omniture

Fosun's "Insurance + Investment" Model Achieves Unparalleled Success

Interim Results Yield Excellent Accomplishments
2015-08-31 18:36 3332

HONG KONG, Aug. 31, 2015 /PRNewswire/ -- Fosun International Limited (together with its subsidiaries, "Fosun" or the "Group", SEHK stock code: 00656) announced its interim results for 2015. For the six months ended 30 June 2015, Fosun's net assets attributable to owners of the parent reached RMB63.315 billion, up 28.1% from the corresponding period last year. Profit attributable to owners of the parent was RMB3.617 billion, up 97.2% year-on-year.

With the "insurance + investment" twin-driver core strategy, Fosun has accomplished further enhancements on both the financing-end and investment-end as well as the optimization of the overall asset structure during the first half of 2015. The twin-driver empowered by the "Insurance-oriented Comprehensive Financial Capability" and "Global Industrial Integration Capability Taking Roots in China" has been much strengthened than ever.

Further expanded the scale of insurance investible assets, profit from the insurance segment grew rapidly

In the first half of 2015, Fosun's insurance segment continued to expand rapidly. Insurance investible assets reached a record high of RMB143.199 billion, up significantly by RMB36.414 billion as compared to the end of 2014. Profit attributable to owners of the parent generated from the insurance segment reached a record high again to RMB1.789 billion, RMB640 million more than that for the whole year of 2014. Meanwhile, Fosun has completed its acquisition of 100% equity interest of the US P&C insurer MIG which has rich experiences in labor insurance in July 2015 and 20% equity interest of the US specialty insurance company Ironshore in the first half of 2015, while announcing its plan to acquire the remaining 80% interest of Ironshore. In addition, Fosun announced during the first half of 2015 its plan to acquire 52.31% equity interest of Israeli insurer Phoenix Holdings. On a proforma basis after consolidating the above-mentioned projects, the scale of Fosun's insurance investible assets would have reached to RMB240.697 billion. As such, the proportion of Fosun's aggregated insurance assets to the Group's aggregated total assets will increase from 34.81% as of end-2014 to 44.8%. Fosun's strategy of "Insurance-oriented Comprehensive Financial Capability" significantly strengthened and its insurance segment has become the Group's critical growth driver.

Fosun maintained its rapid growth in net profit from the insurance segment, while achieved diversification in currency mix for its investible assets. Currently, the largest portion of Fosun's investible assets is denominated in Euros, at 45.2% of the total, followed by US dollars which accounted for 34.8%, and RMB at 10.1%, Hong Kong dollars at 5.5%, Pound-sterling at 1.6% and Japanese yen at 1.4% accordingly. The allocation of diversified currencies helps Fosun gain better resistance against the impact from foreign exchange volatility, a move which is increasingly important against the current backdrop of significant foreign exchange volatility.

Leveraging the Group's investment capabilities and knowledge, Fosun has enhanced its insurance segment return significantly in accordance with the relevant laws and regulations of its invested insurers. Fosun's insurance segment saw total investment returns reached 4.0% for the first half of 2015, up from 2.7% for the corresponding period in 2014. ROE of insurance segment was 12.8% for the first half of 2015.

Health and happy & lifestyle businesses grew rapidly

Since the beginning of 2015, Fosun has formed its health and happy & lifestyle strategy. Fosun and its fund under management have rapidly launched their investment plans in the global ecosystem with a focus onthese two segments (i.e. health and happy & lifestyle segments). As at 30 June 2015, the total assets from the health and happy & lifestyle surpassed the RMB60 billion level to a record high at RMB60.119 billion, up 69.6% year-on-year, contributing to 17.0% to the Group total assets. Net assets reached to RMB28.205 billion, up 31.0% year-on-year, contributing to 29.9% to the Group total net assets. The net profit generated from the health and happy & lifestyle segment reached RMB788 million, up 36.1% year-on-year.

