Futong Insurance officially renamed to CHOW TAI FOOK Life, can changing the name ease the anxiety of the Zheng's family?

Fortune Insurance, acquired by CHOW TAI FOOK Group six years ago, officially changed its name to "Zhou". In 2018, the prestigious CHOW TAI FOOK Group acquired Fortune Insurance from Earning Star Limited for HKD 21.5 billion. Under the protection of the Zhou family, Fortune Insurance flourished, ranking first in new single premium income in the Hong Kong insurance market, with 60% of its mainland customers. As one of the earliest domestic gold brands, CHOW TAI FOOK enjoys high visibility and public trust. It is perhaps for this reason that CHOW TAI FOOK Group chose to rename Fortune Insurance at this time.

Fortune Insurance under CHOW TAI FOOK Group is officially renamed Zhou Dafu Life Insurance.

On July 22nd, Fortune Insurance announced its official name change to Zhou Dafu Life Insurance Limited.

The connection between CHOW TAI FOOK and Fortune Insurance dates back to 2018. At that time, the struggling "Earning Star Limited" had to sell Fortune Insurance to Earning Star Limited for HKD 21.5 billion, which is controlled by CHOW TAI FOOK Group. Therefore, Fortune Insurance officially became one of the members of the Zheng family's business empire in Hong Kong, one of the four major families.

After six years of ownership, the Zheng family finally bestowed the century-old business reputation of "CHOW TAI FOOK" upon Fortune Insurance, indicating a closer connection between the insurance company and CHOW TAI FOOK.

Having been rooted in Hong Kong for nearly 40 years, Fortune Insurance has become one of the largest life insurance companies in Hong Kong. According to the latest statistics from the Hong Kong Insurance Authority in 2023, Fortune Insurance ranks first in terms of new single premium income, followed by Manulife, AIA, Sun Life, and Fubon Insurance.

Ye Wenjie, CEO of Fortune Insurance, explicitly stated in a statement that the new business structure of Fortune Insurance currently shows significant characteristics, with mainland customers accounting for a significant share of up to 60%.

Given the widespread recognition and reputation of CHOW TAI FOOK brand in mainland China, renaming to "Zhou Dafu Life" may further attract attention and favor from more mainland customers.

Fortune Insurance, changing hands for the fifth time

This is the fifth time Fortune Insurance has changed its name.

Records show that Fortune Insurance was originally named New Zealand Insurance. In 1992, Hong Kong entrepreneur Yuan Tianfan acquired New Zealand Insurance and renamed it Pengli Insurance.

However, due to disagreements among partners, Pengli Insurance was sold to Li Zekai in 1995 and renamed Yingke Insurance. In 2007, Li Zekai sold 50.5% of Yingke Insurance's shares to the Belgian Fortune Group, cashing out over HKD 3 billion, and Yingke Insurance was officially renamed Fortune Insurance.

In 2015, this insurance company underwent another change in shareholders. In August of that year, Jiuding Group spent nearly HKD 15.5 billion to fully acquire Fortune Insurance, changing the shareholder behind Fortune Insurance from Fortune Group to Jiuding Group.

After joining Jiuding Group, Fortune Insurance developed rapidly. In 2016 and 2017, Fortune Insurance's net profit reached HKD 609 million and HKD 996 million respectively. In the first half of 2018, Fortune Insurance's revenue was HKD 3.77 billion, a 23% year-on-year increase, achieving a net profit of HKD 799 million, a 47% year-on-year increase. Fortune Insurance's profits once accounted for 85% of Jiuding Group's total profits However, the good times did not last long. With the "Jiuding Group" falling into trouble, Jiuding Group had to divest its stake in FUTON Insurance. Faced with this "cash cow," there were many coveters in the market, but only a few could afford the huge acquisition cost.

After multiple rounds of negotiations, at the end of 2018, one of the four major families in Hong Kong, the Cheng family, emerged and fully acquired FUTON Insurance for HKD 21.5 billion.

