Chinese conglomerate Fosun International Ltd has bid for the Portuguese insurance firm Companhia de Seguros Fidelidade Mundial SA, which also has a branch here.
Fosun is competing against American private equity firm Apollo Management International LLC for the insurance business of Portugal’s Caixa Geral de Depósitos SA (CGD).
State-owned CGD, one of Portugal’s biggest financial services conglomerates, is currently going through restructuring and trying to sell-off its three insurance units: Fidelidade, Multicare and Cares.
Fosun made a bid for all three units last Monday, said vice president and executive director Liang Xinjun in an interview with Portuguese news agency Lusa.
The group made “a pretty attractive offer,” Mr Liang said, without disclosing any concrete figure. “It would be our biggest investment ever in the insurance sector,” he added.
Fosun, China’s largest private-owned conglomerate currently owns shares in three insurers, including an 85 percent stake in Hong Kong’s Peak Reinsurance Co Ltd. Mr Liang emphasised that the group has “a lot of experience in issues related to the restructuring of state-owned companies,” having played a role in the privatisation of 18 such firms. “It is an experience that could help the Portuguese companies. (…) We could, in fact, add value” to CGD’s insurance arm,” the Fosun co-founder said. Mr Liang said he is “confident” of the success of Fosun’s bid and praised the “good communication” with the Portuguese government during the privatisation process. “We hope to win but even if we don’t we will continue to keep a close eye on other investment opportunities in Portugal,” the businessman said.
Paulo Barbosa, general manager of Fidelidade’s Macau branch, told Business Daily in July that a sell-off could have a positive impact for the insurer’s operations here if the unit’s new owner enjoyed a higher rating. Standard & Poor’s ratings agency has downgraded CGD to a BB-minus rating in July last year due to Portugal’s perilous political and economic situation.
That means Fidelidade is unable to grab part of the profitable casino insurance business, Mr Barbosa explained. “The bank syndicates that finance casinos here require that insurers have a rating from Standard & Poor’s of at least A-minus,” he said.
Fosun is yet to reach that threshold, though. It currently has a BB+ rating from Standard & Poor’s.Fidelidade’s non-life division has posted a profit of 11.1 million patacas (US$1.4 million) last year, a 26.5-percent increase on 2011. The company had a market share of 5.9 percent. Mr Barbosa said market share had increased to 8.3 percent last year and was “close to 9 percent” in the first quarter of this year. “The company is now fifth in the market in the non-life sector.”