Anbang dumps Chinese state bank shares as ratings agency cites debt pressure, liquidity strains
Insurer raises 6.6 billion yuan in disposal of stock seen by some analysts as likely to have been ordered by Beijing
Anbang Insurance Group, whose chairman disappeared from view in June after regulators curtailed the firm’s operations, has raised at least 6.6 billion yuan by selling its shares in four state commercial banks, according to those lenders’ half-year reports.
Two funds run by Anbang Life Insurance – the group’s flagship unit – have sold 881.3 million Agricultural Bank shares, 390.4 million Industrial and Commercial Bank of China shares, and 327.1 million Bank of China shares in the three months to June 30, the filings showed.
Chengdu-based Hexie Health Insurance, a subsidiary of Anbang Insurance, also sold all of its 131.2 million China Construction Bank shares in the same period.
At the lowest second-quarter closing prices of ABC, ICBC, BOC and CCB – respectively 2.86 yuan, 4.73 yuan, 3.51 yuan and 5.76 yuan – the disposals would have raised at least 6.62 billion yuan for Anbang Insurance, according to calculations by the South China Morning Post.
The stock sales came after Anbang Life was reprimanded in May by the China Insurance Regulatory Commission. The watchdog had found that one of its annuity products was in violation of rules governing short-term insurance products and had disturbed market order.
This may have been behind the firm’s decision to dispose of the bank shares, according to Ivan Li, a trader with Everbright Securities, though there are rumours in the market that it had no choice in the matter.
“On the face of it, Anbang needs to cash out to brave rough weather after the regulator tightened regulation of its wealth management product sales,” said Li. “But there is speculation among investors that the insurer was forced to dump the shares.”
A month after being admonished by the watchdog, Anbang Group chairman Wu Xiaohui left his US$300 billion business empire amid speculation and media reports he had been taken away by the authorities to assist them with their investigation.
The company said at the time Wu could not perform his duties because of “personal reasons”.
Anbang Insurance is one of several privately-controlled Chinese companies that have been criticised for their aggressive overseas acquisitions.
Its trophy assets include New York’s iconic Waldorf Astoria hotel, purchased for US$1.95 billion in 2014.
In June, the China Banking Regulatory Commission ordered banks to check their offshore exposures to Anbang, Fosun, HNA Group and Wanda – four of China’s biggest buyers of overseas assets – raising concern over their capacity to raise new financing or refinance old loans.
Some analysts played down speculation that Anbang’s sale of the bank shares was to raise funds to boost its solvency margin ratio – a measure of an insurer’s ability to settle claims.
Two fund managers who asked not to be identified said the divestments were probably politically motivated, rather than normal privately negotiated financial transactions, since Beijing’s leadership would not allow untrusted institutions or individuals to hold a large chunk of banking shares.
Heavyweight Big Four banks are seen as among the backbones of the national economy.
In addition, volatility in banking share prices could have a huge impact on the movement of the mainland’s stock market, which the leadership would want to avoid.
Dagong Global Credit Rating last week downgraded Anbang Life’s credit rating by one notch to AA+, citing growing debt repayment pressure as a result of liquidity strains and falling investment yields.
Dagong Global said Anbang Life booked a loss in the first half of the year and its operating revenue has been “dropping fast”.