Insurance Segment Taking Shape, Investments Gathering Strengths: Fosun Adheres Comprehensively to the Warren Buffett Model
HONG KONG, Aug. 27, 2014 /PRNewswire/ — Fosun International Limited (together with its subsidiaries, “Fosun” or the “Group”, HKEx stock code: 00656) announces today its interim results for 2014. As at June 30, 2014, net assets attributable to owners of the parent of the Group amounted to RMB43.99 billion, up 11.0% from end-2013. Profit attributable to owners of the parent of the Group amounted to RMB1.83 billion, up 8.4% from the same period of 2013.
Fosun has been persistently making a major stride towards becoming a world-class investment group underpinned by the twin drivers of “insurance-oriented comprehensive financial capability” and “industrial-rooted global investment capability” since the beginning of 2014 to date. Following the completion of the acquisition of the three insurance companies namely Fidelidade, Multicare and Cares under Caixa Seguros e Saude (“CSS”) of Portugal (“Fosun Insurance Portugal”); the successful investment in one of the largest independent private banks in Europe, BHF of Germany; the successful acquisition of the Japanese real estate capital management firm IDERA; and signing of an equity purchase agreement with the US insurance company Ironshore Inc., the Group’s “insurance-oriented comprehensive financial capability” under the twin drivers development model has already taken on firm foothold. Meanwhile, Fosun will continue to leverage and pursue its another driver of “industrial-rooted global investment capability”, seeking to deliver more successful investment cases under the value investing principle.
Insurance funds available for investments close to RMB120 billion
Significant enhancement of Fosun’s “insurance-oriented comprehensive financial capability”
Fosun has always been considering the development of the insurance business as a premium path in connecting its investment capability to long-term high-quality capital. Currently, Fosun’s insurance business comprises over one-third of its total assets. Fosun’s latest investment in insurance business was signing an equity purchase agreement with the US insurance company Ironshore Inc., for acquisition of 20% of its total outstanding ordinary shares (on a fully diluted basis) and to become its largest shareholder. Excluding the investment in Ironshore of which the acquisition has not yet been closed and completed, Fosun’s insurance segment comprises four companies, namely Yong’an P&C Insurance, Pramerica Fosun Life Insurance, Peak Reinsurance and Fosun Insurance Portugal, constituting a comprehensive insurance platform underpinned by property and casualty, life, and re-insurance. Following the successful completion of the Fosun Insurance Portugal acquisition on May 15, 2014, Fosun successfully matched and commenced a total of 14 equity and debt investment projects for Fosun Insurance Portugal, including investments in the Portuguese power grid company Redes Energeticas Nacionais SGPS, S.A. (REN), China’s leading film distributor with an integrated business chain Bona Film Group, etc., aggregating an investment amount of approximately EUR460 million. Leveraging its successful connection to Fosun’s investment capability, the profit attributable to owners of the parent of insurance segment amounted to RMB114.5 million during the first half of 2014, up 19.9% from the same period of 2013, with an investible fund stood at approximately RMB119.06 billion.
Besides investing in the insurance segment, Fosun also extended its footholds to the comprehensive financial area including banking, real estate capital management, securities brokerage and asset management. Fosun succeeded in investing in one of the largest independent private banks in Europe, BHF of Germany in the first half of 2014. For this transaction, Fosun acquired an approximately 19% interest in KBG to secure an indirect ownership of the BHF and the well-established UK private bank with a very long history, Kleinwort Benson, thereby gaining footholds in two big financial hubs, Frankfurt and London. Fosun will capitalize on their connections with billionaires and family enterprises to establish a platform and a network for Fosun’s investment businesses in Europe. It is the first time Fosun holds indirect interests in a private-banking business which will successfully enhance its comprehensive financial capability. In addition, Fosun completed the acquisition of a 98% equity interest in a Japanese real estate capital management firm IDERA. Japan is one of the important markets in the global property investment mix for institutional investors. IDERA will become the most important property investment and management platform in Japan for Fosun. After the IDERA acquisition, the Group can efficiently acquire capital and asset management capability in the Japanese property market. In July 2014, Fosun acquired Hong Kong Hani Securities (It is still waiting for the final approval by the SFC). Hani Securities has licenses including for dealing in securities and assets management. Looking forward, it will help secure a foothold for Fosun in supporting “Shanghai-Hong Kong Stock Connect” and start pursuing differentiated assets management business in Hong Kong, while engaging in further development with Fosun’s other financial platforms.
Investments gathering strengths
Accomplished successful large-scale global value investment cases based on deep industrial footholds in China
During the first half of the year, Fosun sped up establishment of localized investment capabilities in overseas markets. It proactively invested in local platform entities, put together local partner teams in Europe, the US, Japan, Hong Kong, Southeast Asian countries and regions. Ripping benefits from the significant acceleration of globalization of China’s growth momentum, Fosun completed many investments across Asia, Europe and North America. Fosun’s global investment strategies are based on “benefits from China’s growth momentum” to further implement its “industrial-rooted global investment capability”, accomplishing a long list of value investment cases.
On the top of its successful investments in the global leisure resort hotel chain Club Med of France and the Greek renowned fashion retail group Folli Follie, etc., Fosun took its “Combining China’s Growth Momentum with Global Resources” investment model further. Since last year until lately, Fosun and funds under its management invested, respectively, in the US high-end female apparel brand St. John, the premium Italian menswear manufacturer Caruso, the world’s leading medical and cosmetic energy-based device manufacturer Alma Lasers originated in Israel, the largest lifestyle restaurant chain group in Southeast Asia Secret Recipe, a leading German fashion and lifestyle brand TOM TAILOR, as well as a renowned Spanish premium ham, wines and spirits producer Osborne Group. Fosun believes in co-operation with its investees and partners to discover and share investment opportunities brought about by China’s sustaining economic growth.
