The futures of Tongyang and ABL, two South Korean insurers owned by China’s Anbang Insurance Group, remain unclear, after Beijing decided to hold on to Anbang for one more year.
The Chinese government seized Anbang in February 2018 as part of its industry-wide crackdown on financial risks. This led to former Anbang chairman Wu Xiaohui’s arrest and subsequent conviction for fundraising fraud and embezzlement. He was later sentenced by a Chinese court to 18 years in jail.
Initially, the government said it would take control of Anbang for one year, but the country’s insurance regulator has announced that it will continue running the troubled insurer until February 22, 2020.
Following the decision, concerns arose over Tongyang and ABL’s business activities, as the extension of Anbang’s government ownership may have led to the two insurers’ further stagnation amid a downturn in the Korean insurance market.
“Under the Chinese government’s guardianship, their marketing and PR activities are constrained as the Chinese government controls budgets and expenses in a very conservative manner,” an industry insider told the Korea Times, under condition of anonymity.
Beijing is looking to sell off Anbang’s overseas holdings, but it has been encountering difficulties in finding buyers due to differences in valuation. Anbang’s total assets are estimated at US$47.27 billion, roughly half of which are located abroad.
Despite the concern surrounding the two insurers, another industry insider said that the duo’s businesses are in good shape.
“Both firms are still maintaining a solid risk-based capital (RBC) ratio over 200%,” the source said. “They may think the guardianship won’t be a problem at this point.”
Korean regulations state that insurers must maintain RBC ratios of at least 150%.