Anbang Insurance Group Co., a troubled Chinese conglomerate, said Wednesday it will receive a $ 9.7 billion capital injection from an industrial bailout fund to stabilize operations and help them find new private investors hold.
The big capital injection comes one and a half months after China's insurance regulator said it has officially taken control of Anbang, the country's third largest insurer. Anbang had gone on an overseas shopping spree in recent years, spending billions on real estate and luxury hotels, including the Waldorf Astoria in New York.
Last week, Anbang's former chairman,
Accused in a court in Shanghai for fraud and embezzlement. Mr. Wu, who led Anbang until his arrest last summer, asked for leniency after the prosecution accused him of falsifying financial reports and using corporate funds. The court did not state whether Mr. Wu had filed a lawsuit for the indictment. A verdict has yet to be announced.
The Chinese authorities have reported little on Anbang's financial situation, except that the company's "illegal activities" could bring the company's solvency "at high risk". The large capital injection suggests that Anbang was likely to require substantial financial support.
In recent years, the company has expanded rapidly by selling large volumes of short and high yield investment products to numerous policyholders, a risky strategy. By contrast, investments in foreign real estate resulted in a large number of long-term and hard-to-sell assets.
The fresh capital will come from China Insurance Security Fund Co., an industry fund designed to support the country's insurance companies. The regulator approved a capital injection of 60.8 billion yuan for Anbang on March 28, the company said. The fund, which receives contributions from life and property insurers and was originally set up by the Chinese authorities in 2008, had a fortune of 1
China's insurance regulator said in a separate statement that the industrial rescue fund is a common mechanism used by insurers and regulators in other countries.
Authorities intend to monitor anbangs operations for at least a year and have said that they intend to do so as a private insurer. Anbang said the capital contribution would provide temporary support as he looks for new strategic investors, a process he says began.
"The capital infusion and takeover by the Insurance Inspectorate suggests that the government has complete control over Anbang," said Sean Xu, a lawyer with the Shanghai Highper Law Firm.
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