(Bloomberg Gadfly) — As a Chinese firm that came from nowhere and transformed into one of the nation’s largest insurers, Anbang Insurance Group Co.’s tumble from grace was perhaps predictable. China Inc.’s history is littered with fallen businessmen, even ones that were politically well connected.
Caijing Magazine said late Tuesday that Anbang Chairman Wu Xiaohui was taken away by authorities on June 9, citing people it didn’t identify. The news report was later deleted from Caijing’s website and Anbang issued a statement saying Wu is unable to perform his duties for personal reasons.
(Related: China’s Insurers Don’t Know Their Own Risks)
It’s a situation that would best be resolved quickly, but probably won’t be.
A small provincial car insurance company just 12 years ago, Anbang was by last year selling premiums faster than state-owned China Life Insurance Co.
The bulk of those policies were high-risk, short-term ones masquerading as life insurance products, and they were snapped up by retail investors. Similar to peers including Foresea Life Insurance Co., Anbang was promising returns of at least 6%, well above what could be had from government bonds or bank deposits, according to Bloomberg Intelligence analyst Steven Lam.
To meet those sort of yields, Anbang embarked on a global buying spree. Many of its purchases, however, were bricks-and-mortar assets such as hotels that can’t be easily liquidated.
Wu, whose marriage to the granddaughter of Deng Xiaoping has helped him build contacts, has been almost as adept at forming relationships in the U.S. Anbang, and a company owned by the family of President Donald Trump’s son-in-law Jared Kushner, in March ended talks to develop 666 5th Avenue, a Manhattan office tower. Investing in the loss-making property would have won Wu some kudos, both at home and abroad.