China’s CIRC Follows Anbang Takeover with Ping An Punishment in Outbound Investment Crackdown

Chinese insurers’ $15 billion overseas real estate shopping spree may go on the endangered list, as the country’s insurance regulator reprimanded three major insurers for illicit cross-border investments Saturday. The move is part of the regulator’s efforts in reining in insurers’ overseas acquisition spree, which seemingly culminated with the agency’s takeover of embattled Anbang Insurance Group on Friday.

China Insurance Regulatory Commission (CIRC) issued three separate notices to major insurers Ping An Insurance, New China Life Insurance and China Re Asset Management on its website Saturday. The regulator said the insurance companies’ overseas investments have violated official rules on cross-border deals first published in 2012.

The insurers were also ordered to rectify the wrongdoings and report to the authority on the process within a month. The CIRC notices did not specify the violations of the insurers made and no previous mentions of foreign investment policy violations by the three firms had been made public.

Ping An, China’s largest non-state-owned insurer by premium size has been among the country’s biggest investors in overseas real estate, having put more than $2.3 billion into deals in the US, UK and Australia since 2013, including joint ventures with Tishman Speyer, Gaw Capital and Lendlease.

China Re Asset Management is the asset management arm of China Reinsurance (Group) Corp, a subsidiary of sovereign wealth fund CIC. In December, China Re sold a 10 percent stake in Logicor to Blackstone just months after CIC had purchased the European warehouse platform from the private equity giant for $13.8 billion.

Anbang As An Example

The administrative warning followed just one day after the CIRC’s takeover of Anbang Insurance Group. The regulator explained its seizure of the  owner of New York’s Waldorf Astoria hotel by indicating that Anbang’s management had violated China’s insurance laws, which may “seriously endanger” the firm’s solvency.

The group’s former chairman Wu Xiaohui, who disappeared into detention last June, is being prosecuted for “economic crimes,” according to an announcement by the public prosecutor’s office in Shanghai.

The Anbang takeover comes as China’s government cracks down on the country’s most acquisitive cross-border investors, with HNA Group and Wang Jianlin’s Dalian Wanda already being forced to sell off assets after falling afoul of official investment guidelines.

With a combined $16 billion of properties, insurance firms and other overseas assets acquired in the span of 30 months, Anbang is China’s most globally acquisitive insurer. However, Ping An Insurance, China Life, Taikang Group and several other players have also made cross-border deals in recent years.

Ping An Bought $2.3B in Property Since 2013

Ping An Insurance and its affiliates have tallied more than $2.3 billion in property acquisitions in the past five years.

The Shenzhen-based insurance company kicked off its cross-border real estate shopping in July 2013 buying the Lloyd’s Building in London for ₤260 million ($390 million). Less than two years later, the insurer partnered with Hong Kong’s Gaw Capital to add Tower Place into its London portfolio for another ₤327 million ($490 million).

The insurer also became a force in Sydney’s real estate market. In December 2016, Ping An took a 50 percent stake in a $1 billion commercial project on Sydney’s Circular Quay with Australian developer Lendlease and Japanese conglomerate Mitsubishi. Prior to that, the Chinese insurer formed a joint venture with local real estate group Mirvac to develop a 500-apartment residential project in Sydney’s north shore in mid-2016.

Ping An’s presence is not limited to London and Sydney. In 2015, it joined mainland competitor China Life in taking twin $167 million stakes in a Tishman Speyer mixed-use project along Boston’s waterfront, its maiden real estate investment in the US. In addition to commercial and residential projects, the insurance group has investments in logistics properties. In 2016, Ping An committed over $300 million in warehouse projects in Japan with logistics real estate platform e-Shang Redwood, after committing $1 billion to US logistics projects in August of 2015.

While Ping An did not make any high-profile real estate investments abroad in 2017, it continued to expand its overseas investments portfolio. In May, it launched its first overseas fund to invest in financial and healthcare technology. The Ping An Global Voyager Fund would have an initial size of $1 billion.

Overseas Investments Coming to an End

Chinese insurers made at least $15 billion investments on foreign real estate over the past five years, according to data compiled by Mingtiandi. That outbound investment surge followed a new set of rules on foreign investment issued by the CIRC in 2012, which allowed the country’s insurers to invest in overseas real estate assets for the first time, but capped those holdings at a maximum of 15 percent of total assets under management.

A 2015 report by Cushman & Wakefield estimated that Chinese insurers would spend a total of $73 billion on real estate investments by 2019. The optimism persisted at least through late 2016 when insurance companies were projected to invest $100 billion overseas in the next three years. As of April 2016, Ping An had invested less than 2 percent of its assets overseas, and by the end of the year had $802 billion in insurance assets, as well as substantial holdings through its banking, securities, asset management, wealth management, private equity, and Internet finance affiliates.