China Reinsurance (Group), the mainland's only state-owned reinsurer, plans to buy out all subsidiaries it does not yet wholly own in a restructuring process that is likely to push back its estimated US$2.6 billion initial public offering to next year, market sources said.

A Xinhua News Agency report yesterday said China Re was hoping to sell shares before the end of this year and would focus on reinsuring the farming industry and damages related to natural disasters.

The company would sell shares in Shanghai and Hong Kong, according to the Xinhua report.

As part of the latest stage of the restructuring announced earlier this month, China Re now has a 72 per cent stake in subsidiary China Property and Casualty Reinsurance, a 75 per cent interest in China Life Reinsurance and an unspecified controlling holding in China Reinsurance Assets Management Company.

Minority shareholders including Fuxi Investment Holding, a domestic investment company, and Japan's Toa Reinsurance sold their remaining shares to the company as part of the restructuring.

China RE also operates China Continent Property and Casualty, China Insurance News as well as Huatai Insurance Agency and Consultant Services.

Since the restructuring, the group's discussions with foreign suitors including Munich Re and Swiss Re have also slowed, sources said.

The mainland insurance regulator wanted China Re to complete the restructuring, obtain an international credit rating and mandate investment banks before finalising any share sale, they said.

The company had been actively looking for a partner earlier this year, sources said.

"The credit rating is important for ChinaRe as a signal that it has attained a certain level of disclosure and gone through the process of getting an independent view," said an insurance analyst who asked not to be identified. "But it's going to be very difficult because it's a very different beast from what it was."

International rating agencies such as Standard & Poor's, Moody's Investors Service and AM Best, a financial services ratings specialist, give reinsurers ratings similar to general corporate ratings that, among other things, influence the cost of raising capital.

Beijing broke China Re's dominance of the mainland reinsurance market in December 2005 when it scrapped rules requiring insurers to give part of their business to China Re. The central government injected US$4 billion into China Re through Central Huijin Investment last year to boost the reinsurer's capital ratio. China Re was valued at US$6 billion at the time.

Reinsurance companies agree to indemnify or pay damages to insurance companies should claims be filed, in what amounts to an insurance policy for the insurance companies themselves. By offloading the risk of paying out claims to reinsurers, insurance companies can sell more premiums.

The mainland reinsurance market is expected to reach 100 billion yuan by 2010 when its total premium revenue surpasses one trillion yuan, according to the China Insurance Regulatory Commission.