By Chuin-Wei Yap
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 18, 2017).
HONG KONG -- China's first online-only insurer said Sunday it plans to raise up to $1.5 billion in an initial public offering that could value the company at around $10 billion, tapping into rising investor interest in the region's financial-technology sector.
ZhongAn Online Property & Casualty Insurance Ltd., a Shanghai-based company co-founded in 2013 by Chinese billionaire Jack Ma, is set to begin a share sale Monday morning in Hong Kong. It named Japan's SoftBank Group Corp. as a cornerstone investor in the deal, with a 5% stake in the company.
ZhongAn's biggest shareholders include Ant Financial Services Group, an affiliate of Mr. Ma's Alibaba Group Holding Ltd. As a result of Ant's ownership structure, Mr. Ma and several investment entities linked to him also hold significant stakes. The insurer's other founders include Pony Ma, the chairman of Tencent Holdings Ltd., and Ma Mingzhe, chairman of Ping An Insurance Group Co. of China Ltd. The three individuals surnamed Ma aren't related.
One of ZhongAn's biggest businesses is selling insurance to merchants and buyers for e-commerce purchases on Taobao, Alibaba's flagship online shopping mall in China. The company also sells insurance policies to Chinese consumers that provide compensation for cracked smartphone screens or delayed flights.
During a recent Chinese online-shopping festival similar to Black Friday in the U.S., ZhongAn sold a record 13,000 policies per second, the company said. More than 60% of ZhongAn's customers are aged 20 to 35.
"Numbers like that aren't something that traditional insurers can imagine," chief executive Chen Jin said Sunday at a press conference in Hong Kong.
The large sales volumes have yet to translate into big profits. ZhongAn produced a net profit of $1.4 million in 2016 after earning about $488 million in net premiums, which were up two-thirds from the previous year.
In the first quarter of this year, ZhongAn suffered a net loss of $31 million that it attributed to costs associated with ramping up its business. The company warned it would incur a "significant net loss" in 2017 as a result.
The coming listing is among the largest among technology offerings in Hong Kong this year. Other imminent listings include gaming-gear developer Razer Inc. and e-books publisher China Literature Ltd., which is controlled by Chinese tech giant Tencent. Ant also is pursuing plans to list as early as next year, though it hasn't confirmed a venue.
Many Chinese tech giants are trying to expand into the insurance business. Private-equity investor Yunfeng Financial Group Ltd., another Jack Ma vehicle, last month joined a consortium that acquired the Hong Kong business of U.S. insurance giant Massachusetts Mutual Life Insurance Co.
Despite a recent crackdown on investment-oriented insurance products and aggressive overseas acquisitions among some insurers, the insurance sector is seen as having significant growth potential because of relatively low takeup rates in China.
ZhongAn also is a rarity: Few technology platforms count both Ant and Tencent as backers. Despite Tencent and Ant's increasing rivalry for market dominance at home and abroad, their leaders have periodically invested together. Pony Ma and Jack Ma took stakes in Ping An Insurance in 2014. The trio of Ma's also invested in Beijing-based entertainment company Huayi Brothers Media Corp. in 2014.
ZhongAn said it plans to start taking investor orders for its IPO on Monday. Its shares are expected to start trading on the main board of the Hong Kong stock exchange on Sep. 28.