Fosun: Profit from Insurance Business Grew Rapidly; Two-thirds of Assets Belong to Wealth, Health and Happiness Businesses
Fosun International Limited (which, together with its subsidiaries, collectively referred to as “Fosun” or the “Group”, SEHK stock code: 00656) today announced its annual results for 2015. As at 31 December 2015, Fosun’s total assets amounted to RMB405.3 billion, up 24.8% year-on-year. Net assets attributable to owners of the parent reached RMB75.3 billion, up 52.3% from the end of 2014. Net assets per share attributable to owners of the parent was RMB8.74, up 22.5% year-on-year. Net assets attributable to owners of the parent have grown by CAGR of 43.1% for 11 consecutive years since 2004. Profit attributable to owners of the parent rose by 17.3% to RMB8.04 billion.
Continued to implement its “insurance + investment” twin driver core strategy, Fosun sharpened its focus on businesses of wealth, health and happiness and launched new strategies for having the Group’s rating raised, developing light assets as well as seeking for and developing “Unicorns” in 2015. As a result, the Group further improved its asset-and-debt structure. At the same time, Fosun started its global partnership program and its twin driver empowered by the “Insurance-oriented Comprehensive Financial (Wealth) Capability” and “Global Industrial Integration Capability Taking Roots in China” has been much strengthened than ever.
Investable insurance assets continued to grow rapidly and profit from insurance segment increased significantly
In 2015, Fosun further increased its equity interest in Fosun Insurance Portugal to 84.986% and injected EUR500 million as supplementary capital into the Portuguese insurance business in December 2015. In the second half of 2015, Fosun finished consolidating the financial statements of Ironshore, a global insurance company engaged in specialty insurances, that of MIG (Meadowbrook Insurance Group), an American P&C insurance company with rich experience in labor insurance. As such, a prototype of Fosun’s global insurance network which comprised Yong’an P&C Insurance, Pramerica Fosun Life Insurance, Peak Reinsurance, Fosun Insurance Portugal, Ironshore and MIG took shape.
As at the end of 2015, the total assets under the insurance segment of Fosun already reached RMB180.6 billion, accounting for 44.6% of the Group’s total assets, up from the 32.9% at the end of 2014; investable insurance assets reached a new high again to exceed RMB160.0 billion, up significantly by RMB53.6 billion as compared to the end of 2014. Profit attributable to owners of the parent from the insurance segment surged by 88.4% to RMB2.1 billion.
While its insurance business expanded quickly, all of the insurance companies under Fosun performed well in terms of cost control. For non-life insurance business, apart from its newly acquired MIG, whose net consolidated ratio was 100.3%, net consolidated ratios of Ironshore, Yong’an Insurance and Fosun Insurance Portugal are all below 100% at 96.7%, 98% and 98.4%, respectively. For life insurance business, average guaranteed interest rate at Fosun Insurance Portugal’s existing deposit-oriented life insurance was 2.20%. The average guaranteed interest rate of Fosun Insurance Portugal’s new deposit-oriented life insurance business was merely 1.8%. The average guaranteed interest rate of Pramerica Fosun Life Insurance-related products was 2.7%.
Fosun’s insurance segment will focus on strengthening post-investment management in 2016 and the coming year. While consolidating the post-investment management, Fosun will continue to identify quality businesses as investment targets. Fosun will look for acquisition targets which enable synergies and whose products can supplement the Company’s existing profile. For example, Peak Reinsurance acquired 50% shareholding of a Caribbean property insurance company, namely NAGICO Holdings Limited (pending for regulatory approval). On the other hand, Fosun will actively explore new models for the growth of the investable assets of our insurance business, for example, the Run-off of insurance assets.
Assets were focused on the demand for wealth, health and happiness from middle-class families
Fosun believes that China’s economy will be increasingly driven by consumption. On the demand side, the most noteworthy are the desires to preserve and increase the value of household wealth and those for maintaining health and happy life of every family. These are also what middle-class families love and seek all over the world. Therefore, Fosun persistently focused its assets on B2F (Business to Family) in 2015 and invested in wealth, health and happiness segments.
As at 31 December 2015, total assets from wealth, health and happiness segments reached RMB303.4 billion, accounting for 74.8% of the Group’s total, or up 11.6 percentage points from the end of 2014. Net assets of the three business segments increased by 77.2% to RMB44.3 billion, which accounted for 45.1% of the Group’s total. Revenue grew by 84.6% to RMB38.7 billion, accounting for 49.1% of the Group’s total. Profit attributable to the owner of the parent amounted to RMB7.66 billion, up 47.7% year-on-year and accounting for 95.3% of the Group’s total.
