Report questions insurer's capital flow, shareholder structure
Anbang Insurance Group's dispute with domestic financial media outlet Caixin is having a negative impact on the insurer's business and the complicated matter should be dealt with by legal action, experts said Tuesday.
Shares in companies related to Anbang tumbled on Tuesday, with Beijing-based developer Financial Street Holdings closing down 3.74 percent per share, Gemdale Corp falling 3.29 percent and China State Construction dropping 0.43 percent.
Anbang said Sunday in a statement on its website that Caixin's recent reports had falsified facts about Anbang CEO and Chairman Wu Xiaohui as well as about the company's business operations, adding that this had come after Caixin had been unable to get sponsorship or advertising from the company.
Anbang said it would take legal action against Caixin and its editor in chief, Hu Shuli, according to the statement.
Caixin responded Monday by rejecting Anbang's claims, saying that its reports were not influenced by commercial interests. Caixin also said it would consider legal redress.
In an article published on Saturday, Caixin said that despite Anbang's eye-catching track record for acquisitions in the world market, there is some mystery surrounding the firm's capital flows, as well as its shareholding structure and business operations.
Anbang has grown into a financial conglomerate from a pure insurance company in just 10 years, Song Qinghui, an independent economist, said in a note sent to the Global Times on Tuesday.
"Its complex shareholding structure as reported by Caixin may contain some hidden affiliated shareholders," Song noted.
The most curious point about Anbang is its capital source, Song said.
"Based on Anbang's overseas acquisitions, its capital source relies totally on bank lending."
The Caixin report said that Anbang's swelling capital came from injections from companies linked to Wu. "The left hand has been helping the right hand to obtain capital."
The report also said that the insurer's shareholding structure is like a puzzle, with the number of shareholders rising from seven to 39 as of September 2014.
Doubts and concerns
In an 18-month period beginning October 2014, Anbang spent around $16 billion in its overseas shopping spree, including the acquisition of Strategic Hotels & Resorts in 2016 for $6.5 billion, according to media reports.
The dispute with Caixin will have some effect on Anbang's overseas expansion plans, said an industry insider who did not wish to be named.
Caixin's report questioning Anbang's capital flow will reduce the prices of Anbang's related equity and affect the stability of its cash flow against the background of China's tightening regulation of foreign exchange, the insider said.
Also, overseas sellers may be more suspicious about Anbang, and less willing to see it as a potential buyer, he noted.
Wang Jun, deputy director of the Department of Information at the China Center for International Economic Exchanges, told the Global Times on Tuesday that Anbang's ongoing dispute with Caixin will not only affect the company's overseas business, but also its domestic business.
"It will bring doubts and worries for the company's partners and investors in the Chinese and overseas markets," Wang said.
Wang noted that the proper way to solve the problem would be through legal action, but said the complexities of the case would make it difficult for the courts to handle.
"The media still has natural credibility in China. It should enhance the coverage of cases such as this, and should not cower in face of obstruction," according to Song.
Given the consistent style of Caixin, it is likely to win this battle, Song predicted, adding that Anbang has not found much support among the media so far.
