China United was examining bids from potential strategic investors in a move to boost its share capital, said its publicity chief who identified himself as Mr Li. 'It's well on its way but we have no imminent information to disclose at this point,' he said.

IAG declined to comment. A spokesman for China Continent, also known as Dadi Insurance, said he was unaware of any talks with the Australian insurer.

Car insurance represents about 70 per cent of all premiums in the mainland's general insurance industry - a high proportion by western standards - and intense competition has reduced profitability. A lack of reliable data in the market has also led to poor policy selling.

'You can see wide differences between management quality' in mainland insurance companies, said Quam analyst Albert Chan.

'What you look for in good management is stability of earnings.'

The mainland's car insurance sector is expected to earn premium income of 200 billion yuan in 2012 compared with the 111 billion yuan it earned last year, according to Swiss Reinsurance, the world's largest reinsurer.

IAG is making a second attempt to buy a stake in a mainland insurer after its planned deal with China Pacific Insurance fell through earlier this year.

IAG had held talks to buy 25 per cent of China Pacific's property insurance arm and hoped to swap it into a stake in China Pacific after the mainland group's restructuring.

However, the Australian company walked away after private equity firm Carlyle Group and Prudential Financial won a combined 19.9 per cent stake in China Pacific by exchanging their 25 per cent stake in the mainland firm's life-insurance unit.

Once the two United States firms took 19.9 per cent in the parent company, IAG was limited to an unattractive 5 per cent stake because foreign ownership in insurers is capped at a combined 25 per cent.

'International insurers are actually pretty cautious about most of the existing players that have grown very quickly on the property and casualty side and they want to do things themselves and have more control,' said Credit Suisse banking analyst Bill Stacey.

China United Property Insurance earned 10.8 billion yuan in revenue from premiums in the first six months of the year, up 37 per cent from a year ago, according to data from the China Insurance Regulatory Commission.

The company is based in Urumqi, the capital of the Xinjiang region.

Shanghai-based Dadi Insurance is 60 per cent owned by China Reinsurance Group.

Troubled path

IAG is making a second attempt to buy into a mainland insurer

The Australian company first sought to buy into China Pacific Insurance, with a planned stake size of:

25%