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One of China Reinsurance (Group) Co. and the People's Insurance Company (Group) of China (PICC) may take over the stake then.
The State Council, China's powerful cabinet, on August 6 approved of the Insurance Guarantee Fund Management Act, under which Insurance Guarantee Fund Management Co. will be set up after the Beijing 2008 Olympic Games.
The transfer of alleged New China Life Insurance stake is one of the reasons for the establishment of the company, said Hao Yansu, a well-known insurance professor.
The Insurance Guarantee Fund, which was established to protect the insured's interests and take over bankruptcy insurance companies, just holds the 38.8 percent stake provisionally.
In addition to China Re and PICC, Baosteel Group Co and Ping An Insurance (Group) Co. (SHSE: 601318; SEHK: 2318) also covet the stake.
China Insurance Regulatory Commission, the industry watchdog, once discussed about the feasibility of PICC taking over the alleged stake. Some officials were for it and said Baosteel Group has invested in quite a few financial institutions and it is not clear whether its diversified expansion would bring positive effect on New China Life Insurance. Moreover, it needs a large insurance institution that is experienced in insurance business and can boost it to grow stably. PICC is such an appropriate candidate.
But some others contended that as PICC has PICC Life Insurance Co., it is impossible for it to integrate PICC Life Insurance and New China Life Insurance nor seek balance between the two life insurers. On the other hand, PICC needs make capital injection into PICC Life Insurance and PICC Health Insurance Co. to fund their future growth, so it is hard to take over the stake in New China Life Insurance, said the sources.
While China Re is considered rich in cash as it is the world's sole insurer whose net assets are more than premium incomes. At present, China Re, the country's sole state reinsurer, controls six subsidiaries including China Property and Casualty Reinsurance Co., China Life Reinsurance Co., China Continent Property & Casualty Insurance, China Reinsurance Asset Management Co, Huatai Insurance Brokers Co. and China Insurance News, but it has no life insurance unit.
Moreover, China SAFE Investments Limited, the investment arm of the Chinese government, and the Ministry of Finance are the majority shareholders of China Re.
These make China Re become a competitive candidate for the takeover of 38.8 percent stake in New China Life Insurance, said the sournces.
(USD 1 = CNY 6.86)
From www.hexun.com, Page 1, Monday, August 18, 2008 info@SinoCast.com
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