Following Zhong Miao Innovation and Technology, the parent company of Little Umbrella Insurance Brokers ("Little Umbrella"), Hand Back Group Limited ("Hand Back Group"), submitted its statement to the main board of Hong Kong for the second time, and the joint sponsor was CICC (601995. SH) and China Thailand.
At this time, it has only been less than 1 month since the first submission of materials by the handback group was invalidated.
Hitting the main board for the second time in a tight period of time shows that it is bound to IPO.
In 2015, Guangyao, Xu Han and Han Liwei established Shenzhen Muchenglin Technology Co., Ltd. (later renamed "Shenzhen Hand Hui") in Shenzhen, with Xu Han as chairman, Guangyao as CEO, and Han Liwei as CTO.
Later, Shenzhen Shouhui experienced angel round to C round financing, and its shareholders included top domestic investment institutions such as Sequoia China, Jingwei Venture Capital, Gopher Assets, Tasly Capital, and Xintian Venture Capital.
When it was booming, Xu Han and Guangyao had a quarrel, although in the end both parties said that they had "reconciled as before", Xu Han still withdrew from the company in 2020, and Guangyao served as the chairman.
The core body of the group is Shenzhen Hand Hui, and the distribution products are mainly life insurance.
From 2021 to the first five months of 2024, the revenue of this segment was $1.548 billion, $806 million, $1.634 billion and $603 million respectively.
However, the profit performance has been poor, and the adjusted net profit in the above reporting period was -204 million yuan, 131 million yuan, -356 million yuan and -52 million yuan, with a total loss of 481 million yuan.
With the deepening of the transformation of sales channels in recent years, insurance intermediaries have been significantly differentiated, presenting "ice and fire".
On the one hand, the call for "disintermediation" in the insurance industry continues, coupled with the extension of the "integration of newspapers and banks" to the agency channel, the commission rate continues to decline, a number of listed intermediaries retreat from the New Third Board, and the intermediary equity store is frequently cold.
On the other hand, insurance intermediaries with technological attributes have seen a rare boom in overseas IPOs.
Within July, "iYunbao" has been notified of the filing of overseas issuance and listing, and Zhongmiao Innovation and Technology has passed the listing hearing on the main board of the Hong Kong Stock Exchange; During the year, another 7 companies wanted to go overseas for IPO.
Although going to the capital market, the group still faces many problems.
In order to have long-term profitability, the group also needs to face the "triple test" of the overall decline in intermediary rates in the industry, the intensification of competition among intermediaries and the high promotion costs.
Rates for sustained pressure drops
The revenue of the Handback Group is mainly driven by the small umbrella, Kadabao and Niu Bao 100, and the distribution methods of the three are direct distribution, agent distribution and partner distribution.
From 2021 to the first five months of 2024, its revenue was $1.548 billion, $806 million, $1.634 billion and $603 million respectively.
The strict control of commission rates by the regulator has a greater impact on this part of the income, which is related to the year-on-year decline in revenue in 2022 and the first five months of 2024.
According to the prospectus, the decline in revenue in 2022 was caused by the new regulations on online life insurance products and the restrictions on marketing and business under the epidemic.
In October 2021, the "Notice on Further Regulating the Internet Life Insurance Business of Insurance Institutions" issued by the regulator clarified the commission rate, requiring that the commission for products with a term of one year or less be less than 35%; The commission for products with a term of more than one year is less than 60% in the first year, and the average commission is less than 25%.
After the policy was issued, a total of 95 distribution products of the Group were affected in 2022, and the total first-year premiums involved dropped from $1,806 million in 2021 to $244 million.
"Some customers were affected by the notice to reduce the transaction amount, resulting in a decrease in the number of online life insurance products we distributed." Hand back group said.
The implementation of the "integration of newspapers and banks" from August 2023 has also had a negative impact on the Group's revenue.
The "integration of reporting and banking" emphasizes that the pricing assumptions used in the product approval or filing materials submitted by insurance companies should be consistent with the actual business process, with the intention of eliminating the chaos of intermediary channel benefit transfer and strictly controlling commission rates.
Under strong supervision, insurers have lowered their rates when signing new contracts with channels.
In the first five months of 2024, the Group's revenue decreased by 7.8% year-on-year, and the first-year premium of the product decreased from $1.041 billion to $840 million.
The prospectus explains that "insurance companies have made prudent adjustments in response to changes in industry policies, especially the bancassurance channel. ”
Shouhui Group said that although the regulator has not yet issued a "newspaper and bank integration" for intermediaries, some insurance companies have lowered the commission rate to control the risk that the actual operating costs of insurance companies exceed expectations.
In the future, the trend of intermediary fee reduction will continue.
First, the supervision has publicly stated that the trend of strict control of channel rates remains unchanged; Second, under the background of pressure on the performance of the investment side, insurance companies are bound to continue to reduce intermediate costs due to the principle of asset-liability matching.
This is hardly optimistic for the trading business, which accounts for 99% of the total revenue.
In addition, there is also a risk from the "crowding out effect" brought by the increase in the degree of insurance technology to the intermediary ecology.
In the prospectus, Shouhui Group pointed out that after the digital platform and online sales channels are sufficiently developed, insurance companies can directly reach the customer base at a low cost, and use their self-built online platforms to achieve "disintermediation", further weakening intermediaries and diluting intermediate costs.
Under such a trend, how to weaken the negative impact of the intermediary rate reduction through business structure adjustment is the first test that the group needs to face.
Intensified competition in the industry
The "cake" is shrinking, and the involution of insurance intermediaries is also intensifying.
Among the three types of sales channels, namely individual insurance, bancassurance, and economic agency, different insurance companies have their own priorities.
