CNInsure Reaches Deal to Acquire Companies

CNinsure Inc., an independent insurance agency and brokerage company operating in China, has entered into definitive agreements to acquire Khubon Insurance Loss Surveyors & Adjusters Co., Ltd. ("Khubon").

Separately, CNinsure has signed an MOU with Shanghai Tianheng Insurance Loss Surveyors & Adjusters Co., Ltd. ("Tianheng") for a proposed acquisition of 51% of Tianheng. CNinsure acquired 60% of Fangzhong Insurance Loss Surveyors & Adjusters Co., Ltd. ("Fangzhong"), an insurance adjusting company based in Guangzhou, in December 2007.

With the acquisitions, it intends to incorporate Fangzhong, Khubon and Tianheng into one big group, and combine the networks, expertise and customer bases of the three companies into one large adjusting service network in China. The proposed group will adopt the brand of "CNinsure" and be named as "Fanhua ('CNinsure') Insurance Adjusting Group."

Under the terms of the agreements, Fangzhong will acquire all of the equity interests in Khubon from Khubon's existing shareholders, who in return will receive 29.4% of the equity interests in Fangzhong. CNinsure will invest an additional RMB51 million in Fangzhong. Together with its investment in the initial acquisition of 60% of Fangzhong, CNinsure's total investment in these transactions will be RMB58 million.

Upon the completion of these transactions, CNinsure will hold 51% of the enlarged Fangzhong. In addition, two senior executives of the enlarged Fangzhong will transfer some of their equity interests in Fangzhong back to CNinsure for nominal value if Fangzhong fails to meet certain performance targets in 2008 to 2010. The transaction is expected to close in the second quarter of 2008 subject to certain consents, authorizations and other customary closing conditions.

The three adjusting companies are all among the top 20 insurance adjusting firms in terms of revenue in 2007, according to the Insurance Intermediary Market Development Report 2007 published by the China Insurance Regulatory Commission ("CIRC"). Fangzhong was the first CIRC-certified adjusting company in China and ranked No. 17 according to the CIRC report. It specializes in property insurance adjusting. Khubon ranked No. 4 among the top 20. It provides adjusting services to customers in over 20 provinces, with branches in 9 major cities and a professional team of loss surveyors and adjusters. It is particularly strong in vehicle insurance adjusting.

Tianheng, ranked No. 5 among China's top 20 insurance adjusting firms in 2007, according to the same CIRC report. It is one of the two leading adjusters in the non-vehicle insurance adjusting sector, particularly in marine insurance adjusting.

According to the combined revenues of Fangzhong, Khubon and Tianheng in 2007 as shown in the CIRC report, "Fanhua Insurance Adjusting Group" would become the No. 2 insurance adjusting company in China.