IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/waterdrop-inc" target="_blank" data-smartkarma-citation="entities:33018:1" rel="noopener">Waterdrop Inc (WDH US)</a> is the largest independent third-party insurance platform in China as measured by life and health insurance first-year premiums (FYP) distributed in 2020, according to iResearch. Waterdrop is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/swiss-re-ag-1f83dcbc-730e-46fa-82f2-bfe7e8e361a1" target="_blank" data-smartkarma-citation="entities:27914:1" rel="noopener">Swiss Re AG (SREN SW)</a> and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>.</p></div><div><div><div class="content-highlight"><p>Waterdrop is pre-marketing an NYSE IPO with a placeholder amount of $100 million. In <a href="https://www.smartkarma.com/insights/waterdrop-ipo-initiation-going-for-brokers" target="_blank" data-smartkarma-citation="insights:50610" rel="noopener">Waterdrop IPO Initiation: Going for Brokers</a>, we opined that as a leading online third-party insurance broker, Waterdrop is well-positioned to benefit from favourable industry trends. The key unknown is whether the changing regulations will throw a spanner in the works. Notwithstanding the regulatory overhang, we concluded that Waterdrop is worth a look. In this note, we present our forecasts and take the first look at Waterdrop's potential valuation range. </p></div></div></div>

Waterdrop Inc (WDH US) is the largest independent third-party insurance platform in China as measured by life and health insurance first-year premiums (FYP) distributed in 2020, according to iResearch. Waterdrop is backed by Tencent Holdings (700 HK), Swiss Re AG (SREN SW) and Meituan (3690 HK).Waterdrop is pre-marketing an NYSE IPO with a placeholder amount of $100 million. In Waterdrop IPO Initiation: Going for Brokers, we opined that as a leading online third-party insurance broker, Waterdrop is well-positioned to benefit from favourable industry trends. The key unknown is whether the changing regulations will throw a spanner in the works. Notwithstanding the regulatory overhang, we concluded that Waterdrop is worth a look. In this note, we present our forecasts and take the first look at Waterdrop's potential valuation range. 

Fintech & EM-focused Analyst, KT Capital Group

Alec Tseung

Fintech & EM-focused Analyst

Equity Bottom-Up

ZhongAn Online P&C Insurance C / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/zhongan-online-p-c-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:23681:1" rel="noopener">ZhongAn Online P&amp;C Insurance (6060 HK)</a> and <a href="https://www.smartkarma.com/entities/lemonade-inc" target="_blank" data-smartkarma-citation="entities:29163:1" rel="noopener">Lemonade Inc (LMND US)</a> are two widely known Insurtech companies in the world's two largest property &amp; casualty (P&amp;C) insurance markets</li>
<li>Based on the comparison in the following article, ZhongAn is preferred to Lemonade, both in terms of the valuation and company development</li>
<li>ZhongAn further showed encouraging signs in 2020 as it shifted the product mix towards the health segment, thanks to the pandemic, and its combined ratio was at the lowest since it started operations  </li>
</ul>



ZhongAn Online P&amp;C Insurance (6060 HK) and Lemonade Inc (LMND US) are two widely known Insurtech companies in the world's two largest property &amp; casualty (P&amp;C) insurance markets
Based on the comparison in the following article, ZhongAn is preferred to Lemonade, both in terms of the valuation and company development
ZhongAn further showed encouraging signs in 2020 as it shifted the product mix towards the health segment, thanks to the pandemic, and its combined ratio was at the lowest since it started operations  


ZhongAn Vs. Lemonade: Which One Is a Better Insurtech Bet?

Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Algosun Global

<p><a href="https://www.smartkarma.com/entities/oscar-health-inc" target="_blank" data-smartkarma-citation="entities:31499:1" rel="noopener">Oscar Health (OSCR US)</a> is technology-driven and consumer-focused health insurer with the best-in-class in-house built technology and customer service. VC-backed insurtech unicorn wants to disrupt and transform health insurance through engagement technology. <a href="https://www.smartkarma.com/entities/oscar-health-inc" target="_blank" data-smartkarma-citation="entities:31499:1" rel="noopener">Oscar Health (OSCR US)</a>  helps to save money and optimize spending for its members using the personalized data to drive real-time actionable insights and recommendations.</p><p>Morgan Stanley, Goldman Sachs and Allen &amp; Company are lead underwriters on the IPO. <a href="https://www.smartkarma.com/entities/oscar-health-inc" target="_blank" data-smartkarma-citation="entities:31499:1" rel="noopener">Oscar Health (OSCR US)</a>  raised ~$1.6 billion in funding over 10 rounds, according to Pitchbook and Crunchbase. The expected price range on the IPO of 31 million shares was raised to $36-38 per share and today Oscar Health sold shares at IPO price of $39 per share implying valuation of ~$8 billion.</p>

Oscar Health (OSCR US) is technology-driven and consumer-focused health insurer with the best-in-class in-house built technology and customer service. VC-backed insurtech unicorn wants to disrupt and transform health insurance through engagement technology. Oscar Health (OSCR US)  helps to save money and optimize spending for its members using the personalized data to drive real-time actionable insights and recommendations.Morgan Stanley, Goldman Sachs and Allen &amp; Company are lead underwriters on the IPO. Oscar Health (OSCR US)  raised ~$1.6 billion in funding over 10 rounds, according to Pitchbook and Crunchbase. The expected price range on the IPO of 31 million shares was raised to $36-38 per share and today Oscar Health sold shares at IPO price of $39 per share implying valuation of ~$8 billion.

Oscar Health IPO. Reinventing Health Insurance

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Upstart Holdings  / Equity Capital Markets

<p>Our base case valuation of Upstart Holdings is EV of $3,153 million, implied market cap of $3,236 million, and implied price of $35.8 per share, which would be 63% higher than the high end of the IPO price range of $22. Given the attractive upside, we have a positive view of the Upstart IPO. Our base case valuation uses our estimated sales of $321 million in 2021 and a 9.8x EV/S multiple. The 9.8x EV/S multiple was derived from the average of the comps' 2021 EV/Sales average and median multiples. </p><p>Upstart's core business uses the cloud-based artificial intelligence lending platform and aims to provide lower interest rates, higher approval rates, and a smoother digital experience. Since the company's inception, its bank partners have originated more than 0.62 million personal loans that have generated over 9 million repayments. As of the end of September 2020, about 70% of the Upstart-powered loans were entirely automated. </p>

Our base case valuation of Upstart Holdings is EV of $3,153 million, implied market cap of $3,236 million, and implied price of $35.8 per share, which would be 63% higher than the high end of the IPO price range of $22. Given the attractive upside, we have a positive view of the Upstart IPO. Our base case valuation uses our estimated sales of $321 million in 2021 and a 9.8x EV/S multiple. The 9.8x EV/S multiple was derived from the average of the comps' 2021 EV/Sales average and median multiples. Upstart's core business uses the cloud-based artificial intelligence lending platform and aims to provide lower interest rates, higher approval rates, and a smoother digital experience. Since the company's inception, its bank partners have originated more than 0.62 million personal loans that have generated over 9 million repayments. As of the end of September 2020, about 70% of the Upstart-powered loans were entirely automated. 

<p style="text-align: justify;">In October VC-backed app-based car insurance unicorn Root announced pricing of its IPO and sold ~27 million shares of Class A common stock at IPO price of $27 a share (above its initial target range of $22-25). Columbus insurtech startup raised more than $1 billion dollars and funds affiliated with Dragoneer Investment Group and Silver Lake Technology agreed to purchase an aggregate of up to $500 million worth of shares in private placements. We saw solid demand for Root Insurance IPO. However, Root shares fell ~16% below IPO price and we believe this is a great buying opportunity for long-term investors.</p><p style="text-align: justify;">Root is a fully licensed insurance carrier with a scaled proprietary telematics solution and operates on fast growing Pay-How-You-Drive (PHYD) segment of insurance telematics market. Under PHYD model driver may control the cost of insurance premium. Furthermore, company offers such products as Root Renters and Root Home cross-selling non-auto products across its customer base. At 14x and 11x forward EV/Revenue on our CY20 and CY21 estimates, which is a significant ~60% discount to its closest publicly listed peer Lemonade, Root valuations look attractive under our base case scenario. If we look at forward adjusted gross profit multiples, Root shares trade at 49x EV/Adj. Gross Profit on our CY21 estimates. This is a modest discount to insurtech peer Lemonade.</p>