However, as far as the agency channel is concerned, it is often difficult for intermediary companies to build a moat.
First, the products sold by intermediaries are homogeneous.
Under the circumstance that the predetermined interest rate and surcharge are strictly regulated, the life insurance products sold by each company are less differentiated.
In the eyes of policyholders who attach importance to the cost-effectiveness of products, there is no essential difference between which channel and which institution to subscribe from, and the policyholder may purchase product B from Company B immediately after purchasing product A from company A.
This has also led to the high revenue growth of many intermediary companies in the early stage, but the customer retention rate is low, and it is difficult to achieve secondary development, resulting in weak performance growth in the later stage.
In order to increase customer retention, Hand Hui Group prefers long-term products in its product selection strategy.
"The products we sell are mainly long-term life insurance." "Its nature and its service life cycle allow us to build and strengthen long-term relationships with our insurance customers, thereby generating consistent revenue," the group said in its prospectus. ”
Since 2017, Handhui Group has distributed customized products that it has participated in the formulation of liability terms and has brand IP, hoping to increase the market's brand awareness of the company and accumulate influence.
"We have signed exclusive agreements with insurers for most of our customized products, and we have exclusive distribution rights after meeting the performance." "In the customization process, we identify and clarify the needs of our target insurance customers, negotiate competitively with insurers and reinsurers, and finally select partner companies and distribute customized products. ”
At present, the first-year premiums of customised products account for 63.3%, 52.5%, 59.0% and 57.1% of the first-year premiums of distributed products in the first five months from 2021 to 2024 respectively.
But exclusive customization can also be imitated.
Given the relative transparency of the terms of insurance products, it is possible that competitors will be able to replicate similar products after the release of the customized products of the hand-back group.
"If we are unable to quickly upgrade our products to meet market demand, we may not be able to maintain our competitive edge, and our business and operating results will have a negative impact." ”
Second, the threshold of distribution channels is low.
Handhui Group pointed out that both Internet companies and traditional insurance companies entering the Internet insurance market may compete fiercely with the company.
"Internet companies have a lot of data and strong technology development capabilities, and they may develop insurance business in a short period of time to compete with us." "There are also a number of traditional insurance companies that have entered the online insurance service market, which have the potential for offline resources and online conversion of insurance customers. ”
Once the traditional leading institutions enter the Internet insurance market, the handback group will face more fierce competition.
Hand Hui Group believes that it has three competitive advantages: first, it ranks eighth in the domestic life insurance intermediary market; Second, based on the total premium of long-term life insurance in 2023, the company is the second largest online insurance intermediary in China; Third, since the launch of the company's customized product Super Mario Critical Illness Insurance series, the number of policies distributed by online life insurance intermediaries has ranked among the top four.
The above is more based on the first-mover advantage from the perspective of scale, and in the case of taking the lead, how to rely on resource advantages to build a more competitive moat may be the second test that Shouhui Group needs to face.
High promotion fees
In the direct sales, agent distribution and cooperative distribution business, cooperative distribution contributes to the main revenue of the group.
From 2021 to the first five months of 2024, the proportion of revenue from this channel in total revenue has always remained above 60%.
The business with the largest proportion of revenue is also the existence with the lowest gross profit level.
Compared with the direct sales and agent distribution business, which have gross profit margins of about 80% and 30% respectively, the gross profit margin of cooperative distribution channels has been around 20% all year round.
This part of the business specifically includes media, advertising companies, KOLs and other self-media traffic channels.
The traffic and income brought by high-quality self-media are real, but they are also highly bound to the promotion fee.
Shouhui Group pointed out that the reason for the low gross profit of this part is that the partners are commercial organizations and have higher requirements for commissions.
From 2021 to the first five months of 2024, channel promotion fees of RMB332 million, RMB150 million, RMB503 million and RMB165 million were paid to self-media, accounting for 30.6%, 28.6%, 46.5% and 43.5% of the operating costs in the same period.
"We plan to sign an annual framework agreement with KOLs who can bring in high-quality traffic to increase the scale of traffic acquisition through effective advertising." "Offline, we plan to actively track and motivate partners with good product sales performance to encourage them to introduce more business to us." ”
But this also determines a high dependence on this part of the channel.
As Handhui Group said, "If we fail to maintain stable relationships with our partners, the Company's business, results of operations, financial condition and business prospects could be materially and adversely affected." ”
The financial result of the high promotion fee is the accumulation of huge losses.
From 2021 to the first five months of 2024, the cumulative loss of the group reached 481 million yuan.
It is difficult to predict how long the "promotion fee" can be high in this state.
Or based on performance pressure, the group is also prudently investing and managing costs.
"We plan to carefully select influential self-media traffic channels and further optimize our customer acquisition methods," the group wrote in its prospectus. ”
According to the prospectus, the gross profit margin of the cooperative channel in the first five months of 2024 has increased to 23.1% from 14.6% in the same period last year.
Shouhui Group said that the change is mainly due to the change in the allocation of promotion expenses and the change in product structure from the second half of 2023.
"The company considers profitability to be a factor in establishing new relationships with business partners and evaluating existing relationships." "The revenue contribution of Niu Bao 100 from long-term medical and other insurance products with higher gross margins, as well as long-term critical illness insurance products, also increased. ”
However, the gross profit margin of the self-media channels where the group has invested a large amount of promotion fees has not exceeded 20%, only 19.3%.
As an insurtech company, relying on investment and promotion to increase performance may meet the needs of the moment, but it is difficult to become a core advantage.
how to adjust the business model and invest capital in more efficient channels; At the same time, empowering the main business through science and technology and establishing a real "moat" may be the third test faced by the group.
This article is from Wall Street News, welcome to download the APP to see more