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Continued optimization of the ownership of China's insurers has brought with it critical reforms, as well as blazed a trail for progressive local insurers, said the China Insurance Regulatory Commission (CIRC), the industry's watchdog.
While the growing investment of foreign strategic investors in Chinese insurers has brought such urgently needed skills as know-how and managerial expertise, listing on international capital markets has proven effective in improving governance and rectifying deep-rooted mindsets.
With the further liberalization of the domestic insurance industry in recent years, foreign financial institutions have been increasing their equity stakes in a number of major local insurers. After being the target of the industry's first foreign equity investments in 1993 from Morgan Stanley and Goldman Sachs, Ping An Insurance (Group) Company of China has boosted the amount of the company in foreign hands to 23.74 per cent.
New China Life Insurance, Taikang Life Insurance and Huatai Insurance, leading players in the local market, have also welcomed foreign investment, which now stands at 24.9 per cent, 25 per cent and 22.13 per cent in their companies respectively.
China Pacific Property Insurance has reportedly reached an agreement with US-investor Carlyle Group for a nearly 25 per cent stake sale, but the deal is awaiting regulatory approval.
"By buying equity stakes, overseas strategic investors have helped accelerate reforms at Chinese insurance companies," Yuan Li, director of the CIRC's Development and Reform Department, told China Daily.
"They increased the Chinese insurers' capital strength, and helped improve their corporate governance," he said.
"Overseas investors have brought advanced know-how and managerial experience, and set good examples in operating prudently and providing quality services, which has helped raise the development level of the Chinese insurance industry," he said.
"Such equity ties have also helped domestic insurance companies learn the international rules and shorten the gap with the international insurers."
Most of China's insurers are less than 20 years old. They have traditionally been hampered with such problems as weak corporate governance, inadequate capital, irrational underwriting methodologies, and tight investment restrictions, which are being alleviated by taking foreign equity investment on board.
Wang Zimu, chairman of Huatai Insurance, said the arrival of its foreign shareholder has helped improve corporate governance, strengthened risk control, brought insurance know-how, increased underwriting capacity and enhanced employee training. The insurer sold a 22.13 per cent stake to US insurer ACE Limited in 2002.
But co-operation is based on mutual understanding and becoming accustomed to each other's cultures and ways of doing business, he said.
"The co-operation is like a marriage between a Chinese and a foreign company," Wang said in an earlier interview.
Besides bringing in strategic investors, Chinese insurers have also been seeking overseas listings, a trend regulators expect to also help improve the insurers' corporate governance and capital strength.
Three Chinese insurers have become public firms. The PICC Property and Casualty Co Ltd, China's largest property insurer, became the first listed Chinese insurer at the end of 2003 with an initial public offering in Hong Kong. China Life Insurance Co Ltd, the nation's largest life insurer, soon followed suit with a dual listing in Hong Kong and New York. And Ping An Insurance (Group) Company of China listed in Hong Kong last June.
"After the listings, huge changes have taken place in the companies," Yuan said.
"Their operational ideologies have changed noticeably, and have enjoyed improved vitality and competitiveness," he said.
"Restraints and scrutiny from the international capital market have greatly influenced the companies' behaviour," he added. "The idea of profitable growth has taken root in those companies, while compliance with regulatory rules and rational competition are being increasingly accepted within the industry."
The CIRC has expressed support for qualified insurers seeking listings on the stock market. A number of insurers, such as New China Life, have recently revealed plans for public share offerings.
(China Daily March 10, 2005)
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