China Ends Two-Year State Custody of Troubled Anbang Insurance

February 21, 2020 by

China’s two-year state custody of Anbang Insurance Group Co., the group that became a poster child for private companies with too much debt and lofty global ambitions, is set to end this weekend.

Authorities took control of the 2 trillion yuan ($285 billion) conglomerate in February 2018 after its former chairman Wu Xiaohui was arrested — and subsequently jailed — for fundraising fraud. They initially set themselves a 12-month timeline to raise cash by jettisoning non-core assets such as luxury hotels, preserve Anbang’s main insurance operations and find strategic investors. That deadline was later extended by a year to Feb. 22.

The first two of those objectives have largely been met. Anbang agreed to sell a high-end hotel portfolio to South Korea’s Mirae Asset Management Co. for $5.8 billion in September and has offloaded other assets including Dutch insurer Vivat NV and Hexie Health Insurance Co. In June, China created a new entity — Dajia Insurance Group — to take over the insurance operations of Anbang.

Finding private strategic investors has proven more difficult. It was one of the China Banking and Insurance Regulatory Commission’s key tasks to see Anbang, or what is now left of it, placed back into private hands so that the China Insurance Security Fund Co., which now controls both Anbang and Dajia, can exit “orderly and safely.”

That goal has become less clear since Anbang stopped accepting new business and considering Beijing-based Dajia now houses the life insurance, pension and asset management units along with parts of its property insurance business. Some of the toxic assets involved in Wu’s case have been kept outside Dajia, Bloomberg reported in May.

Representatives from CBIRC didn’t immediately respond to a request for comment.

Risks at Anbang were curbed after the government stepped in, CBIRC Vice Chairman Liang Tao told a briefing in Beijing in July. The riskier medium and short-term investment products, which Wu used to finance his overseas buying binge, are expected to drop to below 15% of the insurance business by the end of 2019, he said last year.

Foreign investors from Cerberus Capital Management LP to Swiss Re AG were said to have held discussions about potential investments in Anbang, Bloomberg reported in 2018.

The CBIRC is unlikely to extend this weekend’s deadline.

When announcing the takeover in early 2018, authorities said it would last for a maximum period of two years. If the objectives couldn’t be met in that time, the takeover team would report back to CBIRC and it would authorize “other regulatory measures,” the China Insurance Regulatory Commission, which later combined with the banking regulator, said in a statement at the time.

Still, with much of the old Anbang now defunct, regulators have probably done enough to claim a victory.

“In terms of maintaining social stability and defusing financial risks, they’ve probably done their job because we didn’t see any waves from outside, although there’s been little information about their business development or talent losses,” Gary Liu, president of Shanghai-based China Financial Reform Institute, said. “It will be up to the new shareholders and management to take the company’s business to a new level.”

Photograph: The entrance of the Anbang Headquarters in Beijing seen from Jianguomen Outer Street on Feb. 24, 2018. Photographer: Giulia Marchi/Bloomberg.

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