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

<a href="https://www.smartkarma.com/entities/policybazaar-insurance-web-aggregator" target="_blank" data-smartkarma-citation="entities:33470:1" rel="noopener">Policybazaar Insurance Web Aggregator (1569999D IN)</a>/PB Fintech operates the Policybazaar and Paisabazaar platforms in India. Policybazaar is India’s largest digital insurance marketplace with a 93.4% market share based on the number of policies sold in FY20, according to Frost &amp; Sullivan. Paisabazaar is India’s largest digital consumer credit marketplace with a 53.7% market share, based on disbursals in FY21, according to Frost &amp; Sullivan. PB Fintech’s shareholders include SoftBank Vision Fund, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, Tiger Global and <a href="https://www.smartkarma.com/entities/info-edge-india-ltd" target="_blank" data-smartkarma-citation="entities:14461:1" rel="noopener">Info Edge India (INFOE IN)</a>.   PB Fintech will launch its IPO on 01 November at an indicative price range of Rs940-980. The IPO comprises a primary raise of Rs37,500 million ($502 million) and a secondary raise up to Rs19,600 million ($262 million). The main secondary seller is SoftBank Vision Fund which aims to sell up to Rs18,750 million ($250 million) worth of shares. In <a href="https://www.smartkarma.com/insights/pb-fintech-policybazaar-ipo-initiation-insurance-policy" target="_blank" data-smartkarma-citation="insights:55735" rel="noopener">PB Fintech (Policybazaar) IPO Initiation: Insurance Policy</a>, we stated that Policybazaar, which is India’s largest digital consumer credit marketplace, is a direct play on the rising insurance penetration rates in India. PB Fintech operates an asset-light capital model and does not underwrite any insurance or retain any credit risk on loans. The business is well-positioned to benefit from the post-COVID-19 recovery in insurance policies sales and loan disbursals by its partners. Helped by strong brand recognition and retention rates, the favourable unit economics also suggest that medium-term profitability is within reach. <div class="content-highlight">In this note, we look at the updated prospectus which outlines the 1QFY22 results (for the quarter ending June) and recent developments. Overall, the recent results reinforce our view that PB Fintech has attractive fundamentals. We will discuss valuation in our next note.  </div>

Policybazaar Insurance Web Aggregator (1569999D IN)/PB Fintech operates the Policybazaar and Paisabazaar platforms in India. Policybazaar is India’s largest digital insurance marketplace with a 93.4% market share based on the number of policies sold in FY20, according to Frost &amp; Sullivan. Paisabazaar is India’s largest digital consumer credit marketplace with a 53.7% market share, based on disbursals in FY21, according to Frost &amp; Sullivan. PB Fintech’s shareholders include SoftBank Vision Fund, Tencent (700 HK), Tiger Global and Info Edge India (INFOE IN).   PB Fintech will launch its IPO on 01 November at an indicative price range of Rs940-980. The IPO comprises a primary raise of Rs37,500 million ($502 million) and a secondary raise up to Rs19,600 million ($262 million). The main secondary seller is SoftBank Vision Fund which aims to sell up to Rs18,750 million ($250 million) worth of shares. In PB Fintech (Policybazaar) IPO Initiation: Insurance Policy, we stated that Policybazaar, which is India’s largest digital consumer credit marketplace, is a direct play on the rising insurance penetration rates in India. PB Fintech operates an asset-light capital model and does not underwrite any insurance or retain any credit risk on loans. The business is well-positioned to benefit from the post-COVID-19 recovery in insurance policies sales and loan disbursals by its partners. Helped by strong brand recognition and retention rates, the favourable unit economics also suggest that medium-term profitability is within reach. In this note, we look at the updated prospectus which outlines the 1QFY22 results (for the quarter ending June) and recent developments. Overall, the recent results reinforce our view that PB Fintech has attractive fundamentals. We will discuss valuation in our next note.  

PB Fintech (Policybazaar) IPO: Signs of Life

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Another Weak Number: Waterdrop, Inc. (WDH.US) [Waterdrop] reported its second set of earnings results since its IPO, coming in at a negative CNY 656 mn  - declining CNY 286 mn or 77.3% linked quarter bringing cumulative losses since the IPO to over CNY 1.0 bn or about 38% of IPO funds raised. Challenges came from overall cost growth of CNY 411 mn (30.6%) due primarily to sales and marketing spend; and    *”Notice” To Online Insurers: The China Banking and Insurance Regulatory Commission’s (CBIRC) roll out of the internet insurance revision plan “Notice on Carrying out Special Rectification of Internet Insurance Disorders”, aims to scrutinize mainland China’s insurance technology platforms, ordering firms and agencies to end improper marketing and pricing practices, and improve privacy protections. This will be a direct challenge for Waterdrop and other mainland Chinese insurers.

