Triple Challenges for Asia-Pacific Insurance: Fines, Equity, Performance

In the ever-changing landscape of China's business world, Lu Zhiqiang, once the richest man in Shandong, is experiencing a dramatic turn of events.

In the 1990s, Lu Zhiqiang seized the opportunity of the booming real estate market in China and began his business journey. With his adeptness in the capital market, Lu Zhiqiang made a series of bold and precise investments, building a business empire that spans across real estate, securities, insurance, and other fields.

The business world is unpredictable, with constant changes. On January 27th, Pan-Sea Holdings announced that the company had received the "Decision on the Termination of Listing of Pan-Sea Holdings Co., Ltd.'s Shares," and the Shenzhen Stock Exchange decided to terminate the listing of the company's shares.

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This once-giant, with a market value of over a hundred billion, is now leaving the stage in a subdued manner. At the same time, Lu Zhiqiang himself is also in trouble, listed as an executor facing a huge amount of enforcement and restrictions on high consumption.

In the financial blueprint meticulously crafted by Lu Zhiqiang, Minsheng Securities, Minsheng Trust, and Asia-Pacific Property Insurance were once his proud "iron triangle."

Among them, Asia-Pacific Property Insurance has been hit with consecutive penalties, once again pushing the entire "Pan-Sea System" to the forefront of public attention.

Frequent Violations of Compliance Red Lines

In the context of increasingly strict financial regulation, compliance in the insurance industry has become more important. Recently, Asia-Pacific Property Insurance Co., Ltd. (hereinafter referred to as "Asia-Pacific Property Insurance") has been frequently stepping on the high-voltage line of compliance.

Within just one month, Asia-Pacific Property Insurance has announced several administrative penalty notices.Zhejiang branch was fined 40,000 yuan for operating across provincial borders; Tianjin branch received a penalty of 71,000 yuan due to improper practice registration management and cross-regional operations. On September 9th, the Zhejiang branch was again shown a yellow card by the regulatory authorities for cross-provincial operations.

On August 29th, a penalty notice from the Shenzhen Regulatory Bureau of the Financial Regulatory General Administration pushed the company into the spotlight: the company was heavily fined 900,000 yuan for not using insurance company funds as stipulated. Notably, Yu Haibo, then Vice President and Chief Investment Officer, who also served as the financial officer, could not escape punishment and was warned and fined 100,000 yuan for direct responsibility.

Looking at the "report card" of Asia-Pacific Property Insurance in recent years, it is indeed quite embarrassing: in 2021, the company was fined 720,000 yuan for issues such as false documentation and false reimbursements; in 2022, it was fined a total of 1,625,000 yuan for improper use of rates, fabricating false financial information, and虚构ing intermediary business to extract funds; by 2023, the company had stepped on regulatory mines nine times, with the total fines approaching two million yuan.

It is worth noting that Yu Haibo, involved in this penalty, has been promoted to President of Asia-Pacific Property Insurance. According to public information, Yu Haibo has extensive experience in the financial field and has held key positions in several large enterprises.

However, the "Regulations on the Qualification Management of Directors, Supervisors, and Senior Management Personnel of Insurance Companies" has strict requirements for senior executives, including full civil conduct capacity, a good credit record, and no history of illegal or non-compliant behavior.

In this regard, some industry insiders have pointed out that penalties for non-compliant behavior by senior executives may affect their eligibility for positions, which is not only related to individual career development but may also affect the company's personnel arrangements and governance structure.

In response to external doubts, Asia-Pacific Property Insurance stated to Investor Network: "Our company has always attached great importance to and strictly adhered to the 'Regulations on the Qualification Management of Directors, Supervisors, and Senior Management Personnel of Insurance Companies' and all relevant laws and regulations in the insurance industry. We deeply regret this penalty. To this end, we will internalize regulatory requirements as the criteria for our business operations, regularly organize senior management teams to deeply study the latest regulatory policies, and ensure that every decision made by our company's management complies with regulatory guidance."