In October VC-backed app-based car insurance unicorn Root announced pricing of its IPO and sold ~27 million shares of Class A common stock at IPO price of $27 a share (above its initial target range of $22-25). Columbus insurtech startup raised more than $1 billion dollars and funds affiliated with Dragoneer Investment Group and Silver Lake Technology agreed to purchase an aggregate of up to $500 million worth of shares in private placements. We saw solid demand for Root Insurance IPO. However, Root shares fell ~16% below IPO price and we believe this is a great buying opportunity for long-term investors.Root is a fully licensed insurance carrier with a scaled proprietary telematics solution and operates on fast growing Pay-How-You-Drive (PHYD) segment of insurance telematics market. Under PHYD model driver may control the cost of insurance premium. Furthermore, company offers such products as Root Renters and Root Home cross-selling non-auto products across its customer base. At 14x and 11x forward EV/Revenue on our CY20 and CY21 estimates, which is a significant ~60% discount to its closest publicly listed peer Lemonade, Root valuations look attractive under our base case scenario. If we look at forward adjusted gross profit multiples, Root shares trade at 49x EV/Adj. Gross Profit on our CY21 estimates. This is a modest discount to insurtech peer Lemonade.

Root Insurance. Leader And Innovator In Pay-How-You-Drive (PHYD) Segment

United States

Horace Mann Educators Corporation is an insurance holding company.  The Company markets and underwrites personal lines of property and casualty insurance, retirement annuities, and life insurance.  Horace Mann markets its products primarily to educators and other employees of public schools and their families.

National Western Life Group, Inc. operates as a life insurance company. The Company offers life and term life insurance products. National Western Life Group serves customers throughout the United States.

Goosehead Insurance, Inc. operates as an insurance agency. The Company offers home, auto, motorcycle, umbrella, flood, landlord, life, business, commercial auto, product liability, and recreational insurance services. Goosehead Insurance serves customers in the United States.

Stewart Information Services Corporation provides title insurance and related services through locations in the United States and several international markets. The Company meets the needs of real estate and mortgage industries through the electronic delivery of services required for settlement. Stewart's services include title reports, flood determinations, and credit reports.

Employers Holdings, Inc. provides workers' compensation insurance.  The Company focuses on small businesses involved in low to medium hazard industries.

Safety Insurance Group, Inc. provides personal lines property and casualty insurance focused exclusively on the Massachusetts market.  The Company's principal product line is private passenger automobile insurance.  In addition, Safety Insurance offers commercial automobile, homeowners, dwelling fire, umbrella and business owner policies.

Argo Group International Holdings, Ltd. offers property casualty insurance and reinsurance. The Company offers excess and surplus lines, select markets, and international specialty insurance.

HCI Group, Inc. offers property/casualty insurance.  The Company offers homeowners', condominium owners', and tenants' insurance.

SiriusPoint Ltd. operates as a global insurance and reinsurance company. The Company offers services in insurance lines which includes environmental, property, energy, workers compensation, and aviation and space, and reinsurance lines includes life, accident and health, property, marine and energy, casualty, and credit and bond. SiriusPoint serves customers worldwide.

AMERISAFE, Inc. provides workers' compensation insurance focused on small to mid-sized employers involved in hazardous industries, principally construction, trucking, logging, agriculture, oil and gas, maritime, and sawmills.

Hanwha Life Insurance Co., Ltd. offers life insurance services and reinsurance services.  The Company also does insurance against loss business, beverages business, real estate rental, and securities investment business through its subsidiaries.

Wuestenrot & Wuerttembergische AG is a financial services company.  The Company offers housing finance and building society savings accounts, as well as life insurance, real estate, and investment products. W&W is the result of the merger between Wuestenrot Beteiligungs-AG and Wuerttembergische AG VersicherungsBeteiligungsgesellschaft.

