BEIJING; China Reinsurance, the nation’s only specialised reinsurer, has received a four-billion-dollar government fund injection in preparation for listings at home and abroad, state media said Monday.
The company will launch a share restructuring programme soon, the China Securities Journal reported, citing Wu Dingfu, chairman of the China Insurance Regulatory Commission, the industry watchdog.
“Work, including a capital injection, share restructuring, listing and introducing strategic investors should be completed this year,” Wu said.
Central Huijin Investment Co. Ltd, the government investment arm that provided the cash, will become the majority shareholder of China Reinsurance.
“The capital injection has not been completed yet,” Sun Xiaoxia, vice director of the finance department of Central Huijin told AFP.
It is not the first time that Huijin has come to the rescue of weak state companies to facilitate reforms aimed at making them more competitive in the face of increasing international competition.
Huijin injected 22.5 billion dollars each into the Bank of China and the China Construction Bank, and 15 billion dollars into the Industrial and Commercial Bank of China to shore-up their balance sheets ahead of their overseas share listings.
China Reinsurance, which assures other insurance companies, has been planning a dual listing on the Hong Kong and Shanghai stock exchanges since last year, according to an earlier report by the official China Daily.
Core-Pacific Yamaichi analyst in Shanghai, Xia Ping, said the money was “mainly for raising the company’s capital adequacy ratio,” that is to bolster its balance sheet, prior to an expected initial public offering (IPO).
The bailout was also likely also be aimed at preparing the company for competition in a market now open to foreign investors, in line with China’s commitments to the World Trade Organisation, Xia said.
Swiss Re and Munich Re Group, two big guns in the business that have capitals bases up to fifty times larger than that of China Reinsurance, are already operating in China.
China Reinsurance’s weaker financial position has led to official concerns that without government help the company will be unable to meet business demand expected to top 100 billion yuan in the years ahead.
According to Zhou Gang, an insurance analyst with China International Capital Corp based in Beijing, the group’s total premiums came to about 20 billion yuan (2.6 billion dollars) last year.
Total company assets in the first half of 2006 were 3.8 billion dollars.