Rating agency downgrades Chinese insurer Anbang Life over growing debt pressures

Owner of New York City’s Waldorf Astoria also facing falling investment yields, Dagong Global Credit says

PUBLISHED : Wednesday, 23 August, 2017, 7:48pm
UPDATED : Wednesday, 23 August, 2017, 10:55pm

The credit rating of China’s Anbang Life Insurance Co was downgraded by Dagong Global Credit Rating Co on Wednesday, three months after the regulator curtailed its operations and two months since the chairman of its parent company disappeared from public sight.

The downgrade by one notch to AA+ came as Dagong said in a statement that Anbang Life is facing growing debt repayment pressure as a result of liquidity strains and falling investment yields.

Anbang Insurance says chairman Wu Xiaohui stepping aside amid probe reports

Anbang Life is an arm of Anbang Insurance Group, which has come under fire for its aggressive overseas acquisitions, including the purchase of New York City’s Waldorf Astoria for US$2 billion.

Anbang Group chairman Wu Xiaohui left his job in June to help Chinese authorities with an investigation, sources told the Post earlier. The company said in a brief statement at the time that Wu, who married a granddaughter of China’s former leader Deng Xiaoping, could not perform his duties for “personal reasons”.

Dagong Global said that Anbang Life booked a loss in the first half of 2017 and that its “operating revenue has been dropping fast”.

Data from the China Insurance Regulatory Commission show Anbang’s life insurance premiums fell to 56.5 million yuan in May from 85.2 billion yuan in January.

Meet Wu Xiaohui – the man behind Anbang’s big bang from no-name to heavy hitter

“The change of external environment has lifted the liquidity pressure on Anbang Insurance, dragged down its investment returns. Meanwhile, its channels of capital replenishment have been restricted and its existing business model faces great challenges,” the rating agency said.

Anbang’s model of selling investment-related insurance policies and then using the funds to buy trophy assets has been criticised by Beijing for being too risky.

The insurance regulator suspended the sale of two of Anbang Life insurance products in May and banned it from applying for new products for three months.

Dagong Global said that Anbang’s debt burden is heavy as it had pledged domestic assets to secure loans to fund its overseas deals. The actual size of the debt was not stated, however.

How China’s overseas property dream turned into a nightmare

Both Anbang and the insurance regulator denied media reports that Anbang had been ordered to sell its overseas assets, including the Waldorf Astoria.

Chen Wenhui, a vice-chairman of the CIRC who has been in charge of the regulatory body since its former chief Xiang Junbo was put under investigation, said last week that the industry must not be led by the aggressive investment policies of some insurers.

“Insurance capital should be operated with caution and prudence,” he said.