China's top insurer Ping An seeks to raise US$3.5 billion via convertible bond sale
Ping An Insurance (Group), China's largest insurer by market capitalisation, is turning to the convertible bond market to raise US$3.5 billion, joining a raft of Chinese companies tapping cheaper funding sources amid high interest rates.
The bonds, due in 2029, have a coupon rate of 0.875 per cent per year, and the initial conversion price is HK$43.71 per share on the maturity date, according to a filing on Tuesday. That represents a 21.3 per cent premium over the closing price of HK$36.05 on Monday, the company said.
With full conversion, the bonds would be convertible into around 625 million new shares, which represents about 8.39 per cent of existing H-shares and 3.43 per cent of total shares outstanding, according to the filing.
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The net proceeds from the bonds after deduction of issue fees and expenses are estimated to be around US$3.45 billion. Morgan Stanley and JPMorgan are joint global coordinators for the deal.
The company's stock dropped 5.1 per cent to HK$34.20, near a two-month low, as investors reacted to the potential share dilution and convertible arbitrage strategies.
The issue of the bonds represents "an opportunity to optimise the capital structure and diversify funding sources", the company said.
The group intends to use the proceeds to further develop its core business, strengthen its capital position, support new strategic initiatives in the healthcare and elderly care sectors, and for general corporate purposes, the filing said.
A convertible bond is a debt-like instrument that pays interest and includes an upside call option to convert into the underlying stock. It can help issuers reduce financing costs compared with traditional bond sales when interest rates are elevated, while also providing investors with equity upside potential and downside protection.
Chinese firms have increasingly turned to equity-linked products to raise funds at cheaper rates. Tech firms including JD.com, Alibaba Group Holding and Trip.com sold a total of US$10.5 billion in convertible bonds in May and June.
Ping An's bond sale also comes at a time when its profits have fallen to a five-year low amid weakness in its asset management and tech businesses, while China's tepid stock market and lowered bond yields have continued to suppress its investment returns.
Ping An Co-CEO Michael Guo Xiaotao, pictured at Island Shangri-La in Admiralty on March 22, 2024. Photo: Jonathan Wong alt=Ping An Co-CEO Michael Guo Xiaotao, pictured at Island Shangri-La in Admiralty on March 22, 2024. Photo: Jonathan Wong>
The insurer is looking to expand in the Greater Bay Area and in Hong Kong, where more mainland Chinese people are opting to buy life insurance products and policies as they search for diversification, Michael Guo Xiaotao, co-CEO of Ping An, said in an interview with the Post earlier this year.
Mainland Chinese tourists last year spent HK$59 billion (US$7.6 billion) on life and medical insurance policies in Hong Kong, higher than the HK$51 billion recorded in 2019, according to Insurance Authority figures.
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