A massive capital
restructuring by New China Life Insurance (NCLI) has received the
backing of its largest foreign shareholder, Swiss insurer Zurich
Financial Services (ZFS).
In a move that will see it
retain its 20% stake in China’s fourth largest life insurer, it
will pump in an additional $420m taking its total capital
investment to $551m. ZFS acquired its first stake in NCLI in 2000,
four years after the Chinese insurer’s establishment.
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ZFS CEO Martin Senn
commented: “Our decision to participate in NCLI’s share issue
reflects our belief that China’s fast-growing insurance sector
represents an attractive investment opportunity.
“The Chinese government has
expressed a clear intent to further develop the country’s insurance
market, and NCI is well-positioned in the life market. In addition
to our investment in NCLI, we continue to focus on building our own
insurance business in this important growth market.”
NCLI is finally emerging from
a period of turmoil, which began in 2006 when its then chairman
Guan Guoliang was forced to resign amidst accusations that he had
misappropriated company funds. Following this, NCLI found itself
facing increasing management upheaval and significant pressure on
its solvency.
To protect policyholder
interests, China’s Insurance Protection Fund was forced to step act
and in May 2007 bought 23% of NCLI’s equity. This was later
increased to a 38.8% stake.
Matters returned to a
semblance of normality in November 2009 when state-owned Central
Huijin Investment Company acquired the Insurance Protection Fund’s
stake in NCLI. The insurer reported gross written premium income of
$ 9.6bn in 2009.
From a market performance
perspective, NCLI has done extremely well so far in 2010. In the
first half of the year, the insurer reported that it had achieved a
68% increase in premium income, compared with the first half of
2009, to RMB54bn ($8bn) giving it a market share of
9.3%.
The China Insurance Regulatory Commission reported that
premium income in China’s life market grew by just short of 34% in
the first half of 2010.
