Anbang suffers second setback in overseas push as offer for US insurer put on hold; follows Starwood withdrawal

Politically well connected company asked by New York regulator to provide further details on shareholding and funding structure

PUBLISHED : Wednesday, 01 June, 2016, 8:31pm
UPDATED : Wednesday, 01 June, 2016, 8:31pm

Anbang Insurance Group, one of China’s most aggressive overseas acquirers and controlled by enigmatic businessman Wu Xiaohui, has suffered another setback in its offshore expansion plans after halting a bid to buy a US based insurer.

The group plans to put on hold its purchase of annuities and life insurer Fidelity & Guaranty Life after the New York finance regulator sought more detailed information about the Chinese company’s funding and shareholder structure, foreign media reported.

Anbang would refile an application with the regulator in the near future, Fidelity & Guaranty Life said in a filing to the New York Stock Exchange on Tuesday. Anbang was not available for immediate comment.

Earlier reports said Anbang had agreed to buy the insurer for US$1.57 billion in November.

It is the second time in recent months that Anbang has suffered a setback in terms of acquiring overseas assets, after it dropped a plan to take over hotel giant Starwood in late March.

“If Anbang fails again this time, the company is very likely to face bigger pressure in fund raising in future as investors will question its execution ability in carrying out acquisition deals,” said a Hong Kong-based insurance analyst, who declined to be named.

The company is very likely to face bigger pressure in fund raising in future as investors will question its execution ability
Hong Kong-based insurance analyst

“It seems Anbang has met with some problems...and the US regulator is being cautious to ask [the insurer] to prove two things,” the analysts said.

If it continued with the acquisition, Anbang would first have to prove it had sufficient financial resources to cushion the existing insurance liabilities carried by Fidelity. Secondly, it would need to show that its funding structure was in compliance and that the acquisition funding would come from legitimate channels, the analyst explained.

The rise of Anbang Insurance has been a mystery to market watchers. During an eight-month period in 2014, the privately owned company’s registered capital expanded fivefold but the shareholder list was filled with names of little-known fund companies.

Anbang chairman Wu Xiaohui remains an enigma, continuing to shun publicity, but is believe to have one of the most powerful political networks based on his personal connection with China’s former paramount leader Deng Xiaoping, analysts say. There were rumours that Wu was married to a granddaughter of Deng.

Anbang made a global name for itself in 2014 with the US$2 billion purchase of the historic Waldorf Astoria hotel in New York City.

Last year, it purchased a controlling stake in South Korea’s Tongyang Life Insurance, following a slew of high-profile deals in Europe, including the purchase of Dutch insurer Vivat and Belgian insurer Fidea in 2014.

On March 31, Anbang suffered a major setback when it abruptly pulled out from a US$14 billion bid to acquire Starwood Hotels & Resorts, apparently triggered after China’s insurance regulator stepped in and questioned Anbang’s risk control ability with regard to the huge size of the investment.

Prior to that scrutiny, the company had aggressively raised its offer several times to beat out the rival bidder Marriott International.

A week ahead of Anbang’s withdrawal from the Starwood deal, mainland finance media Caixin reported that the Chinese Insurance Regulatory Commission (CIRC), the top insurance regulator, questioned whether Anbang’s bid for Starwood exceeded the investment limit for Chinese insurers – which is capped at 15 per cent of total assets in relation to overseas markets.

Caixin reported in early May that the CIRC was planning to send inspectors to Anbang Insurance after the watchdog stepped up scrutiny of insurers’ investments in real estate and unlisted equities.