Fosun cuts insurance stake amid growing debt problems
What’s new: Fosun Groupone of China’s largest private conglomerates, is stepping up efforts to cut investment amid growing concerns about its debt risks.
Fosun International Ltd., the group’s main investment arm, reduced its stake in the Hong Kong-traded shares of New China Life Insurance Co. Ltd. from 5.84% to 4.99% via a block trade on Thursday, according to a New China Life filing on Monday.
The share sale could total HK$448 million ($57 million) based on New China Life’s Thursday closing price of HK$17.12. Fosun made its first investment in New China Life in 2016 when the company’s shares in Hong Kong traded at around HK$22 each.
The context: Concerns about Fosun’s financial health have recently increased after the Beijing municipal government warned state-owned companies of the potential risks of doing business with the company.
Fosun has invested in a large number of companies ranging from property development and tourism to pharmaceuticals and finance. Concerns about its debts have risen amid slowing economic growth and a sluggish real estate market in China.
At the end of June, Fosun’s liability-to-asset ratio rose to 76.7 percent from 74.8 percent at the end of last year, according to its semi-annual report. Short-term borrowings rose 29% from a year earlier to 123.7 billion yuan ($17.8 billion) at the end of June, surpassing 117.1 billion yuan of cash and cash equivalents announced by the company.
Fosun has made various efforts to appease worried investors and accelerated the offloading of assets to improve its liquidity.
Insurance is an important segment of Fosun’s investments in the financial sector. According to the company’s financial report, insurance contributed 19% of the company’s total revenue in the first half, but the segment recorded the largest net loss of 541 million yuan ($77 million). .
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