The Real Deal New York

Adult supervision: Chinese regulator takes control of Anbang

Insurance firm owns the Waldorf Astoria, other trophy US assets
February 23, 2018 09:00AM

Wu Xiaohui and the Waldorf Astoria

Meet the new boss, very different from the old boss … who was detained by Chinese communist party officials amid fraud allegations.

The China Insurance Regulatory Commission took over Anbang Insurance Group on Friday in the wake of the financial fraud indictment of chairman Wu Xiaohui, saying they needed to take this step to prevent the company from collapsing, according to the Wall Street Journal.

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. Anbang will continue to be a private insurer, although the regulators could extend their takeover for another year.

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Wu, who is married to the granddaughter of former paramount leader Deng Xiaoping, was detained in June and has been indicted on fraud charges. The CIRC specifically cited Article 144 of Chinese insurance law in its Anbang takeover, a clause about illegally altering business registration filings.

CIRC official He Xiaofeng will lead the regulatory group. The company’s head of real estate Theo Cheng left the company over the summer amid uncertainty over its leadership.

Anbang was growing enormously as recently as two years ago, purchasing New York’s famed Waldorf Astoria hotel from Blackstone Group in 2016 for $1.95 billion and buying Asian and European insurers. However, the Chinese government questioned how sustainable their business model could be and took steps to halt their expansion last year, ordering banks to stop conducting business deals with the company.

The company may be under greater pressure to sell its overseas holdings following the government takeover, with the Blackstone Group reportedly interested in buying back the Waldorf from Anbang, along with 16 other properties. Along with operations partner Hilton Worldwide Holdings, Anbang has begun converting the Waldorf into a complex with 350 condos and 350 hotel rooms over the course of a three-year renovation. Before the Anbang takeover by government officials, Hilton CEO Christopher Nassetta told investors that he did not believe the property was up for sale.

Chinese companies such as HNA Group, which is facing serious debt problems, and Dalian Wanda Group are also looking to put more of their properties on the market.

Anbang had seemed to have strong political support for a time, but the Chinese government is now at work on new regulations for overseeing such firms. The company had changed the way companies sell insurance in China by issuing products more similar to investments, a move that sparked a number of copycat companies, some of which have faced sanctions from the Chinese government as well.

Despite these problems, Ivan Shi, research director at the consultancy Z-Ben Advisors, told the Journal he thinks the government will draw the line at breaking up Anbang.

“I think their goal is probably insuring the stability of the company,” he said. “It’s such a big company with so many clients that I think it will cause more problems for them to break it up.”

Before his detainment by party officials, Wu also met with former Kushner Companies CEO Jared Kushner to discuss a multi-billion-dollar recapitalization and redevelopment of 666 Fifth Avenue. Anbang eventually withdrew from talks amid political scrutiny. [WSJ]Eddie Small