Ping An Insurance (Group) Co learned a bitter lesson from its Fortis investment and will shift its focus to the domestic market, analysts said, adding that the insurer is one example of how ambitious Chinese companies embarking on a globalization path tumbled amid the global turmoil.
Ping An's massive investment in Fortis turned out to be a bitter lesson when the insurer was hit with an impairment charge of 15.7 billion yuan (US$2.3 billion) that will be included in its third-quarter earnings report as the worst financial crisis since the Great Depression spilled over from the United States into global markets.
Shenzhen-based Ping An in November made a high-profile announcement of its 1.81-billion-euro (US$2.5 billion) purchase of a 4.2-percent stake in Fortis as the biggest overseas investment made by a Chinese insurer.
The company, started by 13 employees two decades ago, grew into China's second largest insurer and called the Fortis stake a strategic investment. Ping An raised its Fortis stake to 4.99 percent.
"Ping An is expected to post a loss-making third-quarter report with its 15.7-billion-yuan impairment charge," said Cao Hengqian, a GF Securities Co analyst. "The impairment charge is expected to drag down Ping An's full-year profit to 150 million yuan."
Analysts said the bitter lesson from the Fortis investment will push Ping An to focus on the Chinese market, as its Chairman Peter Ma already indicated in an internal letter to employees.
Ping An said on October 2 that it had terminated its planned 2.15-billion-euro investment to buy 50 percent of Fortis Assess Management.
(Shanghai Daily October 9, 2008)
