Beijing-based Anbang Insurance has agreed to buy US insurer Fidelity & Guaranty Life (FGL) for $1.57 billion the companies said on Monday, making Anbang one of the largest insurers by market share in fixed indexed annuity products in the US.
Privately held Anbang will acquire all of the outstanding shares of FGL. Stockholders of FGL will receive $26.80 per share in cash at closing.
While Anbang has been acquiring assets in other sectors, buying New York’s Waldorf Astoria Hotel for $1.95 billion, the deal marks Anbang's first purchase of a US insurer.
The transaction represents a 28.9% premium over $20.79 per share, FGL's unaffected closing stock price prior to the public announcement of the strategic review process on April 6. Debevoise is advising Anbang while Jefferies acted as joint financial advisor to FGL.
“We believe that this transaction fully reflects the value that has been created at FGL and we strongly support it," said Omar Asali, president and chief executive officer of HRG Group, the majority owner of FGL.
The transaction represents the third largest life insurance transaction in the US this year.
Armed with massive capital resources, Anbang has been on a global acquisition binge of late as it seeks to diversify risk geographically. Earlier this year it agreed to buy a controlling stake in Tong Yang Life Insurance for W1.13 trillion ($1.06 billion) and its $1.1 billion purchase of Dutch insurer Vivat (the old SNS Reaal insurance operations).
Last year the life and non-life insurer bought 10% of China Minsheng Banking for $4.88 billion, Delta Lloyd Bank Belgium for $273 million, the Waldorf Astoria Hotel in New York for $1.95 billion and Belgian insurer Fidea.
Some analysts are concerned that Anbang lacks experience overseas and brand recognition oversees, a big hurdle for an insurer selling products to the general public.
Insurers in China, including Anbang, have benefited recently from investment liberalisation and more liquidity, following several years of pressure on earnings from a life insurance industry-wide focus on quantity over quality in terms of products and more expensive insurance agents as wages rose across China.
Founded in 2004, Anbang is also well connected within China. Its chairman and chief executive, Wu Xiaohui, is the husband of Deng Xiaoping’s granddaughter, according to reports and stock analysts. Deng spearheaded China’s opening up to the West. In China the group owns stakes in ICBC, about six insurers and two asset managers.
Anbang is not the only privately owned group expanding overseas. Fosun is also looking to acquire insurance firms overseas, giving it access to large pools of funding at a lower cost than onshore in China.
To be sure, Anbang has tried and failed to buy some assets. The unlisted group showed interest in buying Hong Kong’s Wing Hang but was eventually outbid by Singapore’s OCBC. It also bid for South Korea’s Woori Bank but was blocked by regulators.
Anbang’s activities span property, life insurance and health insurance, as well as other financial services. Anbang has said on its website it wants to grow its assets, especially in Europe and North America. It has 3,000 outlets, more than 20 million customers, 30,000 employees and total assets of Rmb800 billion ($128 billion).