Fosun achieved stable growth in the health and happy & lifestyle business segments due to its proactive planning in the global health and happy & lifestyle ecosystem. In the first half of 2015, Fosun completed the consolidation of accounts of the globalpremium tourism chain Club Med and Portugal high-end medical services group Luz Saúde to the Group statements, further expanded its foothold in the health and happy & lifestyle segment. In addition, Fosun and the funds under its management invested in the UK leisure tourism group Thomas Cook, the quintessence of Canada - Cirque du Soleil, the UK high-end nursery brand Silver Cross etc. Fosun Pharma, a subsidiary of Fosun, also completed an investment in the US innovative biopharmaceutical company Ambrx, which will generate substantial synergies with the current R&D system and platform of Fosun Pharma.

Continued to optimize asset structure, substantial increase in contribution from light assets with weak cyclicality including finance, health and happy & lifestyle, substantially lowered gearing

In the first half of 2015, Fosun continued to optimize its asset structure. The proportion of assets from the finance, health and happy & lifestyle segments to the Group's total assets expanded to 65.1%, amounting to RMB230.033 billion, up 21.45% year-on-year. The net profit generated from this segment rose significantly by 8.5 times, surpassed the achieving RMB4 billion in one move to reach RMB4.149 billion.

In past six months, Fosun also achieved major progresses in the finance segment. In the beginning of 2015, Fosun completed its acquisition of 20% equity interest of the US specialty insurance company Ironshore, while announcing its plan to acquire the remaining 80% interest of Ironshore. If the transaction was completed successfully, the cost of Fosun's investment in Ironshore will be -0.8% per year, and theinvestible assets of Ironshore which amounted to approximately US$ 5 billion will expand Fosun's insurance float, a move that will further lower Fosun's attributable cost for the investment float. Apart from Ironshore, Fosun also announced to acquire 52.31% of the issued outstanding capital of the Israeli insurer and financial services company Phoenix Holdings Ltd. ("Phoenix", TASE ticker: PHOE). Phoenix ranked forth and third in life and non-life insurance in terms of market shares, respectively. Its assets under management amounted to approximately US$41.88 billion.

Apart from the insurance segment, Fosun's banking segment made notable achievements. In the first half of 2015, Zhejiang Internet Commerce Bank, which was jointly established by Fosun and Ant Financial Services Group under Alibaba Group, officially commenced operation. Zhejiang Internet Commerce Bank is one of the first batch of private banks in China. Fosun, as the second largest shareholder, owns a 25% stake. In addition, in July 2015, Fosun announced to acquire 100% equity interest in the German private bank Hauck & Aufhäuser Privatbankiers KGaA ("H&A"). H&A is one of the largest independent private banks in Germany. Its assets under management amounted to approximately EUR43 billion.

In addition, Fosun established Guangzhou Fosun Yuntong Small Loan Co., Ltd. in July 2015. This is an Internet small loan company with a nationwide operating license. Fosun will leverage this platform and its industrial capabilities to further develop supply chain finance.

With the favorable stock market during the first half of 2015, Fosun chose to beef up its capital to lower the gearing ratio, further strengthen its resistance against volatility. In the first half of 2015, Fosun expanded its capital 12.16% or by issuing 838 million new shares, thereby beefed up its net assets. Meanwhile, Fosun and the invested enterprises of the funds under its management completed four IPOs, including two backdoor or merger listings. Furthermore, Fosun holds strict requirements for dividend payouts from its subsidiaries. From 2004 to 2013, the dividend payouts to the Group averaged 33.41% of the attributable earnings of the industrial subsidiaries. In the first half of 2015, Fosun received dividends from subsidiaries amounted to RMB769 million (including dividiends from industrial subsidiaries amounted to RMB409 million).

Reaping benefits from the enhancements in asset structure and equity expansion, Fosun's net gearing ratio lowered to 63.0% in the first half of 2015, down 10.3 percentage points from end-2014. The Group's ROE rose significantly to 12.9%, up 4.1 percentage points year-on-year.

