Restructure to raise $2.32b for Picc

PUBLISHED : Thursday, 11 July, 1996, 12:00am
UPDATED : Thursday, 11 July, 1996, 12:00am

The People's Insurance Co of China (Picc) plans to raise 2.5 billion yuan (about HK$2.32 billion) for three subsidiaries to be set up in a restructuring this month.

A Picc official said the subsidiaries would be created by spinning off the life insurance, property insurance and reinsurance divisions. They would be inaugurated by the end of the month. Picc is being restructured into a holding group, the People's Insurance Group Corp of China (or Zhongbao Group), with a registered capital of three billion yuan.

The restructuring is to comply with the new insurance law which requires all insurance companies to separate life and property insurance operations. Other insurers are expected to follow suit.

Picc is expected to sell stakes in the new subsidiaries to other enterprises.

The property insurance arm is expected to have a registered capital of two billion yuan, of which 1.1 billion yuan will come from the parent. The life insurance arm will have capital of 1.5 billion yuan, with 800 million yuan from the parent.

The group will inject 1.1 billion yuan into the reinsurance unit, which will have a registered capital of two billion yuan.

Stake sales will cover the rest of the capital.

If investment from other enterprises did not meet the target, the parent firm would have to increase its injection, the official said.

It is understood provincial branches of the property insurance unit will be given the autonomy to maintain their own financial accounts - the so called 'two-tier financial accounts' system. Under the new structure, provincial branches of the property unit will be responsible for their own profits and losses after remitting a fixed amount of revenue to the parent.

A source said Picc was more confident in giving operational autonomy to its property insurance arm because the group was experienced in the sector. Property insurance makes up the bulk of Picc's premium income.

The life insurance arm will have only one set of accounts and branches will report directly to the new life insurance company.

It is understood the reinsurance subsidiary will not set up branches.

Branch staff will be divided into two teams.