ZhongAn swimming in money post-Hong Kong IPO

Extremely high valuation could be unsustainable, warns expert

ZhongAn swimming in money post-Hong Kong IPO

Insurance News

By Gabriel Olano

ZhongAn Online Property and Casualty Insurance, an online-only mainland Chinese insurer backed by e-commerce giant Alibaba, was massively oversubscribed when its initial public offering (IPO) closed last week.

The insurer was able to price its IPO at the top of the indicated range, raising US$1.5 billion, making it the largest-ever insurtech listing in Hong Kong. Over 100,000 retail investors have subscribed to the IPO, and trading of shares will begin on Thursday.

ZhongAn was founded in 2013 and is backed by the “three Mas”, Alibaba founder Jack Ma Yun, Tencent chairman Pony Ma, and Ping An Insurance’s Ma Mingzhe. Its cornerstone investors include Japanese telecommunications giant SoftBank, which owns less than 5%, and Alibaba fintech affiliate Ant Financial, which owns 16%.

May Zhao, deputy head of research at Zhongtai Financial International, told China Daily that the oversubscription down to: internet giants Tencent and Alibaba being shareholders; the sunny outlook of the mainland Chinese insurance and insurtech sector; and its diversified products that attract a wide variety of consumers, including the younger, more technology-literate demographic.

According to Zhao, the valuation of the company’s IPO market capitalisation is relatively high at HKD77.32-95.96 billion (US$9.9-12.28 billion).

Zhao also expressed doubts that ZhongAn’s profits could continuously support its stock’s high prices, due to high cost of contracts and uncertain annual net profit growth rate. She also cited other concerns, such as the expected surge of internet users in mainland China in the future, as well as regulatory issues, as the current regulatory regime has yet to fully adapt to the emergence of insurtech.

Related stories:
ZhongAn mulls foray into life insurance market
Softbank eyeing US$500m investment in ZhongAn’s IPO
Online-only insurer ZhongAn Online Property and Casualty Insurance planning $1.5 billion listing

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