v2.3.0.11
Acquisitions
 12 Months Ended
Dec. 31, 2010
Acquisitions [Abstract]  
Acquisitions
(3) Acquisitions
Acquisitions in 2010
(a) P&C segment
On December 31, 2009 and March 30, 2010, the Group entered into agreements to acquire an addition 41% equity interest in Hebei Fanlian Insurance Agency Co., Ltd. (“Fanlian”), Shandong Fanhua Mintai Insurance Agency Co., Ltd. (“Mintai”) and Ningbo Baolian Insurance Agency Co., Ltd. (“Baolian”) at a cash consideration of RMB52,000, RMB90,000 and RMB60,000, respectively, bringing the Group’s shareholdings in Fanlian, Mintai and Baolian from 10% to 51%. The acquisitions of Fanlian, Mintai and Baolian were completed on January 1, 2010 and April 1, 2010 respectively. The selling shareholders of Fanlian, Mintai and Baolian agree to transfer 5% interest in Fanlian, Mintai and Baolian to the Company for RMB0.001 if Fanlian, Mintai and Baolian fail to meet performance target in years 2010 to 2012. In addition, the selling shareholders of Fanlian, Mintai and Baolian agree to return up to RMB9,000, RMB13,500 and RMB9,000 to the Group, respectively, if performance criteria for years 2010 to 2012 cannot be met.
On September 27, 2010, the Group entered into agreements to acquire an additional 46% equity interest in Shengyang Fangda Insurance Agency Co., Ltd. (“Fangda”) for a total cash consideration RMB40,000, bringing its shareholdings in Fangda from 5% to 51%. The acquisition of Fangda was completed on October 1, 2010. The selling shareholder of Fangda agrees to transfer 5% interest in Fangda to the Company for RMB0.001 if Fangda fails to meet performance target in years 2011 to 2013. In addition, the selling shareholder of Fangda agrees to return up to RMB15,000 to the Group if performance criteria for years 2011 to 2013 cannot be met.
On July 29, 2010, the Group entered into an agreement to acquire 65.1% equity interest in Inscom Holding Limited (“Inscom”) and its subsidiaries and its VIE for a cash consideration RMB84,000. The acquisition of Inscom was completed on November 1, 2010.
The following table summarizes the estimated fair value for the acquirees assumed at the date of acquisition:
                                         
    Fanlian     Mintai     Baolian     Fangda     Inscom  
    RMB     RMB     RMB     RMB     RMB  
Cash consideration for controlling interest
    52,000       90,000       60,000       40,000       84,000  
Fair value of previously held equity interest
    10,530       16,900       11,270       3,344       —  
Fair value of noncontrolling interests
    51,580       82,820       55,210       32,776       37,380  
 
                             
Total consideration
    114,110       189,720       126,480       76,120       121,380  
 
                             
The Group recognized investment income of RMB41,244 representing gains from re-measuring equity interests formerly held by the Company in Fanlian, Mintai, Baolian and Fangda at fair values on the date of completion of acquiring the additional equity interest.
The following table summarizes the estimated fair value for major classes of assets acquired and liabilities assumed at the date of acquisition.
                                         
    Fanlian     Mintai     Baolian     Fangda     Inscom  
    RMB     RMB     RMB     RMB     RMB  
Net tangible assets acquired
    3,265       2,632       (411 )     2,382       10,044  
Intangible assets
    20,880       17,850       12,760       12,111       17,680  
Goodwill
    95,185       173,608       117,093       64,500       98,076  
Deferred tax assets
    —       92       228       155       —  
Deferred tax liability
    (5,220 )     (4,462 )     (3,190 )     (3,028 )     (4,420 )
 
                             
Total consideration
    114,110       189,720       126,480       76,120       121,380  
 
                             
The excess of purchase price over tangible assets and identifiable intangible assets acquired and liabilities assumed was recorded as goodwill.
The acquired intangible assets were composed of the following:
                                                 
            Fair Value Acquired  
    Useful life     RMB  
    (Years)     Fanlian     Mintai     Baolian     Fangda     Inscom  
Trade name
    9.4       —       —       —       —       8,140  
Customer relationship
    5.8-6.25       13,360       490       2,300       4,910       3,210  
Non-compete agreement
    5.8-6.25       6,640       16,880       10,020       6,311       —  
Agency agreement
    5.8-6.25       880       480       440       890       590  
System and software
    5.0-10.0       —       —       —       —       5,740  
 
