By staff reporter Chen Huiying

Asia’s largest reinsurance company, China Reinsurance (Group) Corp., is scrambling for fresh sources of capital amid a management shakeup.

Liu Jingsheng, who spent three years as company head, stepped down for “personal reasons” at a board of directors meeting August 13.

He was replaced by Liu Feng, 55, who worked for years at the central bank and Chinese Insurance Regulatory Commission (CIRC), and also served at the Liaoning Province insurance regulatory office.

The true reason for Liu Jingsheng’s resignation has been a topic of industry speculation. A source close to the firm’s government investors told Caijing the board was “dissatisfied” with his performance and questioned his competence. In addition, Liu was criticized for a decision, backed by management, to give bonuses to employees earlier this year without board permission.

Launched in 2005 and incorporated last October, China Reinsurance is 85 percent owned by a government investment bank, China International Capital Corp. Ltd. (CICC), and 14 percent controlled by the Ministry of Finance. CICC is a subsidiary of a government sovereign wealth fund, China Investment Corp.

Before taking the helm in May 2005, Liu served as director of the property insurance supervision department at CIRC.

Liu has apparently been on the China Reinsurance chopping block since late 2007, when the board started hunting for his replacement. The search has included foreign candidates, although for some the company failed to meet compensation expectations.

In addition to the new chairman, the company named 55-year-old Wu Gaolian as president. He has 16 years of management experience in the insurance sector, and once served as a vice president at People’s Insurance Co. of China (PICC).

Meanwhile, a search for capital is weighing heavy at China Reinsurance.

A CICC injection of US＄ 4 billion and internal restructuring in 2007 increased its registered capital to 36.15 billion yuan from 3.9 billion yuan, making it Asia’s largest reinsurer and the fifth largest worldwide. Since then, however, the company’s returns have disappointed investors.

“The board and regulators are not very satisfied with the performance of China Reinsurance,” said a senior officer close to the company.

Early this summer, market rumors said China Reinsurance might be bankrupt. The stories were based on the enormous payouts following recent natural disasters, including the May 12 earthquake in Sichuan Province, as well as investment and foreign exchanges losses.

According to CIRC data, the nation’s insurance payments linked to disasters and other claims have topped 5 billion yuan so far this year, and may soar to 10 billion yuan. And since China Reinsurance has the largest share of the market, its damages are not likely to be small.

The company also lost billions of yuan in May when it swapped its dollars for Chinese currency, which had strengthened considerably in the year since the US＄ 4 billion capital injection.

Neither did China Reinsurance score on the equity market. Instead, its cash infusion sat on the sidelines.

“If China Reinsurance had increased its investment in the equity market after the capital injection, it would have pulled money into the stock market when the index was above 4,000 points,” said one equity investor.

And China Reinsurance will not be able to raise money through an initial public offering anytime soon.

“To raise more capital, China Reinsurance will have to rely on special approval from the authority to go public,” a source said. “But the current bear market is not in good enough shape to receive such a titanic IPO.”

A source close to government regulators added that, “Listing on the stock market is different now. The (company’s) priority is to improve internally. China Reinsurance should strive to strengthen risk control and modern corporate governance.”

China Reinsurance looked like a potential capital markets star as recently as last fall. But within months, the sparkle faded.

Might China Reinsurance now find a corporate partner to provide the cash it needs? That’s debatable.

“There are only two kinds of firms interested,” explained an investment banker close to China Reinsurance. They include “those with ample experience and knowledge of the Chinese insurance sector and its risks, and those seeking access to the Chinese market through marriages.”

The banker also noted that a future investor would not buy the company’s assets “but its risk portfolio.”

1 yuan = 14 U.S. cents