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Chinese State Insurers Consider Selling Stock
China's state-owned insurance companies are pondering selling shares of their branches to institutional investors to alleviate funds shortages and bring life to their outmoded management.
The wholly state-owned insurance sector consists of mainly three insurance companies who are holding the lion's share of their respective field. The three are: non-life insurer People's Insurance Company of China (PICC), life insurer China Life Insurance Company (China Life), and reinsurer China Reinsurance Company (China Re).
Statistics from the industry watchdog, the China Insurance Regulatory Commission (CIRC), showed that wholly State-owned insurance companies have made up 70 per cent of the total insurance market in China.
"We can say that the success and failure of State-owned insurance companies directly influences the whole industry,'' said CIRC Chairman Ma Yongwei.
However, as State-owned insurers were born under the planed economy, they have accumulated quite a number of problems in their operating systems and management mechanisms.
Moreover, their further development has been hindered by a serious lack of capital.
The faster their businesses grow, the more risks exist due to the lack of capital, said insiders.
Under the circumstances, some insurance officials have begun to consider issuing a shareholding system in some branches to settle the problem.
The shareholding system can not only amplify the State companies' capital to stave off operational risks, but also help the enterprises implement more energetic management and operation systems, and strengthen their supervision, said officials.
The CIRC has said earlier that it will help State-owned companies actively explore new ways of system reform and organize experts and scholars to research the feasibility of the shareholding reform.
Among the big three companies, China Life will conduct the feasibility study during the rest of this year and try to launch the reform on a trial basis as soon as possible, said Wang Xianzhang, the company's general manager.
The company will first choose branch institutions where conditions are ripe to co-operate with international big-name companies.
"Our goal is to develop China Life into a trans-regional, trans-ownership and trans-country, large-scale, shareholding insurance corporation,'' said Wang.
China Life is the biggest life insurer in China, making up 66 per cent of the total national life insurance premium income. Its operation network is also the most encompassing among life insurers in China, extending to even remote corners of the country.
The People's Insurance Company of China, the country's largest non-life insurer, will also launch a feasibility study on the implementation of a shareholding system this year, said a top official with the company.
The China Reinsurance Company, according to insiders, has finished drafting a shareholding reform plan and submitted it to the State Council.
It is still unknown whether PICC and China Re will introduce foreign investors in their reforms.
Although details about the reform plans have not been released yet, domestic and foreign insurers have shown interest in participating in the scheme.
One allure for these potential investors is the expansion of the operation network.
Besides the big three and the comparatively larger China Pacific and China Ping An, all other insurers, including national-level companies Huatai, Taikang and Xinhua, have a very limited number of operation outlets nationwide due to stringent control from regulatory authorities, which has hindered their expansion.
On the other hand, these companies, who were born under the market economy, enjoy sound assets, state-of-the-art management mechanisms, advanced technology and relatively sufficient capital funds.
"We are willing to participate in the shareholding reform of State insurers and bring our most advanced technology and management know-how,'' said Wang Zimu, chairman of the Huatai Insurance Company of China, which is said to be the only insurance company in China that does not suffer from a shortage of capital funds.
Meanwhile, questions exist as to what kind of branch companies of State-owned insurers should be offered for reform, and whether State insurers will continue to control the branches or give up their holding rights.
"If State companies can well manage their branches, we'd like to leave the holding rights alone. Otherwise, the State companies had better give up the rights to technology-advanced investors,'' said Huatai's Wang Zimu. (Chinadaily)
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