Fosun International will use its Portuguese insurance firms' kitty of €12.6 billion (HK$128.9 billion) to invest in property and stocks in Organisation of Economic Cooperation and Development countries to reduce its gearing ratio, chief executive Leo Liang Xinjun said yesterday.
"We are very interested in investing in insurance firms," Liang said. "We want to increase our pool of investment funds."
The Shanghai-based investment firm would use funds from US insurer Ironshore, in which it acquired a 20 per cent stake this month, to make investments around the world, said Fosun's co-founding chairman, Guo Guangchang.
Fosun chief financial officer Ding Guoqi said it would also use the US$150 million fund of its Hong Kong insurance company, Peak Reinsurance, to make international investments.
Liang said Fosun was also acquiring a controlling stake in an unnamed, unlisted Hong Kong securities firm to take advantage of the planned through train stock trading scheme between Shanghai and Hong Kong. He declined to reveal more details because the deal has not been announced through the Hong Kong stock exchange.
Fosun, which is listed in Hong Kong, was also interested in investing in a privately held Shanghai bank, which would offer synergies in insurance and investment, Liang added.
Ratings agencies Moody's and Standard & Poor's have expressed concern that Fosun's international shopping spree is incurring heavy debt. This year, Fosun has spent more than HK$22 billion on overseas investments, including majority stakes in three formerly state-owned Portuguese insurance firms.
"We see more and more investment opportunities," Liang said. "We will look for opportunities to use funds from our insurance companies to reduce pressure on our balance sheet. We don't want to increase our gearing ratio. Our Portuguese insurance firms have lots of bonds and cash, which is suitable for investment in property and stocks in OECD countries."
Fosun's cash doubled to 33 billion yuan (HK$41.5 billion) in the six months to June, but total debt rose 26.7 per cent to 87.53 billion yuan. However, its net gearing ratio dipped to 44.7 per cent from 46.2 per cent during the same period. Ding said Foshan aims to reduce its net gearing ratio to 40 per cent.
Fosun plans to team up with Chinese state-owned enterprises in investing overseas, Guo said, and would bring its overseas firms into the mainland to take part in the reform of SOEs, which would include mixed private and state investment in companies.
Net profit from its insurance business rose 19.9 per cent to 114.5 million yuan in the first half, as insurance revenue surged 8,294 per cent to 2.2 billion yuan. Fosun's operating revenue rose 3.4 per cent to 24.8 billion yuan, while net profit grew 8.4 per cent to 1.83 billion yuan.