THE former chairman of New China Life, the mainland's fourth-largest life insurer, has been arrested for allegedly embezzling 13 billion yuan (US$1.75 billion) from his company during his eight years at the helm.

The mainland insurance regulator convened a meeting with New China Life shareholders Monday and told them that the authorities had taken action against Guan Guoliang, Xinhua said.

Officials with the China Insurance and Regulatory Commission (CIRC) said misuse of funds had been uncovered at New China Life and that the former chairman must bear most of the responsibility for it.

Xinhua said most of the misused funds could be returned to the New China Life but about 2.7 billion yuan was still missing.

Guan has been under official investigation since September last year for alleged wrongdoing related to real estate investments worth almost 13 billion yuan. He promised the CIRC he would return the funds but did not do so.

In May, the CIRC used the country's 8-billion-yuan insurance protection fund to buy 22.53 per cent of New China Life to make up for the misused funds.

It was the first time the regulator had used money from an insurance asset protection fund in this way. The fund is meant to help policyholders when an insurer goes bankrupt or faces huge problems.

"The scattered shareholders' structure makes the insurance company vulnerable to any misconduct by management executives," said Core Pacific-Yamaichi International analyst Olive Xia.

New China Life, set up in 1996, has 15 shareholders, of which 12 are domestic companies.

The three foreign shareholders are Zurich Financial Services Group, International Finance Corp and Japan's Meiji Life Insurance, the insurer's website shows.

Guan reportedly circumvented the board in making investment decisions and was widely reported within the industry to have clashed with other major shareholders.

Reports said his investment decisions bypassed the board to help other companies he controlled.

New China Life had a 6.1 percent share of the mainland life insurance market at the end of September, behind China Life Insurance, the country's biggest life insurer, Ping An Insurance (Group) and China Pacific Life Insurance. It had a registered capital of 1.2 billion yuan.

(SD-Agencies)