CPIC plans strategic offshore investments after UK listing

China Pacific Insurance (CPIC), which has become the first Chinese insurer to be listed in the three markets of Shanghai, Hong Kong and London, intends to make strategic investments into overseas insurers after its new UK share issuance.

“Most of the funds raised from the GDRs [global depositary receipts] will be used for long-term strategic investments around the core business,” Benjamin Deng, group chief investment officer, told AsianInvestor.  

The insurer has raised $1.81 billion by issuing 102,873,300 GDRs at $17.60 each. The final price, which was set on Tuesday (June 16), is the lowest end of its indicative price range of $17.60-$19.00 per GDR. One GDR represents five A-shares of the insurer.

Benjamin Deng

According to its listing prospectus, CPIC had said it intends to use 70% or more of the net proceeds to develop the group’s businesses overseas. These include equity investments, partnerships and alliances, as well as acquisitions in both developed and emerging markets to support the growth of its core business. Deng didn’t provide further details on the acquisition plans.

Up to 30%, or the remainder of the net proceeds, will be used to develop an overseas platform to invest in innovative businesses, such as healthcare, aged care and technology, leveraging CPIC’s offshore investment capabilities, it said.

Deng also said that the GDR listing would have an indirect impact on the group’s investment portfolio. Following any potential significant investments into insurers in markets with growth potential, there will be foreign-currency liabilities, and CPIC would need to invest in overseas assets to match these liabilities, Deng explained.

The insurer may then leverage the capabilities of its offshore investment arm CPIC Investment Management (CPIC IM) for possible financial investments. CPIC IM was re-established in Hong Kong last year after it was closed in 2013 as the insurer did not have a big appetite for offshore assets back then. But the unit is now expanding its team to help its parent insurer build up its overseas asset portfolio.

Deng said the new funds raised will not substantially invest for financial investments such as listed equities and bonds, as the returns for the investments are not high enough to meet GDR investors' requirements on return on investments, he added. That suggests may instead be used to help CPIC to fund strategic investments into promising companies or to buy into private assets such as private equity. 

As of December 2019, the total asset under management of CPIC Group reached Rmb2.04 trillion ($288.43 billion), of which Rmb623.8 billion was from third parties. 

CORPORATE GOVERNANCE 

Deng also said that the GDR listing could help to optimise CPIC’s shareholding structure and further enhance its corporate governance standards, as the composition of its shareholders would become more international.

“Our largest shareholders are state-owned entities. The investors we will try to attract for the GDR listing are mainly long-term overseas investors,” he said. 

This would bring CPIC closer to global standards in its management and investment strategies, which are crucial for attracting international investors. Such a move can help to enhance CPIC’s international profile too, he said.

Swiss Re has agreed to become a cornerstone investor in CPIC’s listing, and it will acquire no more than 1.5% of the total number of ordinary shares issued at the final price.

CPIC’s GDR listing is conducted under the London-Shanghai Connect scheme that was established last year. It is the first-ever stock trading link between China and a financial centre in Europe. Huatai Securities became the first Chinese issuer under the trading scheme.

This listing would help to strengthen the economic and trade relationship between China and the UK, and showcase the opening up of China's capital markets to the world, CPIC said in its prospectus.