Richard Li's insurer offers geopolitical cover

Richard Li, Hong Kong businessman and younger son of tycoon Li Ka-shing, waves as he arrives to vote during the election for Hong Kong's next Chief Executive in Hong Kong
Richard Li, Hong Kong businessman and younger son of tycoon Li Ka-shing, waves as he arrives to vote during the election for Hong Kong's next Chief Executive in Hong Kong, China March 26, 2017. REUTERS/Bobby Yip

HONG KONG, March 22 (Reuters Breakingviews) - Time may be on Richard Li’s side. The tycoon is preparing to list his $9 billion Asian insurer FWD in his home city of Hong Kong after three false starts, including a roundtrip to New York, in just two years. The delay may ultimately be a blessing for him and his early backers including Swiss Re (SRENH.S).

FWD turns ten this year. It’s young compared to established rivals in the city; $116 billion AIA (1299.HK) recently celebrated its centenary; Prudential (PRU.L), is more than 150 years old. Li touts youth as an advantage in a region where technology is increasingly important to sales. But the company has also had a lot of growing up to do.

By cobbling together acquisitions, Li has built a brand to sell life insurance across Hong Kong, Japan and Southeast Asia. Back in 2021 when Li first attempted a listing, it was too early to discern whether that strategy would be successful. The same year, FWD’s operating profit after tax was a modest $124 million, less than 2% of AIA’s equivalent number.

But that figure leapt nearly two thirds last year, and momentum is building. The value of new business – a measure of the present value of future earnings from policies signed - rose around 30%. That implies FWD is winning committed clients. It can take as long as five years for insurers to book a profit from policies after initial costs such as agency fees are covered.

The company’s heavy Southeast Asian presence looks more appealing too. The region generated 57% of its value of new business in 2022, including fast-growing economies Vietnam and Cambodia where FWD reckons life insurance penetration is still less than 2%. Its peers are more China-focused. Take AIA, whose overall value of new business shrank 5% last year as Beijing’s pandemic controls kept many potential customers at home. As global investors cool on the People’s Republic for geopolitical reasons and more, FWD’s deal will offer something slightly different.

A private fundraising round last year valued FWD at $9 billion, Reuters reported; the price represents around 1.5 times embedded value in 2022. Despite FWD’s faster growth, that’s a little under AIA’s 1.6 times, prior to its share buyback. Markets are in a spin, but at least that now looks like the only real thing holding Li back.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)


Asian insurer FWD has made a fresh application for a Hong Kong listing, according to stock exchange filings published on March 13.

It is the company’s fourth attempt at an initial public offering. FWD last filed for a Hong Kong IPO in February 2022 and won listing approval in May but put the deal on hold owing to volatile market conditions. Before that, in June 2021 it applied to list in New York. A first attempt to go public in Hong Kong in 2021 was refused owing to concern over its dual-class shares. The company no longer has weighted voting rights.

Proceeds will be used for strengthening capital, building a capital buffer to fund further growth and reducing debt, the prospectus says.

Morgan Stanley, Goldman Sachs, CMB International and JPMorgan are the sponsors. HSBC is the financial advisor.

Editing by Una Galani and Thomas Shum

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Katrina Hamlin is global production editor, based in Hong Kong. She is also a columnist, writing on topics including environmental policy, cleantech and green finance, as well as the gambling industry in Macau and Asia. Before joining Reuters in 2012, Katrina was deputy managing editor of Shanghai Business Review magazine. She graduated from the University of Oxford with an MA in Classics, and earned a Masters of Journalism with distinction from the University of Hong Kong.