Central Huijin to take stake in New China Life
Central Huijin Investment, a unit of the nation's sovereign wealth fund, will buy a stake in New China Life to become the controlling shareholder as part of a strategy to ensure financial stability in the mainland insurance sector.
Mainland media reported yesterday that the government insurance protection fund wanted to transfer its majority stake in New China Life to Central Huijin. The transfer will help improve New China Life's shareholding structure and business development.
New China Life, the nation's fifth-largest life insurer, has been hobbled by poor management which saw its former chairman involved in an embezzlement scandal last year and prompted the government insurance protection fund to acquire a stake from three mainland shareholders.
The insurance protection fund was set up by the industry regulator in January 2005 and levies money from insurers to protect against company failures, and other potential problems that might hurt the insurance sector.
The stake purchase in New China Life last year was the first time the regulator had used the fund. 'The use of the protection fund in New China Life does not align with its original objective, putting itself in an embarrassing situation,' said Olive Xia, an analyst with Core Pacific-Yamaichi International.
'Central Huijin would certainly be much more appropriate to put the insurer back on the right track.'
Central Huijin has played an important role in the reform of the nation's state banks, including helping them find strategic investors, improving corporate governance and achieving stock market listings.
New China Life collected 32.6 billion yuan (HK$36.92 billion) in premium last year, trailing rivals China Life, Ping An, China Pacific and Tai Kang Life. The top five mainland insurers control 80 per cent market share. Profits of mainland insurers have been hit by the lacklustre performance of the stock market.
