Nonbank financial institution AMTD Group Co. Ltd. plans to raise up to US$150 million through an IPO of insurance broker unit AMTD Strategic Capital Group in 2017, AMTD Chairman and CEO Calvin Choi told S&P Global Market Intelligence.
Aspiring to become a Chinese corporate insurance broker with a worldwide reach, the insurance unit is in "acquisitive mode" and going public will serve this purpose, he said. AMTD Strategic Capital Group would be the first insurance broker listed on the main board of the Hong Kong Stock Exchange.
The Hong Kong-based company has mandated China Merchants Securities and Everbright Securities as joint sponsors of the IPO. UBS, Standard Chartered and AMTD's investment banking unit will also be arranging the deal, according to people familiar with the situation.
Its U.S.-listed peer companies are mostly trading at a valuation in the high teens. New York-listed Marsh & McLennan Cos. Inc., one of the largest insurance brokers in the world, is trading at 20.4x 2017 estimated EPS.
Chinese corporates that are going global, in particular under the "One Belt, One Road" initiative, will require insurance after acquiring different assets. These companies will prefer a Chinese risk-solutions provider because of cultural intimacy, Choi said. AMTD's clients are primarily based in Hong Kong and China.
"In China, among insurance product distributional channels, professional insurance brokerage companies make up just a relatively small channel. There is potential for them to grow," said Dayton Wang, a research analyst at Guotai Junan International Holdings.
Established in 2003, Canada-based private equity firm L.R. Capital Group and China Minsheng Investment Group control over 70% of AMTD Group. Other shareholders include CK Hutchison Holdings Ltd. and Morgan Stanley Private Equity.
The company has three core business units — capital advisory, asset management and insurance brokerage. The three segments contribute almost equally to revenue, Choi said. AMTD recorded 2015 net profit from core operations of HK$110 million, a sharp increase from HK$20 million in the prior year.
Following the listing of AMTD Strategic Capital Group, the parent plans to conduct an IPO for its investment banking unit, he said.