Section 2: The rapid rise and fall of Anbang

25 October 2018

In 2004, Anbang started operations as a private motor insurance company headquartered in Beijing. By 2010, it had entered the life insurance segment and began selling investment and wealth management products in 2014, causing its total premium volumes to grow 30 times over the previous year. Simultaneously, investment funds accumulated in Anbang’s P&C and life companies surpassed CNY 100bn during the same year, and reached a staggering CNY 730bn by the end of 2016 (see Figure 1).

Anbang’s strategy was simple but highly effective in gaining market share. Its prolific growth was driven by lightly regulated, high-yielding and short-duration savings products that guaranteed returns in excess of typical savings accounts. Many of its products were sold widely to retail customers, often under the guise of insurance. Finding itself flush with capital from its bloated asset base, Anbang leveraged up further with debt as it embarked on a series of overseas acquisitions totalling over USD 13bn. A large part of these acquisitions were in real estate, including landmark properties such as the Waldorf Astoria Hotel in New York City (USD 2bn) and Strategic Hotels & Resorts Inc. (USD 6.5bn), in addition to other Asia-Pacific and European insurance assets.

FIGURE 1: ANBANG’S PREMIUM GROWTH (P&C AND LIFE BUSINESS), 2011-2016

arbang's premium growth

SOURCE: China Insurance Statistics, Anbang P&C Annual Reports 2012-2016, Anbang Life Insurance Annual Reports 2012-2016

This debt-fuelled activity did not go unnoticed by regulators, who were becoming increasingly cognisant of the wider risks to China’s macroeconomic stability as indicators pointed towards a slowdown in growth. Rules on overseas investments were consequently tightened to restrict the outflow of funds from China and disincentivise the purchase of assets deemed incompatible with businesses’ core activities.

In many respects, Anbang’s fall was precipitated by pursuing a business strategy that was fundamentally highrisk and at odds with the changing regulatory cycle. Despite nominally operating in one of the insurance industry’s safest segments, Anbang had been effectively selling short-term investment products whilst simultaneously pursuing an aggressive overseas investment strategy funded almost entirely by local debt.

On 23 February 2018, the regulator clamped down decisively, imprisoning Anbang’s CEO and taking control of the company for a stated duration of one year. The CBIRC announced in April that it would inject USD 10bn from the state-owned insurance protection fund into Anbang, with the goal of stabilising operations and attracting new private investors. Current indications point towards what will be a slow, costly and complex process of unwinding the group’s overseas acquisitions.

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