Investors offer $25.6 billion to Alibaba-backed insurer's float

ZhongAn Online Property and Casualty Insurance, the Chinese mainland's largest online insurer backed by Alibaba, was oversubscribed by a factor of more than 400 with HK$200 billion ($25.6 billion) in funds frozen when its initial public offering closed on Thursday, according to market news.

Originally scheduled to debut on the Hong Kong stock exchange next Thursday, ZhongAn offered 199 million new shares at HK$53.70 to HK$59.70 apiece with a minimum investment of HK$6,030.16 for a board lot of 100 shares. The insurer managed to price its IPO at the top of the indicated range, raising HK$1.5 billion, making itself Hong Kong's largest-ever insure-tech firm listing, according to Thomson Reuters' IFR magazine.

More than 100,000 retail investors have subscribed, and shares will trade from Thursday.

Founded in November 2013, ZhongAn Online is backed by the "three Mas" - Alibaba founder Jack Ma Yun, Tencent chairman Pony Ma Huateng and Ping An Insurance chairman Ma Mingzhe. It attracted cornerstone investors including Japan's SoftBank, which bought less than 5 percent for approximately HK$550 million and Alibaba-affiliated Ant Financial, which took 16 percent.

May Zhao, deputy head of research at Zhongtai Financial International, said ZhongAn is the mainland's largest internet-based insurer with a market share of 0.9 percent and the world's first insure-tech IPO. The oversubscription is supported by the effect of internet giants being among the shareholders, bright expectations on the mainland's insurance and insure-tech industry, as well as its diversified products that attract young consumers.

According to a report by Oliver Wyman, the mainland is the world's second-largest insurance market, with compound annual growth rate (CAGR) at 17.2 percent in the previous five years, and an estimated CAGR growth rate of 9.6 percent in the next five years. The mainland's insure-tech industry is expected to have a CAGR of 31.2 percent in the coming five years.

Zhao said: "The present valuation of the company's IPO market capitalization - HK$77.32 billion to HK$95.96 billion - is relatively high."

She doubted company profits can consistently support the stock's elevated price and valuation as the cost of contracts is high and annual net profit growth rate is uncertain.

ZhongAn Online's total insurance premium revenue amounted to 3.4 billion yuan ($516 million) last year, increasing 49.28 percent year-on-year, with a CAGR from 2014 to last year of 107.16 percent. In the first half of the year, its insurance premium revenue reached approximately 2.6 billion yuan and the annual revenue is expected to be 6.5 billion yuan. It has approximately 350 million clients at present.

Zhao said other concerns about ZhongAn's IPO performance include the fact that more and more internet insurers will emerge on the mainland and regulations in this emerging industry are uncertain.