Fully embracing the internet, establishing an Internet ecosystem, promoting the Star Plans

In the first half of 2015, Fosun Group further expanded its investment efforts in the Internet. Fosun and its managed funds have been persisting in "first or unique in the industry" as the guideline in identifying projects. Fosun and its managed funds added RMB1.83 billion in new Internet investment assets, including one of the first approved private banks Zhejiang Internet Commerce Bank, Dianping.com with over 200 million mobile client-end users and active users, and the world's largest Internet diagnosis healthcare platform Guahao.com with 82 million subscribers. Moreover, Cainiao Internet Technology Limited has nine projects under construction, which had a total of approximately 1.1 million sq.m. in aggregate GFA, and the three projects in Tianjin, and Jinyi city and Haining city in Zhejiang had been completed. Cainiao Internet Technology Limited also has eight projects signed in Guangdong, Chongqing, Hubei, Shaanxi and Sichuan. In addition, Fosun will join forces with SinoPharm Logistics to establish a nationwide pharmaceutical infrastructure platform. Fosun, through a subsidiary, will hold a 60% interest.

Apart from investing in the Internet, Fosun has been actively building customer and enterprise cloud. Since the FosunLink (originally named "Fosun-Managing-Link") was successfully launched last year, its products currently covers over 27,000 employees from Fosun Group and its 100 invested companies. In Fosun's view, these employees are middle class, or even high-net-worth individuals, which are the target clients for the health and happy & lifestyle ecosystems which Fosun is building actively. Riding on the successful launch of FosunLink, Fosun has also proactively encouraged every staff to establish their online mini-shops via FosunLink, thereby enabling them to promote the products of Fosun's portfolio companies within the healthcare and happy & lifestyle segments to their friends and families. Meanwhile, Fosun also internally launched a one-stop health services platform - Xingyikang with current registered users totaled more than 220,000.

Fosun also has noticed that many enterprises in traditional industries own large customer bases and databases, and with solid industrial foundations have begun their internet transformation. The O2O transformation in traditional companies is the blue-ocean for investments. Fosun always promotes O2O transformation in all invested companies based on this understanding. In the first half of 2015, Fosun's subsidiary Fosun Pharma formed a strategic cooperation with Fosun's investment enterprise Guahao.com, jointly developed pharmaceutical e-commerce with JXDYF.com, to initiate deep cooperation and online & offline O2O development. Guahao.com is the world's largest Internet diagnosis healthcare platform in scale, with 82 million subscribers. It served 160 million people in 2014 and had 1,860 professional teams on standby. In addition, Fosun established Guangzhou Fosun Yuntong Small Loan Co., Ltd. in July 2015, aiming to further develop supply chain finance nationwide. Lastly, Fosun is now actively promoting happy & fashionable lifestyle e-commerce transformation, with online products of Club Med, Folli Follie, Secret Recipe, Yuyuan to be launched one after another.

Taking roots in all-round industrial competitiveness upgrade rapidly

Leveraging Fosun's established capabilities in healthcare, happy & fashionable lifestyle, logistics and commodity industries, the Group encouraged cross-industry integration and proactively promoted connection of industries with insurance and finance, capabilities of creating environments that facilitated integration of industries and insurance into hive cities, creating cross-industry integration operation platform unique to Fosun one after another. Hive cities are new urbanization products promoted by Fosun since 2013. As at 30 June 2015, Fosun, its managed funds and its invested companies with controlling and minority interests, launched a cumulative total of 18 hive cities in 4 major categories, with a total construction areas for these hive cities exceeded 6.3 million sq.m. The 18 hive cities including (1) Healthcare hive includes of five projects: The First Affiliated Hospital of Soochow University Medical Care Community in Suzhou, Taizhou Zanyang Medical Care Community, Ningbo No.9 Hospital Medical Care Community, Changbai Island Medical Care Community in Shenyang and Shanghai Starcastle Zhonghuan Medical Care Community; (2) Financial services hive includes four projects such as Shanghai Bund BFC; (3) Culture & tourism hive has five projects including Atlantis, Sanya, Hainan and Yuyuan Phase II; (4) Logistics & trade hive includes four projects such as Tianmao City in Jimo, Qingdao. Shanghai Bund BFC was built as a financial center in Shanghai's core area, with gross floor area of 426,000 sq.m., and is expected to open in 2016.In addition, the Atlantis, Sanya, Hainan has been confirmed to be built into an iconic tourist facility in Sanya for tourism 3.0 upgrade version. The project occupies a site area of 806 acreage with 510,000 sq.m. in GFA in the core area of Haitang Bay, Sanya. The Atlantis Sanya, Hainan has a book value of RMB2.6 billion. The first phase is earmarked for a hotel with eight floors of the main hotel building completed construction and are expected to be officially opened in September 2017. The second phase is for villas and apartments with total saleable area of 120,000 sq.m. The second phase project proposal has been approved and is expected to be launched for sale next year.

