People's Insurance Company (Group) of China, the nation's largest property insurer, is seeking as much as HK$27.8 billion ($3.6 billion) in what may become Hong Kong's biggest initial public offering in more than two years.

The insurer will offer about 6.9 billion shares at HK$3.42 to HK$4.03 apiece, according to a regulatory filing in Japan on Wednesday. The highest price values PICC Group at about 113 billion yuan ($18 billion), said two people with knowledge of the IPO, asking not to be identified as the information is private.

The comany logo of PICC Group is seen in an advertisement in Beijing. [Jing Wei/Asianewsphoto]

The IPO would be the largest in Hong Kong since October 2010, when AIA Group Ltd sold $20.5 billion of shares, and more than double the $3.2 billion raised by companies in the city this year. Investors have stayed away from new equity amid an economic slowdown on Chinese mainland.

"Even though we've seen some inflows into the market, this kind of money is not too eager to enter the IPO market," said Steven Leung, institutional sales director at UOB Kay Hian Ltd. "This close to the year-end, not too many institutions would like to get involved in such a big issue. Market sentiment is not favorable."

The 44 companies that priced shares in Hong Kong this year are down almost 9 percent, on average. The value of funds raised in new share sales this year is down from $15 billion in the same period last year, and the lowest since at least 2001, data compiled by Bloomberg show.

PICC Group has commitments for about $1.35 billion of shares from so-called cornerstone investors, two people with knowledge of the matter said. These include China State Grid Corp, which will invest $300 million, they said.

Though the cornerstone investors will make PICC's sale easier, the company may still find it a challenge to reach the high end of its offering range, Leung said.

"The rest depends on how aggressively they're going to place the stock," he said.

The Beijing-based company is the biggest property insurer on the mainland with 147 billion yuan in premium income for the first nine months of this year, according to the website of China Insurance Regulatory Commission.

Excluding its already listed property insurance business, the price range values PICC Group at 1.18 times to 1.63 times the estimated 2012 embedded value of its life and health insurance business, one person said. That compares with 1.6 times at China Life Insurance Co, the nation's biggest life insurer, and 1.3 times at Ping An Insurance (Group) Co, the person said.

The new shares will account for about 16.7 percent of PICC Group's enlarged share capital, one person said. China's Social Security Fund acquired 11.3 percent of PICC Group for 10 billion yuan in June last year, according to a statement on the fund's website. That transaction valued the insurer at about 90 billion yuan.

PICC Group expects a premium to the 90 billion yuan valuation because the pension fund bought its shares at a discount, people with knowledge of the matter said Nov 12.

PICC Property & Casualty Co, which was listed in Hong Kong in 2003, has a market value of HK$121 billion.