China Pacific Insurance A Shares Likely To Rise 67% On Debut

The FINANCIAL — According to Dow Jones, China Pacific Insurance (Group) Co. (601601.SH) will likely rise as much as 67% on its trading debut in Shanghai on December 20, on expectations of strong business growth in mainland China and an imminent Hong Kong listing.

A survey of four analysts by Dow Jones Newswires forecasts the yuan-denominated A shares of China Pacific to rise to CNY50.00 on their trading debut on the Shanghai stock exchange, up from the initial public offering price of CNY30.00.

The forecast price represents 60 times the insurer's expected 2007 earnings of CNY0.84 a share. The Shanghai-listed shares of China's two other listed insurers, China Life Insurance Co. (LFC) and Ping An Insurance (Group) Co. of China Ltd. (2318.HK), trade at an average price/earnings ratio of about 50 times, analysts say.

"Compared with its larger rivals, China Pacific has more room to improve the efficiency in its operation," said Mo Fan, a financial analyst at Soochow Asset Management Co.

China Pacific had per capita first-year premiums of CNY24,828 last year, much lower than China Life's CNY42,504, Ping An's CNY56,616 and the average CNY38,760 for allChinese insurers, Essence Securities Co. said.

"If China Pacific raises its FYP to the average (CNY38,760) level, the company will grow at a pace that could beat the industry by 50%," Beijing-based Essence Securities said in a research report.

Shanghai-based China Pacific has said it will use the proceeds of the A-share IPO to supplement its working capital and drive its business growth.

The insurer, 17.32%-owned by private equity firm Carlyle Group LP, also intends to sell as many as 900 million H shares in Hong Kong soon after the A-share IPO. It hasn't priced the H-share offering but it said the offering won't be priced below the A shares.

Analysts expect the H-share sale to further supplement China Pacific's capital base and help the company sustain its growth.

China Pacific is China's third-largest insurer in terms of market share, after China Life and Ping An. At the end of last year, China Pacific had 9% of the country's life insurance market.

The insurer earlier this month raised CNY30 billion (US$4.07 billion) in its A-share IPO, after pricing its one billion new A shares at the top end of an indicative price range of CNY27.00 to CNY30.00 each.