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Toh Han Shih

Fosun International ended the year as one of the mainland's most aggressive international dealmakers, with its US$433 million acquisition of US-based Meadowbrook Insurance Group expanding the firm's capability as a global insurance player.
Buying into foreign insurers gives Fosun access to cheaper funding provided by insurance premiums, said Chen Xingyu, an analyst at Phillip Securities.
"Fosun is copying the model of Warren Buffett in running an investment group (Berkshire Hathaway) funded by insurance," Chen said.
The Hong Kong-listed firm's vision was to become "a world-class investment group" driven by a focus on insurance and "global investment capability", Fosun spokesman Chen Bo said.
Including the Meadowbrook acquisition, Fosun invested more than US$3.3 billion in nine overseas deals in 2014, including US film companies and a German fashion firm, making it one of the most aggressive Chinese overseas investors.
However, Fosun closed fewer overseas deals than those of Chinese technology firms Alibaba Group Holding and Tencent Holdings, each of which did more than 30 deals at home and abroad in 2014.
On Tuesday, Fosun signed an agreement to acquire Meadowbrook, a property and casualty (P&C) insurance firm listed on the New York Stock Exchange, for US$433 million in cash, Fosun announced yesterday. This was Fosun's second investment in a US insurance firm in 2014, after it acquired 20 per cent of Ironshore for US$464 million in August.
"This transaction allows Fosun to establish a presence in the important US property and casualty market, consistent with our strategy of expanding our insurance business," Fosun chairman Guo Guangchang said.
Fosun, an investment firm based in Shanghai, has US$50 billion in assets, with over a third of its assets in insurance businesses around the world, said Meadowbrook on its website.
"The company has been making constant efforts to develop insurance as one of its core businesses on a global scale. The company regards the development of the insurance business as a major approach to access long-term high-quality capital," Fosun's announcement said.
The South China Morning Post in August quoted Fosun chief executive Leo Liang Xinjun as saying his company would use its Portuguese insurance firms' kitty of €12.6 billion to make international investments. Fosun completed its acquisition of three Portuguese state insurers for €1 billion in May.
"It's the strategy, using insurance as a funding platform to support Fosun's overseas investments," Chen Xinyu said.
Robert Cubbin, the president and chief executive of Meadowbrook, admitted 2013 was "a very challenging and disappointing year" in his firm's 2013 annual report.
Meadowbrook's operating cash flow plunged to US$2 million at the end of 2013 from US$122 million in 2012. Meadowbrook turned around from a net loss of US$112.3 million in 2013 to a net profit of US$21.1 million in the first three quarters of 2014.
"Combining with Fosun strengthens our capital base," Cubbin said.
The acquisition is subject to the approval of Meadowbrook's shareholders as well as US regulators.
Joyce Huang, a director of insurance ratings at Fitch, said Fosun could better diversify its business through making acquisitions in mature markets such as Europe and the US.
In April, Standard & Poor's downgraded Fosun to BB, indicating the firm faces major uncertainties, saying it did not expect Fosun's financial strength to significantly improve in 12 months.
Fosun's shares edged down 0.39 per cent to HK$10.16 yesterday.
 


Meadowbrook deal sees Fosun end year as one of China's top dealmakers

Fosun chairman Guo Guangchang

Business

Companies

Purchase of US-based Meadowbrook Insurance adds to conglomerate's credentials as one of the mainland's most ambitious global dealmakers
