Online finance

Online insurer ZhongAn prices Hong Kong IPO at top end to collect US$1.5bn: report

PUBLISHED : Friday, 22 September, 2017, 9:19pm
UPDATED : Friday, 22 September, 2017, 10:47pm

China’s first online-only insurer has priced its initial public offering (IPO) at the top end of its expected price range, as it looks to raise US$1.5 billion in the city’s biggest fintech IPO, according to press reports.

ZhongAn Online Property & Casualty Insurance’s share offering, applications for which closed on Thursday at noon, attracted demand of nearly 400 times the number of shares on offer, according to financial research firm Infocast, based on information from local brokers.

ZhongAn has priced the IPO at HK$59.7 (US$7.6) per share, the top of the price range between HK$53.7 to HK$59.7, said IFR, a Reuters publication, citing unnamed sources. It added the insurer declined to comment on the pricing.

The South China Morning Post made several attempts to contact ZhongAn, but did not receive a response by press time.

ZhongAn plans to offer 199.3 million shares, 5 per cent of which are intended for public offering while the rest are aimed at institutional investors, particularly from overseas.

Nonetheless, according to the prospectus, if the public offering receives an oversubscription of more than 100 times, it will trigger a so-called clawback rule which will enable underwriters to reallocate shares to retail investors from institutional investors, and increase their tranche to 20 per cent.

ZhongAn is set to announce the finalised IPO details on September 27 and make its debut on the Hong Kong stock exchange the following day.

The listing is likely to be the biggest since Guotai Junan raised HK$16 billion (US$2.04 billion) in April.

According to the prospectus, Japan’s SoftBank Group is a cornerstone investor, agreeing to subscribe for 71.9 million shares at the offer price, 36.08 per cent of its shares on offer and 4.99 per cent of its total issued share capital.

ZhongAn was founded in 2013 by Alibaba Group’s chairman Jack Ma Yun, Tencent Holdings’ chairman Pony Ma Huateng, and Ping An Insurance’ chairman Peter Ma Mingzhe. The three are not related.

The company’s gross written premiums jumped to 3.41 billion yuan (US$518 million) in 2016 from 2014’s 794.1 million yuan, a fourfold increase within three years.

Nonetheless, it recorded underwriting losses for three consecutive years, with losses of 61.5 million yuan, 511.6 million yuan, and 153.1 million yuan respectively in 2014, 2015, and 2016.

The losses were blamed on its business plan to “expand operations at scale”, the prospectus said.

ZhongAn expects to incur “a significant net loss” in 2017, due to increases in unearned premium reserves, operating and administrative expenses, and handling charges and commissions.

It, however, aims to gradually lower its combined ratio to under 100 per cent and realise an underwriting profit in the medium to longer term.