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Reporter: Zhang Qiaoyu

Recently, Shouhui Group Co., Ltd. (hereinafter referred to as Shouhui Technology), a life insurance intermediary service provider, has once again submitted its IPO prospectus to the Hong Kong Stock Exchange. Shouhui Technology had previously submitted the application on January 12, with CICC and Huatai International as joint sponsors.

In recent years, the listing boom in the insurance intermediary field has continued to heat up, and many companies have accelerated their IPO process. Specifically, on July 22, Zhongmiao Technology passed the main board listing hearing; on July 5, the insurance service platform iYunbao was approved by the China Securities Regulatory Commission for listing in the United States; Zhongmiao Technology passed the main board listing hearing of the Hong Kong Stock Exchange on July 22, 2024.

Prior to this, Shuidi Company and Huize Insurance had already been listed on the US stock market. Soon after, Youjia Insurance (UBXG.O) successfully landed on Nasdaq on March 28, 2024, and Zhibao Technology followed closely and was listed on Nasdaq on April 2 of the same year.

In addition to Shouhui Technology, companies such as Yishengxin Technology, Yuanbao Technology, and Hengguang Insurance are also making intensive preparations for listing. Insurance intermediary companies are accelerating their pace to go public, and market competition is becoming increasingly fierce. Can Shouhui Technology break through?

There was a battle to grab the official seal

Shouhui Technology is a Chinese life insurance intermediary service provider. According to Frost & Sullivan, in 2023, the total premium of China's life insurance intermediary market reached 237 billion yuan, accounting for 6.3% of the total premium of China's life insurance market.

Based on the total premiums of China's life insurance intermediary market, Shouhui Technology ranks eighth with a market share of 2.9%; based on the total premiums of long-term life insurance in 2023, Shouhui Technology is China's second largest online insurance intermediary, accounting for 7.3% of the market share.

China's online long-term life insurance intermediary market is relatively concentrated and highly competitive. In 2023, based on total premiums, the top five participants accounted for a total of 68.6% of the market share, with a large gap between Shouhui Technology and the first market participant's 45.5% market share.

The insurance products distributed by Shouhui Technology are borne by insurance companies. During the reporting period, personal insurance products were distributed through three distribution channels facilitated by three platforms: Xiaoyusan was directly distributed online; Kachabao was distributed through insurance agents; and Niubao 100 was distributed with the assistance of business partners.

Previously, Xiaoyusan had a "seal-grabbing" war. Xiaoyusan Insurance Brokerage was established in January 2015. Its founders include Xu Han, Guangyao and Han Liwei, who serve as chairman, CEO and CTO respectively.

In the early morning of May 14, 2020, Xu Han "accused" CEO Guangyao of usurping power in his WeChat Moments. Xu Han said that Guangyao, his entrepreneurial partner for five years, took advantage of the opportunity of his replacement of his Hong Kong permanent resident identity card and the closure of the border between Shenzhen and Hong Kong due to the epidemic, and used his authority as an administrator in the company to arbitrarily deprive him of the right to use the corporate WeChat and corporate email. In addition, Xu Han also pointed out that Guangyao obtained the company's financial seal and business license through coercion, but fortunately, the company's official seal was still in his hands.

Xiaoyusan Insurance responded on its WeChat official account at the time: Xiaoyusan Insurance is communicating with the board of directors and management regarding the company's personnel changes. Everything is within the scope of legal permission and business operations are normal. Regarding the personnel changes and company development direction of Xiaoyusan Insurance, the company will discuss with the board of directors and announce it after confirmation. A few hours later, Xu Han and Guangyao posted on their Moments that the two had reconciled.

In this IPO, Xu Han did not appear in the company's prospectus. Before the IPO, Guangyao (through its controlled corporation) controlled 29.68% of the issued share capital of Shouhui Technology, founder Han Liwei held 8.18%, founding member Liu Li held 1.23%, and the employee stock ownership platform held 3.98%.

First-year commission rates continue to decline

During the reporting period (2021 to 2023 and January to May 2024), Shouhui Technology's revenue was RMB 1.548 billion, RMB 806 million, RMB 1.634 billion and RMB 603 million respectively; net profit was RMB -204 million, RMB 131 million, RMB -356 million and RMB -51.761 million respectively. Excluding changes in the book value of financial instruments issued to investors and share-based compensation, the company's adjusted net profit was RMB 195 million, RMB 75.023 million, RMB 253 million and RMB 104 million respectively.

