Annual profit tops $4.6b, fueled by firm's aggressive investment strategy

Anbang Insurance Group, a little-known Chinese insurer several years ago, has transformed itself into a formidable player both at home and abroad, as the group's net profit and total assets ballooned last year.

Net profit of its four subsidiaries exceeded 30 billion yuan ($4.6 billion) in 2015.

The highlight was its life insurance business, with net profit surging 131 percent to 19.66 billion yuan, according to its latest annual financial statement.

Thanks to aggressive investment and global acquisitions, Anbang Life Insurance Co's total assets expanded to 921.6 billion yuan, 6.7 times higher than the previous year's 120 billion yuan.

Analysts said that the aggressive expansion underscored Anbang's asset-driven business model, which helped it generate abundant cash flow and returns.

"Anbang's explosive growth was primarily led by its aggressive investment activity, dominated by acquisitions in overseas insurance markets, as well as in the property and hotel sectors," said Wang Guojun, an insurance professor at the University of International Business and Economics in Beijing.

Known for its high-profile purchase of New York's famed Waldorf Astoria hotel in 2014, Anbang has continued with its overseas buying spree.

Its most recent target was Allianz Life Insurance Korea and Allianz Global Investors Korea, the South Korean operations of German insurer Allianz SE.

That deal followed the purchase of a controlling stake in Tongyang Life Insurance Co last year as well as a slew of high-profile deals in Europe, including the purchase of Dutch insurer Vivat and Belgian insurer Fidea in 2014.

While investment income of Anbang's life insurance business grew by 110.9 percent last year, its insurance premium rose a more modest 20 percent, the financial report showed.

But analysts said Anbang will be under pressure to optimize its liabilities so it can sustain the aggressive expansion program.

"Anbang has relied on an asset-driven business model," Wang said.

"It now tends to pay greater attention to its liabilities, meaning an improvement to the weaker part of its business, its insurance premiums

The company's first quarter financial data for 2016 could offer some insight into such a transition, which saw Anbang Life Insurance record a rapid rise in its premium income to 125 billion yuan, making it the third-largest Chinese life insurer after China Life Insurance Co and Ping An Life Insurance Co.

But some analysts have warned that Anbang's growth seems too aggressive, and risks may arise against the backdrop of negative interest rates globally and the shortage of high-yield assets in the domestic market.

"Chinese insurers will this year be under increasing pressure to look for new investment targets, given that both the equities and fixed-income asset markets have declined," said Cao Hengqian, an analyst at GF Securities Co.