Central Huijin Investment Co., Ltd. is to spend four billion yuan (US$585.9 million) to take over 38.8 per cent of the stake in New China Life Insurance Co., Ltd. from China Insurance Security Fund Co., Ltd., according to market rumors.

Central Huijin, an investment arm of the China Investment Corporation, China's sovereign wealth fund, promised a lock-up period of five years for these shares.

The investment company and the China Insurance Security Fund finally agreed to set the takeover price at 8.7 yuan per share. Earlier discussions had set a price at 7.1 yuan per share.

After the deal, the Central Huijin will become the largest shareholder in New China Life, and the latter will change from a joint stock company to a state-owned holding company.

Central Huijin currently is the major shareholder of the China Reinsurance (Group) Corporation and indirectly owns China Continent Property & Casualty Insurance Co., Ltd., a subsidiary of China Reinsurance.

Hao Yansu, a professor of the Central University of Finance and Economics, said that once Central Huijin has holdings in New China Life Insurance, it would own reinsurance, property and life insurance licenses. In these circumstances, the investment company would be likely to integrate these businesses into a complete insurance group.

Central Huijin would set up a new corporate governance system in New China Life and appoint new directors after its takeover, as the insurer currently has no board directors.

New China Life Insurance posted premiums of 49.105 billion yuan by the end of September, ranking fourth in life insurance industry in China.