Internet insurance intermediary invested by Sequoia sprints for Hong Kong stocks, Shouhui Technology bets on the question of online direct sales channels.

On January 12th, Shouhui Technology Co., Ltd. (referred to as "Shouhui Technology") officially submitted its prospectus to the Hong Kong Stock Exchange, planning to list on the main board. CICC and Huatai International will act as joint sponsors.

In April 2017, October 2020, and August 2021, Shouhui Technology acquired 100% equity of Xiaoyusan Insurance Brokers Co., Ltd., 100% equity of Chuangxin Insurance Sales Co., Ltd., and 99.8% equity of Shaoguan Baihong Insurance Appraisal Co., Ltd., thereby obtaining insurance brokerage license, insurance sales license, and insurance appraisal license.

Shouhui Technology's main business is insurance intermediary services, with three major platforms: Xiaoyusan, Kachaobao, and Niubao 100. It has accumulated over 18 million registered users.

Xiaoyusan is a platform for online direct sales of customized insurance products and existing products from insurance companies. Kachaobao is a platform serving insurance agents. Niubao 100 provides comprehensive support for insurance transactions for self-media and licensed insurance brokers and agents.

According to Frost Sullivan, from 2018 to 2022, the online intermediary insurance market in China has rapidly expanded, with total premium income increasing from 39 billion yuan to 141 billion yuan, achieving a compound annual growth rate of 38.1%.

The Chinese online long-term personal insurance intermediary service market is highly concentrated and fiercely competitive.

In 2022, based on total premium income, the industry's CR5 reached 78.8%.

Shouhui Technology ranks third in the Chinese online insurance intermediary market, with a market share of 7.1%. Based on the first-year premium of long-term personal insurance in the first half of 2023, Shouhui Technology ranks second in the Chinese online insurance intermediary market.

In 2021 and 2022, Shouhui Technology achieved revenues of 1.548 billion yuan and 806 million yuan, respectively, with net losses of 204 million yuan and net profits of 131 million yuan.

In the first three quarters of 2023, Shouhui Technology achieved revenue growth but not profit growth. Revenue increased by 140.91% YoY to 1.337 billion yuan, but recorded a net loss of 287 million yuan. This was mainly due to the impairment of contingent preferred shares issued by Shouhui Technology to investors, which was included in financial liabilities. The operating profit of Shouhui Technology increased by 351.73% YoY to 244 million yuan, with an operating profit margin of 18.25%.

Shouhui Technology's revenue is composed of insurance transaction services and insurance technology services, with over 99% of revenue contributed by insurance transaction services.

Revenue from insurance transaction services is mainly generated by commissions charged by Shouhui Technology to upstream insurance companies.

As of now, it has established partnerships with approximately 100 domestic insurance companies, including 63 life insurance companies and 37 property insurance companies.

However, Shouhui Technology has a high concentration of customers. From 2021 to the first three quarters of 2023, the revenue from the top five customers accounted for 85.8%, 77.2%, and 70.9% respectively.This situation is not unique to Shouhui Technology.

In May 2023, Zhongmiao Innovation Technology (Qingdao) Co., Ltd., controlled by Haier Group, submitted its application to the Hong Kong Stock Exchange. It also faced the issue of high customer concentration. In 2021 and 2022, its top five customers accounted for 74.5% and 63.7% respectively. In November 2023, Zhongmiao Innovation's prospectus failed, and its first attempt to list on the Hong Kong Stock Exchange was unsuccessful.

In the downstream market, Shouhui Technology mainly sells insurance products directly through the Xiaoyusan platform, followed by insurance agent channels.

In its prospectus, Shouhui Technology mentioned its customized product and IP operation capabilities. Through customized insurance product types, it has achieved full coverage of life insurance product types.

In the first three quarters of 2023, the total first-year premium of Shouhui Technology's customized products reached 1.6 billion yuan, accounting for 57.8% of its first-year premium.

Since its establishment, Shouhui Technology has sold over 1,300 products, including over 200 customized products and over 1,100 existing products from insurance companies.

However, Shouhui Technology seems to be lacking in the agent channel, as it did not disclose the revenue from direct sales and agent sales in its prospectus.

As of September 30, 2023, Shouhui Technology had over 20,000 insurance agents. In comparison, China Ping An (601318.SH) reached 360,000 agents during the same period.

The online life insurance market where Shouhui Technology operates is not only small but also crowded. In 2022, online life insurance in China accounted for only 11.1% of the total life insurance market, with life insurance mainly sold through channels outside online platforms.

In recent years, internet platforms that have a large number of downstream users have set their sights on this market. Tencent, Alibaba, JD.com, Meituan, and others have all entered the internet insurance intermediary business, trying to get a share of the market.

In its prospectus, Shouhui Technology also openly stated in the risk factors that it faces fierce competition from potential competitors, given the strong ability of leading internet companies in China to promote products through their existing online channels, as well as the potential for traditional insurance companies and other insurance service providers to shift offline resources and insurance customers to online platforms.

As of now, Shouhui Technology's founder Guangyao holds a 29.68% stake, making him the largest single shareholder. From 2015 to 2024, Shouhui Technology has completed five rounds of financing, with institutional investors including Gopher Asset Management, Tasly Group, Sequoia China, and IDG Capital. Among them, Gopher Asset Management, Tasly, and Sequoia China hold 14.21%, 13.35%, and 13.18% respectively.

In this attempt to list on the Hong Kong Stock Exchange, Shouhui Technology plans to use the funds raised for developing insurance products and improving services, enhancing research and development capabilities and technological infrastructure, selecting mergers, acquisitions, and strategic investments, as well as for working capital and general corporate purposes.