China’s Anbang Insurance says time to digest US$13.5 billion worth of deals

Group bought iconic Waldorf Astoria Hotel in New York City

PUBLISHED : Wednesday, 07 September, 2016, 4:50am
UPDATED : Wednesday, 07 September, 2016, 4:50am

Anbang Insurance Group Co., known for its aborted attempt to buy Starwood Hotels & Resorts Worldwide Inc. in March, is turning its attention from chasing deals to digesting US$13.5 billion of overseas acquisitions announced since 2014.

The company will focus on integrating purchases such as South Korea’s Tongyang Life Insurance Co., Vice Chairman Yao Dafeng said in an interview on Tuesday.

While Yao said Anbang will still continue to seek acquisitions, mostly insurers and banks, his comments suggest a deal spree that included buying New York’s iconic Waldorf Astoria Hotel and mounting a $14 billion bid for Starwood might abate.

“We want to build up the existing synergies a bit first, and consider new deals when appropriate opportunities emerge,” Yao said, adding that the insurer’s premium growth remains strong enough to finance new deals. “You can’t just keep buying everyday. You need to also digest and absorb.”

Anbang, founded in 2004, has been at the forefront of a record wave of overseas acquisitions by Chinese companies as the world’s second-largest economy cools. The insurer, which has amassed assets across the US, Europe and Asia, is now preparing an initial public offering in Hong Kong of its life insurance operations.

There are signs that some major Chinese acquirers are taking a pause.

Fosun Group, whose purchases included Club Med, has slowed its deal pace in the past year as billionaire founder Guo Guangchang switched focus to cutting debt.

Led by Chairman Wu Xiaohui, Anbang has faced calls for more disclosure by Standard & Poor’s Ratings Services and drawn scrutiny for its unconventional dealmaking methods. Wu this year abruptly pulled out of the deal to buy the Starwood hotel chain, which would have been the biggest purchase of a US asset by a Chinese company.

The main reason for that decision was to strictly abide by the company’s “price discipline,” the company said in a statement Tuesday.

The proposed IPO is part of efforts by Anbang to better integrate itself into the global community as an “open and transparent” player, said Yao, who is also chairman of the life insurance unit.

The New York Times reported last week that Anbang is controlled by a group of companies owned by about 100 people with ties to the insurer’s chairman, many of them hailing from Wu’s home county of Pingyang on the eastern Chinese coast.

The report was “not factual,” Yao said. “Anbang is a private company that strictly abides by Chinese laws and regulations. Some people in America always have stereotypes about China and Chinese companies.”

Anbang, which has announced $13.5 billion in overseas deals in the past two years, folded four of the companies it acquired into the life unit last year. They include Tongyang Life, Dutch insurer Vivat, Belgium lender Nagelmackers and insurer Fidea NV, according to the unit’s 2015 annual report.

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“Those consolidated numbers are just the technical aspect, and a very small part” of benefits such acquisitions have brought Anbang, Yao said. “From the strategic and market competition point of view, our global deployment is taking shape.”

Some of the acquired companies are already benefiting as Anbang has started integrating them. Seoul-based Tongyang Life, which Anbang bought last September, posted its best results since its establishment in 1989 in the first half of this year, with premiums income jumping 91 per cent mainly thanks to a new pension insurance product designed with Anbang’s help, Yao said.

Amstelveen-based Vivat, bought in July last year, reported a tenfold profit jump for the same period, after management strategies “exported” from Anbang helped reduce costs and improve efficiency, he added.