China’s biggest unlisted insurer Anbang poised to go public

IPO could value Anbang’s life insurance business at HK$116 billion, while information disclosure will be key, analysts say

PUBLISHED : Wednesday, 24 August, 2016, 3:10pm
UPDATED : Wednesday, 24 August, 2016, 11:00pm

Anbang Insurance Group, China’s biggest unlisted insurer and owner of New York’s Waldorf Astoria hotel, is preparing an initial public offering of its life insurance unit in Hong Kong next year.

The possible floating of Anbang Life Insurance on the stock exchange could see the company valued at more than 100 billion yuan (HK$116.54 billion). But analysts warned the company’s famously mysterious holding structure and opaque business style may pose challenges for bankers looking to disclose sufficient information to attract international investors, analysts said.

The Beijing-based insurance giant has asked investment banks to submit proposals by the end of this week. The listed entity will include Anbang’s domestic life-insurance operations, according to the Wall Street Journal. Anbang’s chairman Wu Xiaohui is reported to be married to a grand daughter of former Chinese paramount leader Deng Xiaoping.

Bloomberg reported that Anbang will pack many of its overseas businesses into the listed body, and is considering first raising funds through a pre-IPO private placement in the coming months.

The size of the proposed floatation remains unknown, while a spokesman from Anbang Group told the South China Morning Post it was “too early to comment”.

Anbang Life, the flagship subsidiary of the Anbang Group, is currently the second biggest player in China’s life insurance sector after China Life, followed in third place by Ping An Insurance, according to data from the China Insurance Regulatory Commission (CIRC).

By the end of June this year, the written premium of Anbang Life stood at 228.4 billion yuan, accounting for 10 per cent of total market share.

“Market capitalisation of Anbang Life Insurance could be around 103 billion yuan if valued by price to book (PB) ratio of 1.5 times, an average ratio among peers, making its size close to New China Life,” said Dayton Wang, an insurance analyst with Hong Kong based Guotai Junan International.

That compares with the 631 billion yuan market cap of Ping An Insurance Group, the biggest listed insurer in Hong Kong, and the 492 billion yuan market cap of AIA Group, based on market closing prices on Monday.

Wang said the news of Anbang’s potential IPO comes at a time of rapidly emerging opportunities in China’s senior care and health care sectors. But he also noted some concerns that may discount the valuation.

“Anbang sells more universal life insurance contracts than listed peers, which could result in a higher overall funding cost for its insurance liabilities, while the margin rate is lower because it relies heavily on bancassurance as the distribution channel, rather than individual insurance agents,” he said.

“Its high-profile mergers and acquisitions moves on both domestic and overseas markets makes the exposure to equity investment high, which also adds risks.”

Brett McGonegal, Capital Link International’s chief executive, said many Western investors regarded Anbang as “a powerful and very unknown commodity, which is both good and bad”.

The IPO could be big and the success will rely on the international investors’ understanding of who [Anbang] are
Brett McGonegal, chief executive, Capital Link International

He added: “The IPO could be big and I think the success will rely on the international investors and their understanding of who [Anbang] are and what they are looking to accomplish. Their style seems to stay unknown.”

Having started out as a little-known car insurer in 2004 in East China’s Zhejiang, Anbang is now the most active player in both the domestic and international mergers and acquisitions market.

It has completed 11 outbound acquisition deals since 2012, with aggregate deal value of more than US$4.98 billion, including the high-profile US$1.95 billion purchase of the historic Waldorf Astoria hotel in New York City in 2014.

Earlier this year, Anbang abruptly withdrew from a bidding war with Marriott International to acquire hotel chain Starwood for US$14 billion.

Boosted by the strong growth of universal life insurance contracts, a wealth management-style product, Anbang has climbed from 40th to third place in the ranks of premium Chinese life insurers over the last four years. But the company is under rising pressure to meet the high investment return rate.

Anbang has developed a reputation for its opaque corporate structure. Chinese corporate registry filings show 39 mostly anonymous shareholders, with multiple layers of holding companies registered all over China.