*Another Weak Number: Waterdrop, Inc. (WDH.US) [Waterdrop] reported its second set of earnings results since its IPO, coming in at a negative CNY 656 mn  - declining CNY 286 mn or 77.3% linked quarter bringing cumulative losses since the IPO to over CNY 1.0 bn or about 38% of IPO funds raised. Challenges came from overall cost growth of CNY 411 mn (30.6%) due primarily to sales and marketing spend; and    *”Notice” To Online Insurers: The China Banking and Insurance Regulatory Commission’s (CBIRC) roll out of the internet insurance revision plan “Notice on Carrying out Special Rectification of Internet Insurance Disorders”, aims to scrutinize mainland China’s insurance technology platforms, ordering firms and agencies to end improper marketing and pricing practices, and improve privacy protections. This will be a direct challenge for Waterdrop and other mainland Chinese insurers. 

Fintech & EM-focused Analyst, KT Capital Group

Alec Tseung

Fintech & EM-focused Analyst

Thematic (Sector/Industry)

This Original aims to showcase the leading Insurtech companies in the three insurance markets with the highest growth potential in Asia - China, India, and Southeast Asia.Insurtech companies can be broadly divided into three categories - full-stack Inustech, Insurtech marketplace, and Insurtech enablers. As such, the Original also presents the Insurtech companies based on these categories by showing their company overview, how they leverage tech to do things differently, their product offerings, and financial information (capital raise and valuation in case of no financial information).The Insurtech companies presented are:<ul><li>Full-stack Insurtech: ZhongAn Online (China), Acko (India), SingLife (Singapore)</li><li>Insurtech marketplace: Waterdrop (China), Huize (China), Policybazaar (India), Coverfox (India), Turtlemint (India), PasarPolis (Indonesia), PolicyStreet (Malaysia)</li><li>Insurtech enablers: eBaoTech (China), Turtlemint (India), CXA Group (Singapore)  </li></ul>By analyzing the key Insurtech companies and their development in these countries/regions, we have further identified the following key trends/themes in the sector:<ul><li>In the near future, Insurtech is unlikely a threat to traditional (re)insurers who have also been actively investing in Insurtech themselves.</li><li>Insurtech marketplace is expanding offline and will likely embrace a hybrid model, especially in less developed insurance markets.</li><li>L&amp;H full-stack Insurtech companies are yet to be common in less developed insurance markets.</li><li>Insurtech is going to promote differentiated growth in insurance markets of different maturity.</li><li>“ReInsurtech” is currently still a blind spot.</li></ul><h2>What is Original?</h2>A deep dive into 12 (mostly private) leading Insurtech companies, under each Insurtech category from China, India, and Southeast Asia, is presented in this Original. Key investment thesis and risks are also developed for each company.  Based on the company analysis and the broader insurance and Insurtech development in these countries/regions, five key Insurtech trends and themes are further identified.

This Original aims to showcase the leading Insurtech companies in the three insurance markets with the highest growth potential in Asia - China, India, and Southeast Asia.Insurtech companies can be broadly divided into three categories - full-stack Inustech, Insurtech marketplace, and Insurtech enablers. As such, the Original also presents the Insurtech companies based on these categories by showing their company overview, how they leverage tech to do things differently, their product offerings, and financial information (capital raise and valuation in case of no financial information).The Insurtech companies presented are:Full-stack Insurtech: ZhongAn Online (China), Acko (India), SingLife (Singapore)Insurtech marketplace: Waterdrop (China), Huize (China), Policybazaar (India), Coverfox (India), Turtlemint (India), PasarPolis (Indonesia), PolicyStreet (Malaysia)Insurtech enablers: eBaoTech (China), Turtlemint (India), CXA Group (Singapore)  By analyzing the key Insurtech companies and their development in these countries/regions, we have further identified the following key trends/themes in the sector:In the near future, Insurtech is unlikely a threat to traditional (re)insurers who have also been actively investing in Insurtech themselves.Insurtech marketplace is expanding offline and will likely embrace a hybrid model, especially in less developed insurance markets.L&amp;H full-stack Insurtech companies are yet to be common in less developed insurance markets.Insurtech is going to promote differentiated growth in insurance markets of different maturity.“ReInsurtech” is currently still a blind spot.What is Original?A deep dive into 12 (mostly private) leading Insurtech companies, under each Insurtech category from China, India, and Southeast Asia, is presented in this Original. Key investment thesis and risks are also developed for each company.  Based on the company analysis and the broader insurance and Insurtech development in these countries/regions, five key Insurtech trends and themes are further identified. 