Just Group PLC provides financial services. The Company specializes in de-risking solutions, retirement income products, mortgages, financial advice, and guidance services to individual customers, financial intermediaries, corporate clients, and pension scheme trustees. Just Group serves customers worldwide.

Protector Forsikring ASA underwrites casualty insurance throughout Norway.  The Company focuses on delivering standard insurance products to the SME market, the public sector and the affinity market (grouped arrangements).

Vaudoise Assurances Holding SA, also known as Vaudoise Versicherungen Holding, is an insurance holding company, offering, through its affiliates, life, health, accident, property, commercial, motor vehicle, liability and legal protection insurance services, among others. The Company operates through a network of Swiss offices and affiliates in Spain and Italy.

Bao Viet Holdings, through its subsidiaries, engages in insurance, reinsurance, financial investment, fund management, securities, banking, and real estate services businesses in Vietnam. The Life Insurance segment offers a range of whole life, pure endowment, term life, endowment, bancassurance, annuity, universal life, healthcare and personal accident riders, and other life insurance products, as well as reinsurance assumed and ceded in life, healthcare insurance, and personal accident. The Non-life Insurance segment provides health and personal accident, property, cargo, hull-P&I, general indemnity, aviation, automobile, fire and special risk, agriculture, and other insurance products; and assumes and cedes reinsurance for various non-life insurance products. The Financial Services segment offers fund management, investment portfolio management, security brokerage and trading, investment consulting services, etc.; investment management services to policyholders; and security brokerage, securities underwriting and issuance agency, securities trading, custody, investment, and financial consulting services. The Banking Services segment provides various banking services, such as handling individual customer deposits, and deposit and current accounts for corporate and institutional customers; and provision of consumer loans, overdrafts, credit card facilities, and fund transfer services. The Real Estate Operations and Other Activities segment is involved in the rental and development of various real estate projects. The company also engages in the real estate investment and consulting activities; provision of machinery and equipment; and vocational driving training operations. It offers its services through approximately 150 branches in 63 cities and provinces. Bao Viet Holdings was founded in 1964 and is headquartered in Hanoi, Vietnam.

PSC Insurance Group Limited provides insurance brokerage services. The Company offers services such as risk management, workers compensation, business protection, worth insurance, claims settlements. PSC Insurance Group conducts its business globally.

Anadolu Hayat Emeklilik AS is a life insurance company offering its services in Turkey. The Company is active in both private pension and life insurance markets and operates through regional sales offices in Turkey.

Momentum Metropolitan Holdings operates as a holding company. The Company, through its subsidiaries, provides financial services such as individual life assurance, group life assurance, employee benefits, health insurance, and credit life products. Momentum Metropolitan Holdings serves customers in South Africa.

Mercuries Life Insurance Co., Ltd. offers diversify life insurance products and services.

Lemonade, Inc. operates as an insurance company. The Company offers artificial intelligence (AI) based technology for fire, property, liability, and other related insurance policy issuing and claim settlements. Lemonade serves customers in the United States.

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Lemonade Inc (LMND US)

Waterdrop IPO: Valuation First Look

Waterdrop is pre-marketing an NYSE IPO with a placeholder amount of $100 million. In this note, we present our forecasts and take the first look at...

Arun George

ZhongAn Vs. Lemonade: Which One Is a Better Insurtech Bet?

With encouraging signs shown in 2020, ZhongAn Online is preferred to Lemonade, both from the perspectives of the valuation and company development.

Alec Tseung

Oscar Health IPO. Reinventing Health Insurance

We have positive view on Oscar Health IPO and believe that Oscar Health is a technology company and not traditional insurer making health care more...

Andrei Zakharov

Upstart IPO Valuation Analysis

Our base case valuation of Upstart Holdings is implied market cap of $3,236 million and implied price of $35.8 per share, which would be 63% higher...

Douglas Kim

Root Insurance. Leader And Innovator In Pay-How-You-Drive (PHYD) Segment

Root Insurance is going to disrupt $260B+ U.S. auto insurance market and revolutionize personal auto insurance through technology and data science...

Andrei Zakharov

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