HONG KONG (BLOOMBERG)- China's government is injecting 60.8 billion yuan (S$12.7 billion) into Anbang Insurance Group Co after the company's chairman was accused of masterminding a multibillion dollar fraud.
The money will come from the China Insurance Security Fund, Anbang said on its website on Wednesday (April 4). The injection is aimed at ensuring the firm's solvency and stability and protecting policy holders' interests, the China Insurance Regulatory Commission said.
Officials moved a week after a hearing of fraud and embezzlement charges against former Chairman Wu Xiaohui. The government is trying to revamp and stabilise a company that burst onto the global scene in 2014 with the purchase of New York's Waldorf Astoria hotel - but was ultimately seized by the Chinese government in February this year.
In court, Wu was accused of masterminding a massive fraud, using unauthorised sales of investment-type policies to prop up the acquisitive company's capital.
The case is one of the most striking illustrations of China's war against financial risk. During the court hearing, prosecutors alleged that Wu's actions had threatened national financial security.
Much of Anbang's growth was powered by sales of short-term, high-yield products that the company used to fund purchases of long-term assets such as real estate - a duration mismatch that had long worried analysts and regulators.
The charges against Wu alleged wrongdoing going as far back as 2007. Wu ordered up fraudulent financial statements and used money raised from fraud for investment, debt repayment and personal use, a Shanghai court said last week.
Wu disputed both the facts and the charges, saying that he didn't understand the law and didn't know if his behaviour amounts to crime, according to the court. He was later quoted by the court as saying he "realised the crimes and regrets the crimes," asking for leniency.
Anbang's registered capital will be kept at 61.9 billion yuan after the injection, according to a statement from the China Insurance Regulatory Commission, adding that the company will start to select strategic investors and aim to introduce private capital as soon as possible.China's government in February seized control of Anbang for at least a year.