Ping An lines up advisers for US$5b placement
Mainland insurer is working with Credit Suisse and Goldman Sachs on US$5b share sale as it joins smaller peers to tap market for growth
Ping An Insurance (Group), the mainland's second-biggest insurer, picked investment banks to work on a private placement that could raise as much as US$5 billion, sources said.
Ping An joins smaller players PICC Property & Casualty and China Taiping Insurance Holdings in tapping the stock market for further growth amid improved prospects for the sector.
The company said last month that third-quarter profit jumped 90 per cent as banking revenue expanded and a rally in the stock market bolstered investment returns.
"Ping An has very diverse businesses and every section needs a lot of capital," said Chen Xingyu, an 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 might also be preparing for increased investment opportunities expected from a planned trading link between the stock exchanges in Shanghai and Hong Kong, Chen said.
Ping An won approval from the China Securities Regulatory Commission for an H-share offering of as many as 625.9 million new common shares to overseas investors, a statement on the watchdog's website said.
The insurer last year sold 26 billion yuan (HK$32.8 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 it 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, Tong Chengdun, an analyst at Citic Securities, wrote in a research report.
Fundamentals at mainland insurers were improving this year on both premium growth and investments, as fewer policy surrenders and smaller repayments on maturing contracts reduced their cash-flow pressures, Ping An Securities analysts led by Jiao Wenchao wrote in a report. The companies' third-quarter results were "brilliant", they wrote.
PICC, the mainland's biggest non-life insurer, said earlier this week that it planned to raise 7.25 billion yuan in a rights offer in Hong Kong and on the mainland.
The sale will raise its solvency ratio to more than 200 per cent, according to Credit Suisse estimates.
PICC's solvency ratio was 181 per cent as at June 30, compared with Ping An's 186.6 per cent.
China Taiping, the first overseas-listed mainland insurer, said last month that it would raise as much as HK$6.43 billion in a rights offer.
