Thursday 17 August 2017

Intrigue as chairman of controversial Chinese insurance giant 'steps down'

Former chairman of the Anbang Insurance Group Wu XiaohuI
Former chairman of the Anbang Insurance Group Wu XiaohuI

Only a year ago he was hailed as one of the boldest dealmakers in China - but yesterday, with scant explanation, Wu Xiaohui was said to be unable to perform his duties as chairman of Anbang Insurance Group.

In a terse statement sent to reporters around 2am Beijing time, Anbang said only that Wu - who spent more than a decade building the company into a global juggernaut - was no longer able to serve in his post for personal reasons.

The development added another layer of intrigue to the story of Anbang, whose overseas acquisition spree has slowed in recent months amid increased scrutiny at home and abroad.

China's central bank was said to be looking into suspected breaches of anti-money laundering rules at the insurer late last year, while authorities temporarily banned Anbang's life insurance unit from selling new products in May. High-profile bids for American hotels, insurance assets and a Manhattan office tower owned by the family of US presidential adviser Jared Kushner have all fallen through over the past 18 months.

"It looks very unlikely that Anbang will be able to continue its overseas buying spree," said Grace Zhou, a Hong Kong-based analyst at ICBC International. "Its business model is no longer viable given tightened regulatory scrutiny," Zhou said, adding that the latest shock to the firm's reputation could drive policy surrenders and make it harder for Anbang to tap international financing.

The exact nature of Wu's role in any government investigation has become the subject of widespread speculation.

Before Anbang's statement, Caijing Magazine, citing unidentified sources, reported that Wu had been taken away by Chinese authorities on June 9. The article, which said it was unclear whether Wu was assisting with a government investigation, was later deleted from the magazine's website.

Caijing didn't answer calls and emails requesting comment, while Anbang referred to its statement when asked to comment on the Caijing report. The company on June 2 denied a Financial Times report that said Wu was barred by authorities from leaving the country.

It wouldn't be the first time a Chinese tycoon has allegedly fallen afoul of Chinese authorities. Prominent financier Xiao Jianhua was taken by agents from a Hong Kong hotel earlier this year and presumed to have been brought back to China, according to local media reports.

Executives of a company controlled by tycoon Guo Wengui stood trial this month on charges of loan and foreign exchange fraud, the state-owned Xinhua News Agency reported.

Anbang's story begins in 2004, when it was founded as a property-and casualty-insurer selling auto policies. The firm's early shareholders included state-owned behemoths SAIC Motor and Sinopec.

Anbang added a life unit in 2010 and turbocharged its expansion in 2014 by selling single-premium, high-yield policies - many of which could be redeemed in two years at a profit.

With names like Anbang Longevity Sure Win No. 1, the products offered returns well above benchmark deposit rates and have proven popular with inexperienced investors. Anbang now has almost 2 trillion yuan (€262bn) of assets and more than 30,000 employees.

Wu first turned heads abroad when Anbang offered to buy New York's iconic Waldorf Astoria hotel in October 2014.

Chinese media likened his approach - using insurance income to fund wider ambitions - to the model honed by Berkshire Hathaway's Warren Buffett. Anbang's targets have also included the Belgian banking operations of Delta Lloyd NV, South Korean insurer Tongyan Life Insurance and the massive Starwood Hotels & Resorts Worldwide, though that bid was dropped last year.

Later that year, Anbang called off an agreement to buy a landmark Southern California hotel from Blackstone after US national security officials expressed concern over the property's proximity to a naval base. An offer to acquire US-based Fidelity & Guaranty Life failed to win regulatory approval. In March, Anbang cancelled talks with Kushner Cos, owned by the family of President Donald Trump's son-in-law. The negotiations to redevelop 666 5th Avenue had came under scrutiny from Democratic lawmakers, who cited ethics concerns over the Chinese firm's potential investment.

Anbang is controlled by a group of companies owned by about 100 people with ties to Wu, many of them hailing from his home county of Pingyang on the eastern Chinese coast, the New York Times reported last year. At least 35 of Anbang's corporate shareholders can trace all or part of their ownership to relatives of Wu or his wife, according to the report. (Bloomberg)

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