- China’s insurance regulator will lead a consortium of state-backed entities in a takeover of Anbang Insurance.
- The company is expected to continue operating, and the takeover period will run for one year.
- Anbang Chairman Wu Xiaohui will be removed from his role and face prosecution, after being detained in June last year.
China’s state-backed insurance regulator — the China Insurance Regulatory Commission (CIRC) — has announced that it will lead a takeover of struggling insurance conglomerate Anbang Insurance for a period of one year.
Anbang started as a regional Chinese auto-insurer before embarking on a period of debt-fuelled global expansion.
It made headlines in 2014 with a $US2 billion bid for the Waldorf-Astoria hotel in New York, before deals started falling through as questions arose as to how its global deals were being financed.
It ran into further problems last June when its chairman, Wu Xiaohui, was detained by Chinese authorities.
Bloomberg reports that Wu Xiaohui will be removed as chairman and face charges, citing a statement by the CIRC. It follows an extensive investigation by Chinese authorities since Wu’s detainment.
Along with the CIRC, four other state-backed entities will be involved in the takeover process: the People’s Bank of China, two regulatory bodies for banking and securities, and the State Administration of Foreign Exchange.
The CIRC statement said the company’s finances remain stable and it will continue to run, although “illegal activities” could pose a risk to its ability to operate as a going concern.
The takeover period will run from February 23, 2018 to February 22, 2019.
Today’s announcement is the latest in a series of moves by Chinese authorities in an attempt to reign in excessive leverage in China’s financial system and crack down on risky lending practices.
It follows increasing concerns among analysts that China’s annual rate of growth in the 6-7% range has been artificially supported via a steady increase in debt.
At the 19th National Congress of the Communist Party in October, Chinese President Xi Jinping renewed his pledge to address the build-up of risks in China’s financial system.
China’s Shanghai Composite Index rose by 2.17% yesterday — its biggest intra-day gain in 18 months.
The index is around 0.7% higher today in early trade, but is still down by around 8% from its recent highs in late-January.
You can find more on Bloomberg here.