Compared to Jiuding Group, the Cheng family undoubtedly had stronger financial strength. According to Forbes' data for 2023, the Cheng family's total assets reached a high of USD 2.89 billion, approximately HKD 22.54 billion, ranking third, only behind the Lee Shau Kee family and the Lee Ka Shing family.

Currently, the Cheng family's listed companies mainly include four, namely Chow Tai Fook Jewellery Group, which specializes in jewelry retail, New World Development in the core real estate sector, New Creation Group covering transportation containers and insurance businesses, and New World Department Store China operating department stores in mainland China.

In addition to the industrial sector, the Cheng family is also seeking financial licenses. In addition to FUTON Insurance, in 2017, the Cheng family completed the acquisition of Beijing Huarui Fuda Technology Co., Ltd., indirectly obtaining a payment license. In 2018, they fully established Zhongxin Guoxin Financial Leasing Co., Ltd., obtaining a financial leasing license. In the same year, they participated in the capital increase and share expansion of Sichuan Jincheng Consumer Finance Co., Ltd., holding a 25% stake and becoming its second largest shareholder. In 2020, they were granted approval to establish Hainan New Creation Asset Management Co., Ltd., and the Cheng family successfully obtained an AMC license.

Furthermore, the Cheng family has also raised the flag of "venture capital," successively establishing multiple investment platforms such as C Capital, Six Veins Capital, and Guanbo Qicheng, investing in many well-known enterprises such as XPeng, Nio, JD Logistics, and Xiaohongshu.

In fact, many of the Cheng family's capital operations are inseparable from the influence of the third-generation successor, Zheng Zhigang. Unlike predecessors who started with jewelry and made their mark in real estate, Zheng Zhigang graduated from Harvard and has worked at international investment banks such as Goldman Sachs and UBS, experiences that have made him extremely proficient in capital operations.

Now, renaming FUTON Insurance to Chow Tai Fook Life may indicate that the Cheng family will further strengthen its presence in the insurance industry.

Can one plus one be greater than two?

With the full customs clearance between Hong Kong and the mainland, the enthusiasm of mainland residents to purchase insurance in Hong Kong has significantly increased, presenting a great opportunity for the development of the Hong Kong insurance industry.

According to the latest statistics from the Hong Kong Insurance Authority, mainland visitors' insurance premiums in Hong Kong reached HKD 59 billion in 2023, a 28-fold increase year-on-year, second only to the historical peak of HKD 72.7 billion in 2016, reaching the second highest peak in history.

In the first quarter of this year, new business premiums from mainland visitors continued to rise, reaching HKD 15.6 billion, a 62.5% increase year-on-year; the number of policies reached 52,000, with a growth rate of 52%.

Previously, FUTON Insurance's CEO Ye Wenjie explicitly stated in a statement that the new business structure of FUTON Insurance currently shows significant characteristics, with mainland customers accounting for a significant share of up to 60%. Impact of Mainland Residents' Increasing Interest in Hong Kong Insurance

By the end of 2023, FUTONG Insurance's annualized premium income has increased by 176% year-on-year, far exceeding the industry's overall growth rate of 99%. The premium income has grown by 233% year-on-year, significantly surpassing the industry's overall growth rate of 34%.

According to the latest statistics on Hong Kong insurance released by the Insurance Authority of Hong Kong in 2023, FUTONG Insurance, with a premium income of HKD 16.2 billion, not only ranks fifth in total premium income, policy numbers, and average premium per policy in the individual business new policy ranking, but also achieved a staggering 232% year-on-year growth in total premium income, the highest in the Hong Kong insurance industry.

In the broker business new policy ranking, FUTONG Insurance, with a premium income of HKD 15.12 billion, outperformed Hang Seng Insurance, AIA Insurance, Sun Life Insurance, and Fubon Insurance, with a market share of 28.1%, firmly holding the top spot.

Furthermore, FUTONG Insurance has excellent risk control indicators. By the end of 2023, FUTONG Insurance's solvency ratio reached 314%, far exceeding the regulatory standard of 150% in the Hong Kong life insurance industry.

Given the widespread recognition and reputation of the CHOW TAI FOOK brand in mainland China, renaming it "CHOW TAI FOOK Life" may attract more attention and favor from mainland customers.