For Asia-Pacific Property Insurance, which is mired in compliance difficulties, how to achieve stable operations without crossing regulatory red lines while pursuing business development will be crucial. Whether it can learn from this experience and strengthen its compliance culture is not only related to the company's ability to stand firm in fierce market competition but will also determine its future development direction.

98% of the equity is pledged and frozen.

In addition to frequent regulatory penalties, the equity structure of Asia-Pacific Property Insurance is also of concern.This insurance company, which traces its origins back to 1982, has undergone multiple transformations. It started as the Shenzhen branch of Hong Kong Min'an Insurance, became a nationwide comprehensive property insurance company in 2005, was taken over by HNA Capital and others in 2011, and was eventually renamed Asia Pacific Property Insurance in January 2016. Behind this series of changes lies a complex history of equity changes.

However, in recent years, the equity situation of Asia Pacific Property Insurance has become increasingly confusing.

According to the solvency report for the second quarter of 2024, as much as 98.32% of the company's equity is in a frozen predicament, involving four major shareholders: Wuhan Central Business District Co., Ltd. (holding 51%), China Minsheng Trust Co., Ltd., Yili Resources Group Co., Ltd., and Chongqing Three Gorges Fruit Industry Group Co., Ltd.

It is worth mentioning that the equity of major shareholders Wuhan Central Business District and Yili Resources Group is not only frozen but also pledged.

In 2022, the China Banking and Insurance Regulatory Commission published the fifth batch of major illegal and irregular shareholders, and the figure of Wuhan Central Business District, a major shareholder of Asia Pacific Property Insurance, appeared prominently.

This company directly controls Minsheng Trust, and behind it, there is a close connection with the Pan-Sea Group, which has recently been frequently involved in financial and legal disputes.

Considering the debt crisis and difficulties in capital turnover faced by the Pan-Sea Group, it has cast a shadow of uncertainty over the development prospects of Asia Pacific Property Insurance.

In response to external doubts, Asia Pacific Property Insurance emphasized to investors that "equity pledge is a normal financing behavior of shareholders. Since Asia Pacific Property Insurance is an independent legal entity, the shareholder situation has no direct impact on the company's operation and management. At present, the company's three meetings are operating in a standardized manner, and the operation and management are stable and orderly."

Overall, in this complex equity puzzle, whether Asia Pacific Property Insurance can break the situation will undoubtedly be a focus of attention in the industry for some time to come.

Can it regain its glory?Looking back at the development trajectory of Asia-Pacific Property Insurance, it is indeed a roller coaster ride.

From 2017 to 2020, the company stood out in the insurance industry like a dark horse: it made profits continuously, its premium income growth rate led the industry on several occasions, and its risk control was second to none. It won the A-class crown of the China Banking and Insurance Regulatory Risk Comprehensive Rating for 11 consecutive quarters, standing proudly above 77% of its peers, which is undoubtedly the best testament to its glorious years.

However, the situation changed dramatically, and this glory has long been gone.

Under the leadership of the former president, Pu Haicheng, since he took over the daily operation and management work in February 2018, although the company's net profit has grown slowly, its comprehensive solvency has plummeted from 360.04% in 2018 to 214.34% in 2021, which has sown the seeds of hidden dangers for the future.

In 2021, the accumulated problems finally exploded, and the company suffered a huge loss of 496 million yuan, wiping out the hard-earned profits accumulated before.

The appointment of the current president, Yu Haibo, also seems to have failed to reverse the downward trend. In 2023, the company fell into a loss again, with an amount as high as 706 million yuan, and the investment return rate even fell to -5.78%.

At the crossroads, every step of Asia-Pacific Property Insurance is of great importance. In the future, can the company prescribe the right medicine to eradicate the management problems that have accumulated over the years? Can it reshape the compliance culture and build a solid risk control dam? And how to regain the trust and support of the public? These are all tough questions facing Asia-Pacific Property Insurance.