The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Katrina Hamlin
HONG KONG, June 26 (Reuters Breakingviews) - Richard Li is nothing if not relentless. The tycoon's pan-Asian insurer FWD is going public after multiple false starts. A $6.2 billion market capitalisation is less than half what Li once targeted. But there are plenty of silver linings.
When founder and controlling shareholder Li first tried to list his company in New York in 2021, the group aimed for a valuation of up to $15 billion, sources told Reuters. When that floundered, FWD instead tried for a Hong Kong debut in 2022, but rocky markets thwarted a further two attempts there.
FWD’s world changed dramatically in the interim. Its closest peers, Asia-focused insurers Prudential PRU.L and AIA 1299.HK, have shed around a fifth and a third of their value since 2021 as China’s economy stalled, leaving Hong Kong’s market in a slump. FWD shifted to steadier growth after an action-packed decade of acquisitions.
Its operating profit after tax still outpaces its older, larger rivals, climbing 29% last year to $463 million, while AIA and Pru each managed about 7%. But the value of new business – a measure of estimated future profits from policies sold – rose 14% last year, compared with 28% in 2021.
That makes today’s $6.2 billion price tag pretty punchy. At HK$38 per share, the pan-Asian insurer is worth 1.1 times its embedded value in 2024 – roughly in the middle of Pru's 0.9 multiple and the 1.4 times sported by AIA.
The deal stands out in other ways too. If FWD exercises its overallotment option to hit around $510 million in proceeds, it would be level with Mixue’s 2097.HK $511 million capital raise in February, the city’s largest IPO so far this year.
True, it's far below the $3 billion targeted in New York. However, Li was able to drum up some $1.8 billion through pre-IPO private funding rounds in 2021 and 2022, making up some of the difference. And in some respects the IPO is testing the waters: the company is only selling a small slug of stock – less than 10% – and no existing shareholders are cashing out.
That means Li and fellow owners can still hold out hope that public markets may at some point bump up FWD's value. For now, a successful deal is being redefined as one that can get done at all.
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CONTEXT NEWS
Insurer FWD Group, backed by billionaire Richard Li, aims to raise HK$3.5 billion ($442 million) through a Hong Kong initial public offering, according to a filing on June 26.
The insurer is offering 91.3 million shares at HK$38 apiece, valuing FWD at HK$48.3 billion ($6.2 billion), the filings showed.
AIA and Prudential shares have fallen since FWD first attempted an IPO https://www.reuters.com/graphics/BRV-BRV/dwpklrellvm/chart.png
(Editing by Antony Currie; Production by Ujjaini Dutta)
((For previous columns by the author, Reuters customers can click on HAMLIN/ katrina.hamlin@thomsonreuters.com ; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net ))
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