Anbang Insurance Group Co. is going back to basics.
The acquisitive Chinese firm, which landed in Beijing’s crosshairs after funding a global buyout spree with sales of high-yield investment products, is adopting a more traditional approach as it emerges from a three-month regulatory ban on new client offerings. Anbang is preparing to sell more than 20 new products, the majority of which are plain-vanilla, protection-type policies, according to people familiar with the matter.
(Related: China’s Insurers Don’t Know Their Own Risks)
The pivot illustrates how China’s crackdown on financial risk is changing the nation’s insurance industry. Gone are the days when firms like Anbang could fund explosive growth by offering short-term policies with juicy yields. The company will now have to go head-to-head with more traditional players, including China Life Insurance Co. and Ping An Insurance (Group) Co., that have much larger armies of agents. While Anbang’s sales will probably pick up as the ban on new products at its life unit ends, the boost is likely to be limited, according to Grace Zhou, a Hong Kong-based analyst at ICBC International.
“The new products will certainly help with sales to some extent,” Zhou said by phone. “But you can’t expect a revival any time soon given the difficulty in selling such protection type products” without a sizable agent force, she said.
The Beijing-based insurer’s life unit, the firm’s main source of revenue, is preparing to sell the new products after the China Insurance Regulatory Commission allowed Anbang to register them, said the people, who asked not to be identified because the information hasn’t been publicly announced. More than 10 of those products are traditional, protection type, regular-premium policies, and the remainder are corporate and personal annuity products, the people said.
An Anbang representative confirmed the new products, while the CIRC didn’t immediately reply to a faxed request for comment.
The regulator has been cracking down on short-term, high-yield offerings as policy makers try to reduce the risks from asset-liability mismatches at insurers. Anbang was banned from selling new life products for three months in May and saw its revenues plunge amid a crackdown that resulted in the detention of Chairman Wu Xiaohui by Chinese authorities in June.
Anbang Life Insurance Co. had its rating cut by China’s Dagong Global Credit Rating last month on signs the company’s ability to repay debt is weakening. The life unit’s gross premiums from traditional products in July slumped 99.6% from a year earlier, while sales of investment-type products plunged 94.4%, according to Bloomberg News calculations based on government data.
Anbang Life is facing rising liquidity pressure amid lower investment returns and restrictions on capital-replenishment channels, according to Dagong. The unit made a net loss in the first half after some revenue slumped, according to the ratings company.
Among assets acquired by Anbang in its more than $10 billion global takeover binge were New York’s Waldorf Astoria hotel, Dutch insurer Vivat NV and South Korea’s Tong Yang Life Insurance Co.
— Read Anbang’s Fall Closes Wild Chapter in China’s Insurance Industry History on ThinkAdvisor.
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