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Making it in New York
Little-known Chinese insurer buys Waldorf Astoria at record price
Christina Wang 10 Nov 2014

 China undoubtedly took the hottest story among New York’s financial circle in September and October. On September 19, the mainland’s e-commerce giant Alibaba completed the world’s largest initial public offering (IPO) on the New York Stock Exchange. October 6, Anbang Insurance Group – a little-known Chinese insurer – buys the city’s legendary hotel Waldorf Astoria where Alibaba held its first investor roadshow for its mega offering.


Hilton Worldwide Holdings Inc. has reached an agreement with Anbang to sell Waldorf Astoria New York for a record US$1.95 billion. The Chinese buyer will grant Hilton Worldwide a management agreement to continue to operate the property for the next 100 years, and the hotel will undergo a major renovation to restore the property to its historic grandeur, according to a company statement.


China Insurance Regulatory Commission (CIRC) data shows that Anbang Insurance’s property and casualty arm ranked 17th among Chinese domestic insurers in terms of premium for the first eight months this year while its life insurance arm ranked 35th during the same period.


The most expensive hotel purchase deal may just present a prelude to the wave of overseas asset purchases by China’s 1.4 trillion yuan (US$228.5 billion) of insurance capital eligible for overseas investments.

 

Largest hotel deal

 

 
Waldorf Astoria New York  

Waldorf Astoria New York has 1,413 rooms which means each room is sold for US$1.4 million, a record high in US history. The two companies didn’t say how much the renovation will cost, but the expenditure will be borne by Anbang. The luxury Plaza Hotel spent US$400 million for renovation some years ago.


Foreigners are curious about Anbang, the “mysterious” buyer with such a strong cash pool. China’s paramount leader Deng Xiaoping (邓小平) paid his first official visit to the US in 1974 and was received by the former secretary of state Henry Kissinger at Waldorf Astoria New York. Forty years later, the Ningbo-based Anbang has a chairman named Wu Xiaohui (吴小晖), grandson-in-law of Deng. Its board of directors is said to be made up of other names with pedigrees such as Chen Xiaolu (陈小鲁), son of Chen Yi (陈毅), a communist general and politician as well as former marshal of the People’s Liberalization Army.


Founded in 2004 in Beijing, Anbang now has over 30,000 employees and more than 700 billion yuan in assets. It provides a broad range of financial and insurance services and products to about 20 million customers, including life insurance, pensions, health insurance, property and casualty insurance and asset management.


Anbang is a shareholder of some listed banks and corporates, such as China Merchants Bank, China Minsheng Banking Corporation, ICBC, Gemdale Corporation, Power Construction Corporation of China and Jilin Aodong Medicine Industry Group.

 

Overseas investments


Chinese insurers’ overseas property acquisitions are largely due to China’s more relaxed insurance policy in the recent decade, according to Chen Xiaoyi, analyst from ChinaMerger, a cross-border transaction information provider.


In 2007, CIRC, People’s Bank of China and the State Administration of Foreign Exchange jointly issued a regulation that allowed insurance companies to put no more than 15% of their total investment assets as of the end of the previous year in overseas assets – but these are restricted to monetary, fixed-income and equity products.


In 2012, CIRC broadened the investable assets to include real estate with stable income, notably the commercial and office properties located in core districts of developed countries’ major cities. In February 2014, CIBC further amended the regulation to change the assets calculated to the end of the previous quarter from the previous year.


In August this year, China’s State Council or the country’s cabinet, issued guidelines to encourage insurance companies to “go out” to invest in overseas markets.


As of end-August, the total insurance assets in China stood at 9.5 trillion yuan, making the 15% of that eligible for overseas investment or a total of 1.4 trillion yuan, Chen estimates.


It seems the sale of the iconic hotel to the Chinese insurer is not all smooth-sailing though. Reports have it that an investigation on the sale is being conducted by the US government on questions involving potential security risks. The hotel serves as home to the US ambassador to the United Nations.

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