Insurance firms aim for more listings

Driven by strong growth potential, Chinese insurance intermediary companies are striving to expand their listings to satisfy the hunger for capital.

Chinese insurance agency and brokerage CNinsure made its debut on the NASDAQ stock exchange on October 31. The firm became one of the best first-day performers among Chinese initial public offerings (IPOs) on US stock exchanges this year.

American Depositary Shares of CNinsure Inc closed at $25.29 - up 58 percent a day after its IPO priced above expectation and raised $188 million.

Experts said CNInsure's popularity with investors is because of the company's strong revenue growth and the industry's huge growth potential.

The company's revenue rose 41 percent to 246.5 million yuan in 2006 from 143.7 million yuan a year earlier, according to its filing with the US Securities and Exchange Commission. Net income was 57.3 million yuan in 2006 versus a loss of 6.7 million yuan in 2005.

According to Huang Huaming, an analyst with CITIC Securities, the biggest challenge facing Chinese insurance intermediary companies is their profitability capabilities. Because the industry is still in an emerging stage, competition remains fierce.

The China Insurance Regulatory Commission's latest statistics show that by the end of September, there were 2,297 professional insurance intermediary companies, 41 more than in the second quarter. Insurance intermediaries usually include insurance agents, insurance brokers and loss adjusters.

Around 429 billion yuan in premiums was earned through intermediary companies during the January-September period of this year, accounting for 80.49 percent of the overall premiums. That proportion is 2.73 percentage points higher than the same period of last year.

"The intermediary market maintains sound development, and is in a good order," said an insurance intermediary market report by the CIRC in early November. "The greater than 80 percent proportion shows that intermediary companies have been the major sales channel for insurance policies."

Chairman of the CIRC Wu Dingfu told reporters this month that China's premiums would hit 700 billion yuan this year, which would be 2.3 times more than in 2002. It demonstrates the huge growth potential insurance intermediaries still boast.

In addition, intermediary companies' strong networks also increase their appeal to investors. Once established, the network could also be used to sell other products and services.

In addition to CNinsure, other insurance intermediary companies mulling listing plans include: Jiangtai Insurance Broker Co, China Concord, Shenzhen Mintaian Insurance Surveyors Co and Mingya Insurance Broker Co.

The top management of Huakang Financial, an insurance intermediary that received $25 million from VC company IDG, also said that it planned to launch its IPO on the NASDAQ in 2009.

According to an insurance intermediary market report published by the CIRC in August, the insurance regulator, for the first time, encourages qualified insurance intermediaries to launch IPOs and become financed by all types of capital.

Wang Jian, director of the intermediary supervision department of the CIRC, told reporters that the regulator's move was intended to standardize the industry and promote the development of good companies.

"After the listing, insurance intermediary companies will not only be supervised by the CIRC but also by the China Securities Regulatory Commission and investors, making their business operations and information releases more transparent," Wang said.

"Meanwhile, some of the companies are trying chain store management models and other innovations, which call for more capital support, which could be provided by listings," he added.

Insurance intermediary companies' assets totaled 7.53 billion yuan by September, up 4.15 percent over the second quarter, the CIRC report said.

(China Daily 12/07/2007 page15)