China’s ZhongAn Online jumps 15pc in Hong Kong trading debut

PUBLISHED : Thursday, 28 September, 2017, 9:56am
UPDATED : Thursday, 28 September, 2017, 11:04pm

Shares in ZhongAn Online, China’s first internet-only insurer, surged by as much as 18 per cent in their trading debut in Hong Kong on Thursday, in what was the city’s first major fintech listing that may pave the way for further IPOs by start-ups.

The stock closed the day 9.2 per cent ahead at HK$65.20 after hitting a high of HK$70.50. The initial public offering was priced at the top end of HK$59.70 per share.

ZhongAn Online Property and Casualty Insurance raised US$1.5 billion, making it the biggest IPO in the city since Guotai Junan raised HK$16 billion (US$2.05 billion) in April. The company is offering 199.3 million shares with 20 per cent for public offering and the rest for institutional investors, particularly overseas investors.

“Technology and the internet are changing the world. We believe ZhongAn’s IPO in Hong Kong will give confidence to other players in the fintech industry and give a boost to Hong Kong’s status as an international financial hub,” said ZhongAn CEO Chen Jin.

Hong Kong aims to diversify its mix of constituent company listings, given the fact that 56 per cent of the funds raised in the first half were by financial firms, and less than 1 per cent from new economy or technology firms.

Last month, Hong Kong Exchanges and Clearing (HKEX) completed a consultation to set up a new board to allow listings by companies with dual-class share structures and start-ups, although many industry observers consider the planned start-up market is a risky strategy.

“We hope ZhongAn’s IPO will be the beginning of a round of new economy companies choosing Hong Kong as their listing venue,” said Charles Li, CEO of HKEX. “We are working hard trying to attract other new economy companies, such as biotech companies and life science companies.”

Chen said as a cornerstone investor, Japan’s SoftBank Group also hopes to share in the rapid growth of China’s fintech industry and has expressed confidence in Zhong An’s business growth and its management team. The global telecommunications and internet company agreed to subscribe to 71.9 million shares at the offer price, being 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. Alibaba owns the South China Morning Post.

The company’s gross written premiums jumped to 3.41 billion yuan 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 in 2014, 2015, and 2016, respectively.

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

ZhongAn said it 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 aims to gradually lower its combined ratio to under 100 per cent and realise an underwriting profit in the medium to longer term.

Asked when the company could return to making a profit Chen said: “We are still a young company and at the early development stage. We will continue to increase our input, to stay competitive in the future.”