Asian Insurtech: The New Golden Child in Town?

*Regulatory Onslaught Continues: The China Banking and Insurance Regulatory Commission (CBIRC) announced that it is investigating Ping An Insurance’ (2318.HK) [Ping An] property investments. Regulatory scrutiny of Ping An is occurring against the backdrop of the country’s skyrocketing real estate market and excessive leverage to the sector. This is on top of the CBIRC’s roll out of the internet insurance revision plan, which aims to scrutinize mainland China’s insurance technology platforms to which Ping An too has exposure; and*Improving Overall Fundamentals: Ping An’s reported 1H21 results of CNY 58.0 bn, declined CNY 16.4 bn (22.0%) HOH related to the above real estate risk. Excluding the real estate write-downs, we note that Ping An’s HOH operating result would have actually improved CNY 8.2 bn or 11.0% on the back of insurance fundamental improvement nearly across the board.

*Regulatory Onslaught Continues: The China Banking and Insurance Regulatory Commission (CBIRC) announced that it is investigating Ping An Insurance’ (2318.HK) [Ping An] property investments. Regulatory scrutiny of Ping An is occurring against the backdrop of the country’s skyrocketing real estate market and excessive leverage to the sector. This is on top of the CBIRC’s roll out of the internet insurance revision plan, which aims to scrutinize mainland China’s insurance technology platforms to which Ping An too has exposure; and*Improving Overall Fundamentals: Ping An’s reported 1H21 results of CNY 58.0 bn, declined CNY 16.4 bn (22.0%) HOH related to the above real estate risk. Excluding the real estate write-downs, we note that Ping An’s HOH operating result would have actually improved CNY 8.2 bn or 11.0% on the back of insurance fundamental improvement nearly across the board.

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

*First Half Profits: ZhongAn Online P&amp;C Insurance (6060.HK) [ZhongAn] reported positive 1H21 bottom-line results of CNY 604.1 mn, an increase of CNY 840.2 mn over losses of CNY 236.1 mn in 2H20. Results were primarily driven by P&amp;C, which delivered profits of CNY 1.0 bn - tracking the improvement in underwriting profits (combined ratio of 99.4%) and investment performance (up 43.2% HOH); and *Heavy Handed Government: Increased scrutiny of the online insurance segment by the China Banking and Insurance Regulatory Commission’s (CBIRC) intimates the near wipeout of this current generation of online insurers. This regulatory onslaught is stifling innovation and likely will push business returns to well below the cost of equity.

*First Half Profits: ZhongAn Online P&amp;C Insurance (6060.HK) [ZhongAn] reported positive 1H21 bottom-line results of CNY 604.1 mn, an increase of CNY 840.2 mn over losses of CNY 236.1 mn in 2H20. Results were primarily driven by P&amp;C, which delivered profits of CNY 1.0 bn - tracking the improvement in underwriting profits (combined ratio of 99.4%) and investment performance (up 43.2% HOH); and *Heavy Handed Government: Increased scrutiny of the online insurance segment by the China Banking and Insurance Regulatory Commission’s (CBIRC) intimates the near wipeout of this current generation of online insurers. This regulatory onslaught is stifling innovation and likely will push business returns to well below the cost of equity.

ZhongAn Online P&C Insurance – Loss Ratio Improvement

United States

Waterdrop Inc. is an insurtech platform headquartered in China. Founded in 2016, with coverage of Waterdrop Insurance Marketplace and Medical Crowdfunding, Waterdrop offers insurance and healthcare service through technology.

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Waterdrop Inc (WDH US)

PB Fintech (Policybazaar) IPO: Signs of Life

PB Fintech (Policybazaar) will launch its IPO on 01 November to raise up to $764m. The updated prospectus reinforce our view that PB Fintech has...

Arun George

Waterdrop – Someone Plug The Dike

WATERDROP: WDH reported its second set of earnings since the IPO, coming in at a negative CNY 656 mn - declining 77.3% QOQ bringing cumulative...

Thomas J. Monaco

Asian Insurtech: The New Golden Child in Town?

A deep dive into 12 Insurtech companies in China, India, and Southeast Asia is presented in this Original. The key Insurtech trends and themes in...

Alec Tseung

Ping An Insurance - Ugggh

PING AN INSURANCE: The CBIRC is investigating Ping An's property investments against the backdrop of the country’s skyrocketing real estate market...

Thomas J. Monaco

ZhongAn Online P&C Insurance – Loss Ratio Improvement

ZHONGAN ONLINE: ZhongAn reported a positive 1H21 bottom-line result, driven by improving P&C underwriting profits and investments. However,...

Thomas J. Monaco

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