China Regulator Issues Guidance on Tackling Insurance Fraud

Gladys Abbott
February 24, 2018

Anbang grew from a domestic seller of property insurance into a financial services powerhouse, hitting headlines in 2014 when it bought the landmark Waldorf Astoria in NY for a record $1.95 billion (€1.58 billion).

Anbang also made a $14 billion dollar bid for Starwood Hotels & Resorts Worldwide, but pulled out of a bidding war with Marriott.

During the government takeover of Anbang Group, which will last for one year starting from Friday, the company will be managed by a group of officials from the CIRC, the central bank and other key financial regulators and government bodies.

In particular, it has striven to bring to heel companies such as Anbang, Wanda Group, and Fosun, which have been responsible for some of the highest-profile foreign acquisitions.

A group of 31 regulators will oversee the company for at least one year, taking over all management and board responsibilities such as asset trading and contract signing. It didn't specify what those activities were. "They are just making official what has been in effect since June" when Wu was first detained by authorities.

Marriott declined to comment on Friday about Anbang's status.

Anbang, which had scooped up the famed Manhattan property three years ago as part of a $30 billion offshore deal spree, is guilty of illegal operations and will be restructured, according to a note posted on the official website of the China Insurance Regulatory Commission (CIRC) this morning. "The legitimate rights and interests of insurance consumers and individual stakeholders are being protected effectively".

Anbang, founded in 2004, gained a reputation for aggressive expansion in a stodgy industry dominated by state-owned insurers.

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Anbang has spent more than $20 billion on deals since 2014, according to data from research firm Dealogic.

"Currently, operations at Anbang Insurance Group and its units are operating normally with abundant cash reserves". Some analysts said there are real concerns over Anbang's future solvency. That heightened liquidity risks and the potential for a duration mismatch between assets and liabilities for Anbang, whose investments included real estate investments that are often locked up for years.

But authorities have become increasingly alarmed by the corporations' influence, their webs of subsidiaries and debt, and capacity to trip up the Chinese economy if they over-extend. The company claims over $300 billion in assets.

Wu had first been detailed previous year, as part of the Chinese government's crack-down on financial firms borrowing, loans and investments.

Anbang has attracted plenty of controversy outside of China, too.

Anbang Insurance has significant stakes in a slew of major Chinese companies, such as banks and property developers.

Besides the Waldorf Astoria, its USA purchases include the multibillion-dollar acquisition of Strategic Hotels & Resorts from private equity giant Blackstone in 2016.

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