In its ongoing campaign to lower financial risks, the Chinese government on Friday seized control of Anbang Insurance Group Co., owners of the Waldorf Astoria in New York City and Marriott International’s former competitor in the Starwood Hotels & Resort deal, according to a statement from the China Insurance Regulatory Commission (CIRC). Despite the news, “The work we are doing at the Waldorf (in New York City) is continuing,” a representative from construction firm AECOM Tishman told HOTELS Mag on Friday.
The CIRC also said Anbang’s chairman and key shareholder, Wu Xiaohui, had been prosecuted for economic crimes. Wu was arrested in June as troubles mounted for one of China’s most aggressive buyers of overseas assets.
The Shanghai prosecutors office said in a statement Friday that Wu had recently been charged with fundraising fraud and abuse of his position, and that his case had been forwarded to the city’s intermediate court for prosecution.
During the government takeover of Anbang Group, which will last for one year starting from Friday, the company will be managed by a group of officials from the CIRC, the central bank and other key financial regulators and government bodies. The group will seek to undertake an equity restructuring of the insurance giant, even as it keeps Anbang operating as usual, protecting the rights and interests of its consumers and stakeholders, the CIRC said.
The takeover of Anbang, which claims 1.97 trillion yuan ($310.85 billion) in assets and ranks 139 on the Global Fortune 500 list, is a defining blow to a conglomerate best known for acquiring New York’s landmark Waldorf Astoria hotel.
The unprecedented seizure of a major non-state company also underscores how far the ruling Communist Party will go in its growing campaign to lower financial risks, sending a signal to risk-taking private enterprises.
Anbang Insurance has significant stakes in a slew of major Chinese companies, such as banks and property developers. Late on Friday, China Minsheng Banking Corp Ltd, China Merchants Bank Co Ltd, developers China Vanke Co Ltd and Gemdale Corp said they received similar notices from Anbang assuring them that there would not be immediate stake sales.
“Currently, operations at Anbang Insurance Group and its units are operating normally with abundant cash reserves. There are no plans to sell shares in your company,” the companies quoted Anbang as saying in similar filings to the Shanghai and Shenzhen stock exchanges.
It was not immediately clear what triggered the move. Three insurance industry insiders said they were not surprised by the move since Anbang had been in the crosshairs of the government. But they said they believed it had more to do with Anbang’s behaviour than systemic financial risks.
A regulatory source with knowledge of the matter said the government had been effectively running the company since Wu was detained and the timing of the official takeover was linked to the investigation into Wu, which was nearly complete.
But a Beijing-based lawyer who works with the CIRC and other regulators said senior officials at the insurance regulator had been watching Anbang closely since last year as its liabilities from the sale of shadow banking products grew, raising questions about the company’s solvency.
“The group has become too big to fail in some sense,” said the lawyer, who declined to be identified by name.
The Waldorf Astoria New York
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