Gao Guofu (C), chairman of China Pacific Insurance (Group) Co, talks to reporters at the company's listing ceremony in Hong Kong yesterday. [Agencies]
China Pacific Insurance (Group) Co, the nation's third-largest insurer, rose in its Hong Kong trading debut, the best first-day performance among the three biggest public share sales in the city this year.
The shares climbed 1.1 percent to HK$28.3 at the close, erasing losses of as much as 1.8 percent earlier. The company raised HK$24.1 billion ($3.1 billion) last week in Hong Kong's second largest public share sale this year.
Pacific Insurance is tapping a 47 percent gain in the Hang Seng Index this year to replenish capital after premium growth brought down solvency margins, a gauge of its ability to settle claims.
China Minsheng Banking Corp fell 3.1 percent on its Nov 26 debut after raising HK$30.1 billion in the city's biggest public share sale since April 2007.
Sands China Ltd, controlled by billionaire Sheldon Adelson, tumbled 10 percent when it first traded on Nov 30 after its HK$19.4 billion IPO.
"Pacific Insurance's valuation is attractive to some extent," said Nan Sheng, an analyst at UOB Kayhian Investment Co. "Most brokerages are recommending insurance stocks for next year because rising interest rates will benefit their investment returns."
A likely 20 percent increase in embedded value in 2010 would mean HK$32.30 for Pacific Insurance's shares, and even if the valuation stays at the current about two times embedded value, the shares have further room to gain next year, Sheng said. The insurer sold the shares at HK$28 apiece after offering them at HK$26.8 to HK$30.1.
China Life Insurance Co, the nation's biggest insurer, trades at about 2.8 times of estimated 2010 embedded value and Ping An Insurance Group Co, the second largest, is valued at 2.5 times, he added.
Shanghai-based Pacific Insurance, partly owned by Carlyle Group and the nation's pension fund, the National Social Security Fund, sold a combined 861.3 million shares, or a 10.2 percent stake, last week.
The insurer made a 1.7 billion yuan ($249 million) profit in the third quarter, reversing a loss a year earlier as the domestic stock rally boosted returns. The Shanghai Composite Index gained 68 percent this year as China recovered from a slowdown.
Pacific Insurance had planned to sell shares in Hong Kong in 2007, when it went public in Shanghai. The sale was delayed by the global financial crisis. The company's Shanghai-traded shares gained 0.34 percent to 23.32 yuan ($3.42) yesterday, extending this year's rally to 110 percent.
PICC Property & Casualty Co, China's biggest non-life insurer, surged 50 percent in its Hong Kong trading debut on Nov 6, 2003, after raising HK$5.4 billion in the first overseas share sale by a Chinese insurance company.