                                     
Total
            20,880       17,850       12,760       12,111       17,680  
 
                                   
The following unaudited pro forma information summarizes the effect of the acquisition, as if the acquisition had occurred as of January 1, 2009 and January 1, 2010. This unaudited pro forma information is presented for information purposes only. It is based on historical information and does not purport to represent the actual results that may have occurred had the Group consummated the acquisitions on January 1, 2009 and January 1, 2010, nor is it necessarily indicative of future results of operations of the consolidated enterprises:
Acquisition of Fanlian
                 
    Year ended December 31,  
    2009     2010  
    RMB     RMB  
    (unaudited)     (unaudited)  
Pro forma net revenues
    1,180,577       1,485,029  
Pro forma income from operations
    322,981       431,616  
Pro forma net income
    299,775       422,309  
Pro forma net income per share
    0.3285       0.4408  
Acquisition of Mintai
                 
    Year ended December 31,  
    2009     2010  
    RMB     RMB  
    (unaudited)     (unaudited)  
Pro forma net revenues
    1,154,934       1,485,639  
Pro forma income from operations
    322,948       430,649  
Pro forma net income
    299,494       421,817  
Pro forma net income per share
    0.3282       0.4403  
Acquisition of Baolian
                 
    Year ended December 31,  
    2009     2010  
    RMB     RMB  
    (unaudited)     (unaudited)  
Pro forma net revenues
    1,157,672       1,486,220  
Pro forma income from operations
    323,474       430,684  
Pro forma net income
    299,474       421,714  
Pro forma net income per share
    0.3282       0.4402  
Acquisition of Fangda
                 
    Year ended December 31,  
    2009     2010  
    RMB     RMB  
    (unaudited)     (unaudited)  
Pro forma net revenues
    1,158,969       1,492,002  
Pro forma income from operations
    323,819       430,148  
Pro forma net income
    299,661       421,738  
Pro forma net income per share
    0.3284       0.4402  
Acquisition of Inscom
                 
    Year ended December 31,  
    2009     2010  
    RMB     RMB  
    (unaudited)     (unaudited)  
Pro forma net revenues
    1,169,207       1,490,068  
Pro forma income from operations
    328,576       426,688  
Pro forma net income
    304,225       415,734  
Pro forma net income per share
    0.3334       0.4339  
(b) Headquarter
On December 31, 2009, the Group entered into an agreement to acquire 100% equity interest in Litian Zuoyue Software (Beijing) Co., Limited (“Litian”) for a total cash consideration RMB0.002. Litian is a company qualified as software company and exempted from PRC income tax for two years starting from its first profit-making year, followed by a 50% reduction for the next three years. The estimated fair value of liabilities acquired assumed at the date of acquisition amounted to RMB9,007 and intangible assets of RMB9,007 was recorded. Such acquisition was completed on January 1, 2010 and accounted as acquisition of assets.
Acquisitions in 2009
(a) Claims Adjusting segment
On June 1, 2009, the Group entered into an agreement to acquire 100% equity interest in Shenzhen Fanhua Property and Casualty Insurance Surveyors & Loss Adjustors Co., Ltd. (formerly known as Shenzhen Hongzhengda Insurance Surveyors & Loss Adjustors Co., Ltd.) (“Hongzhengda”) for a total purchase consideration RMB30,000, through a VIE, Fanhua Surveyors & Loss Adjustors Co., Ltd, in which 51% equity interest was held by the Company. Hongzhengda is a company specializing in the provision of claims adjusting services related to non-automobile property and casualty insurance.
The following table summarizes the estimated fair value for major classes of assets acquired and liabilities assumed at the date of acquisition.
         
    RMB  
Net tangible assets acquired
    3,597  
Intangible assets
    11,290  
Goodwill
    16,940  
Deferred tax liability
    (1,827 )
 
     
Total consideration
    30,000  
 
     
The excess of purchase price over tangible assets and identifiable intangible assets acquired and liabilities assumed was recorded as goodwill.
The acquired intangible assets were composed of the following:
                 
    Useful life     Fair value acquired  
    (Years)     RMB  
Brand name
  Indefinite       3,980  
Customer relationship
    5.6       5,910  
Non-compete agreement
    3.0       410  
Agency agreement
    5.6       990  
 
             
Total
            11,290  
 
             
The following unaudited pro forma information summarizes the effect of the acquisition, as if the acquisition had occurred as of January 1, 2008 and January 1, 2009. This unaudited pro forma information is presented for information purposes only. It is based on historical information and does not purport to represent the actual results that may have occurred had the Group consummated the acquisitions on January 1, 2008 and January 1, 2009, nor is it necessarily indicative of future results of operations of the consolidated enterprises:
                 
