Chinese regulator bars HNA insurance unit from funding parent

Regulators in China have clamped down further on acquisitive conglomerate HNA, barring it from accessing capital or financing from an insurance unit it controls.

In a letter posted on its website, the China Insurance Regulatory Commission said Bohai Life was banned from providing its parent and related parties with capital for 6 months.

The letter stated that an inspection earlier this year had found that Bohai Life had problems managing internal controls and transactions with related parties, and that any current transactions with related parties must also be terminated.

The move comes after HNA spent more than $40bn on major investments Deutsche Bank and Hilton Worldwide in just over 2 years. In June, it became public that the local banking watchdog had asked lenders to assess their credit exposures to HNA and several other Chinese companies that had been buying assets overseas.

4 other life insurance companies were also barred from providing capital to their parent groups this week.

HNA, based on an island province in southern China, has grown from a small airline into a conglomerate that owns airlines and airports, hotels and logistics companies around the world.

However, it has recently attracted global attention for its opaque shareholding structure. In September, Switzerland’s takeover board questioned the veracity of the shareholder information the company disclosed when buying air services company Gategroup last year.

Chinese regulators have been clamping down on borrowing, and insurance companies are among their targets.

Over the past 4 years, some small life insurers have rapidly expanded sales of high-return investment products. In some cases, the companies have used insurance premiums to fund longer-term, hard to sell investments, creating what analysts have described as serious maturity mismatches.

The investment product business of Anbang Insurance, which bought the historic Waldorf Astoria for about $2bn in 2014, was suspended from issuing new products by regulators in May, following several other similar short-term bans for other insurance groups. Anbang’s chairman, Wu Xiaohui, was later detained by Chinese authorities.

Dalian Wanda, the commercial property and entertainment company, and Fosun International, the investment group, have also been subject to the clampdown. Wanda has gone on to divest from billions of dollars worth of assets in China.

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