Wealth segment: Fosun is now engaged in building up a global household wealth management platform. This platform includes not only risk management and wealth protection provided by various kinds of insurance products but also more diversified and comprehensive financial services such as management of growth in household wealth, allocation of household wealth as well as Internet finance. As at the end of 2015, Fosun’s investable assets of insurance segment reached RMB160.4 billion. Funds under the Group’s direct management amounted to RMB63.4 billion. Total fund under the third-party wealth management, which was indirectly managed by private banks and insurance companies held by Fosun, was RMB56.8 billion.
2015 was a fruitful year for the wealth segment: Zhejiang E-Commerce Bank Co., Ltd., which was set up along with Ant Financial as well as a few other shareholders, formally opened for business. After IDERA in Japan, Resolution Property, a British property investment and assets management platform, and Fosun Eurasia Capital, a comprehensive financial platform in Russia, were established. Innovative financing companies such as Fosun Yuntong Small Loan, Fosunling and Fortune Credit were launched in China. The Group’s fully-owned Hani Securities was formally renamed as Fosun Hani Securities in early 2016 and became a crucial part of Fosun’s global wealth management network. The household wealth management model adopted by the wealth segment helped the Group obtain stable earnings over the long term through the management and running of the light assets.
[11:28:46] noonEnjoy: Health segment: The health segment of Fosun is ready to grasp opportunity for consolidating its advantages and it will focus on four main areas, specifically population aging, newborns, sub-health and tumors. In 2015, profit attributable to owner of the parent from the Group’s health segment reached RMB1.75 billion, up 60.1% year-on-year. As at 31 December 2015, Fosun has already invested 13 hospitals, 2 professional nursing units and 7 private clinics with 3,777 beds in total. Fosun’s senior living communities, including the high-end senior living organization Starcastle Senior Living, have a total gross floor area (“GFA”) of 96,700 sq.m. with 1,090 beds in total. For the Group’s senior living communities, the total GFA under development was 342,259 sq.m. with 2,977 beds in total in 2015. In addition, Fosun stepped up efforts to invest in innovative medical care projects built upon modern information technologies such as mobile Internet and big data. So far, Fosun has already invested in a number of mobile Internet health brands, such as Guahao.com, Mingyizhudao, Iplusmed, Easyhin, Ysbang and Mypharma, etc. Fosun also set up venture capital fund and angel investment team dedicated to Internet healthcare in order to build up an incubation platform conducive to rapid development of innovative medical care model.
Happiness segment: In 2015, Fosun completed the acquisition of Club Med, a global high-end tourism chain brand and invested in Thomas Cook, a British leisure tourism group, Cirque du Soleil, the quintessence of Canada, and Silver Cross, a British high-end nursery brand. At the same time, Studio 8, a Hollywood movie producer in which Fosun invested, has invested in the shooting of 4 new movies, including two directed by famous director Ang Lee and one of which will be out on general release in the second half of this year. Furthermore, Yuyuan, which is under the wings of Fosun, successfully acquired Hokkaido Hoshino Tamamu Resort, one of the world’s top ski resorts located in Hokkaido, Japan.
Optimized debt structure and endeavored to have the Group’s rating upgraded
In 2015, Fosun established a new strategy to optimize its debt structure and continued to work hard to have the Group’s rating upgraded. At the end of 2015, Fosun’s net gearing ratio decreased to 69.3%, down by 4.0 percentage points compared with that at the end of 2014. Meanwhile, Fosun took full advantage of the domestic low-interest and rate-cut cycle to optimize debt structure quickly, cut fund-raising costs, extend maturity of liabilities and increase liabilities denominated in Renminbi. At the Group’s consolidated level, the proportion of debts with a maturity of three years and above increased from 31.1% of the total at the end of 2014 to 40.0% of the total at the end of 2015.
In addition, Fosun continued to speed up the preparatory work for the listing of its invested enterprises in order to improve the liquidity of its assets. In 2015, Fosun pressed on with the initial public offering of 8 projects as A shares or H shares and the listing of another 4 projects on the National Equities Exchange and Quotations (NEEQ). Fosun strives to build the “listed company + PE” model as a better way to forge ahead with the listing of its overseas invested projects as A shares more quickly. At the same time, Fosun cashed out its investments in a few big projects in 2015: Fosun exited its investment in Focus Media for US$547 million in 2015. Fosun also exited its investments in BHF project, Changyuan project and CITS project for EUR218 million, RMB1.01 billion and RMB932 million, respectively.
Vigorously implemented light asset strategy and “unicorn” strategy
In 2015, Fosun established “light asset” strategy to improve the return overall on assets by driving the development of light assets vigorously at the Group’s level while better enjoying the natural high leverage ratio brought by the insurance segment. Fosun also set strict investment rules for the Group, its insurance firms, majority-owned listed companies and funds to significantly reduce the Group’s overall capital expenditure. In the past year, Fosun adopted “insurance + industry + hive 1 + 1 + 1” model to launch a number of projects, including Ningbo Rehabilitation Medical Care Community, Shenyang Yulongcheng and so on. Going forward, Fosun will build up its capabilities of “wealth+”, “health+” and “happiness+” by fully leveraging the strength and advantages of its businesses. This “light + heavy” model can be adopted to use Club Med and Atlantis to take charge of hotels which have previously been poorly managed, or to use United Family Hospital and Luz Saude to manage hospitals which have been previously run at low efficiency, or to use Cirque du Soleil to utilize idle entertainment venues.
