The Chinese government is trying to contain the economic fallout from Anbang's over-reaching. From a long-term perspective, Starwood dodged a bullet when it ended up in Marriott's arms instead of the opaque Chinese insurance conglomerate.
China’s government will take over Anbang Insurance Group Co. and prosecute founder Wu Xiaohui, cementing the downfall of a politically-connected dealmaker whose aggressive global expansion came to symbolize the financial overreach of China’s debt-laden conglomerates.
Regulators announced they would take over Anbang for a year, remove Wu and charge him with “economic crimes.” Wu, who was the company’s chairman, was detained by authorities in June.
Under Wu, Anbang came to epitomize the voracious Chinese appetite for overseas acquisitions that saw trophy assets snapped up around the world — sometimes at prices that left observers scratching their heads. The full cost of that headlong spree started becoming clear last year as Chinese authorities, alarmed by mounting financial risks, slammed the brakes on Anbang and peers like HNA Group.
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Wu’s links to the Chinese political elite became fodder for media scrutiny as his ambitions grew, with acquisitions ranging from New York’s glitzy Waldorf Astoria hotel to insurers in Korea and the Netherlands. Wu established ties with the family of reform leader Deng Xiaoping after marrying Deng’s granddaughter Zhuo Ran.
A team led by the China Insurance Regulatory Commission, along with members from the central bank, banking, securities and foreign-exchange regulators, is taking over the company starting Feb. 23, according to the statement Friday, which added that Anbang’s external liabilities won’t be affected and the insurer’s business will continue. Illegal operations at Anbang may “seriously endanger” the company’s solvency, prompting the government to take control, regulators said.
“Regulators want to solve Anbang’s problems without triggering systemic risks,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “After weighing pros and cons, it’s the best way.”
The Beijing-based company’s operations currently remain “stable,” the statement said. China will introduce private capital to restructure Anbang, which will remain private, the CIRC said.
President Xi Jinping and his top economic deputies have vowed to make controlling financial risks their priority, a pledge renewed at the Communist Party’s twice-a-decade leadership congress last year. China’s insurance regulator, along with the main banking watchdog, have announced a flurry of rules since last year to contain financial risks in the system.
Anbang has almost 2 trillion yuan ($316 billion) in assets and owns businesses spanning life and non-life insurance, asset management, financial leasing and banking, according to its website.
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Photo credit: China’s government will take over Anbang Insurance Group Co. and prosecute founder Wu Xiaohui. Bloomberg