China Insurance International Holdings (CIIH) is believed to be preparing to launch its first dollar denominated bond issue. Observers say the Hong Kong listed company has mandated its ratings advisor UBS for the transaction, which should surface in the next month or so.
The deal is expected to be relatively small, with the market anticipating an issue size of $100 million to $200 million. However, the transaction is interesting on two counts.
Firstly, there is the issue of its nationality. Although the company's biggest revenue base comes from Hong Kong, where it is the second largest re-insurer, it is the China growth story that investors are most likely to focus on. As such it joins a very small band of Chinese corporates to have accessed the international debt markets in recent years - Citic, CNOOC, Cosco and China Mobile.
Secondly there is its sector profile. The Chinese insurance industry is currently monopolising investors' attention in the equity markets with imminent listings by PICC and China Life. However, there are no outstanding dollar benchmarks from any Asian insurance companies outside of Japan.
CIIH is well placed to increase its gearing levels given that it ran a comfortable net cash position at the end of 2002. According to analysts' estimates, the group had about HK$5 billion ($641 million) in cash and cash equivalents compared to only HK$2.9 billion in debt.
Its wholly owned reinsurance vehicle, China International Reinsurance (CIRe) has a local currency rating of A-/stable from Standard & Poor's and is the main revenue generator of the group.
In 2001, CIIH also re-entered the life insurance market in China through Taiping Life, in which it owns a 50% stake. The other major shareholder is Belgium's Fortis, which purchased a roughly 25% stake for $88 million in 2001. Together the two have created a company, which now ranks as Shanghai's sixth largest life insurance company.
CIIH also has a similarly structured joint-venture with ICBC Asia in Taiping Insurance, a general insurer headquartered in Shenzhen.
