During Christmas holiday of 2009, China Pacific Insurance (Group) Co., Ltd was listed in the Stock Exchange of Hong Kong Limited, with the stock code”02601” and the stock name of “CPIC”. It became the forth insurance companies which were listed in foreign Stock Exchange in China. The other three are PICC, China Life and Ping An Insurance. The IPO of CPIC gives more hopes for insurance companies to IPO in 2010. PICC just finished the reform to establish a joint stock system for enterprises and its CEO Wu Yan said in public that PICC will choose appropriate time to be listed in A share in future. Besides, China Reinsurance (Group) Corporation, Tian Ping Insurance Company, New China Life Insurance Company all show their ambitious to IPO. For many insurance companies, 2010 will be a starting year for them to IPO.

Just like other companies, insurance companies need large capital to assure the security of operation. Adam Smith said in its well-known An Inquiry into the Nature and Causes of the Wealth of Nations, Volume 2 :

“The trade of insurance gives great security to the fortunes of private people, and, by dividing among a great many that loss which would ruin an individual, makes it fall light and easy upon the whole society. In order to give this security, however, it is necessary that the insurers should have a very large capital.”

That means an insurance company shall have larger capitals than a normal business company. In principle, those capitals shall make sure public believe that the insurance company is “insured” and it has enough solvency capability. The capital of an insurance company shall match with the risks which it controls. Then, IPO is a good way to find more capitals for rapidly developing insurance companies. Through IPO, the insurance company can own those capitals permanently without return and also can increase its stock finance revenue by issuance shares at a price above par value.

However, those four insurance companies which were listed in A shares or H shares are not lacking of capitals. “They were listed to get a name of ‘insurance shares’ which is rare right now and for a better competitiveness”, an insider of insurance company said. IPO for an insurance company can improve its inter control management, increase its insolvency capability, enhance its risk resistance capacity and promote its name. From that view, IPO for an insurance company is not only a way for finding capitals but a fantastic opportunity to reform and improve.

Although, the voice of IPO is high, some professionals still express cautiously optimistic. Since a long time, for whole insurance industry, the capital market is a necessary part. At the moment, many insurance companies have low profits or even loss, especially for property insurance companies. In the last three years, the amount of loss of domestic property insurance companies almost equals with theirs net worth. Most of property insurance companies feed on investment revenue and capital supplement. In one word, those insurance companies can not be survived by premium. As an insurance company, it is terrible that insurance business is not the pillar business. Here is the problem, what shall those insurance companies do when they are listed and get so much money? Do they still use the money to invest or use the money to build up its insurance business? If it is the former, we should say the IPO is not good for the insurance industry eventually. China insurance companies need to be more mature to use money properly.