China’s government sets up Dajia Insurance to take over Anbang’s assets as the disposal of former asset buyer nears
- Dajia Insurance, established this week in Beijing, has an identical structure and shareholders as Anbang, albeit with smaller capitalisation
- The finance ministry’s China Insurance Security Fund owns 98.2 per cent of Dajia, as it does Anbang
China’s government has established a new insurer to take over the operations of Anbang Group, more than 16 months after one of the country’s biggest asset buyers was put under state ward and its chairman was jailed for fraud.
Dajia Insurance Group was registered on June 25 in Beijing with 20.4 billion yuan (US$3 billion) of capital put up by identical shareholders as Anbang, according to documents published by the business registrar.
The move is the clearest sign that the China Banking and Insurance Regulatory Commission (CBIRC) is moving ahead with its programme to transfer Anbang’s business operations. The insurer, which began as a regional seller of car insurance founded by Wu Xiaohui in 1994, had 1.9 trillion yuan in assets as of February 2017, before Wu’s fall from grace.
China Petrochemical Corporation, the country’s state oil monopoly, owns 0.55 per cent of Dajia, as it does in Anbang. Shanghai Automotive Industry Corporation (SAIC), the largest state-owned Chinese carmaker, owns 1.2 per cent in both insurers.
Anbang was one of China’s most aggressive asset buyers, building its war chest from billions of yuan of savings provided by investors of its high-yield “universal life insurance,” a variant of wealth management financial product.
The insurer’s shopping list included the Waldorf Astoria New York Hotel bought in 2014 for nearly US$2 billion, the 2015 purchase of South Korea’s Tongyang Life for US$1 billion, and the €700 million (US$797 million) takeover in cash and debt of VIVAT insurer from the Dutch state. Anbang even entered a US$14 billion bidding war in 2016 for control of Starwood Hotels and Resorts Worldwide, which was ultimately sold to Marriott Hotels International.
An investor will be more likely to invest in a holding company, rather than in Anbang directly, to insulate them from any liabilities that may be hidden in the insurer, analysts said.
“The regulator is probably setting up a holding company to control Anbang, and will sell the stake of this holding company to investors as a way to exit from the takeover,” said Guo Zhenhua, head of the insurance department at Shanghai University of International Business and Economics. “Two things may happen. Firstly, Anbang as a brand name may be eliminated in future. Secondly, using a holding company to control Anbang may look better if the authority misses the takeover deadline because of its inability to find enough eligible investors.”
Corrects the stakes held by Chin Petrochemical Corp and Shanghai Auto in the fifth paragraph.
