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Anbang-linked stocks fall after chairman detained

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Better days: chairman of Anbang Insurance Group Wu Xiaohui attends the China Development Forum in Beijing in March 18 © Reuters

Listed companies in which Anbang Insurance Group owns significant stakes fell on Wednesday, after the insurer acknowledged that chairman Wu Xiaohui was “unable to perform his duties”, reportedly because he has been detained by authorities.

Anbang had used proceeds from the sale of high-yielding investment products — known as “universal insurance” policies — to buy public and private equity in China and abroad. 

The detention of Mr Wu casts doubt on the company’s future and raises the prospect that it may be forced to sell stakes to meet upcoming maturities or early redemptions by nervous policyholders.

Anbang ranked among the 10 largest shareholders in 18 mainland-listed companies at the end of March, with its stakes worth a combined Rmb1.06tn ($155bn), according to data compiled from Wind Information. 

The biggest loser on Wednesday was Shanghai-listed property developer Gemdale Corp, in which Anbang owns 20 per cent stake of tradeable shares, which fell 3.4 per cent. 

China Vanke, the country’s second-largest residential property developer by sales, was down 2.2 per cent at midday in Shenzhen. Anbang built up its Vanke stake in 2015 as part of a high-profile boardroom battle in which Anbang rival Baoneng Group sought to gain control of the developer. 

China Merchants Bank, China’s eighth-largest bank by assets, fell 1.3 per cent in Shanghai. China Minsheng Banking Corp, the country’s 10th-largest lender, dropped 0.9 per cent. 

Mr Wu has long sought control of a large commercial bank, market observers say. That would have allowed Anbang to consolidate the bank’s balance sheet with Anbang’s and use the lender’s funding base to finance acquisitions. Anbang has controlled small, unlisted Chengdu Rural Commercial Bank since 2011.

But the detention of Mr Wu and a broader regulatory crackdown on universal insurance raises doubts about Anbang’s ability to remain a stock-market juggernaut. 

Anbang and other insurers rely at least in part on new products to raise money needed to meet redemptions and maturities on universal policies. But last month China’s insurance regulator banned Anbang from introducing products for three months as a penalty for “wreaking havoc” on the market with aggressive sales tactics and risky instruments. 

A similar punishment meted out to Baoneng subsidiary Foresea Life Insurance in December prompted Foresea to plead with regulators to resume approval of new products. Foresea cited risk of social unrest if a protracted ban on new product sales forced the company to default on payouts due to customers. 

In recent years, China’s insurance regulator significantly loosened longstanding restrictions on what kinds of investments insurers are allowed to make, paving the way for aggressive moves by Anbang, Foresea and others into the domestic stock market and foreign acquisitions. 

But in recent months, Chinese regulators also have warned insurers not to engage in activist shareholding or interfere with management of listed companies.

Problems at Anbang could also hit demand for global private equity, for which Anbang emerged as a frequent bidder for trophy assets. Anbang bought property assets from Blackstone in a string of deals since 2014, including the Waldorf Astoria hotel in New York.

Additional reporting by Nan Ma

Twitter: @gabewildau

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