Fosun Cuts Insurance Stake Amid Mounting Debt Concerns


What’s new: Fosun Group, one of China’s largest private conglomerates, is stepping up efforts to pare back investments amid mounting concerns over its debt risks.

Fosun International Ltd., the group’s main investment arm, reduced its holding of Hong Kong-traded shares of New China Life Insurance Co. Ltd. from 5.84% to 4.99% through a block trade Thursday, according to a New China Life filing Monday.

The share sale could total HK$448 million ($57 million) based on New China Life’s closing price Thursday of HK$17.12. Fosun made its first investment in New China Life in 2016 when the company’s Hong Kong shares traded at around HK$22 apiece.

The context: Concerns over Fosun’s financial health mounted recently after the Beijing municipal government cautioned state-owned enterprises about the potential risks of doing business with the company.

Fosun has invested in a huge number of businesses from real estate development and tourism to pharmaceuticals and finance. Concerns about its debts have increased amid slowing economic growth and a sluggish property market in China.

At the end of June, Fosun’s liabilities-to-assets ratio rose to 76.7% from 74.8% at the end last year, according to its half-year report. Short-term borrowings grew by 29% from a year earlier to 123.7 billion yuan ($17.8 billion) at the end of June, exceeding the company’s reported 117.1 billion yuan of cash and cash equivalents.

Fosun has made various efforts to soothe worried investors and accelerated offloading of assets to improve its liquidity.

Insurance is an important segment of Fosun’s investment in the finance sector. According to the company’s financial report, insurance contributed 19% of the company’s total revenue in the first half, but the segment reported the biggest net loss of 541 million yuan ($77 million).

Quick Takes are condensed versions of China-related stories for fast news you can use.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bob.simison@caixin.com)

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2022-09-20 01:20:04

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