China Insurance Regulatory Commission to look into Anbang deals

Anbang

Following its dropped bid for Starwood earlier this year, China's Anbang Insurance Group is getting some increased attention—from regulators. 

HOTEL MANAGEMENT reported before Anbang withdrew its offer for Starwood that the China Insurance Regulatory Commission could reject Anbang's U.S. hotel conquest plans. And while the regulators did not block that deal from happening, they are now looking into Anbang's business dealings. Following increased scrutiny of insurers’ investments in real estate and unlisted equities, the Commission has assembled a team to examine Anbang and look into its international acquisitions—which have included the Waldorf-Astoria buy in 2014 and the $6.5 billion Strategic Hotels & Resorts acquisition from Blackstone Group. The CIRC said previously that it will seek more disclosure from insurers buying property assets or investing in unlisted companies.

What exactly happens next, however, remains unclear—and the investigation itself has not been confirmed. CIRC has not commented and an Anbang representative disavowed knowledge of an inspection. Furthermore, because Anbang is a multifaceted operation, the focus of the investigation is also uncertain. Net profit of Anbang's four subsidiaries exceeded 30 billion yuan ($4.6 billion) in 2015. Thanks to its investment and global acquisitions, Anbang Life Insurance Co.'s total assets grew to 921.6 billion yuan, 6.7 times higher than the previous year's 120 billion yuan.

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"Anbang's explosive growth was primarily led by its aggressive investment activity, dominated by acquisitions in overseas insurance markets, as well as in the property and hotel sectors," Wang Guojun, an insurance professor at the University of International Business and Economics in Beijing, said, noting that the company "has relied on an asset-driven business model." 

This inspection could have long-reaching ramifications for outbound Chinese hotel investment. If internal forces start putting pressure on potential buyers, these investors may simply decide that an acquisition outside of China's borders is simply not worth the hassle. According to numbers commercial real estate services firm CBRE shared in March, Chinese outbound capital investment into global commercial real estate markets exceeded $10 billion in a year for the first time ever in 2015. And, according to JLL, Chinese investors had $1.9 billion in U.S. real estate acquisitions during the second quarter of 2015.

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