Fully “Embracing the Mobile Internet”: already become a major “mobile internet“ investor in China
Facing the comprehensive reform brought about by the internet, Fosun proactively implement its “Embracing the Mobile Internet Strategy”. Following the successful investment in Perfect World and completion of the Focus Media privatization, Fosun and funds under its management expanded their mobile internet investments comprehensively in many areas, including the internet medical company Scanadu; the online education companies such as Mofangge, and Uniquedu; the mobile game portal Joyme.com; and the online travel company Lailaihui.com; and Southeast Asia mobile internet company Main Spring, etc. Furthermore, Fosun also invested in high-growth traditional industries ancillary to the internet, including distribution warehousing, freight express, smart logistics systems, etc., such as China Smart Logistics Network (CSN) — “Cainiao”. Fosun and funds under its management also invested in and pushed forward traditional enterprises to innovate and achieve O2O, for example, invested successfully in Ali Small-Loan and participated in its rapid growth. In the first half of 2014, the Group has a total of 18 PE and VC projects in the internet sector, for investment amounts aggregating approximately RMB1.85 billion.
Spearheaded investments in industries associated with middle-class lifestyles
Exponential growth in successful cases of experience-driven consumption and consumption upgrade
China’s middle class population is growing rapidly, and the middle class lifestyles are set to become the major driver of consumption in the country. Fosun is eyeing on investment opportunities brought about by the changing lifestyles of the middle class in China, extending its footholds in experience-driven consumption in tourism and the filming and television entertainment industry, as well as focusing on investments in consumption upgrades, etc.
Fosun further extended its investment footholds in experience-driven consumption in the first half of 2014, initiated at a high starting point in the filming and television entertainment industry by investing in Studio 8, an US Hollywood multi-platform media company; increased its holding in Bona Film Group and became the second largest shareholder; and signed a strategic cooperation agreement with one of China’s largest and strongest modern film groups Shanghai Film Group. For experience-driven tourism consumption investments, besides the investment in China International Travel Services and the increased holding in Shanghai Yuyuan Tourist Mart, Fosun continued to develop the world’s third ultimate high-end hotel and ocean theme park Atlantis Resort along the Haitang Bay National Coast in Sanya, Hainan, with Kerzner Group, while facilitated Club Med’s expansion in China and on the heels of Yabuli and Guilin resorts, Club Med has already beta-launched its third resort in China this year. Meanwhile, Fosun persists in its focus on investments in consumption upgrades. Since the beginning of 2014 to date, Fosun and funds under its management invested in the leading lifestyle restaurant chain group in Southeast Asia Secret Recipe, a renowned Spanish premium ham, wines and spirits producer Osborne Group, a leading German fashion and lifestyle brand TOM TAILOR etc.
Transformation of traditional property businesses: Full landing of “Hive Community”, a PPP urbanization model that pioneered “provision of core urban functions, industry-backed urban development and urban-industry integration“
Implementing the new model of urbanization is a major highlight of the Central Government, and a major driver of the sustaining economic development in China. Hive Community is a product integrated Fosun’s industrial resources to assist local governments in the construction of core urban functions, with a key feature of “industry-backed urban development and urban-industry integration”. Through providing core urban functions required by the cities, Fosun is able to take a lead in introducing its core industrial resources and to further introduce ancillary industries that support the core industries, with a view to promoting “Urban-Industry integration” by establishing a 24-hour plus 3-in-1 vibrant community for work, consumption and living, as well as introducing living and consumption services industries. The Hive Community products, therefore, provide clear and distinctive functions with active dispersal of peripheral services. They also provide adequate and diverse job opportunities (no more dormant cities, ghost cities), seeking to constitute functional communities that drive employment by industries. As such, a new model of communities which is self-sufficient and built with flexible combination of modules comprising different functions are established.
In the first half of 2014, Fosun combined its resources to fully extend property businesses migration, securing a foothold to the “Hive Community” development. Currently, Fosun has been exploring actively in this area with several satisfactory case studies: Financial Hive — BFC on the Bund in Shanghai and Chengdu Financial Hive; Healthcare Hive — Shanghai Starcastle Senior Living community; Culture Hive — Shenyang Yulong City and Dongyang Woodcarving City; Tourism Hive — Atlantis Resort in Hainan; and Logistics Hive — Tian Mao Plaza in Xiangyang and Ankang; comprising GFA aggregating 3.96 million sq.m.
Signficant results from long-term vigilance on and grasping of opportunities from China’s SOE mixed ownership reforms
The Third Plenary Session of the 18th Communist Party of China Central Committee proposed to “actively participate in mixed ownership reforms” which confirmed the overall direction for SOE reforms. Mixed ownership reforms are an important move for China’s further reform and opening up, deepening the SOEs reform and enhancing the state-owned assets management system and the economic system. In the past ten years, Fosun actively invested in 21 SOE restructuring projects in a number of industries, accomplished a base of valuable experiences. To grasp opportunities in history, Fosun has been actively participating in mixed ownership reforms since The Third Plenary Session of the 18th Communist Party, and invested in several leading corporates in China as Sanyuan Food in dairy industry, CNFC Fishery in overseas fishing industry and Zhongshan Public Utilities in professional environmental protection industry. (Sanyuan Food project and CNFC Fishery project are still waiting for final approval by the China Securities Regulatory Commission)
Led by a spiritual courage of “Reinitiating two decades of entrepreneurship”, Fosun will follow the trends by combining resources, continue to enhance and implement its twin drivers of “insurance-oriented comprehensive financial capability” and “industrial-rooted global investment capability”, enabling the Group to better and timely grasp the value investing opportunities and making a major stride towards becoming a world-class investment group.