What happens next to Anbang Insurance Group’s interests in Korea could reveal more about what the future holds for crisis-stricken Chinese insurer. 

Almost a year after it was taken over by a state bailout fund following a lavish global investment spree,  Anbang has been streamlining its business and hiving off assets in order to raise liquidity.

As part of that, news emerged in April that the asset management arms of Anbang's two Korean insurance subsidiaries, ABL Life and Tongyang Life, had been sold to Seoul-based financial conglomerate Woori Financial Group

What's uncertain is what the company (or rather the Chinese government-backed China Insurance Security Fund (CISF) that now runs it) intends for its remaining Korean insurance subsidiaries. They fall more in line with its core mission as an insurance business.

“The Korean [asset manager] investments likely held little appeal to Beijing, as once Anbang was in effect nationalised, offshore debt availability became significantly less important than capital repayment,” Brock Silvers, managing director at Shanghai-based private equity investment firm Kaiyuan Capital, told AsianInvestor

If rumours that Anbang intends to sell the Korean insurers turn out to be true, the Chinese government would be sending an unequivocal signal of its determination to sell off assets in order to shrink the business and bring down debt to accomodate the regulator's tightened capital control demands. 

On the other hand, if the subsidiaries are kept as a part of the group, it would indicate Beijing's willingness to salvage an international insurance business out of the Anbang clean-up.

TIGHTER CONTROL

The sale rumours surrounding ABL Life and Tongyang Life first surfaced in 2018. And on April 4 this year, ABL Life announced that its board chairman Xie Zheqiang would also serve as the insurer's new chief executive officer after the previous CEO Sun Lei left for “new career opportunities”. 

The company at the time did not specify what these opportunities were and AsianInvestor has since been unable to ascertain where he went.

Lei was appointed as CEO after Anbang in December 2016 acquired what was then called Allianz Life Insurance Korea, a subsidiary of Munich-based insurance group Allianz. He had been the company’s chief financial officer since November 2013 and also worked at Allianz China Life for more than four years.

AsianInvestor asked Xie why he had taken over daily operations, whether he will continue as the board chairman and whether his appointment will mean changes to ABL Life’s strategy. In its written response, ABL Life said it is “an independently run company, under Korean law and ABL governance structure”. 

It added that “[the] company’s investment strategy is in line with our business, capital market situation and certainly with regulatory requirements. We achieved a top rank in investment yield”.

One takeaway from the move is that Anbang, as the sole owner, has appointed Xie to run the daily operations to shorten the chain of command. And as Anbang’s overwhelming priority is deleveraging, it makes sense for the executives behind that strategy to want units run by people who will support it, Silvers said. 

“This should be important going forward, as all remaining assets are likely available,” he added. “Again, this isn’t due to any strategic redirection other than the need to reduce risk and repay domestic creditors. Beijing stepped in precisely to ensure this could be done without [any] undue adverse impact upon the same businesses they’re counting upon to generate those repayments.” 

INVESTMENT CAPABILITIES

The Chinese government could be right to look at the risk profile of Anbang’s Korean subsidiaries – and the urgency of finding willing buyers. According to one anonymous source familiar with ABL Life’s investment strategy, the impact of going from being an Allianz subsidiary to the Anbang Group was seen immediately.

AsianInvestor understands that while still a part of Allianz, the Korean life insurer was limited and tightly governed out Allianz’s Asia-Pacific headquarters in Singapore, in terms of investment decisions. For instance, within alternatives, the only assets approved for investments were government-backed infrastructure senior tranche loans.

After the sale to Anbang, in the first half of 2017, the company made 30 alternatives investments worth around W1.3 trillion ($1.1 billion), according to the well-placed anonymous source. The investments included expanding into privately backed infrastructure debt such as power plants in the US, and into real estate such Korean retail assets.

Given the more risk-aversive tone of its new owners, this investment approach looks likely to be either reversed or exploited to boost investment yields and make ABL Life attractive for potential investors. 

How that plays out could presage what happens to Anbang as a whole.