Featured : Insurer AIA’s share sale sets Hong Kong record

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    The Asian unit of troubled US insurer AIG looked set Friday to record the world’s second-largest initial public offering this year, in a monster share sale that could still top 20 billion US dollars.

    AIA said that it had raised 17.8 billion US dollars after pricing its shares at 19.68 Hong Kong dollars (2.53 US dollars) ahead of the insurer’s debut on the Hong Kong stock exchange next week. Frenzied investor demand has already made the IPO Hong Kong’s largest ever share sale while the total amount raised could rise if other options are exercised.

    Agricultural Bank of China in July raised a total of 22.1 billion dollars from its IPO, exceeding the previous world record set by the Industrial and Commercial Bank of China, which raised 21.9 billion dollars in 2006. However, Agbank’s IPO was split with it raising 12 billion dollars in Hong Kong and the rest in Shanghai.

    Shares in AIA’s highly-anticipated offering were priced at almost 16 times forecast earnings this year, Dow Jones Newswires cited an unnamed source as saying.

    “The IPO is a critical turning point for AIA and we are delighted that it has been so positively received by investors around the world,” Mark Tucker, AIA’s chief executive, said in a statement on Friday.

    On Sunday, AIA said it would initially offer 5.86 billion shares at between 18.38 and 19.68 Hong Kong dollars, adding that it could issue additional shares if it exercised a so-called greenshoe option. That may bring the total raised to around 20.5 billion dollars and leave AIG with a stake of just 32.9 percent in the firm.

    AIG, which is on the hook to repay US taxpayers after a government bailout in 2008, won approval last month for the sale. The US insurer was forced to look at publicly floating AIA in Hong Kong after the collapse in June of a proposed 35.5-billion US dollar sale to the British insurer Prudential.

    AIA’s reach across 15 Asian countries and its healthy balance sheet explained the strong investor demand, said Francis Lun, general manager of Hong Kong’s Fulbright Securities. The firm booked a net profit of 1.75 billion US dollars in 2009.

    “The listing should do well because of the strong investor demand (for AIA shares),” Lun told AFP, adding that “AIA is a good company and insurance is always a very strong cash flow business.”

    But Patricia Cheng, an analyst at Hong Kong-based brokerage CLSA, questioned AIA’s growth potential despite the firm’s well-known brand, noting that it was losing market share in some countries.

    “Investors are in Asia for growth. Today’s AIA unfortunately doesn’t measure up too well,” she wrote in a report this month.

    “(AIA’s) influence has been declining across the board. It’s already lost the top positions in China (among foreign operations), Hong Kong and Singapore.”

    Major investors in the AIA sale include the Kuwait Investment Authority, the oil-rich Gulf emirate’s sovereign wealth fund, and a number of Hong Kong tycoons. Chinese sovereign-wealth fund China Investment Corp is also among the buyers, according to reports.

    AIA traces its roots in Asia back more than 90 years and was the largest foreign life insurer in China in 2009 based on life insurance premiums.

    Hong Kong, Oct 22, 2010 (AFP)