Poll: AIA IPO price seen above mid-point

By Donny Kwok and Kennix Chim

HONG KONG (BestGrowthStock) – The IPO of American International Group Inc’s (AIG.N: ) Asian life insurance unit is set to command a valuation above the mid-point of an indicative range as attractive valuations draw in investors to the world’s second-largest float this year.

Bailed out insurer AIG plans to sell more than half of its stake in AIA Group Ltd through a Hong Kong listing, aiming to raise up to $20.5 billion at the top price, including a rare up size option and an overallotment to underwriters.

Asia has led the world in IPOs, raising $90 billion in the first nine months of the year, according to data compiled by Thomson Reuters — more than double the combined total from the United States, Europe, the Middle East and Africa.

“Unlike Chinese insurers, which are in a relatively high growth stage, its (AIA) growth is seen at a slower pace. It will be attractive if it can price near the lower end range,” said Patrick Yiu, a director from CASH Asset Management.

AIG is offering 5.86 billion shares in a range of HK$18.38-HK$19.68 each ($2.35-$2.52) under the basic offer.

At its top end, AIA will be valued at $30.5 billion, just above the $30.4 billion UK insurer Prudential (PRU.L: ) had offered for AIA in June, after cutting its initial bid. The bid ultimately failed.

A Reuters poll of 17 participants forecast AIG to price its IPO at HK$19.14 each, with estimates ranging from HK$18.38-HK$19.68, matching the official indicative price range.

Ten fund managers, two analysts, four traders and one hedge fund manager participated in the poll, which closed on Wednesday.

On Sunday, sources said the AIA IPO had already been covered more than five times in the first week since it was launched on Oct 5.

At the top end, AIA will be valued at 1.32 times price to embedded value, far lower than some of the Chinese insurers such as China Life (2628.HK: ) and Ping An Insurance Co (2318.HK: ).

AIA’s unique position as the only listed life insurer with a wide foot print in the rapidly growing Asia Pacific region is a big draw for investors, fund managers said.

The firm operates in 15 markets in Asia. Unlike many other foreign insurers, AIA has 100 percent ownership of its entities in China, Indonesia, Malaysia, Thailand and Vietnam. AIA has more than 300,000 agents in Asia.

AIA’s large size means it will have a sizeable weighting in the benchmark Hong Kong stock index (.HSI: ), creating additional demand from Index tracking funds. CLSA Asia Pacific expects AIA to have a 5 percent weighting in the Hong Kong index.

“It will leave you with no choice but to go ahead and subscribe for the shares even if it is priced at the higher end of the range,” said Alex Wong, a director with Ample Finance Group. “It is a hot issue and there is ample market liquidity,” Wong added.

At $20.5 billion, the AIA IPO would be the world’s second biggest so far this year and the largest ever on the Hong Kong stock exchange. It could generate about $300 million in underwriting fees.

The IPO follows the record-breaking $21.9 billion IPO of the Agricultural Bank of China Ltd (1288.HK: ) (601288.SS: ) in July.

Citigroup Inc. (C.N: ), Deutsche Bank AG (DBKGn.DE: ), Goldman Sachs Group Inc (GS.N: ) and Morgan Stanley (MS.N: ) (Read more about the money market today. ) are joint global coordinators for the IPO. AIG has hired a total of 11 book runners to market the offer.


AIA’s offer is being supported by strong foreign inflows into Asia which has driven many regional stock markets to multi-year highs. The MSCI Asia-Pacific ex-Japan index (.MIAPJ0000PUS: ) has rallied about 13 percent from its August lows.

The IPO is set to be priced on October 21/22 and trading will start on October 29.

AIA traces its roots in Asia to 1919 when Cornelius Vander Starr, a young American entrepreneur, established a fire and marine insurance agency Shangahi. It has more than 23 million in-force policies and a brand widely recognized in Asia.

“Retail investors are excited about the issue due to its already established brand name and relatively significant market share. People are betting on another hefty gain on debut,” Alfred Chan, chief dealer at Cheer Pearl Investment.

Both China Life and Ping An trade more than 2 times price to embedded value due to their higher growth rates in China.

Embedded value is a measure commonly used to gauge the value of insurance companies and includes the present value of future profit from long-term insurance contracts.

(Additional reporting by Daisy Ku and Lee Chyen Yee in Hong Kong, and Kevin Lim in Singapore; Writing by Denny Thomas; Editing by Anshuman Daga)

Poll: AIA IPO price seen above mid-point