SoftBank Group has agreed to be a cornerstone investor in the initial public offering of ZhongAn, China’s first online-only insurance agency, on the Hong Kong Stock Exchange today. SoftBank Group will buy a 5 percent stake in the company, or about 72 million shares, at the offer price, which is in the range of HKD $53.70 to HKD $59.70 per share. If calculated based on the range’s mid-point price of HKD $56.70, that means SoftBank Group’s stake would be worth about HKD $4.08 billion, or $522 million.
Under its agreement with ZhongAn (also called ZA Online), SoftBank Group can choose to acquire the shares through one of its wholly-owned subsidiaries or affiliates, including the $100 billion SoftBank Vision Fund, which is currently making waves in the venture capital ecosystem by going on an unprecedented funding spree. A SoftBank Group representative, however, said the firm cannot comment on how many shares, if any, will be purchased through the Vision Fund.
In total, ZhongAn is offering 199.3 million shares during its IPO. If all shares are sold at the mid-point of the offer price range, that means the company’s proceeds would total about HKD $10.9 billion, or $1.4 billion, after deducting expenses related to the offering. SoftBank Group’s investment represents about 36 percent of the shares offered today.
One interesting aspect of the deal is that ZhongAn was launched in October 2013 by Alibaba Group, Ping An Insurance Company and Tencent. SoftBank was one of Alibaba’s early investors and recently sold about $7.9 billion worth of Alibaba stock to pay off debt, reducing its stake to 28 percent from around 32.2 percent. This marked the first time that SoftBank had sold off any of its Alibaba shares since its first investment in 2000. SoftBank and Alibaba have also invested in many of the same startups and together made a notable impact on Asia’s ride-sharing ecosystem and Southeast Asia’s startup industry.
A press statement from SoftBank Group said “ZhongAn is the clear leader in China’s insuretech space. This strategic investment offers us a unique opportunity to participate in the country’s promising insuretech market. We take a long-term view on disruptive companies like ZhongAn. With its cutting-edge technologies, ZhongAn is building a robust, innovative online-only insurance business in China and is effectively transforming the insurance landscape there.”
ZhongAn says it sold more than 7.2 billion insurance policies and served about 492 million policyholders between its founding in October 2013 and the end of last year and claims that those numbers make it China’s largest insurer. It partners with companies, including e-commerce platforms and online travel agencies, to sell insurance products in five main categories: consumer finance, health, auto, travel and “lifestyle consumption,” which includes shipping insurance on online purchases.
ZhongAn’s massive scale is made possible by its cloud-based tech platform, called Wujieshan, which allows it to develop new policies, target marketing, process insurance applications and offer dynamic pricing.