In addition to increased brand awareness, FUTONG Insurance has also engaged in diversified cooperation with CHOW TAI FOOK and New World Group.

For example, on the day of renaming to "CHOW TAI FOOK Life," the insurance company launched the "CHOW TAI FOOK Life Circle" membership program, which includes diamond, gold, and basic membership levels. Members can enjoy a variety of exciting life benefits from different business units within the CHOW TAI FOOK Group, covering services from hotels, dining, education to health.

During the press conference, Yip Man Kit, CEO of CHOW TAI FOOK Life, also mentioned that the new brand "CHOW TAI FOOK Life" signifies the close relationship between the company and CHOW TAI FOOK Group. On one hand, it carries the nearly century-old brand foundation of CHOW TAI FOOK Jewelry, enhancing customer confidence. On the other hand, the new corporate image will inject unlimited vitality into the company, helping FUTONG seize more opportunities, unleash greater potential, drive business growth, and provide high-quality products and services to different customers, continuously creating new value in the insurance industry.

Anxiety During the Bottleneck Period

The Zheng family, who has been expanding their business empire, has recently encountered challenges.

Since the beginning of this year, the price of gold has repeatedly hit new highs, with the listed gold price at CHOW TAI FOOK stores surpassing 740 HKD per gram at one point. However, despite the rise in gold prices, CHOW TAI FOOK is not feeling happy at all.

On July 30th, CHOW TAI FOOK's stock price once again fell, closing at 7.12 HKD per share, a decrease of nearly 45.15% from the high point of 12.98 HKD per share in March this year. In other words, in just 4 months, CHOW TAI FOOK's market value has evaporated by approximately 58.5 billion HKD, with the current market value standing at only 71.1 billion HKD.

The fluctuation in CHOW TAI FOOK's stock price reflects the current situation of this jewelry and gold enterprise. Gold is inherently a highly cyclical business, and the recent surge in gold prices has not brought new profit increments to the jewelry industry but instead has created operational pressures Data shows that Chow Tai Fook Jewelry's retail value in the mainland China market fell by 18.6% year-on-year, while it dropped by 28.8% in Hong Kong, Macau, and other markets. Among them, both direct-operated and franchised Chow Tai Fook Jewelry stores saw double-digit declines in same-store sales.

Affected by this, from April to June, Chow Tai Fook Jewelry closed a net of 91 retail points in mainland China, with 85 new retail points opened and 176 retail points closed.

Looking at Chow Tai Fook's 2024 fiscal year performance report, in the 2024 fiscal year, Chow Tai Fook achieved a total operating revenue of HKD 108.713 billion, a year-on-year increase of 14.8%; the main operating profit reached HKD 12.163 billion, an increase of 28.9% compared to the 2023 fiscal year.

However, the company's profit performance fell short of expectations. During the reporting period, Chow Tai Fook achieved a net profit attributable to equity holders of HKD 6.499 billion, a 20.7% increase compared to the low point of the 2023 fiscal year, but only recovered to 96.8% of the same indicator in the 2022 fiscal year, far below the market's previous estimate of HKD 7.71 billion.

The decline in gross profit margin may be an important reason for this situation. The financial report shows that in the 2024 fiscal year, Chow Tai Fook's comprehensive gross profit margin was only 20.50%, the lowest level since the 2009 fiscal year.

In addition, the gold business growth is weak, and the real estate business is also sluggish. Last year, New World Development had a difficult year. The financial report shows that in the second half of 2023, New World Development's total revenue was HKD 17.066 billion, a 25% year-on-year decrease. In terms of debt ratio, as of the end of 2023, New World Development's net debt ratio increased by 6.9 percentage points compared to the 2022 fiscal year, to 49.9%.

Similar to Chow Tai Fook, New World Development's stock price has also experienced a significant decline. Data shows that this year, New World Development's stock price has fallen by 41.19%, with a market value evaporation of approximately HKD 11.3 billion.

Against the backdrop of both main businesses not meeting expectations, the Cheng family renaming FTLife Insurance to Chow Tai Fook Life may indicate their next development focus