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Author | Xie Meiyu

Editor | Fu Ying

Source | Unicorn Finance

Guofu Life Insurance Co., Ltd. (hereinafter referred to as "Guofu Life") recently underwent equity changes.

According to the announcement of Guofu Life Insurance, its fourth largest shareholder, Ji'an New Year Enterprise Group Co., Ltd. (hereinafter referred to as "Ji'an New Year"), plans to "clear out" and leave, and the largest shareholder, Guangxi Investment Group Co., Ltd. (hereinafter referred to as "Guangzhou Investment Group") and the second largest shareholder, Guangzhou Vipshop Information Technology Co., Ltd. (hereinafter referred to as "Guangzhou Vipshop") will take over the equity.

If the equity transfer is approved, Guangdong Investment Group will hold 31.77% of Guofu Life's shares; Vipshop will hold 24.32% of Guofu Life's shares.

This equity transfer also drew attention to Vipshop (VIPS.N), which has been quietly developing its financial business.Can Vipshop, the “discount e-commerce company”, turn its financial business into a second growth curve?

1

Guofu Life's equity changes

Guofu Life Insurance was established in June 2018. As the first and only life insurance company headquartered in Guangxi, the local government and regulatory authorities have attached great importance to it.

The largest shareholder of Guofu Life Insurance is Guangdong Investment Group.It is the first pilot state-owned capital investment company in Guangxi. In terms of finance, Guangxi Investment Group has currently obtained financial licenses such as banking, securities, insurance, funds, leasing, asset management, guarantees, and small loans.

On August 9 this year, the Guangxi State-owned Assets Supervision and Administration Commission proposed that after evaluating the pilot reform of the state-owned capital investment company carried out by the Guangxi Investment Group,It was decided to formally transform Guangdong Investment Group into a state-owned capital investment company.

Image source: Canned Image Library

With the support of Guangdong Investment Group and other shareholders, after its establishment, Guofu Life Insurance quickly completed the opening of institutions in 14 prefecture-level cities and key counties in the autonomous region, achieved full coverage of institutions in Guangxi, and carried out special channel operations based on the local economic conditions in Guangxi.

However, according to the 2023 annual report,Guofu Life Insurance still relies heavily on traditional life insurance products, with premium income of 1.911 billion yuan, accounting for 62.29% of total premium income;In addition, in 2023, the top five insurance products of Guofu Life Insurance in terms of premium income were all sold through the bank insurance channel; among them, some products of "Guofu Life Insurance's Ever-increasing Whole Life Insurance" relied on online sales channels.

Source: Guofu Life Insurance 2023 Annual Report

In 2023, the bancassurance channel of Guofu Life Insurance achieved insurance business income of 2.166 billion yuan, accounting for 70.59% of the total insurance business income, far higher than insurance agency, insurance brokerage and direct sales channels.

A relevant person in charge of Guofu Life Insurance told China Times that the bancassurance channel is an important development channel for Guofu Life Insurance, and the main work measures are as follows:The first is to focus on consolidating the core dual-mail channel cooperation, the second is to actively explore and cultivate regional banks in Guangxi, and the third is to build a professional sales team and new business growth points.

In January 2023, the total assets of Guofu Life Insurance exceeded 10 billion yuan, and in April 2022, the Guizhou branch was successfully opened;As of the end of June 2024, Guofu Life Insurance's total assets were 16.8 billion yuan, a year-on-year increase of 36.6%;The total premium scale was 3.169 billion yuan, a year-on-year increase of 33.2%; Guofu Life Insurance ranked third in the Guangxi market and its market share in Guizhou has steadily increased.

At the end of the second quarter of 2024, Guofu Life's core solvency ratio and comprehensive solvency ratio were 119.55% and 155.82%, respectively, an increase of 6.67% and 12.22% from the end of the previous quarter.

Image source: Canned Image Library

but,In terms of equity, the equity held by the fourth and fifth largest shareholders of Guofu Life Insurance were frozen or transferred.

Separately, the fourth largest shareholder of Guofu Life Insurance, Ji'an Xinnian, plans to "clear out" and withdraw. Guofu Life Insurance said that after communication, it was learned that the shareholder transferred the equity due to the need to adjust its own development direction.

Specifically, Guangdong Investment Group will acquire 120 million shares of Guofu Life Insurance held by Ji'an Xinnian, accounting for 6.23% of the total shares of Guofu Life Insurance; Guangzhou Vipshop will acquire 75 million shares, accounting for 3.89% of the total shares of Guofu Life Insurance.

Guofu Life Insurance said that after the share transfer, the shareholding ratio of the first and second largest shareholders increased.The major shareholder will continue to support the company's development in many aspects, including major business decisions, capital increases, bond issuance, and credit enhancement.

At the same time, the shares of Guofu Life held by the fifth largest shareholder, Beijing Xinzhongli Investment Co., Ltd. (hereinafter referred to as "Xinzhongli"), were frozen and pledged.

Xinzhongli is one of the earliest investment institutions in China engaged in venture capital and private equity investment. The scale of its managed funds once exceeded 30 billion yuan, and it has invested in nearly 200 companies in total, but now it has "fallen from the altar."

