Investors in Asia, who currently have few options among insurance stocks, may soon be spoiled for choice as several life underwriters prepare initial public offerings that could raise billions of dollars.
The IPO hopefuls include what would be the first listed life insurers in India and South Korea.
Looming largest in the pipeline is AIA, the Asian arm of American International Group, which plans a Hong Kong IPO in the first half of 2010 to raise roughly $4 billion after its troubled parent failed to find a buyer for the unit.
Shanghai-listed China Pacific Insurance 601602.SS, meanwhile, aims to raise $3.5 billion in Hong Kong by early 2010.
The potential wave of issuance comes as IPOs make a comeback around Asia and as rising stock markets lift earnings for life insurers, for whom investment returns are a key source of income. The need for capital to fund expansion is another driver.
There's a lot of pent-up demand for capital, as insurers need to raise capital to fund growth and meet new risk-based capital requirements, said Chin Yee-Png, co-head of the Asia financial institutions group at UBS.
UBS is among the investment banks, along with China International Capital Corp (CICC), Credit Suisse and Goldman Sachs, helping China Pacific, the country's No.3 life insurer, to revive an overseas share sale that had been shelved earlier due to weak markets.
Scarcity value is expected to drive investor interest in a sector that is a proxy for the growth of the middle class.
Asia is home to just a handful of big listed insurers, led by China Life Insurance and rival Ping An Insurance, the world's two most valuable life insurers, and Taiwan's Cathay Financial Holdings.
There's no way of playing the Indian insurance story today, so I think there's going to be very strong demand. This is part of a broader regional trend, said Rob Jesudason, Asia head of the financial institutions group at Credit Suisse.
There are potentially 5-10 very large insurance IPOs across the region approaching the market, he said.
Esther Chwei, a portfolio analyst covering insurance and banking at fund manager RCM, a unit of Allianz Global Investors, said China and India, with fast-growing economies and low insurance penetration rates, are especially attractive.
Life insurance penetration in India is about 4 percent of GDP, in terms of total premiums underwritten in a year, compared with 2.4 percent in China and about 13.5 percent in the UK.
For China and India, once people get wealthier and have financial obligations, the demand for protection policies will increase, said Chwei, whose firm manages $11 billion in the Asia-Pacific region.
SOUTH KOREA'S FIRST
Tong Yang Life Insurance Co Ltd is on track to be the first to test public appetite for the sector in South Korea, with plans to raise up to 440 billion won ($353 million) in an IPO this month. Credit Suisse and Morgan Stanley are among several firms managing the deal.
Demand for fresh capital to bolster insolvency margins had spurred market talk of a string of Korean life insurer IPOs. But many are units of the country's industrial conglomerates and have secured new capital from their parents, so are in no rush to offer new shares, especially if they might struggle to get the price they want.
South Korea's 73 trillion won ($59.25 billion) life insurance landscape by premium income is divided between three market leaders - Samsung Life, Korea Life and Kyobo Life - and 19 smaller companies such as Tong Yang, Kumho and Mirae Asset.
Korea Life, which has annual premium income of about 10.5 trillion won, is the likeliest to follow Tong Yang with an IPO.
There is a high likelihood we would proceed for an IPO in the first or second quarter of next year, if market conditions allow, said a spokesman for Hanwha Group, the securities to chemicals conglomerate that owns Korea Life.
Kyobo Life's chief said last year it could take 2-3 years before it goes to the market, citing poor market conditions.
India's young and fragmented private life insurance sector is ripe for listings given the capital needed to fund growth, though regulatory issues need to be resolved, including the question of when foreign partners can lift their holdings to 49 percent from 26 percent.
India's private insurers, which were growing rapidly until last year's market meltdown, are all less than 10 years old and prevented from listing until they have been in business for at least a decade. [ID:nDEL428079]
Reliance Life Insurance has asked for a waiver so it can list, and industry insiders say an IPO is possible within a year. India's first foreign-backed joint ventures -- between ICICI Bank and Prudential Plc, Max India and New York Life, and Housing Development Finance Corp and Standard Life -- all will have their 10th birthdays next year and are said by insiders to be eyeing IPOs.
(Editing by Ian Geoghegan)