The Asian unit of troubled US insurer AIG has raised 20.5 billion US dollars in a Hong Kong share sale that was the world’s third-biggest initial public offering, a spokeswoman said Tuesday.
Some of the cash from AIA’s huge IPO, the world’s third biggest, will go towards helping its parent pay off a 182 billion dollar bailout it received from the US taxpayer at the height of the global financial crisis.
AIG said Monday it had also raised 16.2 billion dollars by selling unit American Life Insurance Company (ALICO) to MetLife Inc. The repayment of the huge sums handed out to troubled US companies is a priority for the embattled Obama administration, which is facing voter anger at mid-term elections Tuesday in the United States.
AIG was forced to look at floating AIA in Hong Kong after the collapse in June of a proposed 35.5-billion US dollar sale to British insurer Prudential. AIA raised 17.8 billion dollars in the sale last month but said at the time the IPO could top 20 billion US dollars if certain options were exercised.
The IPO “raised 20.51 billion US dollars after the exercise of the greenshoe option, which brings the total number of shares offered to about 8.08 billion,” an AIA spokeswoman told AFP on Tuesday. Peter Lai, sales director at DBS Vickers in Hong Kong, said: “Many institutional investors had to buy shares (after the IPO) as the portion of shares set aside for them was quite small.”
In July, Agricultural Bank of China claimed title to the world’s biggest IPO with a monster 22.1 billion US dollar offering, beating the previous record set by Industrial and Commercial Bank of China, which raised 21.9 billion dollars in 2006.
AIA shares soared 17 percent on their debut Friday, closing at 23.05 Hong Kong dollars compared with a 19.68 dollar IPO price. The shares were down 1.1 percent at 22.75 dollars by the break Tuesday. Major institutional investors, including the Kuwaiti sovereign wealth fund and several Hong Kong tycoons, snapped up the shares.
Two girlfriends of Hong Kong tycoon Joseph Lau bought a whopping 11.2 billion Hong Kong dollars worth — half the amount of shares set aside for individual investors — the English-language Standard newspaper reported last week, citing unnamed sources.
Lau, chairman of property developer Chinese Estates Holdings, denied that the purchases were made on his behalf. Some observers say AIA is a good bet, pointing to its reach across 15 Asian countries and healthy balance sheet. The insurer booked a net profit of 1.75 billion US dollars in 2009.
Lai at DBS Vickers said China and India are both lucrative markets for AIA since both countries have low insurance penetration rates.
“The social security system in those countries are sorely lacking,” he said.
“As people in China and India become richer, the demand for insurance will rise and AIA will get a piece of that pie.”
But others are less convinced, noting that AIA has lost market share in some countries despite being 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 last 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 first foreign life insurer to operate in China.
Hong Kong, Nov 2, 2010 (AFP)
