SEOUL (Reuters) - Korea Life Insurance Co priced its oversubscribed 1.72 trillion won ($1.5 billion) IPO below the reference range, sources said on Friday, as investors kept an eye on bigger IPOs due from Samsung Life and Japan"s Dai-ichi Mutual.
Second-ranked Korea Life (088350.KS) priced the proposed sale of 210 million shares at 8,200 won each, well below an indicative range of 9,000-11,000 won, said two sources close to the issue, who declined to be named as they are not authorized to talk to the media.
The country"s biggest initial public offering in four years, was oversubscribed in the domestic market, but lackluster stock markets and upcoming rival offerings, including Samsung Life"s $4 billion IPO and a bumper issue from Dai-ichi Mutual, sapped the valuation, fund managers said.
Dai-ichi Mutual Life, Japan"s No.2 insurer, plans a $12 billion IPO, potentially the world"s largest after credit card firm Visa Inc"s (V.N) $19.7 billion offering in 2008, amid optimism it will kickstart Japan"s moribund IPO market.
"Foreign investors were said to have complained that Korea Life"s initial IPO range was too expensive," said a senior fund manager at a local investment management house who declined to be named, noting foreign investors set their price exercise for the IPO at around 8,000 won a share.
"If Korea Life sets the final price at a level they"re not happy with, foreign investors were ready go for other IPOs in the pipeline, including Samsung Life," the senior fund manager said.
Analysts said the IPO price values Korea Life at 1.3 times its post-IPO book value, cheaper than around 1.5 times for smaller rival Tong Yang Life Insurance (082640.KS), so far the only listed Korean life insurer.
"While Tong Yang Life fell after its debut, Korea Life could gain after listing as it is entering the market at an attractive pricing, and the valuation is not too burdensome," said Seo Bo-ick, an analyst at Eugene Investment Securities.
The offering comes as once-booming Shanghai and Hong Kong are hit by signs of IPO fatigue, with shares from recent big IPOs such as UC RUSAL (0486.HK) falling below their offer levels and some new offerings being put off due to market softness.
After a strong performance last year, gaining 50 percent, Korean markets have fallen 3 percent so far this year.
Despite the uncertain market outlook, Korea Life"s top shareholder, Hanwha Group, brought forward the IPO, seeking to tap the market ahead of Samsung Life, whose $4 billion IPO, the country"s biggest, is expected in May or June.
KOREAN MARKET GROWTH
South Korea"s insurance market is Asia"s third-largest after Japan and China, and there is growing demand for more sophisticated insurance products.
Life insurers should also benefit from the full adoption of corporate pensions in 2010, which will unlock part of local companies" massive retirement savings.
More than half the local life insurance market is controlled by three firms -- Samsung Life, Korea Life and Kyobo Life. Competition is heating up, though, with foreign rivals such as Allianz (ALVG.DE), MetLife Inc (MET.N), ING (ING.AS) and AIA (AIG.N) building market share to nearly a fifth combined.
Korea Life, run by CEO Shin Eun-chul, is selling 130 million new shares, and Hanwha firms and state-run Korea Deposit Insurance Corp (KDIC) are offering 80 million existing shares. The public offering represents 25 percent of its enlarged capital of 840 million shares and values the company at 6.9 trillion won.
Credit Suisse (CSGN.VX), JPMorgan (JPM.N) and Deutsche Bank (DBKGn.DE) are joint international bookrunners for the IPO. Among local brokers, Daewoo Securities (006800.KS), Woori Investment Securities (005940.KS) and Tong Yang Securities (003470.KS) were granted mandates.
($1=1141.3 Won)
(Editing by Jonathan Hopfner and Ian Geoghegan)
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