Involving Three Illegal Facts

On August 30th,Tian'an Property Insurance and Shen Neng Property Insurance both disclosed a significant announcement on their official websites,indicating that with the approval of the State Financial Regulatory Administration,Shen Neng Property Insurance will take over the insurance business of Tian'an Property Insurance.

This means that Tian'an Property Insurance has entered a countdown to bankruptcy,and the original customer policies will be fully taken over by Tian'an Property Insurance,with the legitimate rights and interests of the policies remaining unaffected.

It is worth noting that shortly before the official announcement,the Inner Mongolia Regulatory Bureau of the China Securities Regulatory Commission issued a huge penalty to Inner Mongolia Xishui Entrepreneurship Co.,Ltd.(hereinafter referred to as "Xishui Shares"),with multiple violations directly pointing to Tian'an Property Insurance.First,during February,March,and August 2018,Tian'an Property Insurance,as a controlling subsidiary of Xishui Shares,successively signed four trust plan beneficiary rights transfer and repurchase agreements with Huaxia Life and Tian'an Life,involving amounts of 16.98 billion,5.73 billion,4 billion,and 5.99 billion,totaling 32.7 billion yuan.This amount accounted for 115.26% of the audited net assets of Xishui Shares in 2017.However,Xishui Shares did not disclose the relevant information of these trust plan beneficiary rights repurchase agreements in a timely manner as required,and these important matters did not appear in the company's "2018 Semi-Annual Report" and "2018 Annual Report."

Secondly,there were false records in the financial reports for 2018 and 2019.In 2018,Tian'an Property Insurance transferred the aforementioned 32.7 billion yuan of trust plan beneficiary rights to Huaxia Life and Tian'an Life,and simultaneously signed 32.7 billion yuan of trust plan beneficiary rights repurchase agreements.Tian'an Property Insurance,based on the trust plan beneficiary rights transfer contract,terminated the confirmation of related financial assets,reduced "available-for-sale financial assets," and did not account for the repurchase agreement,underestimating "sold repurchase financial assets," which does not comply with the relevant provisions of "Enterprise Accounting Standards No.23 - Financial Asset Transfer," resulting in Xishui Shares' annual financial reports for 2018 and 2019 underestimating liabilities by 34.168 billion yuan and 36.316 billion yuan,respectively,accounting for 29.73% and 56.22% of Xishui Shares' audited total assets for the respective periods.

In addition,Xishui Shares is suspected of inflating profits in the 2019 financial report.Specifically,in 2019,Tian'an Property Insurance did not account for the impairment losses of the equity of Chengdu Sino-German Cilacson Environmental Technology Co.,Ltd.and Deyang Sino-German Avis Environmental Technology Co.,Ltd.The aforementioned actions led to an overstatement of profits by 459 million yuan in Xishui Shares' 2019 annual report,accounting for 19.63% of the audited total profit of Xishui Shares in 2019.

Finally,there was a failure to disclose significant events in a timely manner as required.On June 8th,June 16th,June 23rd,and July 9th,2020,the "New Era Trust Blue Ocean 1109 Collective Fund Trust Plan," "New Era Trust Blue Ocean 1308 Collective Fund Trust Plan," "New Era Trust Blue Ocean 1273 Collective Fund Trust Plan," and "New Era Trust Blue Ocean 1299 Collective Fund Trust Plan" held by Tian'an Property Insurance successively matured and were not redeemed on time,with a total amount of 6.21 billion yuan,which may have a significant impact on the company's profits.Xishui Shares did not disclose the aforementioned significant events in a timely manner as required.

Total fines amount to 14.75 million yuan.Taking into account the aforementioned violations,the China Securities Regulatory Commission (CSRC) has ordered Xi Shui Shares to correct its misconduct,issued a warning,and imposed a fine of 7.5 million yuan.Notably,in this violation,the former chairman and legal representative of Tian An Property Insurance,Guo Yufeng,the former president Gao Huanli,the former CFO and vice president Zhang Xiangzhen,and the former board secretary and vice president Ma Shuwei were all involved and bear direct responsibility.Consequently,the regulatory authorities have fined Guo Yufeng and Gao Huanli 2.1 million yuan each,Zhang Xiangzhen 1.2 million yuan,and Ma Shuwei 200,000 yuan.In addition,Guo Yufeng and Gao Huanli have also been subject to a 5-year market entry ban.Along with fines imposed on Xi Shui Shares' directors and supervisors Su Hongwei,Du Yeqin,and Tian Xin,amounting to 350,000 yuan,500,000 yuan,and 800,000 yuan respectively,the total fines amount to 14.75 million yuan.

