China's insurance protection fund has decided to sell a 38.815 percent stake in New China Life Insurance Co., Ltd. to China SAFE Investments Ltd., said sources.

The price is CNY 8.7 per share, compared to the fund's cost of CNY 5.99 apiece. SAFE Investments, which will pay about CNY 4 billion for the deal, promises not to sell the stake within five years. Before completion, the deal should gain approval from concerned Chinese authorities.

After the deal, the wholly-owned subsidiary of the nation's USD 200 billion sovereign wealth fund China Investment Corp. will become the biggest shareholder of the insurer, which in turn will shit into a state-controlled entity from a privately-owned one by then.

SAFE Investments will serve as the biggest shareholder of New China Life on the behalf of the fund the day it inked a contract to acquire the stake. It will help the insurer establish corporate management mechanism as soon as the completion of the deal. As for irregular activities that took place before the establishment of the mechanism, the China Insurance Regulatory Commission (CIRC) requires the insurer to correct them within two years starting from the dray SAFE Investments signed a contract to acquire the stake. The top Chinese insurance watchdog will take move provided that it fails to achieve the goal.

New China Life is expected to resume its IPO plan after the deal, said industry experts. The insurer got ready for a listing as early as 2004, however, the plan was laid on the table due to complicated holding structure.

SAFE Investments could benefit more as long as the insurer debut on the stock market. However, it will be not an easy job as the insurer has been dragged by debt problem for a long period of time. Guan Guoliang, the former chairman of the insurer, embezzled a large amount of capital of the company and CNY 1.45 billion has not been taken back till now. SAFE Investments will help the insurer to get back the debt, with support from the CIRC.

New China Life was established in Beijing in August 1996 and had over 1,200 branches and outlets across the country as at the end of June 2009. The premium revenue it gained in the first three quarters of this year totaled CNY 49.11 billion, ranking number four in the domestic life insurance sector.