PICC Property & Casualty Co, a unit of China’s biggest property insurer, plans to raise as much as 6 billion yuan (US$725 million) in a Hong Kong public share sale, giving overseas investors their first access into the industry.
Picc property will offer shares as early as October to fund expansion and meet capital demands as it sells more policies, people involved in the sale said. The company will sell about 25 percent of its shares, raising between 4 billion yuan and 6 billion yuan, they said.
The company, which controls about three-quarters of the domestic market, faces increased competition and may sell less profitable policies to protect market share, analysts said. A public share sale, the first of three planned by Chinese insurers, would put pressure on the company to focus on profitability.
“Chinese state-owned insurers have been putting undue focus on top-line growth and disregarding profit, which only goes to the government,” said Peter Luk, the former finance chief of Pacific Century Insurance Holdings Ltd, who now heads Plan B Insurance Consulting in Hong Kong. “They have relatively little sense of risk diversification.”
China international Capital Corp and Morgan Stanley will manage the share sale. Nick Footitt, a Morgan Stanley spokesman, and China International spokesman Deng Ying declined to comment. PICC officials also declined to comment.
Other chinese insurers planning sales this year include China Life Insurance Co, the nation’s biggest life insurer, which plans to raise as much as US$3 billion. Ping An Insurance Co, 25 percent owned by Goldman Sachs Group Inc, HSBC Holdings Plc and Morgan Stanley, also plans to sell shares overseas this year.
Picc property, a unit of People’s Insurance Co of China, has applied to the Hong Kong stock exchange to sell the shares. People’s Insurance last month completed a split of its businesses prior to spinning off the property insurance unit, which has 60 billion yuan of assets.
People insurance, founded in 1949, suspended domestic services for two decades and returned to business in 1978.
Picc property’s profit last year fell by a third to 1 billion yuan because of an unrealized investment loss, the people said, declining to be more specific.
Picc property had 54.9 billion yuan of premium income last year. It is betting China’s annual economic growth rate of about 8 percent and a gradual transfer of government assets to private industry will increase the need for property insurance. China’s non-life insurance market grew 14 percent last year.
Private individuals bought 98.5 percent of total homes sold in Shanghai last year, more than double the percentage in 1996 when the government ceased providing welfare housing, according to DTZ Debenham Tie Leung, a real-estate consultant in China.