China’s Ping An Gets Approval to Raise Capital in Hong Kong Share Sale

November 7, 2014

Ping An Insurance (Group) Co., China’s second-largest insurer, won regulatory approval for a private placement that may amount to as much as $5 billion, Hong Kong’s biggest share sale in almost two years.

The China Securities Regulatory Commission approved Ping An’s H-share offering of as many as 625.9 million new common shares to overseas investors, according to a statement on the watchdog’s website that didn’t give other details. The deal-size estimate is based on Ping An’s closing share price yesterday. The stock was suspended in Hong Kong today.

Ping An joins smaller PICC Property & Casualty Co. and China Taiping Insurance Holdings Co. in tapping the stock market for further growth amid improved prospects for the sector. Shenzhen-based Ping An said last month that third-quarter profit jumped 90 percent as banking revenue expanded and a stock-market rally bolstered investment returns.

“Ping An has very diverse businesses and every section needs a lot of capital,” said Chen Xingyu, a Shanghai-based analyst at Phillip Securities Research. “We thought the company was likely to raise more money, but didn’t expect it to come so soon.”

Insurers may also be preparing for increased investment opportunities expected from a planned trading link between Shanghai and Hong Kong’s stock exchanges, Chen said.

The Shanghai Composite Index has rallied 16 percent this year as funds flowed into mainland stocks before the start of the link, which allows a net 23.5 billion yuan in daily cross- border purchases.

Exceed Expectations

Ping An last year sold 26 billion yuan ($4.3 billion) of convertible bonds. That was enough to support “normal” business growth for two to three years, Chief Financial Officer Jason Yao said in August 2012, after the insurer announced the debt sale.

Ping An’s third-quarter results exceeded market expectations, with the banking business expanding rapidly and insurance and trust operations leaving competitors further behind, Citic Securities Co.’s Shenzhen-based analyst Tong Chengdun wrote in a report Oct. 28.

Chinese insurers’ fundamentals are improving this year on both premium growth and investments, as fewer policy surrenders and smaller repayments on maturing contracts reduce their cash- flow pressures, Ping An Securities Co. analysts led by Beijing- based Jiao Wenchao wrote in a report Nov. 3. The companies’ third-quarter results were “brilliant,” they wrote.

PICC, Taiping

Ping An fell 0.7 percent to HK$61.50 yesterday. The shares declined 11 percent this year compared with a 1.8 percent increase in the benchmark Hang Seng Index.

PICC P&C, China’s biggest non-life insurer, said earlier this week it plans to raise 7.25 billion yuan in a rights offer in Hong Kong and China. The sale will raise its solvency ratio, a gauge of its ability to settle claims, to more than 200 percent, according to Credit Suisse Group AG estimates. PICC P&C’s solvency ratio was 181 percent as of June 30, compared to Ping An’s 186.6 percent.

China Taiping, the first overseas-listed Chinese insurer, said last month it will raise as much as HK$6.43 billion in a rights offer.

–With assistance from Fox Hu in Hong Kong.

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