It can be seen that during the reporting period, Shouhui Technology's performance fluctuated greatly. In 2022, its revenue fell sharply by 48.1% year-on-year; from January to May 2024, its revenue fell again by 7.8% year-on-year.

The company's main sales come from insurance transaction services and insurance technology services. Among them, the income from insurance technology services accounts for less than 1%. Most of Shouhui Technology's income comes from commissions paid by insurance companies for successfully distributing their underwritten insurance products to insurance customers through Shouhui Technology. The products are mainly long-term life insurance products, including products exclusively customized for insurance companies and products already available to insurance companies.

The commission rate charged by insurance intermediary companies for insurance products is generally the highest in the first year, and then decreases year by year. Judging from the changes in the commission rate in the first year, Shouhui Technology's commission rate has been declining. The average first-year commission rates for various insurance products in each period of the reporting period were 61.6%, 34.8%, 33.1% and 27.7% respectively.

Shouhui Technology said that the decline in revenue in 2022 was affected not only by COVID-19, but also by the notice issued by the China Banking and Insurance Regulatory Commission in 2021.

It is reported that in 2021, the China Banking and Insurance Regulatory Commission issued the "Notice on Further Regulating Insurance Institutions' Internet Personal Insurance Business" to adjust the first-year commission rate. The notice stipulates that for Internet personal insurance and health insurance products with an insurance period of more than one year, the first-year expected additional fee rate shall not exceed 60%, and the average additional fee rate shall not exceed 25%. Therefore, the average first-year commission rate of Shouhui Technology's long-term insurance products and medium- and long-term critical illness insurance products has dropped from 95.0% in 2021 to 56.0% in 2022.

In addition, the average first-year commission rate of long-term life insurance products decreased from 39.1% in the five months ended May 31, 2023 to 25.2% in the five months ended May 31, 2024, mainly due to adjustments made by insurance companies in response to changes in insurance industry policies (especially the "integrated reporting and banking" policy of the bank insurance channel).

Although similar policies for insurance intermediaries have not yet been promulgated, insurance companies have lowered the commission rates of insurance intermediaries to control the risk of losses caused by actual operating costs exceeding expected operating costs. The "Reporting and Banking Integration" requires that the commission rates reported by insurance companies for regulatory approval or filing should be consistent with the actual commission rates. According to Frost & Sullivan, this policy has led to a decline in the commission rates of bank insurance channels and insurance intermediaries.

Facing the risk of “disintermediation”

In addition to insurance intermediaries, Shouhui Technology's competitors also include internal sales personnel of insurance companies, bank insurance channels, and insurance and agency agencies, and the market competition is fierce.

In addition, the advancement of financial technology and the emergence of Internet insurance products have prompted insurance companies to increasingly explore different ways to reduce their reliance on intermediaries and directly connect with insurance customers. By leveraging digital platforms and online sales channels, insurance companies can directly reach a wider range of insurance customers at low cost, thereby expanding their market scope and improving their ability to attract and acquire insurance customers.

According to Frost & Sullivan, more and more traditional insurance companies have established their own online platforms to sell Internet insurance products directly to insurance customers.

Take Ping An Property & Casualty Insurance as an example. As a subsidiary of Ping An, it launched dozens of APPs online in the early days by casting a wide net, including Ping An Hui, Ping An Auto Insurance Express, and Wanlitong.

At the same time, China Insurance Group has also used its subsidiaries' websites, WeChat public accounts, apps and other channels to build service platforms early on; Taikang Online, an Internet insurance brand under Taikang Life Insurance, has also been actively promoting online transformation in recent years, expanding sales channels by building its own platform and cooperating with Internet giants. In addition, other leading insurance companies such as Pacific Insurance, Taiping Insurance, and Sunshine Insurance have also launched their own super insurance service platforms.

Shouhui Technology admits that the process of eliminating intermediaries (known as "disintermediation") may weaken our role as an intermediary and reduce demand for our products and services, which may put us at a competitive disadvantage. Disintermediation may also result in a significant reduction in business volume and loss of revenue for our insurance transaction services business, which may have a material adverse effect on our business, financial condition, operating results and prospects.