Chinese conglomerate and investment company, Fosun International Ltd. is considering selling its majority stake or a minority interest in Peak Reinsurance Co., according to Bloomberg News sources.
A transaction could value Peak Re at $500 million to $1 billion, and potential buyers have shown interest, including private equity firms, sources said. Considerations are at an early stage and the company may still decide against pursuing a transaction, they added.
In response to a Bloomberg News query, company representatives said that Fosun regularly evaluates options for its businesses. They did not provide specific comments on Peak Re.
This potential transaction is a move Fosun is considering as it weighs strategic options for its Hong Kong-based reinsurer as it is looking to pay down debt.
According to Peak Re’s latest annual report, US-based Prudential Financial Inc. owns about a 13% stake in the reinsurer, while Fosun holds the remainder.
Founded in 2012, Peak Re focuses on insurance including property and casualty, and life and health, according to its website. It counts more than 580 clients across 60 markets in Asia Pacific, Europe, the Middle East and Africa, and the Americas. It had about $2.1 billion in gross written premiums as of the end of last year.
Earlier this week, Fosun told analysts that it is targeting to sell as much as $11 billion of assets within the next 12 months. According to Bloomberg News, a Fosun representative has said that the group currently has no plans to sell.
On October 25, credit rating agency Moody’s downgraded Fosun to B2 from B1 and revised its outlook to “negative” from “ratings under review” amid concerns over the firm’s accelerated asset sales.
According to Bloomberg News, Moody’s latest ratings were unsolicited, the credit assessor said. On October 24, Fosun disclosed it notified the firm to terminate business cooperation and said it stopped providing Moody’s with relevant information.
The ratings agency placed Peak Re’s Baa1 insurance financial strength rating on review for downgrade on October 7, after changing its outlook in August to negative.
According to Moody’s, Peak Re faces increasing risks of contagion from Fosun’s weakening credit profile. The reinsurer has implemented effective ring-fencing measures and its capital is adequately protected from access by shareholders or other third parties, according to a Peak Re statement addressing the review.
On October 17 rating agency AM Best announced it had revised Peak Re’s and its Swiss subsidiary’s outlooks to Negative from Stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent).
The rating agency noted that the current unfavourable capital and investment market conditions may exacerbate financial stress on the company’s ultimate parent, Fosun, over the short to intermediate term.