Apart from the hive cities, other industries of Fosun will undergo deepening connection or transformation based on quality health and happy services capabilities to achieve cross-border integration and develop multidimensional competitiveness.

For instance, Fosun's high-end medical services brand United Family Hospital has collaborated with Fosun's insurance company Yong'an P&C Insurance to launch "United Family Insurance", which is based on the industrial capacity of United Family Hospital to achieve an overall control in insurance costs. On the other hand, after the completion of investment by Fosun, Club Med has rapidly connected with Cirque du Soleil which Fosun invested in to establish a global partnership to jointly launch projects in its resorts and to unveil a theme park designed by Cirque du Soleil. The first joint project has launched in Club Med's Punta Cana resorts in Dominican Republic. Furthermore, Club Med has also connected with the UK leisure tourism group Thomas Cook, which Fosun invested in the beginning of the year, it will help enhance performances in European markets that Club Med had not been performing well enough in the past.

Looking Forward: Adhere to value investing, identify mismatch opportunities around the world, realize cross bull-bear low-risk high-yield growth

Currently, Fosun decided to use CIPC as its new model for investment, which is to select middle-class families and high net worth individuals as clients (Clients), focusing on upgrades in their consumption and investment demands, through seeking investment opportunities (Investments) worldwide to start opportunistic investments as a small shareholder and gradually to consolidate and merge. Focus on developing highly competitive assets-end and liabilities-end products (Products) to create service experiences that astonish clients (Clients) and maintain sustainable relationships with clients who create frequent and extensive transactions.

Meanwhile, Fosun will continue to identify systematic mismatch of value investing opportunities around the world. Such opportunities mainly include (1) reasonably low-priced overseas consumer assets with China's explosive growth, mismatches between the world's largest and second largest consumer markets, which is the "Combining China's Growth Momentum with Global Resources" investment model that Fosun is proficient in consistently, the key to success rests on helping overseas brands to achieve high growth in China; (2) mismatch between the low-cost capital from the low interest rate environments in Europe, the US and Japan and the high return from RMB and USD assets, the key to success is to identify scalable investment opportunities based on deep and professional industrial capabilities, and to deliver Fosun's investment technique to our invested financial institutions on how to achieve high return in investing RMB and USD assets; (3) sporadic opportunities from the return of China concept stocks, HK-listed stocks and H-shares to A-shares market, opportunities from Asia-listing of Asia-based assets of global consumer enterprises.

Furthermore, Fosun also believes that there are opportunities for A-shares, especially after experiencing the sharp corrections, A-shares are having better margin of safety. Due to the fluctuations in the capital markets, there have been pullbacks recently on Fosun's share price; although such pullbacks reflected market concerns towards performances in the economy in China, but this also brings in a golden value investing opportunity for investors.

For the prospects in the economy in China, Fosun believes although the economy in China is currently under downward pressure, but transformation of the economy has been successful in several provinces such as Shanghai and Zhejiang; if such success in transformation can be replicated and expanded rapidly nationwide, the long-term growth that the transformation of the economy in China brings about is predictable; the corrections in commodity prices have brought about negative sentiments towards the economy in China, but it has lowered costs in Chinese manufacturing sectors; the RMB devaluation has inflicted negative impact on the capital markets, but will benefit exports from China.

Fosun's industrial companies and insurance companies have sufficient capital and is well-prepared for the cross-cycle development.

Source: Fosun International Limited
Related Stocks:
HongKong:0656 OTC:FOSUY
collection