AIG raises $18bn through AIA share sale in Hong Kong

Investors piled into AIA, the Asian life insurance arm of AIG, as it raised $17.9 billion (£11.4 billion) by pricing its Hong Kong IPO at the top of its range.

AIA said the IPO was priced at HK$19.68 each and fully exercised the upsize option. If the underwriters exercise the overallotment option, the IPO size will rise by 15% to $20.5 billion. AIA's trading debut is set for October 29, next Friday.

The pricing of the IPO, set to be the world's third biggest, puts an end to a long-running saga for the company. AIG's efforts to sell AIA to pay back part of its $182.3 billion US bailout included two failed auction attempts — one to Prudential — and two flotation bids.

Antonny Cheng, a fund manager at Gain Asset Management, said: "Investors did not dare to miss this jumbo deal, as the market has ample liquidity and the sentiment is very strong."

The IPO will value AIA at $30.5 billion (£19.4 billion) at the top end, with AIG holding a 41.6% stake that will drop to 33% if the green-shoe option is exercised in full.

"It's more or less fully valued after the shares were sold at the top end," said Francis Lun, general manager with Fulbright Securities. "Still one could expect a 5% upside on debut."

AIA sold 5.86 billion secondary shares and exercised the upsize option to sell an additional 1.17 billion secondary shares after strong demand from investors.

Unlike many other foreign insurers, AIA has 100% ownership of its entities in China, Indonesia, Malaysia, Thailand and Vietnam. AIA has more than 300,000 agents in Asia.

"This is a cost effective way for IPO investors to ride China's growth," said Francis Gaskins, president of IPOdesktop.com.

Asian IPOs raised $90 billion (£57 billion) in the first three quarters, more than double the combined total from the United States, Europe, the Middle East and Africa, according to Thomson Reuters.

AIA's IPO and auction efforts started just after the US bailout in 2008. It was nearly sold this year to Prudential, which offered $35.5 billion (£22.5 billion) but then trimmed the amount to $30.4 billion (£19 billion). The talks collapsed in May.