Anbang Fights Default Accusations on $1B Korean Insurance Deal

Uncertainty is mounting for Anbang Insurance, the troubled Chinese acquisition giant whose chairman was detained by authorities barely two weeks ago, as the company battles a lawsuit over a missed payment for Tong Yang Life Insurance, the Korean insurer it agreed to buy in 2015 for approximately $1 billion.

Anbang is filing a counter-suit against Korean firms which sued it last month for an unpaid bill of 59.7 billion won ($53.3 million), representing Anbang’s latest installment payment for Tong Yang, according to an announcement by one of the parties involved. The controversy adds to the difficulties faced by Anbang as Chinese regulators are reported to be scrutinizing the ambitious firm and applying tighter controls to outbound investments by some of the mainland’s most prominent buyers of international assets.

Anbang Has Money Problems in Korea

In the recent suit filed with the ICC International Court of Arbitration based in Hong Kong, Anbang is demanding 698 billion won ($612 million) in compensation from former shareholders of Tong Yang Life Insurance, claiming they were negligent in reporting the risks of the Korean insurer’s loans.

The counter-suit by the mainland conglomerate names Korean buyout firm VIG Partners, which sold Anbang a 57.6 percent stake in Tong Yang in 2015, as well as brokerage Yuanta Securities and other former shareholders of the Korean life insurer. The defendants first filed suit against Anbang with the arbitration body on May 17, claimed the Beijing-based firm had missed its latest payment for Tong Yang under the agreed installment scheme.

Anbang had bought a controlling stake in the South Korean insurer for 1.13 trillion won (about $1 billion) in February 2015 – a deal that was approved by Korean regulators in June that year – as part of an overseas buying frenzy that saw the high-profile firm headed by Wu Xiaohui rack up over $16 billion in acquisitions worldwide in an 18-month period starting in October 2014.

In its counter-suit, Anbang claims that its Korean business partners did not fully inform it of the risks posed by Tong Yang’s loans, which are secured by imported meats, according to an account in the Korea Times. Tong Yang became embroiled in a major fraud case when it was discovered the company had suffered significant losses on its loans.

“It is the counsels’ opinion that the amount of damages alleged by Anbang Group Holdings is exaggerated and part of the allegations are not true,” said Yuanta Securities in a statement.

Troubles Mount for Outbound Investment Champion

The lawsuit over Anbang’s missed payment hit the controversial firm shortly after China’s insurance regulator banned Anbang from applying for sales of new life insurance products in early May, amid a widespread crackdown on the use of risky products by the country’s insurers. That ban came just days after Anbang’s billionaire chairman gave a rare interview to deny rumours of his detention which circulated in late April.

Then just over two weeks ago, Wu’s situation took a turn for the worse as the tycoon was reported to have been detained by “relevant departments.” And last week, it was reported that China’s banking regulator was cracking down on lending to Anbang among other high-profile overseas investors.

The intensifying dispute in Korea comes a month after Anbang said it would boost its investment in Tong Yang and Allianz Life Insurance Korea by up to 3 trillion won ($2.68 billion). Anbang’s holding company bought a 100% stake in the Korean unit of Germany’s Allianz Group last year for 3.5 billion won ($3 million). Through the two acquisitions, Anbang became the fifth-largest player in South Korea’s insurance market.