Special economic zones have been a fertile breeding ground for some of China’s most powerful insurers.
The first insurance company in China, the Canton Insurance Society, was co-founded by British firm Jardine in 1805 in Guangzhou, the first Chinese port opened for international trade.
Ping An Insurance also found the perfect habitat in Shenzhen, one of the four special economic zones created in the 1980s. Since then Ping An has gone on to assemble licences in almost every area of the financial landscape (see WiC194). But the meteoric rise of another Shenzhen insurer – this one only three years old – is also earning attention.
On December 9 last year more than 1.1 billion shares of China Merchants Bank (CMB) changed hands via the Shanghai exchange’s block trading system (a platform for trading large stockholdings at prices negotiated between seller and buyer within 30% of the previous session’s closing price). At Rmb13.7 billion ($2.3 billion), it was the biggest block trade in the history of the Chinese stock market.
The deal surprised domestic investors and soon had market insiders scrambling for information about the buyer. The investor was soon revealed to be Anbang Insurance Group, a firm that only emerged in 2011 as a result of a restructuring that saw a small Beijing-based property and casualty insurer recapitalised. Anbang then relocated to Shenzhen and has grown rapidly into a financial conglomerate with more than Rmb600 billion ($98.69 billion) in assets.
The growth owes much to the impressive portfolio of banking shares that Anbang has accumulated over the past three years, especially its 2011 purchase of a 35% stake in Chengdu Rural Commercial Bank for Rmb5.6 billion. The regional lender’s assets have tripled to Rmb300 billion since then.
By last September, Anbang had also accumulated a 0.2% stake in ICBC and roughly 5% of Minsheng Bank. With a combined market value of Rmb12 billion, the holdings rank Anbang among the top 10 shareholders of both banking giants.
In May last year CMB shareholders blocked a board candidate proposed by Anbang. Seven months later, Anbang returned with itsjaw-dropping block trade and China International Capital, a local brokerage, expects it to increase its stake in the bank because the insurer “wants a seat on CMB’s board”.
By amassing a substantial stake, or possibly taking a seat on the board of a major lender, analysts have suggested that Anbang is trying to accelerate its expansion by deploying a bancassurance model (i.e. using the banks as a distribution channel for its insurance products). “This is the only way Anbang can catch up with other large insurance companies,” the Economic Observer posits.
In fact, Anbang is just a brokerage licence away from putting itself on a par with Ping An as a fully-fledged financial services powerhouse. Century Weekly magazine says that Anbang now has controlling stakes in at least six insurers, two asset management firms and a financial leasing firm. It has also offered to acquire Shenzhen-based brokerage Century Securities.
So who are the people driving Anbang’s remarkable dealmaking and business growth?
Similar to rumours about Ping An’s steady ascent (a New York Times article in 2012 alleged that its key shareholders include family members of former premier, Wen Jiabao, a claim that both Wen and Ping An have denied), Anbang is said to have powerful connections too.
On its website Anbang says shareholders include state-owned heavyweights SAIC and Sinopec. But according to Hong Kong’s Apple Daily, it also owes much of its success to the “red princelings” running the company.
One of its board directors, Chen Xiaolu, is the son of Chen Yi, a late PLA marshal and longtime foreign minister.
Chen junior shot to international prominence two months ago for making a public apology to high school teachers that he assaulted during the Cultural Revolution. Times have changed: the New York Times now describes him as a “business consultant” who “relaxes on golf courses in Scotland and southern France and eschews the dark suits and high-maintenance black hair of most affluent Chinese men for casual shirts and a grey buzz cut.”
In an interview with Apple Daily in January, Chen revealed that Anbang’s chairman Wu Xiaohui is another person of influence. Wu is the grandson-in-law of Deng Xiaoping, although Chen denied that this means that Anbang’s success is down to its political ties.
“It is impossible if there is no connection at all,” Chen admitted to the newspaper. “But Xiaohui doesn’t rely on guanxi. He’s been doing really well, with his private sector management experience. Many executives here are actually from Hong Kong.”
According to Century Weekly, Wu is in his late forties and comes from Wenzhou. He spent his early years working for an infrastructure investment firm in Shanghai. But since joining Anbang his reputation has soared, albeit with the suggestion that he has been aggressive in building up its portfolio of businesses.
“The company’s remarkable rise in such a short period of time is largely credited to chairman Wu Xiaohui’s charisma and business acumen – and his apparent success at pushing regulatory limits,” the magazine suggests.
Nor are Anbang’s ambitions confined to becoming a financial conglomerate.
Century Weekly says Wu was formerly the chairman of Beijing Guotong Gaosheng Investment, many of whose major shareholders overlap with those of Anbang. Both firms are heavily invested in both the banking and the real estate sectors. In 2011 two consortiums led by Anbang defeated powerful competitors and won the right to develop two prime commercial sites in Beijing’s central business district, adjacent to the iconic CCTV headquarters. Anbang also announced in December that it had established a 5% stake in Gemdale, one of the biggest developers in Shenzhen.
This month, the China Insurance Regulatory Commission also granted Anbang a licence to sell pension insurance, making it only the sixth Chinese insurer that has been permitted to do so.
According to the Economic Observer, there is further crossover opportunity into the property market here too. Homes for China’s aging population are a new growth segment in the real estate industry. While many developers are too cash-strapped to capitalise on the trend, many insurers are keen to double up in winning over older customers. “Providing insurance and homes for the elderly is like a sunrise market for the insurers,” the Economic Observer believes.
All told, Wu’s firm may not be a household name internationally. But if it keeps up its current pace of expansion, it looks like being a company to watch.
© ChinTell Ltd. All rights reserved.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.