    Year ended December 31,  
    2008     2009  
    RMB     RMB  
    (unaudited)     (unaudited)  
Pro forma net revenues
    869,361       1,161,248  
Pro forma income from operations
    210,580       325,572  
Pro forma net income
    192,691       300,132  
Pro forma net income per share
    0.2112       0.3289  
(b) P&C segment
On March 31, 2009, the Group entered into agreements to acquire an additional 41% equity interest in Hangzhou Fanhua Zhixin Insurance Agency Co., Ltd. (“Zhixin”) bringing its shareholdings from 10% to 51% and an additional 46% equity interest in Henan Fnahua Anlian Insurance Agency Co., Ltd. (formerly known as Zhengzhou Fanhua Anlian Insurance Agency Co., Ltd.) (“Anlian”) bringing its shareholdings from 5% to 51%.
The Group paid cash consideration totaling RMB2,000 on acquisition date and shall pay up to RMB99,000 and RMB39,000 additional considerations in cash to the former shareholders of Zhixin and Anlian, respectively, contingent on Zhixin and Anlian meeting certain earnings targets on or prior to December 31, 2011.
                 
    Zhixin     Anlian  
    RMB     RMB  
Cash consideration on acquisition date
    1,000       1,000  
Fair value of previously held equity interest
    16,250       2,730  
Fair value of noncontrolling interests
    79,600       26,720  
Contingent consideration payables at fair value on acquisition date
    85,500       31,580  
 
           
Total consideration
    182,350       62,030  
 
           
The Group recognized investment income of RMB18,905 representing gains from re-measuring the 10% and 5% equity interests formerly held by the Company in Zhixin and Anlian at fair values on April 1, 2009.
The recorded purchase price for all acquisitions consummated after January 1, 2009 will include an estimation of the fair value of liabilities associated with any potential earn-out provisions. Subsequent changes in the fair value of earn-out obligations will be recorded in the consolidated statement of income when incurred. The change to the fair value of earn-out obligations recorded in net income for the year ended December 31, 2009 was RMB5,946.
On August 30, 2009, the Group entered into supplemental agreements with the selling shareholders of Anlian and Zhixin agreeing to fully settle the contingent consideration payables at carrying amounts as of June 30, 2009 of RMB90,000 and RMB33,000, respectively, before the earn-out obligations are met. In addition, pursuant to the supplemental agreements August 30, 2009, the selling shareholder of Anlian has agreed to return up to RMB8,000 to the Group if performance criteria for years 2010 and 2011 cannot be met and the selling shareholder of Zhixin has agreed to return up to RMB23,000 to the Group if performance criteria for years 2009, 2010 and 2011 cannot be met.
The following table summarizes the estimated fair value for major classes of assets acquired and liabilities assumed at the date of acquisition.
                 
    Zhixin     Anlian  
    RMB     RMB  
Net tangible assets (liabilities) acquired
    (394 )     268  
Intangible assets
    18,090       8,240  
Goodwill
    168,953       55,524  
Deferred tax assets
    223       58  
Deferred tax liability
    (4,522 )     (2,060 )
 
           
Total
    182,350       62,030  
 
           
The excess of purchase price over tangible assets and identifiable intangible assets acquired and liabilities assumed was recorded as goodwill.
The acquired intangible assets were composed of the following:
                         
            Fair value acquired  
    Useful life     RMB  
    (Years)     Zhixin     Anlian  
Customer relationship
    5.8       720       1,010  
Non-compete agreement
    5.8       16,590       6,810  
Agency agreement
    5.8       780       420  
 
                   
Total
            18,090       8,240  
 
                   
The following unaudited pro forma information summarizes the effect of the acquisition, as if the acquisition had occurred as of January 1, 2008 and January 1, 2009. This unaudited pro forma information is presented for information purposes only. It is based on historical information and does not purport to represent the actual results that may have occurred had the Group consummated the acquisitions on January 1, 2008 and January 1, 2009, nor is it necessarily indicative of future results of operations of the consolidated enterprises:
                 
    Year ended December 31,  
    2008     2009  
    RMB     RMB  
    (unaudited)     (unaudited)  
Pro forma net revenues
    844,265       1,157,538  
Pro forma income from operations
    204,209       324,987  
Pro forma net income
    187,279       299,916  
Pro forma net income per share
    0.2052       0.3287