9 billion yuan of sales. The Shenzhen-based company, already listed in Hong Kong, also plans to sell shares in Shanghai.
January Debut
Investors drove China Life's H shares up 18 percent between Dec. 15, when the China Securities Regulatory Commission approved its domestic share sale, and Dec. 22. In 2003, the company sold shares at HK$3.625 before listing in Hong Kong and New York.
The stock may rise in its China debut, Dai Jie, an analyst at ABN Amro TEDA Fund Management Co. in Beijing, a joint venture of Dutch ABN Amro Holding that manages about $2.3 billion of assets in China, said yesterday.
``The A share IPO investors will for sure make money because of the higher H share price,'' Dai said.
Premium
Investors bid as much as 26.8 yuan for the shares when China Life tested investor appetite for the stock, according to a company statement, and some fund managers expect the new shares to surge past 30 yuan on the first day of trading.
``China Life's A shares will, over the long run, trade at a premium to its H shares because of the scarcity of insurance stocks at home,'' BNP Paribas's Chen said. ``Domestic fund managers usually take a cue from their international peers in terms of stock selection and China Life has been a darling of international fund managers.''
Chen said she plans to upgrade her recommendation on the company, having issued a ``reduce'' recommendation on China Life on Oct. 26.
To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net .
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