Anbang starts disposals

July 13 2018 by Nick Ferguson

Anbang Insurance is reportedly looking to sell Belgian insurer Fidea as it kicks off the process of disposing of its prime international assets.

The troubled Chinese company is already screening investment banks to work on the deal, according to Bloomberg, with a potential auction process lined up for the third quarter of the year.

Anbang bought Fidea from JC Flowers in 2015 for US$434 million. Somewhat ironically, as recently as last year executives at Fidea were effusive in their praise of Anbang’s long-term focus and its willingness to re-launch a life insurance business.

“With JC Flowers it was strictly focused on short-term returns,” Edwin Schellens, chief executive of the Belgian insurer, told the China Daily last year. While he said that he understood the nature of the private equity business, he also worried that the strategy had angered some of the company’s broker partners.

Anbang appeared to offer a different approach. “Let’s work for a long time together,” was the message Schellens reported getting from his new Chinese owners. “You can see what synergies you can find in collaboration with Anbang and its other European entities.”

Working with Bank Nagelmackers, another Belgian subsidiary of Anbang, Fidea sought to replicate its parent’s Chinese private banking and wealth management-focused strategy. But it’s possible that Fidea will again find itself in the hands of a financial buyer — and out of the life insurance business — now that it is being disposed of in a fire sale.

Nagelmackers is also likely to be up for sale at some point, as well as Dutch insurer Vivat, which was originally slated to be the first European asset on the block. Anbang is reportedly assessing each of its assets on a case-by-case basis, though the circumstances surrounding the disposals means that
potential buyers are unlikely to be as generous as Anbang was at the height of its buying spree.

The extent of its troubles have been well known since April, when the Chinese government injected Rmb60.8 billion (US$9.65 billion) into the company after its capital position was found to be much worse than claimed, forcing a state takeover and prosecution of former chairman Wu Xiaohui for “economic crimes”. He was sentenced to 18 years in prison in May after being convicted of fraud and embezzlement.

It was reported in January that the government was in talks to sell Anbang to Central Huijin Investment, part of China’s sovereign wealth fund, but the company’s balance sheet will need to be in better shape before any sale — which means disposing of more assets and possibly another capital injection by the government.

Shortly after the Chinese regulator started its investigation last June, the group sold at least Rmb6.64 billion of shares in the four biggest Chinese banks — Agricultural Bank of China, China Construction Bank, ICBC and Bank of China.

Anbang also owns significant stakes in Minsheng Bank, Financial Street Holdings and Gemdale Group, while its more infamous assets include Strategic Hotels & Resorts, which it bought for US$6.5 billion in 2016, and New York’s Waldorf Astoria, for which it paid US$1.95 billion in 2015.

There is no timetable for the asset sales and the process is just beginning, but the end of the road ought to be an Anbang that is well capitalised and in the hands of stable owners. Whether it will have a future as a profitable insurer remains to be seen.

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