According to the announcement of Xin Zhongli,For failing to disclose the 2023 annual report on time, Xinzhongli and its actual controller Wang Chaoyong were issued a warning letter; in addition, the company's stock has been suspended since May 6.

2

After 6 consecutive years of losses, why is Vipshop trying to “increase its investment” in Guofu Life Insurance?

When Guofu Life Insurance was first established, Guangzhou Vipshop, a subsidiary of Vipshop, was the second largest shareholder, holding 16% of the shares.

Three years after its establishment, Guofu Life completed its first capital increase, with registered capital increasing from 1.5 billion yuan to 1.926 billion yuan, of whichGuangzhou Vipshop increased its stake from 16% to 20.43% by investing RMB 229 million; Now Guangzhou Vipshop will once again "increase investment" in Guofu Life Insurance,If the equity transfer is approved, it will hold 24.32% of Guofu Life's shares and will still be the second largest shareholder.

Well-known Internet expert Guo Tao believes that,Vipshop's reason for investing in insurance may be to expand its business scope, increase its revenue sources, and enhance user stickiness by providing insurance services. The insurance business can complement Vipshop's e-commerce business and provide users with a more comprehensive shopping experience.”

However, according to public information, Guangzhou Vipshop and Guofu Life Insurance have not yet started business cooperation.

Image source: Canned Image Library

In terms of performance, Guofu Life Insurance has not yet gotten rid of losses. Data shows that from 2018 to 2023, Guofu Life Insurance lost 119 million yuan, 47 million yuan, 66 million yuan, 155 million yuan, 280 million yuan and 225 million yuan respectively.

In the first half of 2024, Guofu Life Insurance continued to lose 61 million yuan, a slight narrowing from the loss of 65 million yuan in 2023.However, Guofu Life Insurance had previously publicly stated that according to the company's five-year development plan, it is expected to achieve profitability in 2024 and enter a profit cycle.It now seems that it remains to be seen whether the profit target for 2024 can be achieved.

A deeper look into the reasons behind Guofu Life Insurance’s losses reveals that they are related to high operating costs.

Since its establishment, Guofu Life Insurance's premium has increased year by year, exceeding 3 billion yuan in 2023, with an annual compound growth rate of 80%.Guofu Life Insurance’s fees and commissions from 2018 to 2023They were 7 million yuan, 54 million yuan, 311 million yuan, 485 million yuan, 483 million yuan and 505 million yuan respectively, accounting for 4.64%, 8.85%, 19.35%, 22.52%, 16.34% and 16.46% of the total premium income respectively.Year-on-year growth。

Source: Guofu Life Insurance 2023 Annual Report

On the other hand, the investment yield of Guofu Life Insurance is also declining.

In the first half of 2024, Guofu Life's investment return rate was 2.51%, compared with 2.69% in the same period of 2023; the comprehensive investment return rate was 3.31%, compared with 2.58% in the same period of 2023.

In 2023, Guofu Life Insurance had trading financial assets of 1.214 billion yuan, and its investments mainly included corporate bonds, stocks, funds and asset management products, among which asset management products and fund investments accounted for the majority, with the year-end balance of asset management products being 862 million yuan, accounting for more than 70%; the year-end balance of funds was 238 million yuan, accounting for about 19.6%.

Source: Guofu Life Insurance 2023 Annual Report

Wind data shows that as of the end of 2023, Guofu Life Insurance holds funds such as Ping An FTSE China State-owned Enterprises Open Win-Win ETF, Penghua CSI Livestock Breeding ETF, HFT CSI Hong Kong Stock Connect Technology ETF and Hua Xia CSI Robot ETF.

Image source: Wind data

If Vipshop is willing to provide support in business, it may help Guofu Life expand its market and improve its profitability. Zhi Peiyuan, a master's degree student enterprise tutor at the School of Management of China University of Mining and Technology (Beijing), believes that "Vipshop can leverage its huge user base and e-commerce platform resources to provide Guofu Life with diversified sales channels and marketing platforms, accelerating the market penetration of insurance products.”

Zhi Peiyuan also said, "VIPSHOP's big data analysis and risk management technology can help Guofu Life Insurance improve the accuracy of product design and pricing., optimize operational efficiency and reduce operating costsIn addition, Vipshop’s supply chain resources and industry experienceIt will help Guofu Life develop innovative insurance products related to e-commerce, logistics, and supply chain.Meet insurance needs in specific scenarios and enhance market competitiveness and customer satisfaction. ”

3

The financial dream of “special sale e-commerce”

Guofu Life Insurance is just a small piece of the puzzle in Vipshop’s financial landscape.

Vipshop started to develop its Internet finance business very early.In 2013, Vipshop established a financial services department and has since expanded into the financial sector.

Industrial and commercial information shows that from 2013 to 2015, Shanghai Pinzhong Commercial Factoring Co., Ltd. (hereinafter referred to as "Shanghai Pinzhong Factoring"), Guangzhou Vipshop Microfinance Co., Ltd. (hereinafter referred to as "Guangzhou Vipshop Microfinance"), and Shanghai Vipshop Microfinance Co., Ltd. (hereinafter referred to as "Shanghai Vipshop Microfinance") were successively established.

