China's Anbang on global shopping spree

Anbang buys control of Korea’s Tong Yang for $1b, the latest in a string of international acquisitions.

Anbang Insurance Group of China has agreed to buy a controlling stake in Tong Yang Life Insurance for 1.13 trillion won ($1.06 billion), the latest in a string of international acquisitions by the Beijing-headquartered group. 

Tong Yang said in a filing on Tuesday that Anbang will acquire 63% of Tong Yang at 16,700 won a share from shareholders including Korean private equity firm Vogo Investment Group. It will pay an additional 33.9 billion won if the deal goes through.

Armed with massive capital resources, Anbang has been on a global acquisition binge of late. On Monday, Anbang said it would buy 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.

"Anbang's management capabilities appear inferior to those of its global peers," said Sean Chang, an analyst at Samsung Securities. Chang expects little upside for Tong Yang in Anbang's ownership as the Chinese insurer has little brand power in Korea and will have little interest in boosting value for minority shareholders. 

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.

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 800 billion yuan ($128 billion).

Under new owners: Waldorf Astoria

Anbang said on its website it would maintain the listing status of Tong Yang Life and that it was the first Chinese company to enter the Korean insurance market.

Vogo finally exits
Vogo has been trying to sell Tong Yang for several years and stepped up efforts after Vogo's disastrous investment in LG Siltron in July. Vogo initially invested in Tong Yang in May 2006 by buying a minority 13.5% stake. In March 2011, Vogo acquired an additional 44%. 

Under Vogo’s ownership, Tong Yang Life grew its premium income from 2 trillion won in 2006 to 4 trillion won in 2014. Net profits increased from 74 billion won to 158 billion won during the same period.

The transaction, which is subject to regulatory approvals in both Korea and China and other customary closing conditions, is expected to close in the second quarter of 2015.

JP Morgan advised Vogo on the sale while a Korean bank advised Anbang.

Additional reporting by Jing Song 


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