Bloomberg News

Fosun to Expand Into ‘Sexier’ Finance, Consumer Businesses

September 15, 2011

Sept. 15 (Bloomberg) -- Fosun International Ltd., which today announced an insurance venture with Prudential Financial Inc., plans more acquisitions in the U.S., Europe and Japan to accelerate growth.

Fosun is setting up a 500 million yuan ($78 million) joint venture with Prudential Financial, the second-biggest U.S. life insurer, to provide life insurance products to Chinese consumers. The Shanghai-based company is shifting its focus to faster growing financial and consumer businesses from heavy industries such as steel, said billionaire Guo Guangchang, the company’s co-founder and chairman.

“Other industries are sexier than steel,” Guo said in an interview in Shanghai today. “We are looking at a lot of projects. China’s domestic consumption will definitely see major growth. Our investments aim to accelerate the growth in China of our foreign partners.”

Fosun, with businesses ranging from health care to mining, has made several acquisitions that will help the company benefit from the rising demand in consumer and financial services such as insurance, said Guo, adding that he learns from Warren Buffett’s investment decisions.

Prudential Financial and Fosun are tapping into a market that has expanded an average 30 percent a year in the past three decades because insurance penetration is still far below the global average level, the companies said today. China’s insurance market is expected an annual growth of 10-15 percent in the next five years, said Guo, who’s ranked 27th in Forbes’s China rich list this year with a fortune of $2.7 billion.

The 50-50 partnership, to be based in Shanghai, is expected to start operations in the fourth quarter of next year, according to a joint statement today.

Growth Potential

“China remains the market with the best growth potential globally and in the Asia-Pacific region for foreign insurers,” said Olive Xia, a Shanghai-based analyst at Core Pacific- Yamaichi International Ltd. “Fosun should be a good choice because you need a fairly big and capital-rich local partner given the investments needed for the first three to five years of a life insurance business.”

Retail and financial services operations accounted for 53 percent of Fosun’s profit in the first six months of this year, according to the company’s interim report. Steel and mining businesses made up 27 percent of the total with health care and property contributing 12 percent and 11 percent, respectively.

Guo said Fosun is targeting foreign companies that have fast growth in China with its investments this year in French resort operator Club Mediterranee SA and Greek luxury retailer Folli-Follie Group.

Luxury Brands

Fosun, seeking to invest in luxury clothing and cosmetic brands in Europe, agreed in May to pay 84.6 million euros ($117 million) to buy a 9.5 percent stake in Athens-based Folli-Follie whose activities include the manufacturing and sale of jewelry and handbags. It has a 9.5 percent stake in French resort operator Club Med.

Luxury-goods sales in China are set to rise 18 percent a year to 180 billion yuan between 2010 and 2015, according to estimates by consultant McKinsey & Co.

“If you don’t move forward, you will fall behind,” Guo said. “As an investment company, if you don’t integrate global resources, you will lose your competitiveness.”

--Helen Yuan, Zhang Dingmin and Stephanie Wong. Editors: Andreea Papuc, Tomoko Yamazaki

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net; Dingmin Zhang in Beijing at dzhang14@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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