Chinese Insurance Firms Plan IPOs
BEIJING -- China's big insurance companies, gearing up to list outside the mainland, will give investors a chance to buy into one of the world's fastest-growing insurance markets. Even as the companies ride a flood of new premiums, they must grapple with the impact of nonperforming investments and high-interest obligations.</br></br>The top three insurance companies -- China Life Insurance, People's Insurance Company of China and Ping An Insurance -- are scrambling to be the first of their number to issue shares abroad, most likely in Hong Kong and possibly in the U.S. While the companies declined to provide details of the planned initial public offerings, industry executives say China Life and Ping An want to raise $1 billion to $2 billion each and People's Insurance less than $500 million. Some of the IPOs could take place as early as the first half of the year.</br></br>The offerings will give investors an entree into China's dynamic insurance market, which saw revenues from premiums surge nearly 50% in 2002 over the previous year. That is even as other insurers world-wide were battered by the worst stock-market decline in three decades, following the Sept. 11, 2001, terrorist attacks on the U.S. But while Chinese insurers may be enjoying booming growth, they face their own set of challenges as they prepare for listing. These include high ratios of nonperforming assets, tight government restrictions on investments and increased foreign competition as China opens its market under World Trade Organization rules.</br></br>"People are attracted by China's growth, but the companies face typical China problems of poor governance, disclosure and weak management," says Fred Hu, a managing director at Goldman Sachs in Hong Kong. "How successful the IPOs will be will depend on whether the companies will really be able to turn a new leaf." (Goldman Sachs Group Inc., which with Morgan Stanley and HSBC Holdings PLC have a combined 24% stake in Ping An, is likely to be a lead underwriter in Ping An's planned listing.)</br></br>Many Chinese insurers are burdened by troubled assets, including speculative property investments made in the late 1980s through 1995, when Beijing banned such deals. Mr. Hu estimates that nonperforming assets account for 20% to 30% of Chinese insurers' total investments.