China Life Insurance Co, the country's largest life insurer, set the share price for its 28.2 billion yuan (US$3.6 billion) initial public offering (IPO) in the Shanghai bourse at the top of its indicative range, the insurer said in a statement yesterday.

The IPO of 1.5 billion A shares, China's second-largest domestic IPO, was priced at 18.88 yuan (US$2.4), at the top of the 18.16-18.88 yuan range the insurer set earlier this week.

"The final price is not surprising," said Zhao Yujie, an analyst with Merchants Securities. "Our expectation for China Life's rational price in 2013 is 34.07 yuan (US$4.4) if its investment return is improved to 8 per cent."

Chinese insurers' investment returns usually hover around 3 to 5 per cent, much lower than the international average. The China Insurance Regulatory Commission (CIRC) is striving to broaden investment channels to boost their returns.

The final price for China Life's A shares was 30 per cent lower than the HK$27 (US$3.5) closing price of its H shares yesterday. Its H shares have more than tripled this year, making it the best performer in the 37-member Hang Seng China Enterprises Index, which tracks State-owned mainland companies traded in Hong Kong.

When China Life tested the market's appetite for the stock, investors bid as much as 26.8 yuan (US$3.4) for the shares, according to the insurer's statement. Some fund managers expect the new shares to surge over 30 yuan (US$3.85) on their debut on January 11, if not earlier.

"Based on China Life's market shares, wide outlets and brand value, we believe a rational price for China Life's A shares hovers around 24 yuan (US$3.07) to 25 yuan (US$3.2)," said Shao Ziqin, a researcher at Ping An Securities.

As the first insurer to list on the yuan-denominated A-share market, China Life received a warm reception from investors.

The amount of money put on the IPO hit a record high of 832.5 billion yuan (US$104 billion), 6.6 per cent higher than that of the Industrial and Commercial Bank of China, China's largest lender.

Institutional investors played a major role in the subscription.

Ten major domestic insurance players, such as Ping An, Taiking and Huatai, took a total of 137.3 million shares, while 136 fund companies constituted the largest group of off-line subscribers.

Investors' confidence in China Life is also based on the skyrocketing development of the country's insurance sector, which has maintained an average annual growth of 30 per cent over the past two decades.

China's life insurance premiums rose 11 per cent year-on-year to 379.8 billion yuan (US$48.7 billion) in the first 11 months of 2006, according to the CIRC.

China Life, which is already listed on the Hong Kong and New York stock exchanges, has gained 44.1 per cent of the country's insurance market.

The fund raised through the IPO will further strengthen its position and fuel its expansion into other sectors.

The CIRC approved its plan to set up a property and casualty company on Wednesday.

Shenzhen-based Ping An, which has the second-biggest share of China's life insurance market, also plans to sell shares in Shanghai in the first quarter of next year.