As part of its light-asset strategy, Fosun pushed forward with its “unicorn” strategy vigorously at the beginning of 2016. Fosun believes that in addition to Internet enterprises, a batch of very competitive unicorn enterprises can be created in the wealth, health, happiness and innovative manufacturing industries in the future by proactively integrating Internet and artificial intelligence into traditional industries and by consolidating idle and cheap resources through mature products or business models. Therefore, Fosun firstly implemented “unicorn” strategy vigorously with new investment, including the use of venture capital funds (“VC”) and private equity funds (“PE”) to invest in unicorn projects such as Guahao.com, developing unicorn from the start through greenfield investment, such as Zhejiang E-Commerce Bank Co., Ltd. and Cainiao, investing in unicorn projects in public market, such as Focus Media, and proactively taking part in the restructuring of state-owned enterprises to build unicorns, such as Sinopharm. Secondly, Fosun sought to transform secondary projects such as Fosun Medical and Fosun Tourism into unicorns. Lastly, Fosun stepped up efforts to work with unicorn enterprises in order to transform the Group itself into a unicorn ultimately.
Deeply integrated into mobile Internet, benefiting from global industry evolution
As Fosun’s platform for investing in Internet enterprise at their start or growth stage, Fosun Kinzon Capital makes investment in Internet finance, Internet healthcare, Internet-related properties and auto, O2O (Online to Offline), Internet education, online tourism as well as services for small and medium sized enterprises. As at 31 December 2015, Fosun Kinzon Capital has invested in 35 projects with a total investment value of around HK$1.452 billion.
Fosun believes that China’s huge demographic dividend is switching from the advantages in manufacturing industry brought about by huge cheap labor to the growth of the world’s biggest middle-class consumption market brought about by a huge middle-class population as well as the growth of the world’s biggest mobile Internet market brought about by the world’s biggest group of Internet users. Therefore, Fosun believes that China now has a huge opportunity — traditional industries will fully leverage modern information technologies such as mobile Internet, big data and cloud computing and a more efficient “intelligent economy” business model will be born and become a thriving “unicorn”.
Now, Fosun has already made the following exploration and investment successfully:
Firstly, “Fosunlink” app is adopted as a comprehensive mobile platform for internal management and business development. Using mobile Internet technology, Fosunlink connects internal ancillary resources for global operations such as human resources, legal compliance, finance and auditing to build up strong middle and back offices share global internal ancillary resources and better realize the model of “small elite team at front office + big group’s global resources”. So far, “Fosunlink” app has already covered around 40,000 staff and over 100 enterprises.
Secondly, Fosun vigorously implemented Star Plan, a data-driven O2O (Online to Offline) solution, to enable the Group’s invested enterprises to share the enormous client resource which consists of a huge number of middle-class families. This plan has already covered real behavioral data of over 30 million users from industries such as finance, health, happiness and property, etc.
Thirdly, Fosun actively invested in and developed mobile Internet apps related to wealth, health and happiness, especially apps that integrate Internet into traditional businesses. Examples include Redcollar Kute Smart, which is engaged in Customers to Manufactory (C2M) to mass produce custom-made suits with its business model already being promoted across the whole industry, and other projects such as Guahao.com, Zhejiang E-commerce Bank and Cainiao, which all show huge potential for growth in the future.
Established global partnership program
In early 2016, Fosun announced its global partnership programme and its first 18 partners. Among these 18 partners, 12 of them are aged under 50 and the youngest one is 37. Fosun expects all its partners to always keep up their entrepreneurial spirit, always want to innovate and create, always study, always think of new business model, and have energy, capability and plan to achieve goals.
Apart from this, Fosun built up a professional investment team covering the global market. The number of its managing directors reached 169, of which 91 are focused on overseas markets and 82 are talents hired locally.
Looking forward: more stable and fast growth
After two years of rapid development, Fosun has completed its initial landscape of “insurance + investment” twin driver and achieved economies of scale and good results from the strategy for “focusing on wealth, health and happiness businesses”. From 2016, the Group will continue to work to have its rating upgraded, implement its light-asset and unicorn strategies, drive its organic growth, and concentrate on launching products and services that astonish clients by integrating existing resources from wealth, health and happiness ecosystem and by leveraging new technologies including Internet. Product strength and organic growth will be the theme of the next stage of Fosun’s development.