The Asian unit of troubled US insurer AIG is set to make its trading debut in Hong Kong on Friday after a monster share offering that could become the world’s second-largest this year.
However, some say investors could be disappointed in AIA in the long term as its growth potential is limited and it had not performed particularly well in the region so far.
AIA said last week that it raised 17.8 billion US dollars after pricing its shares at 19.68 Hong Kong dollars (2.53 US dollars), but the insurer’s offering could still top 20 billion US dollars if certain options are exercised.
Frenzied demand has already made the offering Hong Kong’s largest-ever share sale, attracting a host of big players including the Kuwait Investment Authority 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, while Taiwan’s Fubon Financial said Wednesday that it had picked up about 60 million US dollars worth of AIA shares.
AIG, which is on the hook to repay US taxpayers after a government bailout in 2008, won approval last month for the sale of its Asian unit.
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 British insurer Prudential.
AIA’s sale comes after 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, those listings were split between Hong Kong and Shanghai.
“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 last week.
Earlier, he described AIA as “the only independent, listed life insurance group exclusively focused on the Asian growth opportunity.”
Observers echoed AIA’s chief, pointing to its reach across 15 Asian countries and the company’s healthy balance sheet. The insurer booked a net profit of 1.75 billion US dollars in 2009.
But others are less convinced of AIA’s growth potential, noting that it was losing market share in some countries despite a well-known brand.
“Investors are in Asia for growth. Today’s AIA unfortunately doesn’t measure up too well,” Patricia Cheng, analyst at Hong Kong brokerage CLSA, 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.”
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, October 28, 2010 (AFP)