In fact,apart from the market entry ban imposed on Guo Yufeng and Gao Huanli by the Inner Mongolia Regulatory Bureau of the CSRC,the National Financial Regulatory Administration has taken a tough stance,intending to impose a lifetime ban on Guo Yufeng from the insurance industry.According to the announcement "Notice on the Chairman's Receipt of the Pre-penalty Administrative Penalty Notification" released by Xi Shui Shares on June 24,the National Financial Regulatory Administration plans to warn Guo Yufeng,fine him 300,000 yuan,and permanently revoke his eligibility to hold positions in the insurance industry.This means that Guo Yufeng will become another senior figure in the insurance industry to be permanently banned.

Shockingly,among the hearing defense results of the penalties for several executives,Gao Huanli attempted to evade punishment by claiming "suffering from a mental illness,lacking the corresponding ability to recognize and control behavior." In response,the CSRC stated,"The evidence submitted by Gao Huanli and his representative does not prove that Gao Huanli was in a state of being unable to recognize or control his actions at the time of the illegal activities involved in the case."

As the former president of Tian An Property Insurance,Gao Huanli's attempt to use mental illness as a shield to evade legal responsibility is astonishing.Such tactics are usually seen only in some criminal cases,as a last desperate attempt by the defendant.However,when this method is employed by a corporate executive facing administrative penalties,it appears both absurd and out of place.This approach not only reveals his ignorance of the law but also represents a contemptuous challenge to the intelligence of regulatory authorities and the public.

"Turning a New Page for Tian An"

Tian An Property Insurance concludes with the collective punishment of its executives,seemingly putting a period to its past glory.

According to public information,Tian An Property Insurance was previously the fourth-largest property insurance company in China,with more than 18,000 employees and a sales force of nearly 10,000.However,as time passed,it eventually fell into a situation of insolvency and was taken over,which is lamentable.

The reason for its decline is not hard to find; it is closely related to its aggressive expansion strategy.As a radical among small and medium-sized insurance companies,Tian An Property Insurance attempted to quickly capture the market through the "overtaking on the bend" strategy of wealth management insurance.Wealth management insurance,a non-life investment product,was popular in the market at the time due to its dual functions of investment and financial management as well as insurance protection.Tian An Property Insurance seized this opportunity and invested a large amount of resources and effort into the promotion and sales of wealth management insurance.

However,with market changes and regulatory policy adjustments,the wealth management insurance market experienced an "emergency brake." The wealth management insurance business,which Tian An Property Insurance relied on heavily,was also severely impacted.Due to significant initial investments and a surge in redemption pressures later on,Tian An Property Insurance fell into a serious redemption crisis.Coupled with the cumulative impact of other factors,the company's financial situation deteriorated rapidly,ultimately leading to insolvency and being taken over.

Subsequently,Shen Neng Property Insurance will take over Tian An Property Insurance and become the successor of its assets and liabilities.It is reported that in May of this year,Shen Neng Property Insurance held an opening ceremony in Shanghai,with its management team members,key persons in charge of various branches,and heads of various departments of the head office all participating in the event.Unlike Tian'an Property Insurance,Shen Neng Property Insurance boasts a formidable lineup of shareholders,including "Shen Neng Investment Management Co.,Ltd.","Shanghai International Group Co.,Ltd.","Shanghai Lingang New Area Private Equity Fund Management Co.,Ltd.",and several other state-owned enterprises.

The involvement of state capital seems to have put an end to the crisis,but it reveals a deeper issue: state-owned capital has become a bottomless pit to fill the gaps caused by private management errors,which is a great irony.The executives who once held significant power and pushed the company to the brink of collapse,the penalties of fines and market bans seem woefully inadequate to compensate for the enormous losses they have inflicted on the company and investors.What is even more concerning is the damage to the interests of small and medium investors in this turmoil,who will bear the cost?

In summary,although Tian'an Property Insurance seems to have reached a conclusion,the lessons of the past must not be easily "turned over." In the future,for Shen Neng Property Insurance,the road ahead is long and full of challenges...