In 2015, Vipshop formally established the Internet Finance Division and launched the consumer finance product "Vipshop Flower". In September 2016, Vipshop wholly acquired the third-party payment company Zhejiang Beifu Technology Co., Ltd. and obtained the payment license. The company has been renamed Zhejiang Vipshop Payment Services Co., Ltd. (hereinafter referred to as "Zhejiang Vipshop Payment").

Image source: Canned Image Library

In its first quarter financial report of 2017, Vipshop officially announced the spin-off of its Internet finance business and the reorganization of its logistics business.To create new growth engines, Vipshop Finance came into being.

In 2019, Vipshop reduced its Internet finance business and began to adjust its financial matrix.。

Several financial companies under Vipshop, including Shanghai Pinxun Enterprise Credit Information Co., Ltd., Guangzhou Pinxun Credit Information Co., Ltd., Guangzhou Pinzhong Commercial Factoring Co., Ltd., and Guangzhou Pinkun Asset Management Co., Ltd., were deregistered between 2019 and 2021.

Guangzhou Vipshop Microfinance was sold in 2020 and has now been renamed Guangzhou Guangxin Inclusive Microfinance Co., Ltd.; Guangzhou Pinnuo Insurance Agency Co., Ltd. was sold in 2023 and has now been renamed Shouxin Insurance Agency (Guangdong) Co., Ltd.

Zhi Peiyuan said, “Vipshop has cancelled or sold some of its financial companies in recent years, reflecting that e-commerce companies are facing some challenges in the financial field, includingThe regulatory environment for financial services is becoming stricter；There are significant differences between financial services and e-commerce services in terms of business models, risk management, and technical requirements., which may increase operating costs and affect financial performance in the short term;Facing dual competition from professional financial institutions and Internet giants, e-commerce companies need to continue to explore differentiated competitive advantages. "

Image source: Canned Image Library

However, in October 2021, Sichuan Vipshop Fubon Consumer Finance Co., Ltd. (hereinafter referred to as "Vipshop Fubon Consumer Finance"), a subsidiary of Vipshop, officially obtained approval for opening.

As a result, Vipshop has collected five core financial licenses: Vipshop Fubon Consumer Finance, Shanghai Vipshop Microfinance, Zhejiang Vipshop Payment, Shanghai Pinzhong Factoring, and Guofu Life Insurance.

As of the end of 2023, Vipshop Fubon Consumer Finance's audited total assets were 5.079 billion yuan and its operating income was 192 million yuan, both ranking last among the 30 licensed consumer finance companies;Net profit was 61.7303 million yuan, a year-on-year increase of 759.47%, ranking 28th.

Vipshop Fubon Consumer Finance currently has the following two main products:The first is Xiao Rong Hua, which is a pure online microcredit product.Online approval, real-time loan disbursement, simple interest rate range 6%-24%;The second is Xiaorong Loan, which has a revolving credit limit and can be borrowed and repaid at any time.The maximum amount that can be borrowed is 200,000 yuan, with a simple interest rate ranging from 6% to 24%.

Vipshop recorded total revenue of 27.6 billion yuan in the first quarter of 2024, a slight increase of 0.4% year-on-year; total merchandise transaction volume of 52.4 billion yuan, an increase of 8% year-on-year; and net profit of 2.3 billion yuan, an increase of 24.6% year-on-year.

Huatai Securities pointed out thatAlthough the total growth rate of merchandise transaction volume was not low, Vipshop's product revenue decreased by 0.3% year-on-year, mainly due to the increase in return rate.In the first quarter, fulfillment costs in Vipshop's operating expenses increased by 11.3% year-on-year, which also reflects the costs incurred by Vipshop's optimization of return and exchange services.

Vipshop said in its financial report that "business momentum in the first quarter was slow due to weaker-than-expected seasonal demand in the first quarter." Vipshop expectsTotal revenue in the second quarter of 2024 will be between 26.5 billion yuan and 27.9 billion yuan, with an expected year-on-year decrease of 0-5%.

Image source: Canned Image Library

With the growth rate slowing down or even falling, Vipshop is looking for a new growth curve. The deputy secretary-general of the Zhongguancun Internet of Things Industry Alliance believes that "Vipshop's financial business layout on the B-end and C-end has effectively promoted the capital turnover of suppliers and the immediate consumption needs of consumers through supply chain finance and consumer credit products, and enhanced the stability of the supply chain and user stickiness.These financial businesses are expected to become the second curve of its performance growth. Especially in the context of intensified competition in the e-commerce industry, the growth potential of financial businesses cannot be ignored.”

However, judging from Vipshop’s financial report,As of the end of 2023, Vipshop's Internet finance business had net cash of RMB 105 million.Compared with Vipshop's revenue of 112.9 billion yuan in 2023, this performance seems insignificant.

Do you think Vipshop can make its financial business its second growth curve?Welcome to leave comments in the comment section for discussion.